Departmental Financial Statements

 

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, 2014, and all information contained in these statements rests with the management of Shared Services Canada. These financial statements have been prepared by management using the government’s accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management’s best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of Shared Services Canada’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in Shared Services Canada’s Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities 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 Shared Services Canada 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.

As summarized in the attached annex accompanying these financial statements, a risk-based assessment of the system of ICFR for the year ended March 31, 2014 was completed in accordance with the Treasury Board Policy on Internal Control.

The effectiveness and adequacy of Shared Services Canada’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of Shared Services Canada’s operations, and by the Departmental Audit and Evaluation Committee, which provides objective advice and recommendations to the President regarding the sufficiency, quality and results of assurance on the adequacy and functioning of the department’s risk management, control and governance frameworks and processes. The Committee also provides advice on the financial statements to the President of Shared Services Canada.

The financial statements of Shared Services Canada have not been audited.



Original signed by Grant Westcott
for Liseanne Forand


Liseanne Forand
President

 

Ottawa, Canada
August 27, 2014


Original signed by Pankaj Sehgal
for Elizabeth Tromp


Elizabeth Tromp
A/Senior Assistant Deputy Minister,
Corporate Services, and
Chief Financial Officer

Shared Services Canada
Statement of Financial Position ( Unaudited)
As at March 31
(in thousands of dollars)
  2014 2013
Liabilities
Accounts payable and accrued liabilities (note 4) 431,036 384,180
Vacation pay and compensatory leave 31,487 22,333
Deferred revenue (note 5) 12,716 17,340
Lease obligations for tangible capital assets (note 6) 29,313 52,201
Employee future benefits (note 7) 29,165 57,531
Total liabilities 533,717 533,585
Financial assets
Due from the Consolidated Revenue Fund 332,965 267,299
Accounts receivable and advances (note 8) 138,568 181,475
Total gross financial assets 471,533 448,774
Financial assets held on behalf of Government
Accounts receivable and advances (note 8) (2,388) (3,587)
Total financial assets held on behalf of Government (2,388) (3,587)
Total net financial assets 469,145 445,187
Departmental net debt 64,572 88,398
Non-financial assets
Prepaid expenses 27,735 34,850
Tangible capital assets (note 9) 329,927 324,147
Total non-financial assets 357,662 358,997
Departmental net financial position 293,090 270,599

Contractual obligations (note 10)
Contingent liabilities (note 11)

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



Original signed by Grant Westcott
for Liseanne Forand


Liseanne Forand
President

Ottawa, Canada
August 27, 2014

Original signed by Pankaj Sehgal
for Elizabeth Tromp


Elizabeth Tromp
A/Senior Assistant Deputy Minister,
Corporate Services, and
Chief Financial Officer

Shared Services Canada
Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31
(in thousands of dollars)
  2014 2014 2013
Planned Results    
Expenses
Efficient and effective IT infrastructure services 1,480,014 1,877,231 1,647,030
Internal services 207,553 157,194 118,300
Total expenses 1,687,567 2,034,425 1,765,330
Revenues
Sale of goods and services 317,117 342,901 381,915
Miscellaneous revenues 55 47 35
Revenues earned on behalf of Government (37) (8,146) (8,470)
Total revenues 317,135 334,802 373,480
Net cost of operations before government funding and transfers 1,370,432 1,699,623 1,391,850
Government funding and transfers
Net cash provided by Government of Canada   1,593,765 1,247,414
Change in due from the Consolidated Revenue Fund   65,666 139,225
Services provided without charge by other government
departments (note 12)
  52,167 47,457
Transfer of assets from other government departments for workplace technology devices (note 13)   7,350 -
Transfer of tangible capital assets from other government departments   3,166 3,444
Transfer of tangible capital assets to other government departments   - (1,392)
Net cost of operations after government funding and transfers   (22,491) (44,298)
Departmental net financial position - Beginning of year   270,599 226,301
Departmental net financial position - End of year   293,090 270,599

Segmented information (note 14)

