New Brunswick Credit Union Deposit Insurance Corporation

Financial Statements

FINANCIAL STATEMENTS
NEW BRUNSWICK CREDIT UNION
DEPOSIT INSURANCE CORPORATION
31 DECEMBER 2001

Office of the Auditor General

Auditor's Report

To the Chairperson and Directors of the
New Brunswick Credit Union Deposit Insurance Corporation

I have audited the balance sheet of the New Brunswick Credit Union Deposit Insurance Corporation as at 31 December 2001 and the statement of revenue, expenditure and net assets for the year then ended. These financial statements are the responsibility of the Corporation's management. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In my opinion, these financial statements present fairly, in all material respects, the financial position of the Corporation as at 31 December 2001 and the results of its operations for the year then ended in accordance with Canadian generally accepted accounting principles.

K. D. Robinson, CA
Deputy Auditor General

Fredericton, N.B.
20 March 2002

NEW BRUNSWICK CREDIT UNION
DEPOSIT INSURANCE CORPORATION
BALANCE SHEET
31 DECEMBER 2001

Balance Sheet

NEW BRUNSWICK CREDIT UNION
DEPOSIT INSURANCE CORPORATION
STATEMENT OF REVENUE, EXPENDITURE AND NET ASSETS
FOR THE YEAR ENDED 31 DECEMBER 2001

Statement of Revenue

NEW BRUNSWICK CREDIT UNION DEPOSIT INSURANCE CORPORATION

NOTES TO FINANCIAL STATEMENTS
31 DECEMBER 2001

1. Authority and objective

The Corporation is an independent entity created under the provisions of the Credit Unions Act proclaimed on 31 January 1994. The mandate of the Corporation is to provide deposit insurance to members of credit unions in New Brunswick. The Corporation may also assist stabilization boards in providing financial assistance to credit unions.

The Credit Unions Act provides that the Corporation may levy credit unions for the funds required to carry out its mandate. The Act also provides that costs incurred in relation to the activities of the Corporation shall be assumed by the stabilization boards when they are requested to do so. Finally the Corporation may apply to the Province for loans or guarantees.

The affairs of the Corporation are administered by a Board of Directors of five persons. The Superintendent of credit unions is responsible for the administration of the Credit Unions Act and is the Chairperson of the Board. Each stabilization board appoints two representatives to the Board of Directors of the Corporation.

2. Significant accounting policies

(a) Contributions – Administrative expenses

The Corporation receives advances from the stabilization boards to cover its administrative expenses. The Corporation records portions of the advances as revenue when expenses are incurred. An unspent balance of $11,772 (2000 - $14,686) is recorded as a liability on the balance sheet.

The Corporation operates as a separate entity within the Credit Unions, Co-operatives and Trust Companies Branch of the Department of Justice. As such the Branch assumes the salary and some overhead costs which relate to the administration of the Corporation. Those costs are reflected in the expenditures of the Branch which are recovered by the Branch directly from credit unions.

(b) Contributions/Distributions – Deposit insurance fund

Contributions to the deposit insurance fund are recorded as revenue as they become due for payment.

When the balance of the deposit insurance fund exceeds the amount required, as calculated by the Corporation, the excess from the trust funds is distributed to the stabilization boards. This distribution is recorded with the expenses of the Corporation.

The Corporation accrues expenses for any known or likely losses from specific credit unions, which it expects cannot be paid or assumed by the stabilization board of which the credit union is a member. No such expenditures have been recorded by the Corporation since it began operations in 1994.

(d) Assets held in trust funds

Assets held in trust funds are recorded by the Corporation at the same value as they are recorded on the financial statements of the trust funds. The financial statements of the two trust funds are prepared in accordance with Canadian generally accepted accounting principles.

Investments held in the trust funds are recorded at cost except when a decline in value has occurred that is other than temporary. Premiums and discounts arising at the time of purchase of marketable securities are amortized over the period to maturity.

Investment revenues from the funds in trust include interest income as well as capital gains and losses on disposition of investments. In accordance with the trust agreements, the Corporation is a beneficiary and records investment revenues in the amount needed to cover its expenses or to increase the balance of the trust funds when required. The two stabilization boards are the beneficiaries of investment revenues which the Corporation does not need to cover its expenses or increase the balance of the funds in trust.

3. Income taxes

The Corporation is subject to income taxes under the Income Tax Act. The provisions of the Act generally exclude assessments contributed to the deposit insurance fund from taxable income.

4. Assets held in trust funds

The trust funds held the following assets at 31 December 2001: (Table)

5. Deposit Insurance Fund

Section 223 of the Credit Unions Act requires that the Corporation establish and maintain a deposit insurance fund. The Corporation is required by the Act to maintain the fund in two separate accounts. Each account consists of the amount paid into the fund by one of the stabilization boards together with investment income, less any expenditures charged to the account.

The Corporation has entered into a trust agreement with each stabilization board for the administration and investment of the funds in their respective account. Under the terms of the agreements, each stabilization board will invest the funds in accordance with the investment policy of the Corporation. Each trust fund agreement provides that the Corporation may, at its sole discretion, obtain assets from the trust fund to fulfill the obligations of its statutory purposes.

The two trust fund agreements contain provisions regarding the return of the deposit insurance fund to the two stabilization boards if an amendment to the Credit Unions Act is passed to remove the requirement for the deposit insurance fund and the Corporation has been released of all its deposit insurance obligations.

The Net Assets of the Deposit Insurance Fund must be maintained at a level determined annually by a formula approved by the Board of Directors of the Corporation. The formula requires that a risk rating be given to each caisse populaire and credit union.

The amount of assets of the trust funds is adjusted annually based on the requirement of the formula. This results in a contribution to the trust funds or a distribution to the stabilization boards.

At 31 December 2001 the balance in the trust fund account administered by the Office de Stabilisation de la Fédération des Caisses Populaires Acadiennes Limitée was $906,938 (2000 - $0.87 million). The balance in the trust fund account administered by the Brunswick Credit Union Federation Stabilization Board Limited at the same date was $485,555(2000 - $0.45 million).

6. Deposit protection for credit union members

As described in Note 1 it is the mandate of the Corporation to provide deposit insurance coverage for members of credit unions in New Brunswick. Currently, a maximum basic coverage of $60,000 is provided for insured deposits of each credit union member.

Separate deposit coverage up to a maximum of $60,000 each is also provided for joint deposits, trust deposits and deposits held in RRSPs and in RRIFs. The Corporation has established a deposit insurance fund as explained in Note 5.

The current legislation provides for the continued existence of the two stabilization boards which have operated in the province since 1978. Each stabilization board has established a stabilization fund which is available to provide financial assistance to its affiliated credit unions.

As at 31 December 2001, the financial statements of the Office de Stabilisation de la Fédération des Caisses Populaires Acadiennes Limitée reported net assets of $43.7 million (2000 - $40.4 million). Of this total, an amount of $0.4 million (2000 - $2.1 million) represents investments in caisses populaires for the purpose of stabilization. As at 31 December 2001, the financial statements of the Brunswick Credit Union Federation Stabilization Board Limited reported net assets of $11.2 million (2000 - $9.9 million). Each stabilization board is responsible to carry out inspections and monitor the financial condition and business practices of its member credit unions on an ongoing basis.

Both the stabilization boards and the Corporation have responsibilities for the protection of deposits of credit union members.

7. Related parties

Transactions between the Corporation, the two stabilization funds and the two trust funds are considered related party transactions. Each of the two stabilization boards nominates two directors to sit as directors of the Corporation. Each stabilization board exercises significant influence on the activities of the Corporation.