2010–11 Departmental Performance Report - Financial Statements

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Office of the Public Sector Integrity Commissioner of Canada

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2011, and all information contained in these statements rests with the management of the Office of the Public Sector Integrity Commissioner of Canada (the Office). These financial statements have been prepared by management in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in these financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Office's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Office's Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded, and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the Office; and through conducting an annual assessment of the effectiveness of the system of ICFR.

An assessment for the year ended March 31, 2011, was completed in accordance with the Policy on Internal Control, and the results and action plans are summarized in the annex.

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to assess key risks, to assess effectiveness of associated key controls and to make any necessary adjustments.

The effectiveness and adequacy of the system of internal control is reviewed by an independent Departmental Audit and Evaluation Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the Commissioner.

The Office of the Auditor General, the independent auditor for the Government of Canada, has expressed an opinion on the fair presentation of the financial statements of the Office which does not include an audit opinion on the annual assessment of the effectiveness of the department's internal controls over financial reporting.

 

Ottawa, Canada
July 5^th, 2011

 

Independent Auditor's Report

To the Speaker of the House of Commons and the Speaker of the Senate

Report on the Financial Statements

I have audited the accompanying financial statements of the Office of the Public Sector Integrity Commissioner of Canada, which comprise the statement of financial position as at 31 March 2011, and the statement of operations, statement of equity of Canada and statement of cash flow for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion, the financial statements present fairly, in all material respects, the financial position of the Office of the Public Sector Integrity Commissioner of Canada as at 31 March 2011, and the results of its operations and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Report on Other Legal and Regulatory Requirements

In my opinion, the transactions of the Office of the Public Sector Integrity Commissioner of Canada that have come to my notice during my audit of the financial statements have, in all significant respects, been in accordance with the Financial Administration Act and regulations and the Public Servants Disclosure Protection Act.

 

John Wiersema, FCA
Interim Auditor General of Canada

5 July 2011
Ottawa, Canada

 

 

Statement of Financial Position

As at March 31

Office of the Public Sector Integrity Commissioner of Canada

Contractual obligations (note 9)

The accompanying notes form an integral part of these financial statements.

 

Ottawa, Ontario
July 5^th, 2011

 

 

Statement of Operations

For the year ended March 31

Office of the Public Sector Integrity Commissioner of Canada

Segmented information (note 11)

The accompanying notes form an integral part of these financial statements.

 

 

Statement of Equity of Canada

For the year ended March 31

Office of the Public Sector Integrity Commissioner of Canada

The accompanying notes form an integral part of these financial statements.

 

 

Statement of Cash Flow

For the year ended March 31

Office of the Public Sector Integrity Commissioner of Canada

The accompanying notes form an integral part of these financial statements.

 

 

Notes to the Financial Statements

Office of the Public Sector Integrity Commissioner of Canada

1. Authority and objectives

The Office of the Public Sector Integrity Commissioner of Canada (the Office) was created under the Public Servants Disclosure Protection Act, which came into force on April 15, 2007. The Office is established under the authority of Schedule I.1 of the Financial Administration Act and is funded through annual appropriations. The Commissioner is accountable for, and reports directly to Parliament on the results achieved.

The Office has the mandate to establish a safe, confidential mechanism for public servants or members of the public to disclose potential wrongdoing in the public sector. The Office also protects the public servants from reprisal for making such disclosures or participating in investigations.

Disclosure and Reprisal Management Program

To provide advice to federal public sector employees and members of the public who are considering making a disclosure and to accept, investigate and report on disclosures of information concerning possible wrongdoing. Based on this activity, the Public Sector Integrity Commissioner will exercise exclusive jurisdiction over the review, conciliation and settlement of complaints of reprisal, including making applications to the Public Servants Disclosure Protection Tribunal to determine if reprisals have taken place and to order appropriate remedial and disciplinary action.

Internal Services

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

 

2. Summary of significant accounting policies

These financial statements have been prepared in accordance with the Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles, except as disclosed in Note 3 - Net Debt Indicator.

Significant accounting policies are as follows:

a) Parliamentary authorities

The Office is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Office do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 4 provides a reconciliation between the bases of reporting.

b) Net Cash Provided by Government

The Office operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Office is deposited to the CRF and all cash disbursements made by the Office are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.

c) Due from the CRF

Amounts due from the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Office is entitled to draw from the CRF without further appropriations to discharge its liabilities.

d) Expenses

Expenses are recorded on the accrual basis.

 

e) Employee future benefits

• Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Office's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the Office to make contributions for any actuarial deficiencies of the Plan.
• Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

 

f) Accounts receivable

Accounts receivable are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

g) Tangible capital assets

Tangible capital assets having an initial cost of $5,000 or more are recorded at their acquisition cost. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

Asset class	Amortization Period
Informatics hardware	3 to 5 years
Informatics software	3 to 5 years
Other equipment	1 to 15 years
Leasehold improvements	Lesser of the remaining term of the lease or useful life of the improvement

 

h) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the liability for employee severance benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Net debt indicator

The presentation of the net debt indicator and a statement of change in net debt is required under Canadian generally accepted accounting principles.

Net debt is the difference between a government's liabilities and its financial assets and is meant to provide a measure of the future revenues required to pay for past transactions and events. A statement of change in net debt would show changes during the period in components such as tangible capital assets and prepaid expenses. The Office is financed by the Government of Canada through appropriations and operates within the CRF, which is administered by the Receiver General for Canada. All cash received by the Office is deposited to the CRF and all cash disbursements made by the Office are paid by the CRF. Under this government business model, assets reflected on the Office's financial statements, with the exception of the Due from the CRF, are not available to use for the purpose of discharging the existing liabilities of the Office. Future appropriations would be used to discharge existing liabilities.

(in dollars)	2011	2010
Liabilities
Accounts payable and accrued liabilities (note 7)	454,703	187,234
Vacation pay and compensatory leave	118,300	107,400
Employee future benefits (note 8)	521,900	409,200
Total Liabilities	1,094,903	703,834
Financial Assets
Due from the Consolidated Revenue Fund	422,073	38,069
Accounts receivable and advances (note 5)	41,999	150,292
Total Financial Assets	464,072	188,361
Net Debt Indicator	630,831	515,473

 

 

4. Parliamentary Authorities

The Office receives its funding through annual Parliamentary authorities. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, the Office has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

a) Reconciliation of net cost of operations to current year authorities used

(in dollars)	2011	2010
Net cost of operations	5,977,768	4,044,762
Adjustments for items affecting net cost of operations but not affecting authorities:
Add (Less):
Services provided without charge by other government departments (note 10)	(542,800)	(530,100)
Amortization of tangible capital assets (note 6)	(24,843)	(17,988)
Loss on disposal of tangible capital assets	(2,591)	-
Revenues not available for spending	3,735	38
Increase (decrease) in vacation pay and compensatory leave	(10,900)	81,447
Increase (decrease) in employee future benefits	(112,700)	62,141
Adjustments to previous year's expenses	5,801	173,591
	(684,298)	(230,871)
Adjustments for items not affecting net cost of operations but affecting authorities:
Add (Less):
Acquisition of tangible capital assets (note 6)	30,128	33,295
Variation in prepaid expenses	100	-
Variation in advances	-	(2,555)
	30,228	30,740
Current year authorities used	5,323,698	3,844,631

 

 

b) Authorities provided and used

(in dollars)	2011	2010
Authorities provided:
Vote 45 - Program expenditures	6,347,959	6,347,863
Statutory amounts - Contributions to employee benefits plan	507,555	363,431
Less:
Lapsed authorities	(1,531,816)	(2,866,663)
Current year authorities used	5,323,698	3,844,631

 

 

5. Accounts receivable and advances

(in dollars)	2011	2010
Accounts receivable - other government departments	32,630	149,165
Accounts receivable - external parties	8,369	127
Advance - petty cash	1,000	1,000
	41,999	150,292

 

 

6. Tangible captial assets

Cost (in dollars)	Opening Balance	Acquisitions	Disposals and Write-Offs	Closing Balance
Informatics hardware	10,723	30,128	(5,362)	35,489
Informatics software	33,295	-	-	33,295
Other equipment	22,758	-	-	22,758
Leasehold improvements	83,375	-	-	83,375
	150,151	30,128	(5,362)	174,917

