2015–16 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, 2016, 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 using the Government's accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the 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, directives 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 risk-based assessment of the effectiveness of the system of ICFR.

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

A risk-based assessment of the system of ICFR for the year ended March 31, 2016 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of the Office's system of internal control is reviewed by an independent 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 Office's internal controls over financial reporting.

Joe Friday Public Sector Integrity Commissioner of Canada

Éric Trottier, CPA, CMA, MBA Chief Financial Officer

Ottawa, Ontario
July 14, 2016

 

Statement of Financial Position

As of March 31

Office of the Public Sector Integrity Commissioner of Canada

(in dollars)	2016	2015
Liabilities
Accounts payable and accrued liabilities (note 4)	483,964	459,015
Vacation pay and compensatory leave	149,940	169,132
Employee future benefits (note 5)	195,000	212,000
Total liabilities	828,904	840,147
Financial assets
Due from the Consolidated Revenue Fund	300,631	343,251
Accounts receivable and advances (note 6)	193,799	122,763
Total financial assets	494,430	466,014
Net debt	334,474	374,133
Non-financial assets
Prepaid expenses	4,170	-
Tangible capital assets (note 7)	145,788	171,658
Total non-financial assets	149,958	171,658
Net financial position	(184,516)	(202,475)

Contractual obligations (note 8)

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

Joe Friday Public Sector Integrity Commissioner of Canada

Éric Trottier, CPA, CMA, MBA Chief Financial Officer

Ottawa, Ontario
July 14, 2016

Statement of Operations and Net Financial Position

For the year ended March 31

Office of the Public Sector Integrity Commissioner of Canada

(in dollars)	Planned Results (note 2) 2016	2016	2015
Expenses
Disclosure and Reprisal Management Program	3,888,980	3,030,348	2,967,884
Internal Services	2,300,385	2,068,528	2,430,291
Total Expenses	6,189,365	5,098,876	5,398,175
Net cost of operation before government funding	6,189,365	5,098,876	5,398,175
Government funding
Net cash provided by Government	5,485,057	4,493,555	4,901,826
Change in due from Consolidated Revenue Fund	(36,615)	(42,620)	(59,875)
Services provided without charge by other government departments (note 9)	677,965	655,900	663,702
Transfer of the transition payments for implementing salary payments in arrears (note 10)	-	-	(113,434)
Net cost (revenue) of operations after government funding	62,958	(17,959)	5,956
Net financial position - Beginning of year	(169,727)	(202,475)	(196,519)
Net financial position - End of year	(232,685)	(184,516)	(202,475)

Segmented Information (note 11)

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

Statement of Change in Net Debt

For the year ended March 31

Office of the Public Sector Integrity Commissioner of Canada

(in dollars)	Planned Results (note 2) 2016	2016	2015
Net cost (revenue) of operations after government funding	62,958	(17,959)	5,956
Change due to tangible capital assets
Acquisition of tangible capital assets (note 7)	10,000	49,604	24,312
Amortization of tangible capital assets (note 7)	(66,463)	(75,8474)	(67,685)
Total change due to tangible capital assets	(56,443)	(25,870)	(43,373)
Change due to prepaid expenses	323	4,170	(1,900)
Net decrease in net debt	6,838	(39,659)	(39,317)
Net debt - Beginning of year	342,996	374,133	413,450
Net debt - End of year	349,834	334,474	374,133

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

(in dollars)	2016	2015
Operating Activities
Net cost of operations before government funding	5,098,876	5,398,175
Non-cash items:
Amortization of tangible capital assets (note 7)	(75,474)	(67,685)
Services provided without charge by other government departments (note 9)	(665,900)	(663,702)
Transition payments for implementing salary payments in arrears (note 10)	-	113,434
Variations in Statement of Financial Position:
Increase in accounts receivable and advances	71,036	102,085
Increase (decrease) in prepaid expenses	4,170	(1,900)
Increase in accounts payable and accrued liabilities (note 7)	(3,349)	(36,211)
Decrease (increase) in vacation pay and compensatory leave	19,192	(4,682)
Decrease in employee future benefits	17,000	38,000
Cash used in operating activities	4,465,551	4,877,514
Capital activities
Acquisition of tangible capital assets (note 7)	28,004	24,312
Cash used in capital activities	28,004	24,312
Net cash provided by Government of Canada	4,493,555	4,901,826

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

Notes to the Financial Statements

For the year ended March 31

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 set up to administer the Public Servants Disclosure Protection Act, which came into force on April 15, 2007. The Office is established under the authority of Schedule 1.1 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 is mandated to establish a safe, independent, and confidential process for public servants and members of the public to disclose potential wrongdoing in the federal public sector. The Office also helps to protect public servants who have filed disclosures or participated in related investigations from reprisal. The disclosure regime is an element of the framework which strengthens accountability and management oversight in government operations.