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


Shared Services Canada
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31
(in thousands of dollars)
  2014 2013
Net cost of operations after government funding and transfers (22,491) (44,298)
Change due to tangible capital assets
Acquisitions of tangible capital assets 132,701 118,199
Amortization of tangible capital assets (133,689) (120,045)
Net loss on disposal of tangible capital assets and adjustments (26) (740)
Transfers from other government departments 6,794 3,444
Transfers to other government departments - (1,392)
Total change due to tangible capital assets 5,780 (534)
Change due to prepaid expenses (7,115) (7,636)
Net increase (decrease) in departmental net debt (23,826) (52,468)
Departmental net debt - Beginning of year 88,398 140,866
Departmental net debt - End of year 64,572 88,398

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

 

Shared Services Canada
Statement of Cash Flows (Unaudited>)
For the Year Ended March 31
(in thousands of dollars)
  2014 2013
Operating activities
Net cost of operations before government funding and transfers 1,699,623 1,391,850
Non-cash items:    
Amortization of tangible capital assets (133,689) (120,045)
Net loss on disposal of tangible capital assets and adjustments (26) (740)
Services provided without charge by other government departments (note 12) (52,167) (47,457)
Variations in Statement of Financial Position:    
Increase (decrease) in accounts receivable and advances (41,708) 133,232
Increase (decrease) in prepaid expenses (7,115) (7,636)
Decrease (increase) in accounts payable and accrued liabilities (46,856) (217,877)
Decrease (increase) in vacation pay and compensatory leave (9,154) (1,793)
Decrease (increase) in deferred revenue 4,624 (17,340)
Decrease (increase) in employee future benefits 28,366 36,125
Transfer of prepaids from other government departments (note 13) (3,722) -
Cash used in operating activities 1,438,176 1,148,319
Capital investing activities
Acquisitions of tangible capital assets (excluding leased tangible capital assets) 132,701 75,667
Cash used in capital investing activities 132,701 75,667
Financing activities
Payments on lease obligations for tangible capital assets 22,888 23,428
Cash used in financing activities 22,888 23,428
Net cash provided by Government of Canada 1,593,765 1,247,414

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


Notes to the Financial Statements (Unaudited)
For the year ended March 31, 2014

1. Authority and objectives

Shared Services Canada (SSC) is a federal department created on August 4, 2011, to fundamentally transform how the Government of Canada manages its information technology (IT) infrastructure. SSC reports to Parliament through the Minister of Public Works and Government Services and is responsible for delivering mandated email, data centre and network services to its partner departments in a consolidated and standardized manner to support the delivery of Government of Canada programs and services. SSC also provides certain optional technology-related services to government organizations on a cost-recovery basis. With a whole-of-government approach to IT, SSC is creating economies of scale to deliver more efficient, reliable and secure IT infrastructure services to Government of Canada departments. SSC’s mandate was reinforced on June 29, 2012, with the passage of the Shared Services Canada Act by Parliament.

On April 3, 2013, SSC was given the mandate to provide services related to the acquisition and provision of hardware and software for workplace technology devices. This government-wide, standardized, centralized approach to supplying and supporting workplace technology devices will reduce costs and strengthen the security of government systems.

SSC’s Program Alignment Architecture supports the achievement of the following strategic outcome: Mandated services are delivered in a consolidated and standardized manner to support the delivery of Government of Canada programs and services for Canadians.

SSC’s Program Alignment Architecture includes the following programs:

  • Efficient and effective information technology infrastructure services are delivered across Government of Canada (Efficient and effective IT infrastructure services): Enterprise-wide consolidation in the areas of email, data centres and telecommunications improves the overall efficiency, reliability and security of IT infrastructure.

  • Internal services: Internal services are groups of activities and resources that support the programs and other corporate obligations of an organization. Internal services include only those activities and resources that apply across an organization and not those provided to a specific program. These activity groups include: management and oversight services; communications services; legal services; human resources management services; financial management services; information management services; IT services; real property services; materiel services; acquisition services; and travel and other administrative services.

2. Summary of significant accounting policies

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

Significant accounting policies are as follows:

  1. Parliamentary authorities
                                                                          
    SSC is financed by the Government of Canada through parliamentary authorities. Financial reporting of authorities provided to SSC 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 reconciliation between the bases of reporting.

    The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2013-14 Report on Plans and Priorities.

