Financial Statements for the year ended March 31, 2020 (Unaudited)

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Statement of management responsibility including internal control over financial reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2020, and all information contained in these financial statements rests with the management of the Privy Council Office. These financial statements have been prepared by management using the Government of Canada'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 Privy Council Office's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in Privy Council Office's Departmental Results 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 Privy Council 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, 2020 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the Annex.

The effectiveness and adequacy of the Privy Council Office’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the Privy Council Office's operations, and by the Departmental Audit 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 Clerk of the Privy Council.

The financial statements of the Privy Council Office have not been audited.

Ian Shugart
Clerk of the Privy Council and Secretary to the Cabinet

Matthew Shea
Chief Financial Officer

Ottawa, Canada
September 23, 2020

Statement of Financial Position (Unaudited)

As at March 31

(in thousands of dollars)
  2020 2019
Liabilities
Accounts payable and accrued liabilities (note 4)
25,820 48,547
Vacation pay and compensatory leave
11,053 10,361
Employee future benefits (note 5b)
4,264 3,775
Total liabilities 41,137 62,683
Assets
Financial assets
Due from Consolidated Revenue Fund
21,203 45,098
Accounts receivable and advances (note 6)
7,377 5,727
Total net financial assets
28,580 50,825
Departmental net debt 12,557 11,858
Non-financial assets
Prepaid expenses
1,212 949
Inventory (note 7)
344 167
Tangible capital assets (note 8)
21,371 18,740
Total non-financial assets
22,927 19,856
Departmental net financial position 10,370 7,998
Contractual obligations (note 9)
Contingent liabilities (note 10)

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

Ian Shugart
Clerk of the Privy Council and Secretary to the Cabinet

Matthew Shea
Chief Financial Officer

Ottawa, Canada
September 23, 2020

Statement of operations and departmental net financial position (Unaudited)

For the year ended March 31

(in thousands of dollars)
  Planned Results
2020
2020 2019
Expenses
Serve the Prime Minister and Cabinet
83,547 93,057 127,664
Internal Services
114,587 111,074 105,681
Total expenses
198,134 204,131 233,345
Revenues
Miscellaneous revenues
13 15 24
Internal support services
1,085 2,094 960
Revenues earned on behalf of Government
(3) (15) (10)
Total Revenues
1,095 2,094 974
Net cost from continuing operations 197,039 202,037 232,371
Net cost of operations before government funding and transfers 197,039 202,037 232,371
Government funding and transfers
Net cash provided by Government of Canada
  204,764 198,451
Change in due from Consolidated Revenue Fund
  (23,895) 13,546
Services provided without charge by other government departments (note 11a)
  23,565 22,741
Transfer of overpayments
  (24) (27)
Transfer of tangible capital assets (to) / from other government departments
  - 32
Net cost of operations after government funding and transfers   (2,373) (2,372)
Departmental net financial position - Beginning of year   7,997 5,625
Departmental net financial position - End of year   10,370 7,997
Segmented information (note 13)

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

Statement of change in departmental net debt (Unaudited)

For the year ended March 31

(in thousands of dollars)
  2020 2019
Net cost of operations after government funding and transfers (2,373) (2,372)
Change due to tangible capital assets
Acquisition of tangible capital assets
5,024 5,688
Amortization of tangible capital assets
(2,399) (1,857)
Proceeds from disposal of tangible capital assets
(6) 13
Net (loss) or gain on disposal of tangible capital assets including adjustments
11 3
Tangible capital asset adjustments
- 32
Total change due to tangible capital assets
2,631 3,879
Change due to inventory
178 (104)
Change due to prepaid expenses
263 36
Net increase (decrease) in departmental net debt 699 1,439
Departmental net debt - Beginning of year 11,858 10,419
Departmental net debt - End of year 12,557 11,859
The accompanying notes form an integral part of these financial statements.

Statement of cash flow (Unaudited)

For the year ended March 31

(in thousands of dollars)
  2020 2019
Operating activities
Net cost of operations before government funding and transfers 202,037 232,371
Non-cash items:
Amortization of tangible capital assets
(2,399) (1,857)
Gain (loss) on disposal of tangible capital assets
11 3
Services provided without charge by other government departments (note 11a)
(23,565) (22,741)
Transfer of overpayments
24 27
Variations in Statement of Financial Position:
Increase (Decrease) in accounts receivable and advances
1,650 (2,730)
Increase (Decrease) in prepaid expenses
263 36
Increase (Decrease) in inventory
178 (104)
Decrease (Increase) in accounts payable and accrued liabilities
22,728 (11,233)
Decrease (Increase) in vacation pay and compensatory leave
(692) (1,778)
Decrease (Increase) in employee future benefits
(489) 756
Cash used in operating activities 199,746 192,750
Capital investing activities
Acquisitions of tangible capital assets (note 8) 5,024 5,688
Proceeds from disposal of tangible capital assets (6) 13
Cash used in capital investing activities 5,018 5,701
Net cash provided by the Government of Canada 204,764 198,451
The accompanying notes form an integral part of these financial statements.

Notes to the Financial Statements (Unaudited)

For the year ended March 31

1. Authority and objectives

Privy Council Office (PCO) is a division of the federal public administration as set out in column 1 of Schedule I.1 of the Financial Administration Act and reports to Parliament through the Prime Minister.

PCO reports directly to the Prime Minister and is led by the Clerk of the Privy Council and Secretary to the Cabinet. The Clerk is also the Head of the Public Service. The mandate of PCO is to serve Canada and Canadians by providing professional, non-partisan advice and support to the Prime Minister, and the ministers within the Prime Minister’s portfolio and Cabinet. PCO supports the development of the Government of Canada's policy and legislative agendas, coordinates responses to issues facing the Government and the country, and supports the effective operation of Cabinet.

Commissions of inquiry established under the Inquiries Act are designated as departments under the Financial Administration Act and the Prime Minister is designated as the “appropriate Minister” under that same Act. PCO provides administrative and financial management support to commissions of inquiry. There was one active commission in 2019-20: National Inquiry into Missing and Murdered Indigenous Women and Girls.

To achieve its strategic outcome and deliver results for Canadians, PCO articulates its plans and priorities based on the core programs included below.

Serve the Prime Minister and Cabinet

To deliver analysis, advice and support to the Prime Minister and Ministers of the Portfolio including non-partisan advice and information from across the Public Service resulting from consultations and collaboration with international and domestic sources inside and outside government. To act as secretariat to the Cabinet and its committees including managing the Cabinet's decision-making system; coordinate departmental policy proposals to Cabinet; schedule and provide support services for meetings of Cabinet and Cabinet committees; advance the Government's agenda across federal departments and agencies; and provide administrative services to the Prime Minister's Office, Portfolio Ministers and to Commissions of Inquiry. To lead and renew the public service in order to advise the government; implement its agenda; and deliver services and results to Canadians.

Internal services

Internal support 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 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 are prepared using PCO'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:

  1. (a) Parliamentary authorities
    :
    PCO is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to PCO 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 Departmental 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'' and ''Revenues'' sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2019-2020 Departmental Plan. Planned results are not presented in the ‘‘Government funding and transfers’’ section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2019-2020 Departmental Plan.
  2. (b) Net cash provided by Government
    :
    PCO operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by PCO is deposited to the CRF, and all cash disbursements made by PCO 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.
  3. (c) Amounts due from or to the CRF
    :
    Amounts due from or to 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 PCO is entitled to draw from the CRF without further authorities to discharge its liabilities.
  4. (d) Revenues
    :
    • Revenues are recognized in the period in which the event that gave rise to the revenues occurred.
    • Revenues that are non-respendable are not available to discharge the PCO's liabilities. While the Clerk of the Privy Council and Secretary to the Cabinet is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented as a reduction of PCO’s gross revenues.
  5. (e) Expenses
    :
    Expenses are recorded on an accrual basis:
    • Transfer payments are recorded as an expense in the year the transfer is authorized and all eligibility criteria have been met by the recipient.
    • 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 contributions to the health and dental insurance plans and workers' compensation are recorded as operating expenses at their carrying value.
  6. (f) Employee future benefits
    :
    • Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. PCO's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. PCO'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: The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
  7. (g) Accounts receivable
    :
    Accounts receivable are initially recorded at cost and when necessary, an allowance for valuation is recorded to reduce the carrying value of accounts receivable to amounts that approximate their net recoverable value.
  8. (h) Non-financial assets
    :
    The costs of acquiring land, buildings, equipment and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in Note 8. All tangible capital assets having an initial cost of $5,000 or more are recorded at their acquisition cost. Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, works of art, museum collection and Crown land to which no acquisition cost is attributable; and intangible assets.
     
    Inventories are valued at cost and are comprised of spare parts and supplies held for future program delivery and are not primarily intended for resale. Inventories that no longer have service potential are valued at the lower of cost or net realizable value.
  9. (i) Contingent liabilities
    :
    Contingent liabilities, including the allowance for guarantees, are potential liabilities, which may become actual liabilities when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, a provision is accrued and an expense recorded to other expenses. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.
     
    For guarantees, an allowance is recorded when it is determined that a loss is likely and the amount of the allowance is estimated taking into consideration the nature of the guarantee, loss experience and current conditions. The allowance is reviewed on an ongoing basis and changes in the allowance are recorded as expenses in the year they become known.
  10. (j) Measurement uncertainty
    :
    The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government's best estimate of the related amount at the end of the reporting period. The most significant items where estimates are used are contingent liabilities, 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

PCO receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental 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, PCO 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 thousands of dollars)
  2020 2019
Net cost of operations before government funding and transfers 202,037 232,371
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets
(2,399) (1,857)
Gain (loss) on disposal of tangible capital assets
11 3
Services provided without charge by other government departments
(23,565) (22,741)
Increase / (decrease) in vacation pay and compensatory leave
(692) (1,779)
Increase / (decrease) in employee future benefits
(489) 755
Increase / (decrease) in accrued liabilities not charged to authorities
- 300
Refund of prior years’ expenditures
4,433 516
Tangible capital asset adjustments
- 490
Other
18 19
Total items affecting net cost of operations but not affecting authorities (22,683) (24,294)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets
5,024 5,688
Increase / (decrease) in inventory
178 (104)
Increase / (decrease) in prepaid expenses
263 36
Accounts receivable and advances
531 579
Total items not affecting net cost of operations but affecting authorities 5,996 6,199
Current year authorities used 185,350 214,275

(b) Authorities provided and used

(in thousands of dollars)
  2020 2019
Authorities provided
Vote 1 - Operating expenditures
176,769 217,382
Statutory amounts
16,879 16,612
Less:
Authorities available for future years
- (16)
Lapsed: Operating
(8,298) (19,703)
Current year authorities used 185,350 214,275

4. Accounts payable and accrued liabilities

The following table presents details of PCO's accounts payable and accrued liabilities:
(in thousands of dollars)
  2020 2019
Accounts payable - Other government departments and agencies 6,425 9,382
Accounts payable - External parties 18,404 38,374
Total accounts payable 24,829 47,756
Other liabilities 991 791
Total accounts payable and accrued liabilities 25,820 48,547

5. Employee future benefits

(a) Pension benefits

PCO's employees participate in the Public Service Pension Plan (the ''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/Québec Pension Plan benefits and they are indexed to inflation.

Both the employees and employer 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 related 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 2019-20 expense amounts to $14,929,268 ($14,714,661 in 2018-19). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2018-19) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2018-19) the employee contributions.

PCO's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Consolidated Financial Statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

Severance benefits provided to PCO’s employees were previously based on an employee’s eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2018, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

The changes in the obligations during the year were as follows:

(in thousands of dollars)
  2020 2019
Accrued benefit obligation - Beginning of year 3,775 4,531
Expense for the year 766 (355)
Benefits paid during the year (277) (401)
Accrued benefit obligation - End of year 4,264 3,775

6. Accounts receivable and advances

The following table presents details of PCO's accounts receivable and advances balances:

(in thousands of dollars)
  2020 2019
Receivables - Other government departments and agencies 5,474 3,996
Receivables - External parties 1,732 1,597
Employee advances 176 171
Subtotal 7,382 5,764
Allowance for doubtful accounts on receivables from external parties 5 37
Net accounts receivable 7,377 5,727

7. Inventory

The following table presents details of PCO's inventory, measured at cost using the specific identification method:

(in thousands of dollars)
  2020 2019
Office equipment and furniture 345 167
Total inventory 345 167

8. Tangible capital assets

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
Machinery and equipment 5 to 15 years
Informatics hardware 3 to 5 years
Informatics software 3 to 5 years
Other equipment 10 to 15 years
Motor vehicles 3 to 10 years
Assets under construction Once in service, in accordance with asset class
Assets under construction are recorded in the applicable asset class in the year they are put into service and are not amortized until they are put into service.
(in thousands of dollars)

Cost

Accumulated Amortization
Net Book Value
Capital Asset Class Opening Balance Acquisitions Adjustments (1) Disposal
and
Write-Offs
Closing
Balance
Opening Balance Amortization Adjustments (1) Disposal
and
Write-Offs
Closing
Balance
2020 2019
Machinery and equipment 60 - - - 60 55 3 - - 58 2 5
Informatics hardware 4,738 259 - - 4,997 4,026 283 - - 4,309 688 712
Informatics software 13,772 - - - 13,772 10,117 1,045 - - 11,162 2,610 3,655
Other equipment 14,113 30 - - 14,143 6,714 985 - - 7,699 6,444 7,399
Motor vehicles 606 49 - 156 499 383 83 (31) 132 303 196 223
Assets under construction - software 455 939 - - 1,393 - - - - - 1,393 455
Assets under construction - other 6,291 3,747 - - 10,038 - - - - - 10,038 6,291
Total 40,034 5,024 - 156 44,902 21,295 2,399 (31) 132 23,531 21,371 18,740
(1) Adjustments include assets under construction that were transferred to the other categories upon completion of the assets.

9. Contractual obligations

The nature of PCO's activities may result in some large multi-year contracts and obligations whereby PCO will be obligated to make future payments in order to carry out its programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in thousands of dollars)
 
2021

2022

2023

2024

2025
2026 and
subsequent

Total
Professional and special services 6,171 69 - - - - 6,240
Information 2,621 67 - - - - 2,688
Repair and maintenance 2,121 14 14 - - - 2,149
Rental 436 177 143 109 110 - 975
Transportation and communications 166 143 143 143 107 - 702
Acquisition of machinery and equipment 1,199 - - - - - 1,199
Utilities, materials and supplies 152 - - - - - 152
Total 12,866 470 300 252 217 - 14,105

10. Contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown.

These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. PCO has not recorded an allowance for claims and litigations for the 2019-20 fiscal year.

11. Related party transactions

PCO is related as a result of common ownership to all government departments, agencies, and Crown corporations. PCO enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, PCO has an agreement with the National Security Intelligence Review Agency and the National Security and Intelligence Committee of Parliamentarians for the provision of finance and administration services which is included in the revenues of section b) of this note. During the year, PCO 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, PCO received services without charge from certain common service organizations, related to accommodation, the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded at the carrying value in PCO's Statement of Operations and Departmental Net Financial Position as follows:

(in thousands of dollars)
  2020 2019
Accommodation 13,016 10,145
Employer’s contribution to the health and dental insurance plans 10,549 8,316
Worker’s compensation - 1
Total 23,565 18,462

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 PCO's Statement of Operations and Departmental Net Financial Position. The costs of information technology infrastructure services provided by Shared Services Canada, following the transfer of responsibilities in November 2011 are also not included in PCO's Statement of Operations and Departmental Net Financial Position.

b) Other transactions with other government departments and agencies

(in thousands of dollars)
  2020 2019
Expenses 31,442 56,550
Revenues 2,002 75

12. Transfers from/to other government departments

Effective November 20, 2019, the PCO transferred responsibility for the Youth Secretariat and the LGBTQ2 Secretariat to the Department of Canadian Heritage in accordance with OIC 2019-1370.

During the transition period, PCO continued to administer the transferred activities on behalf of the Department of Canadian Heritage. The administered expenses amount to $638,557 and are not recorded in these financial statements.

13. Segmented information

Presentation by segment is based on PCO's core responsibility. 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 and revenues generated for the main program alignments, by major object of expense and by major type of revenue. The segment results for the period are as follows:

(in thousands of dollars)
  Serve the Prime Minister and Cabinet Internal Services 2020 2019
Expenses
Salary and employee benefits
74,914 69,367 144,281 145,032
Professional and special services
3,934 16,631 20,565 33,777
Accommodation
397 13,016 13,413 13,216
Transport and telecommunications
2,184 2,983 5,167 8,347
Information
8,413 194 8,607 14,989
Acquisition of machinery and equipment
168 3,030 3,198 4,703
Repair and maintenance
10 3,918 3,928 3,624
Amortization of tangible capital assets
94 2,305 2,399 1,857
Rentals
184 2,065 2,249 1,931
Utilities, materials and supplies
315 814 1,129 1,123
Transfer payments
1,580 - 1,580 7,431
Other
864 (3,248) (2,384) (2,685)
Total Expenses 93,057 111,075 204,132 233,345
Revenues
Miscellaneous
- 15 15 24
Internal support services
876 1,219 2,095 960
Revenues earned on behalf of Government
- (15) (15) (10)
Total Revenues 876 1,219 2,095 974
Net cost from continuing operations 92,181 109,856 202,037 232,371

