Financial Statements for 2009-2010
Statement of Management Responsibility
Responsibility for the integrity and objectivity of the accompanying financial statements of the Office of the Communications Security Establishment Commissioner (Office/OCSEC) for the year ended March 31, 2010 and all information contained in these statements rests with the Office's management. These financial statements have been prepared by management in accordance with Treasury Board accounting policies which are consistent with 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 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 to the Public Accounts of Canada and included in the Office's Departmental Performance Report is consistent with these financial statements.
Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the Office.
The financial statements of the Office have not been audited.
_________________________
Robert Décary, Q.C.
Commissioner
_________________________
J. William Galbraith
Chief Financial Officer
Ottawa, Canada
Date:
Statement of Operations (unaudited) for the Year Ended March 31 (in dollars)
|
2010 |
2009 |
|||
|---|---|---|---|---|
|
Review Program |
Internal Services Program |
Total |
Total |
|
|
Expenses |
||||
|
Salaries and employee benefits |
850,926 |
186,790 |
1,037,716 |
1,203,432 |
|
Professional and special services |
235,983 |
142,482 |
378,465 |
258,294 |
|
Accommodation |
147,926 |
147,926 |
146,312 |
|
|
Travel and relocation |
26,191 |
1,682 |
27,873 |
35,637 |
|
Printing and publishing |
11,125 |
8,194 |
19,319 |
16,303 |
|
Rentals |
- |
9,142 |
9,142 |
11,059 |
|
Telephone and telecommunications |
- |
7,513 |
7,513 |
7,643 |
|
Materials and supplies |
- |
6,467 |
6,467 |
7,822 |
|
Machinery and equipment |
- |
4,575 |
4,575 |
4,621 |
|
Amortization |
- |
2,843 |
2,843 |
- |
|
Postage and courier |
- |
507 |
507 |
56 |
|
Repair and maintenance |
- |
458 |
458 |
1,913 |
|
Net Cost of Operations |
1,124,225 |
518,579 |
1,642,804 |
1,693,092 |
|
The accompanying notes form an integral part of these financial statements. |
||||
Statement of Financial Position (unaudited) at March 31 (in dollars)
|
2010 |
2009 |
|
|---|---|---|
|
ASSETS |
||
|
Financial assets |
||
|
Accounts receivable and advances (note 4) |
1,885 |
2,670 |
|
Total financial assets |
1,885 |
2,670 |
|
Non-financial assets |
||
|
Tangible capital assets (note 5) |
16,132 |
18,975 |
|
Total non-financial assets |
16,132 |
18,975 |
|
TOTAL |
18,017 |
21,645 |
|
Liabilities |
||
|
Accounts payable and accrued liabilities (note 6) |
104,576 |
413,712 |
|
Vacation pay and compensatory leave |
87,027 |
75,577 |
|
Employee severance benefits (note 7) |
191,005 |
159,823 |
|
Total liabilities |
382,608 |
649,112 |
|
Equity of Canada |
(364,591) |
(627,467) |
|
TOTAL |
18,017 |
21,645 |
|
Contractual obligations (Note 9) |
||
|
The accompanying notes form an integral part of these financial statements. |
||
Statement of Equity of Canada (unaudited) at March 31 (in dollars)
|
2010 |
2009 |
|
|---|---|---|
|
Equity of Canada, beginning of year |
(627,467) |
- |
|
Net cost of operations |
(1,642,804) |
(1,693,092) |
|
Current year appropriations used (note 3) |
1,532,576 |
1,411,914 |
|
Change in net position in the Consolidated Revenue Fund (Note 3) |
308,351 |
(411,042) |
|
Services received without charge from other government departments (note 8) |
64,753 |
64,753 |
|
Equity of Canada, end of year |
(364,591) |
(627,467) |
|
The accompanying notes form an integral part of these financial statements. |
||
Statement of Cash Flow (unaudited) for the Year Ended March 31 (in dollars)
|
2010 |
2009 |
|
|---|---|---|
|
Operating activities |
||
|
Net cost of operations |
1,642,804 |
1,693,092 |
|
Non-cash items: |
||
|
Amortization of tangible capital assets |
(2,843) |
|
|
Services provided without charge by other government departments (note 8) |
(64,753) |
(64,753) |
|
Variations in Statement of Financial Position |
||
|
(Decrease) increase in accounts receivable |
(785) |
2,670 |
|
Decrease (increase) in liabilities |
266,504 |
(649,112) |
|
Cash used by operating activities |
1,840,927 |
981,897 |
|
Capital investment activities |
||
|
Acquisitions of tangible capital assets |
- |
18,975 |
|
Cash used by capital investment activities |
- |
18,975 |
|
Net cash provided by Government of Canada |
1,840,927 |
1,000,872 |
|
The accompanying notes form an integral part of these financial statements. |
||
Notes to the Financial Statements (unaudited)
1. Authority and Objectives