Disclosure and Reprisal Management Program

The objective of the program is to address disclosures of wrongdoing and complaints of reprisal and contribute to increasing confidence in federal public institutions. It aims 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. Internal services include only those activities and resources that apply across an organization. and not those provided to a specific program. The groups of activities 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 Other Administrative Services.

2. Summary of significant accounting policies

These financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

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 Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Expenses section of the Statement of Operations and Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2015-16 Report on Plans and Priorities. The planned results amounts in the Government funding section of the Statement of Operations and Net Financial Position and in the Statement of Change in Net Debt were prepared for internal management purposes and have not been previously published.

Liquidity risk is the risk that the Office will encounter difficulty in meeting its obligations associated with financial liabilities. The Office's objective for managing liquidity risk is to manage operations and cash expenditures within the appropriation authorized by Parliament or allotment limits approved by the Treasury Board.

Each year, the Office presents information on planned expenditures to Parliament through the tabling of Estimates publications. These estimates result in the introduction of supply bills (which, once passed into legislation, become appropriation acts) in accordance with the reporting cycle for government expenditures. The Office exercises expenditure initiation processes such that unencumbered balances of budget allotments and appropriations are monitored and reported on a regular basis to help ensure sufficient authority remains for the entire period and appropriations are not exceeded.

Consistent with Section 32 of the Financial Administration Act, the Office's policy to manage liquidity risk is that no contract or other arrangement providing for a payment shall be entered into with respect to any program for which there is an appropriation by Parliament or an item included in estimates then before the House of Commons to which the payment will be charged unless there is a sufficient unencumbered balance available out of the appropriation or item to discharge any debt that, under the contract or other arrangement, will be incurred during the fiscal year in which the contract or other arrangement is entered into.

The Office's risk exposure and its objectives, policies and processes to manage and measure this risk did not change significantly from the prior year.

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 Consolidated Revenue Fund

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 authorities to discharge its liabilities. This amount is not considered to be a financial instrument.

d) Expenses

Expenses are recorded on the accrual basis:

• Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program.
• Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
• Services provided without charge by other government departments for accommodation, employer's contributions to the health and dental insurance plans and audit services are recorded as operating expenses at their estimated cost.

e) Employee future benefits

• Pension benefits: Eligible employees participate in the Public Service Pension Plan (Plan), a multiemployer pension plan administered by the Government of Canada. The Office's contributions to the Plan are charged to expenses in the year incurred and represent the total Office obligation to the Plan. 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.
• Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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 accounts receivable where recovery is considered uncertain. Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Office is not exposed to significant credit risk. Accounts receivable are due on demand. The majority of accounts receivable are due from other government of Canada departments and agencies where there is minimal potential risk of loss. The maximum exposure the Office has to credit risk equal to the carrying value of its accounts receivable.

g) Tangible capital assets

All tangible capital assets and leasehold improvements 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

Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

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 future 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. Parliamentary authorities

The Office receives its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Net Financial Position 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)	2016	2015
Net cost of operations before government funding	5,098,876	5,398,175
Adjustments for items affecting net cost of operations but not affecting authorities: Add (Less):
Services provided without charge by other government departments (note 9)	(665,900)	(663,702)
Amortization of tangible capital assets (note 7)	(75,474)	(67,685)
Decrease (increase) in vacation pay and compensatory leave	19,192	(4,682)
Decrease in employee future benefits	17,000	38,000
Adjustments to previous year's expenses	2,751	5,075
	(702,437)	(692,994)
Adjustments for items not affecting net cost of operations but affecting authorities: Add (Less):
Acquisition of tangible capital assets (note 7)	49,604	24,312
Transition payments for implementing salary payments in arrears (note 10)	-	113,434
Increase (decrease) in prepaid expenses	4,170	(1,900)
Increase in employee advances	3,341	-
	57,115	135,846
Current year authorities used	4,453,560	4,841,027

b) Authorities provided and used

(in dollars)	2016	2015
Authorities provided:
Vote 1 - Program expenditures	5,180,606	5,210,967
Statutory amounts - Proceeds from the disposal of surplus Crown assets	-	46
Statutory amounts - Contributions to employee benefits plan	398,273	447,023
Less:
Lapsed authorities	(1,125,319)	(817,009)
Current year authorities used	4,453,560	4,841,027

4. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are measured at cost, the majority of which are due within six months of year-end.

(in dollars)	2016	2015
Accounts payable - Other government departments and agencies	22,527	7,625
Accounts payable - External parties	197,339	196,276
	219,866	203,901
Accrued salaries	264,098	255,114
	483,964	459,015

5. Employee future benefits

a) Pension benefits

The Office's employees participate in the Public Service Pension Plan (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% 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. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into two groups - Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2015-16 expense amounts to $274,530 ($305,585 in 2014-15). For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2014-15) the employee contributions and, for Group 2 members, approximately 1.25 times (1.39 times in 2014-15) the employee contributions.