Annex to the Statement of management responsibility including internal control over financial reporting of the Privy Council Office for fiscal year 2019-20 (unaudited)

1. Introduction

This document provides summary information on measures taken by the Privy Council Office (PCO) to maintain an effective system of internal control over financial reporting (ICFR) including information on internal control management, assessment results and related action plans.

Detailed information on PCO’s authority, mandate, and programs can be found in its most recent Departmental Plan and Departmental Results Report.

2. Departmental system of internal control over financial reporting

2.1 Internal Control Management

PCO has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. This structure is formalized in the departmental Internal Control over Financial Reporting framework, approved by the Clerk of the Privy Council, and includes the following:

The DAC is an independent and objective advisory committee to the Clerk. It is responsible for providing advice to the Clerk on the adequacy and functioning of PCO's risk management, control and governance frameworks and processes.

2.2 Service Arrangements relevant to financial statements

PCO relies on other government departments for the processing of certain transactions that are recorded in its financial statements as follows:

3. Departmental assessment results during fiscal year 2019-20

New or significantly amended key controls - As a result of the COVID-19 pandemic, select business processes were modified to enable them to remain operational and effective while key staff work remotely. Digital signatures were introduced consistent with the approach identified by the Office of the Comptroller General to enable financial and other authorizations to continue to operate efficiently and effectively at PCO. This impacted multiple processes relying on the use of signatures including expenditures, delegation of authority, and procurement. Year-end close processes were modified as needed due to the requirement for staff to work remotely, however the impacts were not significant. Changes to the resulting redesigned processes have been documented.

On-going monitoring program - As part of its rotational on-going monitoring plan, PCO completed the assessment or reassessment of controls for the key processes included in section 4.1 below.  For the most part, the key controls that were tested performed as intended with remediation required to improve processes related to the timely deactivation of delegated authorities following employee departure, improving documentation and verification practices to ensure files are complete, auditable and contain all required supporting documents, and ensuring evidence is available to demonstrate the completion of some key control activities. Management action plans have been developed to address these findings.

PCO also completed a risk assessment in fiscal 2019-20 using an environmental scan and interviews with key stakeholders. This risk assessment resulted in certain business sub-processes (see section 4.2) being combined to achieve a more effective and efficient future-year approach to ICFR monitoring.  

In light of impacts to business processes resulting from COVID-19, PCO subsequently re-evaluated the ICFR risks in line with the guidance issued by the Office of the Comptroller General. The results of the risk assessment were used to update PCO's risk-based ongoing monitoring plan (see section 4.2).

4. Departmental action plan

4.1 Progress during fiscal year 2019-20

PCO conducted its on-going monitoring according to the previous fiscal year’s rotational plan as follows:

Previous year’s rotational on-going monitoring plan for current year Status
  • Travel Expenses
Completed. Remediation actions are planned.
  • Payroll
Monitoring of pre-payment processes completed. Remediation actions are planned.
  • Financial Delegation
Completed. Remediation actions are planned.
  • Accounts Receivable and Deposits
Completed. Remedial actions are complete.
  • Other Operating Expenditures
Not applicable in 2019-20 as transactions were immaterial. Combined with Operating Expenses and Procurement for future review.
  • Departmental Net Asset (Liabilities)
Not applicable in 2019-20 as this was determined to be encompassed with Financial Close and Reporting for future review.

4.2 Departmental action plan for the next fiscal year and subsequent years

PCO’s rotational ongoing monitoring plan for the next three years, presented in the table below, is based on its annual risk assessment:

Rotational on-going monitoring plan for internal control over financial reporting
Key control areas Operating effectiveness testing rotation
Fiscal year 2020-21 Fiscal year 2021-22 Fiscal year 2022-23
Entity Level Controls     X
Information Technology General Controls X    
Capital Assets and Inventory X    
Payroll     X
Operating Expenses and Procurement 1   X  
Delegation of Authority   X  
Liabilities   X  
Accounts Receivable, Revenue, Cash and Deposits     X
Financial Close and Reporting 2 X    
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