The Office of the Communications Security Establishment Commissioner (Office/OCSEC) was created on June 19, 1996. It was established as a separate agency of government in April 2008. The duties of the Commissioner are set out under the following subsections of the National Defence Act:
273.63(2)
a) to review the activities of the Communications Security Establishment Canada to ensure they comply with the law;
b) in response to a complaint, to undertake any investigation that the Commissioner considers necessary;
c) to inform the Minister of National Defence and the Attorney General of Canada of any activity of Communications Security Establishment Canada that the Commissioner believes may not be in compliance with the law;
273.65(8)
to review and report to the Minister as to whether the activities carried out under a ministerial authorization are authorized;
273.63(3)
to submit an annual report to the Minister on the Commissioner's activities and findings within 90 days after the end of each fiscal year;
and under the Section 15 of the Security of Information Act:
to receive information from persons who are permanently bound to secrecy and who seek to defend the release of classified information about Communications Security Establishment Canada on the grounds that it is in the public interest.
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 Commissioner's 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. Summary of Significant Accounting Policies
The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.
Significant accounting policies are as follows:
(a) Parliamentary appropriations – OCSEC is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to OCSEC do not parallel financial reporting according to generally accepted accounting principles since appropriations 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 appropriations from Parliament. Note 3 provides a high-level reconciliation between the two bases of reporting.
(b) Net Cash Provided by Government - OCSEC operates within the Consolidated Revenue Fund (CRF) which is administered by the Receiver General for Canada. All cash received by OCSEC is deposited to the CRF and all cash disbursements made by OCSEC are paid from the CRF. Net cash provided by government is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.
(c) Change in net position in the Consolidated Revenue Fund is the difference between the net cash provided by Government and appropriations used in a year. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.
(d) Expenses - Expenses are recorded on the accrual basis:
- Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
- A service provided without charge by another government department for the employer's contribution to the health and dental insurance plans is recorded as an operating expense at its estimated cost.
(e) Employee future benefits
- Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government of Canada. OCSEC's contributions to the Plan are charged to expenses in the year incurred and represent the total OCSEC obligation to the Plan. Current legislation does not require OCSEC to make contributions for any actuarial deficiencies of the Plan.
- ii. 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 and advances are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.
(g) All tangible capital assets and leasehold improvements having an initial cost of $5,000 or more are recorded at their acquisition cost. OCSEC does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.
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 |
|
Leasehold improvements |
remaining term of the lease |
(h) Measurement uncertainty - The preparation of these financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities 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. Parliamentary appropriations
OCSEC receives its funding through annual Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, OCSEC 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 appropriations used:
|
(in dollars) |
||
|---|---|---|
|
2010 |
2009 |
|
|
Net cost of operations |
1,642,804 |
1,693,092 |
|
Adjustments for items affecting net cost of operations but not affecting appropriations |
||
|
Add (Less): |
||
|
Services provided without charge by other government departments |
(64,753) |
(64,753) |
|
Amortization of tangible capital assets |
(2,843) |
- |
|
(Increase) in employee severance benefits liability |
(31,182) |
(159,823) |
|
(Increase) in vacation pay and compensatory leave liability |
(11,450) |
(75,577) |
|
1,532,576 |