  2. Net cash provided by Government of Canada

    SSC operates within the Consolidated Revenue Fund, which is administered by the Receiver General for Canada. All cash received by SSC is deposited to the Consolidated Revenue Fund, and all cash disbursements made by SSC are paid from the Consolidated Revenue Fund. 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 or to the Consolidated Revenue Fund

    Amounts due from or to the Consolidated Revenue Fund are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the Consolidated Revenue Fund. Amounts due from the Consolidated Revenue Fund represent the net amount of cash that SSC is entitled to draw from the Consolidated Revenue Fund without further authorities 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 revenue takes place.

    Funds that have been received in advance are recorded as deferred revenue, provided SSC has an obligation to other parties for the provision of goods, services or the use of assets in the future.

    Revenues that are non-respendable are not available to discharge SSC’s liabilities. While the President is expected to maintain accounting control, 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 in reduction of SSC’s gross revenues.

  5. 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 by other government departments for employer contributions to the health and dental insurance plans, accommodation and legal services are recorded as operating expenses at their estimated cost.

  6. Employee future benefits

    • Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the government. SSC’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. SSC’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan’s sponsor.

    • Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the government as a whole.
  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. Tangible capital assets

    All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. SSC does not hold, and therefore does not capitalize the following capital assets: 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
    Buildings From 20 to 40 years
    Works and infrastructure From 20 to 40 years
    Machinery and equipment From 5 to 15 years
    Computer hardware From 3 to 10 years
    Computer software From 3 to 10 years
    Vehicles From 6 to 8 years
    Leasehold improvements Lesser of the remaining term of the lease or useful
    life of the improvement
    Leased tangible capital assets According to the useful life of the asset if a bargain
    purchase option exists or over the term of the lease

    Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.
  1. 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.

  2. Measurement uncertainty

    The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the liability for employee future benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary authorities

SSC receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, SSC 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
  2014 2013
  (in thousands of dollars)
Net cost of operations before government funding and transfers 1,699,623 1,391,850
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (133,689) (120,045)
Net loss on disposal of tangible capital assets and adjustments (26) (740)
Services provided without charge by other government departments (52,167) (47,457)
Decrease (increase) in vacation pay and compensatory leave (9,154) (1,793)
Decrease (increase) in employee future benefits 4,091 60,513
Bad debt expense - 3
Refunds and adjustment to previous years' expenses 16,022 2,679
Respendable revenue (16,223) 23,172
Other 9 -
Total items affecting net cost of operations but not affecting authorities (191,137) (83,668)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets (excluding leased tangible capital assets) 132,701 75,667
Payments on lease obligations for tangible capital assets 22,888 23,428
Increase (decrease) in prepaid expenses (10,837) (7,636)
Revenue available for spending - (18,496)
Other - 4
Total items not affecting net cost of operations but affecting authorities 144,752 72,967
Current year authorities used 1,653,238 1,381,149

 

b) Authorities provided and used
  2014 2013
  (in thousands of dollars)
Authorities provided:
Vote 15 - Operating expenditures 1,406,522 1,370,381
Vote 20 - Capital expenditures 221,727 101,459
Statutory amounts 90,574 80,611
Less:
Authorities available for future years (9) (2)
Lapsed: Operating expenditures (42,724) (171,300)
Lapsed: Capital expenditures (22,850) -
Lapsed: Statutory amounts (2) -
Current year authorities used 1,653,238 1,381,149

4. Accounts payable and accrued liabilities

The following table presents details of SSC’s accounts payable and accrued liabilities:

  2014 2013
  (in thousands of dollars)
Accounts payable - Other government departments and agencies 26,200 44,578
Accounts payable - External parties 193,240 182,057
Total accounts payable 219,440 226,635
Accrued liabilities 211,596 157,545
Total accounts payable and accrued liabilities 431,036 384,180

5. Deferred revenue

Deferred revenue represents the balance at year-end of unearned revenues stemming from amounts received prior to services being performed. Revenue is recognized in the period in which the service is performed. Details of the transactions related to this account are as follows:

  2014 2013
  (in thousands of dollars)
Opening balance 17,340 -
Amounts received - 18,496
Revenue recognized (4,624) (1,156)
Net closing balance 12,716 17,340

6. Lease obligations for tangible capital assets

SSC has entered into agreements to lease certain computer hardware under capital leases with a cost of $73 million and accumulated amortization of $42 million as at March 31, 2014 ($81 million and $27 million respectively as at March 31, 2013). The obligations related to the upcoming years include the following:

  2014 2013
  (in thousands of dollars)
2014 - 23,444
2015 20,417 20,417
2016 9,148 9,149
Total future minimum lease payments 29,565 53,010
Less: imputed interest (0.14% to 6.73%) 252 809
Balance of obligations under leased tangible capital assets 29,313 52,201

7. Employee future benefits

a) Pension benefits

SSC’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 SSC contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Canada’s Economic Action Plan 2012, employee contributors have been divided into two groups – Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2013-2014 expense amounts to $64 million ($54 million in 2012-2013). For Group 1 members, the expense represents approximately 1.6 times (1.7 times in 2012-2013) the employees’ contributions and, for Group 2 members, approximately 1.5 times (1.6 times in 2012-2013) the employees’ contributions.

SSC’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

SSC provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities.

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

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

  2014 2013
  (in thousands of dollars)
Accrued benefit obligation - Beginning of year 57,531 93,656
Expense (adjustment) for the year 16,576 (7,161)
Benefits paid during the year (44,942) (28,964)
Accrued benefit obligation - End of year 29,165 57,531

 

8. Accounts receivable and advances

The following table presents details of SSC’s accounts receivable and advances:

  2014 2013
  (in thousands of dollars)
Receivables - Other government departments and agencies 130,564 179,337
Receivables - External parties 7,988 2,120
Employee advances 23 25
Subtotal 138,575 181,482
Allowance for doubtful accounts on receivables from external parties (7) (7)
Gross accounts receivable 138,568 181,475
Accounts receivable held on behalf of Government (2,388) (3,587)
Net accounts receivable 136,180 177,888

9. Tangible capital assets

(in thousands of dollars)

  Cost Accumulated amortization Net Book Value
Capital Asset Class Opening
Balance
Acquisi–
tions
Adjust–
ments
Disposals
and
Write–Offs
Closing
balance
Opening
balance
Amortiza–
tion
Adjust–
ments
Disposals
and
Write–offs
Closing
balance
2014 2013
Land 2 - (2) - - - - - - - - 2
Buildings 3,085 - - - 3,085 1,945 103 - - 2,048 1,037 1,140
Works and infrastructure 27 - - - 27 2 1 - - 3 24 25
Machinery and equipment 46,286 101 3,778 355 49,810 23,379 3,823 1,319 355 28,166 21,644 22,907
Computer hardware 871,866 101,494 26,639 9,046 990,953 669,464 92,668 5,337 9,046 758,423 232,530 202,402
Computer software 123,578 2,587 6,265 307 132,123 103,373 11,307 2,325 307 116,698 15,425 20,205
Vehicles 25 - - - 25 4 4 - - 8 17 21
Leasehold improvements 3,967 12,848 - - 16,815 1,751 2,742 - - 4,493 12,322 2,216
Leased tangible capital assets 81,090 - - 8,133 72,957 27,334 23,041 - 8,133 42,242 30,715 53,756
Assets under construction 21,473 15,671 (20,931) - 16,213 - - - - - 16,213 21,473
Total 1,151,399 132,701 15,749 17,841 1,282,008 827,252 133,689 8,981 17,841 952,081 329,927 324,147

Adjustments include assets under construction of $21.0 million that were transferred to the other categories upon completion of the assets.

On April 3, 2013, SSC was transferred computer software with a net book value of $3.6 million from several other government departments (see note 13 for further detail on the transfer). This transfer is included in the adjustment columns. Also, during the year, SSC received machinery and equipment, computer hardware, computer software and assets under construction from many other government departments with a net book value of $3.2 million. These transfers are also included in the adjustment columns.

10. Contractual obligations

The nature of SSC’s activities can result in some large multi-year contracts and obligations whereby SSC will be obligated to make future payments when the services/goods are received. Significant contractual obligations ($10 million or more) that can be reasonably estimated are summarized as follows:

(in thousands of dollars) 2015 2016 2017 2018 2019 and
thereafter
Total
Acquisition of goods and services 536,918 181,732 103,837 29,590 30,566 882,643
Operating leases 3,882 3,882 3,882 3,882 - 15,528
Total 540,800 185,614 107,719 33,472 30,566 898,171

11. Contingent liabilities

In the normal course of its operations, SSC may become involved in various legal actions. Some of these legal actions may result in actual liabilities when one or more future events occur. No contingent liabilities are recognized in SSC’s financial statements for the fiscal year ended March 31, 2014.

12. Related party transactions

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

(a) Common services provided without charge by other government departments

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

  2014 2013
  (in thousands of dollars)
Employer's contribution to the health and dental insurance plans 47,697 47,451
Accommodation 4,466 -
Legal services 4 6
Total 52,167 47,457

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 Works and Government Services Canada, are not included in SSC’s Statement of Operations and Departmental Net Financial Position.

(b) Common services provided without charge to other government departments

During the year, SSC provided services without charge to other government departments, related to the provision of IT infrastructure services.

(c) Other transactions with related parties

  2014 2013
  (in thousands of dollars)
Expenses — Services provided to SSC by other government departments and agencies 242,488 312,512
Revenues — Services provided by SSC to other government departments and agencies 334,587 372,521

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

13. Transfers from other government departments

On April 3, 2013, pursuant to Order-in-Council 2013-0368, several other government departments transferred to SSC the responsibility for the acquisition and provision of hardware and software, including security software, for workplace technology devices, as well as the stewardship responsibility for the assets and liabilities related to the program. Accordingly, SSC received the following assets related to the acquisition and provision of software, including security software, for workplace technology devices from several other government departments:

(in thousands of dollars)
Prepaide expenses 3,722
Tangible capital assets (net book value) (note 9) 3,628
Total assets received 7,350
Adjustment to the departmental net financial position 7,350

14. Segmented information

Presentation by segment is based on SSC’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 programs, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

(in thousands of dollars) Efficient and effective
IT
infrastructure services
Internal
services
2014
Total
2013
Total
Operating expenses
Salaries and employee benefits 619,688 95,270 714,958 601,570
Telecommunications 463,267 3 463,270 481,577
Rentals 219,119 1,584 220,703 199,433
Professional and special services 172,066 31,275 203,341 172,448
Machinery and equipment 162,405 6,092 168,497 86,710
Amortization of tangible capital assets 124,187 9,502 133,689 120,045
Repairs and maintenance 90,249 515 90,764 67,262
Accommodation 4,460 10,678 15,138 8,653
Transportation 6,748 1,110 7,858 5,806
Utilities, materials and supplies 5,727 990 6,717 9,792
Information 653 156 809 1,818
Interest on capital lease payments 557 - 557 1,025
Loss on write-offs of tangible capital assets - - - 740
Other expenses 8,105 19 8,124 8,451
Total operating expenses 1,877,231 157,194 2,034,425 1,765,330
Revenues
Sale of goods and services 342,900 1 342,901 381,915
Miscellaneous revenues 18 29 47 35
Revenues earned on behalf of Government (8,124) (22) (8,146) (8,470)
Total revenues 334,794 8 334,802 373,480
Net cost of operations before government funding and transfers 1,542,437 157,186 1,699,623 1,391,850

15. Comparative information

Comparative figures have been reclassified to conform to the current year’s presentation.



Annex to the Statement of Management Responsibility Including - Internal Control Over Financial Reporting

Assessment of Internal Controls over
Financial Reporting and the Action Plan for
the fiscal year ending March 31, 2014

1. Introduction

This document provides summary information on the measures taken by Shared Services Canada (SSC) to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results and related action plans. Fiscal year 2013-2014 was the second year SSC received its own budget and operated as a stand­-alone department since creation on August 4, 2011. This is the second year SSC has produced the Annex to the Statement of Management Responsibility including Internal Control over Financial Reporting.

Detailed information on the department's authority, mandate and program activities can be found in the2013-2014 Departmental Performance Report and the 2014-2015 Report on Plans and Priorities.

2. Departmental system of internal control over financial reporting

2.1 Internal control management

SSC has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control.  A draft Departmental Internal Control Management Framework has been developed and includes:

  • Organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior managers in their areas of responsibility for control management;
  • Values and ethics;
  • Ongoing communication and training on statutory requirements, and policies and procedures for sound financial management and control; and  
  • At least semi-annual monitoring of and regular updates on internal control management, as well as the provision of related assessment results and action plans to the President and departmental senior management and, as applicable, the Departmental Audit and Evaluation Committee.

The Departmental Audit and Evaluation Committee provides advice to the President on the adequacy and functioning of the department's risk management, control and governance frameworks and processes.

The Departmental Internal Control Management Framework is in the process of being finalized and approved.

2.2 Service arrangements relevant to financial statements

2.2.1 Reliance by SSC on other federal government organizations

SSC relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:

Common Arrangements:

  • Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries and the procurement of goods and services, as per the delegation of authority of other government organizations;
  • The Treasury Board of Canada Secretariat provides SSC with information used to calculate various accruals and allowances, such as the accrued severance liability; and
  • The Department of Justice provides legal services to SSC.

Specific Arrangements:

  • PWGSC provides SSC with a SAP financial system platform to capture and report all financial transactions; and
  • Agriculture and Agri-Food Canada (AAFC) provides SSC with a PeopleSoft platform to process transactions related to human resources.

2.2.2 SSC services upon which partner organizations rely

SSC provides information technology (IT) infrastructure services to partner organizations in the areas of data centre and network services.

3. Departmental assessment results during fiscal year 2013-2014

The fiscal 2013-2014 represented SSC’s second full year as a stand-alone department. The department has taken measures to be compliant with the Treasury Board Policy on Internal Control by developing a four-year phased approach for implementation. A multi-year plan for the assessment of Internal Control over Financial Reporting will continue to be developed to carry out design and operating effectiveness testing for key control areas. An on-going monitoring program will be implemented following remediation action resulting from the design and operating effectiveness testing.

Another priority for SSC is to conduct an assessment of Information Technology General Controls (ITGC) for the IT Infrastructure Services supporting partner organizations as well as SSC, in relation to Internal Control over Financial Reporting (ICFR). This will include the development an ITGC Framework for IT Infrastructure Services, which will identify and describe key relevant controls. During 2013-2014, the department devoted significant time and effort on this priority, which included the following:

  • The development of a high-level approach, which was approved by senior management and presented to the Departmental Audit and Evaluation Committee;
  • The establishment of a Director General-level working group, which is chaired by a Senior Executive and meets bi-weekly;
  • The development of a draft framework based on the IT Control Objectives for Sarbanes-Oxley (COBIT for SOX);
  • Procurement activities for a multi-year contract award for professional services; and
  • Engagement activities to inform partner organization and other stakeholders.

The departmental action plan for the assessment of ICFR for SSC was adjusted by deferring certain activities in order to implement the priority for the assessment of ITGCs for IT Infrastructure Services. 

3.1 Design effectiveness testing of key controls

For the assessment of ICFR, the Department continued scoping and risk assessment to confirm key control areas and more fully establish its multi-year plan. Key control areas include:

  • Entity Level Controls;
  • ITGCs for SSC's financial system SIGMA (hosted by PWGSC) and relevant feeder systems, such as PeopleSoft (hosted by AAFC); and
  • Business Process Controls, such as Financial Close and Reporting, Capital Assets, Payroll, Procure to Payment, and Revenue.

SSC also developed a draft Internal Control Management Framework which encompasses the assessment of ICFR as well as the assessment of ITGCs for IT Infrastructure Services.

Once documentation is sufficiently complete, the department will commence the design effectiveness testing in each of these areas. 

3.2 Operating effectiveness testing of key controls

In accordance with the multi-year departmental action plan, the testing is scheduled to commence in 2016-2017 for key areas.

3.3 Ongoing monitoring of key controls

In accordance with the multi-year departmental action plan, the monitoring program is scheduled to commence in 2017-2018 for key areas.

4. Departmental action plan

4.1 Progress during fiscal year 2013-2014

During 2013-2014, SSC continued to make significant progress in assessing and improving its key controls. The following table summarizes the department's progress based on the plans identified in the previous fiscal year's annex.