 

Accumulated amortization (in dollars)	Opening Balance	Acquisitions	Disposals and Write-Offs	Closing Balance
Informatics hardware	4,290	2,341	(2,771)	3,860
Informatics software	-	6,659	-	6,659
Other equipment	8,642	3,457	-	12,099
Leasehold improvements	32,798	12,386	-	45,184
	45,730	24,843	(2,771)	67,802

 

Net book value (in dollars)	Opening Balance	Closing Balance
Informatics hardware	6,433	31,629
Informatics software	33,295	26,636
Other equipment	14,116	10,659
Leasehold improvements	50,577	38,191
	104,421	107,115

 

 

7. Accounts payable and accrued liabilities

(in dollars)	2011	2010
Accounts payable - other government departments	53,708	64,527
Accounts payable - external parties	316,892	61,190
	370,600	125,717
Accrued salaries	84,103	61,517
	454,703	187,234

 

 

8. Employee future benefits

(a) Pension benefits

The Office's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation.

Both the employees and the Office contribute to the cost of the Plan. The 2010-11 expense amounts to $356,303 ($262,397 in 2009-10), which represents approximately 1.9 times (1.9 times in 2009-10) the contributions by employees.

The Office's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

The Office provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

(in dollars)	2011	2010
Accrued benefit obligation, beginning of year	409,200	471,341
Expense for the year	252,330	(62,141)
Benefits paid during the year	(139,630)	-
Accrued benefit obligation, end of year	521,900	409,200

 

c) Significant transaction

In the course of the year, the Office paid a senior management member $354,000 in separation allowance, $53,100 in lieu of foregone benefits, and $126,320 in severance payments. The Office has no liabilities with respect to this employee as at March 31.

 

9. Contractual Obligations

The nature of the Office's activities can result in some large multi-year contracts and obligations whereby the Office will be obligated to make future payments when the goods or services are received. These obligations include equipments and professional services contracts. Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in dollars)
2012	1,059,535
2013	360,548
2014	340,548
2015	85,137

 

 

10. Related party transactions

The Office is related as a result of common ownership to all Government departments, agencies and Crown corporations. The Office enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, the Office has shared service agreements with other government departments related to the provision of Finance, Human Resources, Administration and Information Technology services. The expenses are $509,401 in 2010-11 ($392,299 in 2009-10).

The Office incurred expenses of $1,398,726 in 2010-11 ($1,014,873 in 2009-10) from transactions in the normal course of business with other Government departments, agencies and Crown corporations. These expenses exclude common services received without charge as follows:

(in dollars)	2011	2010
Accommodation	261,500	259,100
Employer's contribution to the health and dental insurance plans	203,300	175,000
Audit services	78,000	96,000
	542,800	530,100

 

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services Canada are not included in the Office's Statement of Operations.

 

11. Segmented Information

Presentation by segment is based on the Office's program activity architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred for the main program activities, by major object of expenses. The segment results for the period are as follows:

(in dollars)	Disclosure and Reprisal Management Program	Internal Services	2011	2010
Expenses
Salaries and employee benefits	3,033,087	839,656	3,872,743	2,437,777
Professional and special services	402,966	1,059,566	1,462,532	1,067,494
Accommodation	173,500	88,000	261,500	259,100
Equipment expenses	-	84,351	84,351	18,978
Information	22,343	59,084	81,427	93,299
Travel	51,296	8,543	59,839	42,498
Communication	19,566	21,965	41,531	39,404
Utilities, materials and supplies	19,693	19,522	39,215	20,457
Repair and maintenance	-	26,421	26,421	8,959
Amortization of tangible capital assets	-	24,843	24,843	17,988
Rentals	9,795	10,980	20,775	38,808
Loss on disposal of tangible capital assets	-	2,591	2,591	-
Total Expenses	3,732,246	2,245,522	5,977,768	4,044,762
Net cost of operations	3,732,246	2,245,522	5,977,768	4,044,762

 

 

12. Comparative information

Comparative figures have been reclassified to conform to the current year's presentation.