1,392,939 |
|
|
Adjustments for items not affecting net cost of operations but affecting appropriations |
||
|
Add: Acquisition of tangible capital assets |
- |
18,975 |
|
Current year appropriations used |
1,532,576 |
1,411,914 |
(b) Appropriations provided and used
Appropriations Provided
|
(in dollars) |
||
|---|---|---|
|
2010 |
2009 |
|
|
Vote 25 - Operating expenditures |
2,123,976 |
1,364,520 |
|
Statutory amounts |
142,885 |
120,592 |
|
Less: |
||
|
Lapsed appropriations: Operating |
(734,285) |
(73,198) |
|
Current year appropriations used |
1,532,576 |
1,411,914 |
(c) Reconciliation of net cash provided by Government to current year appropriations used
|
(in dollars) |
||
|---|---|---|
|
2010 |
2009 |
|
|
Net cash provided by Government |
1,840,927 |
1,000,872 |
|
Change in net position in the Consolidated Revenue Fund |
||
|
(Increase) in accounts receivable and advances |
785 |
(2,670) |
|
Increase in accounts payable and accrued liabilities |
(309,136) |
413,712 |
|
(308,351) |
411,042 |
|
|
Current year appropriations used |
1,532,576 |
1,411,914 |
4. Accounts Receivable and Advances
|
(in dollars) |
||
|---|---|---|
|
2010 |
2009 |
|
|
Receivables from other Federal Government departments and agencies |
1,885 |
2,670 |
5. Tangible Capital Assets (in dollars)
|
Cost |
||||
|---|---|---|---|---|
|
Opening Balance |
Acquisitions |
Disposals and write-offs |
Closing Balance |
|
|
Capital Asset Class |
||||
|
Other equipment including furniture |
10,890 |
- |
- |
10,890 |
|
Leasehold improvements |
8,085 |
- |
- |
8,085 |
|
Total |
18,975 |
- |
- |
18,975 |
|
Accumulated Amortization |
||||
|---|---|---|---|---|
|
Opening Balance |
Amortization |
Disposals and write-offs |
Closing Balance |
|
|
Other equipment including furniture |
- |
1,271 |
- |
1,271 |
|
Leasehold improvements |
- |
1,572 |
- |
1,572 |
|
Total |
- |
2,843 |
- |
2,843 |
|
Net Book Value |
||
|---|---|---|
|
2010 |
2009 |
|
|
Other equipment including furniture |
9,619 |
10,890 |
|
Leasehold improvements |
6,513 |
8,085 |
|
Total |
16,132 |
18,975 |
|
Amortization expense for the year ended March 31, 2010 is $2,843 (2009 was nil). |
||
6. Accounts Payable and Accrued Liabilities
|
(in dollars) |
||
|---|---|---|
|
2010 |
2009 |
|
|
Payables to external parties |
87,317 |
113,695 |
|
Payables to other Federal Government departments and agencies |
17,259 |
300,017 |
|
104,576 |
413,712 |
|
7. Employee Benefits
(a) Pension benefits: OCSEC'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 department contribute to the cost of the Plan. The 2009-10 expense amounts to $103,163 ($87,067 in 2008-09) which represents approximately 1.9 times (2.0 in 2008-09) the contributions by employees.
OCSEC'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: OCSEC 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 appropriations. Information about the severance benefits, measured as at March 31, is as follows:
|
(in dollars) |
||
|---|---|---|
|
2010 |
2009 |
|
|
Accrued benefit obligation, beginning of year |
159,823 |
- |
|
Expense for the year |
94,077 |
159,823 |
|
Benefits paid during the year |
(62,895) |
- |
|
Accrued benefit obligation, end of year |
191,005 |
159,823 |
8. Related party transactions
OCSEC is related as a result of common ownership to all Government of Canada departments, agencies and Crown Corporations. OCSEC enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, OCSEC received services which were obtained without charge from other Government departments as presented in part (a).
a) Services provided without charge:
During the year, OCSEC received without charge from another government department the employer's contribution to the health and dental insurance plans. This service without charge has been recognized in OCSEC's Statement of Operations as follows:
|
(in dollars) |
||
|---|---|---|
|
2010 |
2009 |
|
|
Employer's contribution to the health and dental insurance plans |
$64,753 |
64,753 |
The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge. The cost of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included as an expense in OCSEC's Statement of Operations.
9. Contractual Obligations
OCSEC has commitments for operating leases for accommodations of $784,669 for future years.
Minimum future lease payments are as follows:
|
Fiscal Period |
Amount (in dollars) |
|---|---|
|
2010-11 |
145,834 |
|
2011-12 |
147,566 |
|
2012-13 |
149,220 |
|
2013-14 |
150,875 |
|
2014-15 |
152,595 |
|
2015-16 (lease expires June 30, 2015) |
38,579 |
|
784,669 |
- Date modified: