Future Oriented Financial Statements for 2013-2014

Statement of Management Responsibility

Office management is responsible for these future-oriented financial statements, including responsibility for the appropriateness of the assumptions on which these statements are prepared. These statements are based on the best information available and assumptions adopted as at January 31, 2013 and reflect the plans described in the Report on Plans and Priorities.

The future-oriented financial statements of the Office of the Communications Security Establishment Commissioner have not been audited.

Originals signed by;

Honourable Robert Décary, Q.C.
Commissioner

J. William Galbraith
Chief Financial Officer

Ottawa, Canada

Date: March 13, 2013

Future-oriented Statement of Financial Position (Unaudited) as at March 31 (in dollars)

	Estimated Results 2013	Forecast 2014
Liabilities
Accounts payable and accrued liabilities (note 6)	$53,577	$55,184
Vacation pay and compensatory leave	11,217	27,949
Employee future benefits	74,773	114,373
Total net liabilities	139,567	197,506
Financial assets
Due from the Consolidated Revenue Fund	307,687	316,917
Accounts receivable and advances (note 8)	23,478	24,182
Total net financial assets	331,165	341,099
Commission net debt	-191,598	-143,593
Non-financial assets
Tangible capital assets (note 9)	1,073,970	936,264
Total non-financial assets	1,073,970	936,264
Departmental net financial position	-$1,265,568	-$1,079,857

Information for the year ended March 31, 2013 includes actual amounts from April 1, 2012 to January 31, 2013.

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

___________________

Robert Décary, Q.C.
Commissioner

Date: March 13, 2013

J. William Galbraith
Chief Financial Officer

Date: March 13, 2013

Future-oriented Statement of Operations and Departmental Net Financial Position (Unaudited) for the year ended March 31  (in dollars)

	Estimated Results 2013	Forecast 2014
Expenses
Review Program	$1,424,894	$1,800,000
Internal Services	360,637	572,388
Total expenses	1,785,531	2,372,388
Net cost of operations before government funding	1,785,531	2,372,388
Government funding
Net cash provided by Government	2,754,744	2,111,984
Change in due from the Consolidated Revenue Fund	8,962	9,231
Services provided without charge by other government departments (note 11)	64,753	65,464
Net cost of operations after government funding	-1,042,928	185,711
Departmental net financial position - Beginning of year	-222,640	-1,265,568
Departmental net financial position - End of year	-$1,265,568	-$1,079,857

Segmented information (note 12)

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

Future-oriented Statement of Change in Departmental Net Debt (Unaudited) for the year ended March 31 (in dollars)

	Estimated Results 2013	Forecast 2014
Net cost of operations after government funding	-$1,042,928	$185,711
Change due to tangible capital assets
Acquisition of tangible capital assets	788,445	8,000
Amortization of tangible capital assets	-73,149	-145,706
Total change due to tangible capital assets	715,296	-137,706
Net increase (decrease) in Commission net debt	-327,632	48,005
Departmental net debt - Beginning of year	-136,034	-191,598
Departmental net debt - End of year	-$191,598	-$143,593

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

Future-oriented Statement of Cash Flows (Unaudited) for the year ended March 31 (in dollars)

	Estimated Results 2013	Forecast 2014
Operating Activities
Net cost of operations before government funding	$1,785,531	$2,372,388
Non-cash items:
Services provided without charge by other government departments  (note 11)	-64,753	-65,464
Amortization of tangible capital assets	-73,149	-145,706
Variations in Statement of Financial Position
Increase (decrease) in accounts receivable and advances	-21,483	704
Decrease (increase) in liabilities	283,104	-1,607
Decrease (increase) in vacation pay	15,745	-16,731
Decrease (increase) in employee future benefits	41,304	-39,600
Cash used in operating activities	1,966,299	2,103,984
Capital Investment Activities
Acquisition of tangible capital assets	788,445	8,000
Cash used by capital investment activities	788,445	8,000
Net Cash Provided by Government of Canada	-$2,754,744	-$2,111,984

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

Notes to the Future-oriented Financial Statements (Unaudited) for the year ended March 31, 2013

1. Authority and Objectives

The Office of the Communications Security Establishment Commissioner was created on June 19, 1996.  It was established as a separate agency of government in April 2008.  The mandate of the Communications Security Establishment Commissioner is threefold:

1. to review the activities of the Communications Security Establishment Canada (CSEC) for compliance with the law and to advise the Minister of National Defence and the Attorney General of Canada of a CSEC activity that the Commissioner believes may not be in compliance with the law;                   
2. to receive complaints about the lawfulness of CSEC activities; and
3. to carry out specific duties under the 'public interest defence' provision of the Security of Information Act.

There are two programs that support the Commissioner in the discharge of his mandate. The review program entails the reviews and studies performed by the Office and the reports on these reviews and studies that are forwarded by the Commissioner to the Minister of National Defence. The internal services program entails the corporate services in place that support the review program.

2. Significant Assumptions

The Future-oriented financial statements have been prepared on the basis of the government priorities and the plans of the Office as described in the Report on Plans and Priorities:

The information in the estimated results for the fiscal year 2012-13 is based on the actual results as at January 31, 2013 and forecasts for the remainder of the year.  Estimated year end information for 2012-13 is used as the opening position for the 2013-14 planned results, and forecasts have been made for the planned results for the 2013-14 fiscal year.

The main assumptions underlying the forecasts are as follows:

1. The Office's activities have not changed from the previous year. The estimated results include the cost of leasehold improvements related to the retro-fit of additional office space.
2. Forecast of 2013-14 is based on the planned spending amounts presented in the 2013-14 Report on Plans and Priorities.

These assumptions are adopted as at January 31, 2013.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2012-13 and for 2013-14, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing these future-oriented financial statements, the Office has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the future-oriented financial statements and the historical financial statements include:

1. The timing and amounts of acquisitions and disposals of property, plant and equipment may affect gains/losses and amortization expense.
2. Implementation of new collective agreements.
3. Changes in rent as a result of increased office space.
4. Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.

Once the Report on Plans and Priorities is presented, the Office will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

4. Summary of Significant Accounting Policies           

The future-oriented financial statements have been prepared in accordance with the Treasury Board Accounting Standards.  These accounting policies stated below, 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.

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 Future-oriented Statement of Operations and Departmental Net Financial Position and in the Future-oriented Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament.  Note 5 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 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.

(d) Expenses - Expenses are recorded on the accrual basis

Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

Services provided without charge from other government departments and agencies are recorded as operating expenses at their estimated cost.

(e) Employee Future Benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government of Canada. The Office's contributions to the Plan are charged to expenses in the year incurred and represent its total 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. 
2. 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 usinginformation 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

All tangible capital assets having an initial cost of $3,000 or more are recorded at their acquisition cost. The Office does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value. 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
Other equipment including furniture	5 years
Informatics hardware	3 years
Leasehold improvements	remaining term of the lease
Other work in progress	n/a

5. Parliamentary Authorities

The Office receives its funding through annual Parliamentary authorities. Items recognized in the Future-oriented Statement of Operations and Departmental Net Financial Position and the Future-oriented 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)

	Estimated Results 2013	Forecast 2014
Net cost of operations before government funding	$1,785,531	$2,372,388
Adjustments for items affecting net cost of operations but not affecting authorities
Services provided without charge	-64,753	-65,464
Amortization of tangible capital assets	-73,149	-145,706
Change in employee severance benefits	41,304	-39,600
Change in vacation pay	15,745	-16,731
Total	1,707,677	2,104,886
Adjustments for items not affecting net cost of operations but affecting authorities
Acquisition of tangible capital assets	788,445	8,000
Current year authorities used	$2,493,122	$2,112,886

(b) Authorities Provided and Used (in dollars)

	Estimated Results 2013	Forecast 2014
Authorities provided
Vote 30 - Operating expenditures	$2,260,519	$1,978,878
Transfer from Treasury Board Votes for program expenditures	98,526	-
Total authorities provided	2,359,045	1,978,878
Statutory amounts	134,077	134,008
Total authorities and Statutory amounts	2,493,122	2,112,886
Less: lapsed operating	-	-
Current year authorities used	$2,493,122	$2,112,886

6. Accounts Payable and Accrued Liabilities (in dollars)

The following table presents details of accounts payable and accrued liabilities

	Estimated Results 2013	Forecast 2014
Accounts payable - Other government departments and agencies	$7,032	$2,975
Accounts payable - external suppliers	12,609	89,813
Total accounts payable	19,641	92,788
Accrued liabilities	33,936	25,693
Total accounts payable and accrued liabilities	$53,577	$118,481

7. 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 of Canada. 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/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and the Office contribute to the cost of the Plan. The 2012-13 expense amounts to $94,122 and 94,122 in 2013-14.

