Financial Statements - For the year ended March 31, 2015

1. Authority and objectives

The Public Service Commission (PSC) is an independent agency established under the Public Service Employment Act (PSEA) and listed in schedules 1.1 and IV of the Financial Administration Act (FAA). The PSC reports independently to Parliament and is dedicated to building a public service that strives for excellence by protecting merit, non-partisanship, and representativeness of Canadian society and the use of both official languages. This responsibility is performed in the best interests of the public service as part of Canada’s governance system, by administering and applying the provisions of the PSEA and by carrying out responsibilities as provided for in the Employment Equity Act and the Official Languages Act. The current PSEA came into force in December 2005. This legislation emphasizes the PSC’s accountability to Parliament and delegates staffing authority to deputy heads, who, in turn, are accountable to the PSC for exercising this power. The Commission also carries out audits and investigations and administers measures under the PSEA regarding political activities of public servants.

The PSC, from its head office in Gatineau and its five regional offices, offers recruitment services that allow talented Canadians to join the public service and continually renews its recruitment services to meet the needs of a modern and innovative public service. The PSC has four programs that contribute to the achievement of its objectives:

The Staffing System Integrity and Political Impartiality program is focused on independently safeguarding merit and non-partisanship in the federal public service. This program includes developing and advancing strategic policy positions and directions, conducting policy research, establishing PSC policies and standards, providing advice, interpretation and guidance, administering delegated and non-delegated authorities, including official languages, the political activities regime and Priority Administration.

The Oversight of Integrity in Staffing and of Non-Partisanship program provides an accountability regime for the implementation of the appointment policy and regulatory framework for safeguarding the integrity of public service staffing and ensuring staffing is free from political influence. This program includes monitoring departments’ and agencies’ staffing performance and compliance with legislative requirements, conducting audits and studies, carrying out investigations, and reporting to Parliament on the integrity of public service staffing and the non-partisanship of the public service.

The Staffing Services and Assessment program maintains the systems that link Canadians and public servants seeking employment opportunities in the federal public service with hiring departments and agencies. It provides assessment-related products and services in the form of research and development, consultation, assessment operations and counselling for use in recruitment, selection and development throughout the federal public service. This program also includes delivering staffing services, programs and products to departments and agencies, to Canadians and to public servants, through client service units located across Canada.

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

2. Summary of significant accounting policies

These financial statements have been prepared 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:

1. Parliamentary authorities

   The PSC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the PSC 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 Statement of Operations and Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2013-14 Report on Plans and Priorities.

2. Net cash provided by the Government

   The PSC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the PSC is deposited to the CRF and all cash disbursements made by the PSC 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. Amounts due from the Consolidated Revenue Fund

   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 the PSC is entitled to draw from the CRF without further appropriations to discharge its liabilities.

4. Revenues

   Revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenues takes place. PSC’s revenues are composed of:

   • Revenues are derived from the provision of assessment and counselling services and products. They are recognized in the accounts based on the services provided in the year.
   • Proceeds from the disposal of Surplus Crown Assets;
   • Other revenues collected as Employment Benefits Plan, User fee and other charges.

5. Expenses

   Expenses are recorded on an accrual basis.

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

   Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans, legal services, worker’s compensation and information technology services are reported as operating expenses at their estimated cost.

6. Employee future benefits

   1. Pension benefits

      Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The PSC’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The PSC’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 using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

7. 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.

8. Contingent liabilities

   Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

9. 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. Similar items under $5,000 are expensed in the Statement of Operations and Departmental Net Financial Position. The cost of assets under development by the PSC includes material, direct labour and related overhead. Amounts included in assets under development are transferred to the appropriate class of asset upon completion, and are then amortized.

   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
   Office equipment	3 and 10 years
   Informatics hardware and infrastructure	4 and 5 years
   Computer software	3 years
   In-house developed software	Lesser of 12 years and useful life
   Furniture and fixtures	15 years
   Vehicles	6 years
   Leasehold improvements	Lesser of 10 years and term of lease
   Leased equipment	Lesser of term of lease and useful life

10. Measurement uncertainty

    The preparation of these financial statements requires management to make estimates and assumptions that affect 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 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

The PSC receives most of 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 PSC 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:

4. Accounts payable and accrued liabilities

In Canada’s Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over the next three fiscal years starting in 2012‒2013. As a result, the Department has recorded at March 31, 2015, an obligation for termination benefits for an amount of $5,398,300 ($6,733,650 in 2013‒2014) as part of accrued liabilities to reflect the estimated workforce adjustment costs.

5. Lease obligation for tangible capital assets

The PSC has entered into agreement for photocopier rental under capital lease with a cost of $5,700 and accumulated amortization of $4,179 as at March 31^st, 2015 (total of $5,700 and $3,039 at March 31^st, 2014).

The outstanding liability is related to one photocopier in Montreal with a contract end date of July 2016.

6. Employee future benefits

1. Pension benefits

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

   Both the employees and the PSC 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 related to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate. The 2014-15 expense amounts to $6,929,000 ($9,135,000 in 2013-2014). For Group 1 members, the expense represents approximately 1.4 times (1.6 in 2013-14) the employee contributions and, for Group 2 members, approximately 1.4 times (1.5 in 2013-14) the employee contributions.

   The PSC'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

   The PSC 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 (in thousands of dollars)

   	2015	2014
   Accrued benefit obligation, beginning of year	6,734	9,074
   Expense for the year	negative (297)	2,017
   Benefits paid during the year	negative (1,039)	negative (4,357)
   Accrued benefit obligation, end of year	5,398	6,734

   As part of the collective agreement, employees have been given the option to collect the full or remaining value of benefits on termination from the public service.

7. Accounts receivable and advances

9. Contractual obligations

The nature of the PSC's activities can result in some large multi-year obligations whereby the PSC will be obligated to make future payments when the services are received. Significant contractual obligations other than the lease obligation for tangible capital assets that can be reasonably estimated are summarized as follows:

10. Contingent liabilities

Contingent liabilities arise in the normal course of operations. There is no claim outstanding at March 31, 2015 ($0 at March 31, 2014).

11. Related party transactions

The PSC is related as a result of common ownership to all government departments, agencies, and Crown corporations. The PSC enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the PSC received common services which were obtained without charge from other government departments as disclosed below.

1. Common services provided without charge by other government departments

   During the year, the PSC received services without charge from certain common service organizations, related to accommodation, employer’s contribution to the health and dental insurance plans, legal services, workers' compensation coverage and information technology services. These services provided without charge have been recorded in the PSC’s Statement of Operations and Net Financial Position as follows.

   Services

   (in thousands of dollars)

   	2015	2014
   Accommodation	10,015	10,278
   Employer's contribution to the health and dental insurance plans	5,226	5,873
   Legal services	774	716
   Worker's compensation	40	37
   Information technology services	4,735	4,596
   Total	20,790	21,500

   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.

2. Other transactions with related parties

   Transactions with other government departments and agencies

   (in thousands of dollars)

   	2015	2014
   Expenses	15,004	18,119
   Revenues	9,829	10,565

   Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).

12. Transfer of Accounts Receivable to Public Works and Government Services

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 Department. However, it did result in the use of additional spending authorities by the Department, along with the creation of an interim account receivable. Prior to year end, this interim account receivable was transferred to Public Works and Government Services Canada, who is responsible for the administration of the Government pay system.

13. Segmented information

Presentation by segment is based on the PSC’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 and revenues generated for the main programs, by major object of expense and by major type of revenue.