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 salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities.

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Information about the severance benefits, measured as at March 31, is as follows:

(in dollars)	2016	2015
Accrued benefit obligation, beginning of year	212,000	250,000
Expense for the year	8,342	(38,000)
Benefits paid during the year	(25,342)	-
Accrued benefit obligation, end of year	195,000	212,000

6. Accounts receivable and advances

(in dollars)	2016	2015
Accounts receivable - Other government departments and agencies	115,763	115,763
Accounts receivable - External parties	6,000	6,000
Employee advances	3,341	-
Advance - Petty cash	1,000	1,000
	122,763	122,763

7. Tangible capital assets

Cost (in dollars)	Opening Balance	Acquisitions	Disposals, Write-Offs and Transfers	Closing Balance
Informatics hardware	64,589	41,100	-	105,689
Informatics software	104,413	8,504	-	112,917
Other equipment	70,320	-	-	70,320
Leasehold improvements	242,589	-	-	242,589
	481,911	49,604	-	531,515

Accumulated amortization (in dollars)	Opening Balance	Amortization	Disposals, Write-Offs and Transfers	Closing Balance
Informatics hardware	46,836	18,053	-	64,889
Informatics software	38,567	14,835	-	53,402
Other equipment	41,014	9,013	-	50,027
Leasehold improvements	183,836	33,573	-	217,409
	310,523	75,474	-	385,727

Net book value (in dollars)	2015	2016
Informatics hardware	17,753	40,800
Informatics software	65,846	59,515
Other equipment	29,306	20,293
Leasehold improvements	58,753	25,180
	171,658	145,788

The acquisition of tangible capital assets and the increase in accounts payable and accrued liabilities presented in the Statement of Cash Flow exclude an amount of $21,600 in relation to the acquisition of tangible capital assets, as the amount relates to capital investing activities in 2015-16 that remain to be paid as at March 31, 2016.

8. 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 services or goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in dollars)	Acquisitions of goods and services	Operating leases	Total
2017	881,452	93,494	974,946
2018	378,004	1,368	379,372
2019	95,750	1,368	97,118
2020	-	1,254	1,254
2021	-	-	-

9. 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 $378,157 in 2015-16 ($432,896 in 2014-15). During the year, the Office received common services which were obtained without charge from other government departments as disclosed below.

a) Common services provided without charge by other government departments

During the year, the Office received services without charge from certain common service organizations, related to accommodation, the employer's contribution to the health and dental insurance plans and audit services. These services provided without charge have been recorded in the Office's Statement of Operations and Net Financial Position as follows:

(in dollars)	2016	2015
Accommodation	332,574	325,380
Employer's contribution to the health and dental insurance plans	227,326	234,322
Audit services	106,000	104,000
	665,900	663,702

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 Services and Procurement Canada are not included in the Office's Statement of Operations and Net Financial Position.

b) Other transactions with related parties

The Office incurred expenses of $982,617 in 2015-16 ($1,045,359 in 2014-15) from transactions in the normal course of business with other Government departments, agencies and Crown corporations. These expenses exclude common services received without charge, which are already disclosed in a).

10. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-15. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the Office. However, it did result in the use of additional spending authorities by the Office. Prior to year end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Services and Procurement Canada, who is responsible for the administration of the Government pay system. No transition payments were incurred in 2015-16 ($113,434 in 2014-15).

11. Segmented information

Presentation by segment is based on the Office's program alignment 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 by major object of expense. The segment results for the period are as follows:

(in dollars)	Disclosure and Reprisal Management Program	Internal Services	2016	2015
Transfer payments
Individuals	21,432	-	21,432	40,638
Total transfer payments	21,432	-	21,432	40,638
Operating Expenses
Salaries and employee benefits	2,292,839	914,728	3,207,567	3,468,886
Professional and special services	139,806	799,824	939,630	1,128,578
Accommodation	343,635	142,173	485,538	448,400
Other *	108,000	-	108,000	10,030
Information	8,643	66,861	75,504	67,732
Amortization of tangible capital assets	37,741	37,733	75,474	67,685
Rentals	9,362	60,652	70,014	69,246
Travel	40,538	7,517	48,055	31,667
Communication	26,426	17,392	43,818	40,221
Equipment expenses	-	14,112	14,112	3,666
Utilities, materials and supplies	2,196	3,222	5,418	14,938
Repair and maintenance	-	4,314	4,314	6,488
Total operating expenses	3,008,916	2,068,528	5,077,444	5,357,537
Net cost of operations	3,030,348	2,068,528	5,098,876	5,398,175

* Included in Other is an out of court settlement in relation to a judicial review.