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

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 valued of benefits earned to date to 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.

	Estimated Results 2013 (in dollars)	Forecast 2014 (in dollars)
Accrued benefit obligation, beginning of the year	$116,077	$74,773
Expense for the year	-41,304	39,600
Benefits paid during the year	-
Accrued benefit obligation, end of the year	$74,773	$114,373

8. Accounts Receivable and Advances (in dollars)

The following table presents details of accounts receivable and advances

	Estimated Results 2013	Forecast 2014
Receivables from other government departments and agencies	$23,178	$23,882
Petty cash advance	300	300
Total	$23,478	$24,182

9. Tangible Capital Assets

Capital Asset Class	Cost (in dollars)
	Opening Balance	Acquisitions	Disposals and write-offs	Closing Balance
Other equipment including furniture	$131,135	$8,000	-	$139,135
Informatics hardware	64,700	-	-	64,700
Leasehold improvements	34,442	-	-	34,442
Other work in progress	930,841	-	-	930,841
Total	$1,161,118	$8,000	-	$1,169,118

Capital Asset Class	Accumulated Amortization
	Opening Balance	Amortization	Disposals and write-offs	Closing Balance
Other equipment including furniture	$33,218	$27,827		$61,045
Informatics hardware	22,046	21,351	-	43,397
Leasehold improvements	8,613	3,444		12,057
Other work in progress	23,271	93,084	-	116,355
Total	$87,148	$145,706	-	$232,854

Capital Asset Class	Net Book Value (in dollars)
	2013	2014
Other equipment including furniture	$97,917	$78,090
Informatics hardware	42,654	21,303
Leasehold improvements	25,829	22,385
Other work in progress	907,570	814,486
Total	$1,073,970	$936,264

Amortization expense for the year ended March 31, 2013 is $73,149 and $145,706 for the year ended March 31, 2014.

10.  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 are received. A significant contractual obligation for occupancy costs that can be reasonably estimated is summarized as follows:

Fiscal Period	Amount
2012-13 (including storage)	$150,524
2013-14 (including storage)	150,524
2014-15 (including storage)	150,524
2015-16 (expires June 30, 2015)	36,495
Total	$488,067

11. Related Party Transactions

The Office is related as a result of common ownership to all Government of Canada departments, agencies and Crown Corporations. The Office enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Office received common services which were obtained without charge from other Government departments and agencies 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 and the employer's contribution to the health and dental insurance plans. These services provided without charge have been recorded in the Office's Future-oriented Statement of Operations and Departmental Net Financial Position as follows (in dollars):

	Estimated Results 2013	Forecast 2014
Employer's contribution to the health and dental insurance plans	$64,753	$65,464
Total	$64,753	$65,464

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 cost 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 Future-oriented Statement of Operations and Departmental Net Financial Position.

(b) Other Transactions with Related Parties         

	Estimated Results 2013	Forecast 2014
Expenses - other government departments and agencies	$532,342	$825,000

12. 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 4. 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):

Operating expenses	Program	Internal Services	Estimated Results 2013	Forecast 2014
Salaries and employee benefits	$757,067	$161,736	$918,803	$1,360,804
Professional and special services	409,175	117,221	$526,396	503,500
Accommodation and other rentals	155,417	49,079	$204,496	291,700
Amortization of tangible capital assets	55,593	17,556	$73,149	145,706
Transportation and telecommunications	16,416	5,184	$21,600	21,200
Printing and publishing	14,607	4,613	$19,220	20,000
Office expenses and equipment	7,446	2,351	$9,797	10,478
Utilities, material and supplies	6,865	2,168	$9,033	16,000
Repairs and maintenance	2,308	729	$3,037	3,000
Total program expenses	$1,424,894	$360,637	$1,785,531	$2,372,388