Progress During Fiscal Year 2013-2014

Element in previous year's action plan Status
Complete a departmental framework for ICFR.
  • The original draft framework was significantly redeveloped as the ICMF to align with the Treasury Board Guideline for the Policy on Internal Control.
  • The draft ICMF is in the process of being finalized and approved during 2014-2015.
Finalize the risk assessment and scoping of key control areas related to:
  • Entity Level Controls,
  • IT General Controls, and
  • Business Process Controls
  • Completed the risk assessment and scoping exercise for some Business Process Controls.
  • In relation to ITGCs for financial applications and related feeder systems, SSC started discussions with PWGSC and Agriculture and Agri-Food Canada who host the SAP financial system and PeopleSoft system respectively.
  • Ensured proper controls are in place during the system under development stage of a major feeder system, the electronic procurement and payment system, which will be interfaced with the SAP system.
Conduct interviews with process owners to understand and corroborate the key control areas, and confirm the status of related business processes.
  • Some interviews with process owners have been carried out for the key control areas for pay administration and account verification for non-pay transactions.
  • Finance and Human Resources within SSC worked together on assurance activities for pay administration following the centralization of pay services at the Public Service Pay Centre, including a self-assessment of minimum controls and an attestation for PWGSC.
  • SSC also fully implemented a key business process, the post payment review of non-pay transactions to provide assurance of the account verification process.
Based upon the results of the risk assessment and scoping, develop an ICFR assessment plan with refined timelines and expected completion timeframes for the assessment stages for each of the key control areas.
  • Completed a high-level, multi-year assessment plan covering the next four years, which includes broad timelines (a more detailed plan will be developed with the assistance of professional services).
Undertake the documentation of key processes and controls, and identify gaps that need to be addressed.
  • This phase of the assessment process will be conducted in later stages, as SSC`s action plan was adjusted to focus on other areas, such as the Assessment for ITGCs for IT Infrastructure Services and pay administration services.

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

Building on progress to date, SSC is positioned to complete the assessment of its system of ICFR within the estimated timelines targeted for 2017-2018. At that time, the Department will be applying its rotational ongoing monitoring plan to reassess control performance on a risk basis across all control areas. The status and action plan for the completion of the identified key control areas for the next fiscal year and for subsequent years are shown in the following table.
A key element in the table is the commitment to complete the scoping and risk assessment in 2014-2015. Based on the work done to date, the following controls will be assessed.

  • Entity Level Controls;
  • ITGCs for SSC’s financial system SIGMA (hosted by PWGSC) and relevant feeder systems, such as PeopleSoft (hosted by AAFC); and
  • Business Process Controls, such as Financial Close and Reporting, Capital Assets, Payroll, Procure to Payment, and Revenue.

For these controls, a more detailed assessment plan will be developed and presented in SSC’s 2014-2015 Annex to the Statement of Management Responsibility including Internal Control over Financial Reporting

Status and Action Plan for the Next Fiscal Year and Subsequent Years

Assessment Elements 2014-2015 2015-2016 2016-2017 2017-2018
Assessment of design effectiveness of key controls
Completion of scoping and risk assessment      
Documentation of key risks and key controls    
Testing of design effectiveness of key controls    
Remediation of key control design effectiveness deficiencies, as required    
Assessment of operating effectiveness of key controls
Testing of operating effectiveness of key controls    
Remediation of key control operating effectiveness deficiencies, as required    
On-going monitoring program of the effectiveness of the departmental system of ICFR      

4.3 Specific actions for 2014-2015

 SSC plans to undertake the following:

  • Finalize and approve the ICMF;
  • Complete procurement activities and implement a contract for professional services;
  • Further develop the capacity and expertise of the internal controls team that is coordinating and implementing assessment activities;
  • Complete the scoping and risk assessment of key control areas related to Entity Level Controls, IT General Controls, and Business Process Controls;
  • Based upon the results of the risk assessment and scoping, develop a more detailed assessment plan with the assistance of professional services; and 
  • Start the documentation of key processes and controls in accordance with the detailed assessment plan.

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