Financial Statements (Unaudited) for the year ended March 31, 2017 - 2016–17 Departmental Results Report - Treasury Board of Canada Secretariat

a) Government-Wide Funds and Public Service Employer Payments

The Government-Wide Funds and Public Service Employer Payments program accounts for funds that are held centrally to supplement other appropriations, from which allocations are made to, or payments and receipts are made on behalf of, other federal organizations. These funds supplement the standard appropriations process and meet certain responsibilities of the Treasury Board as the employer of the core public administration, including employer obligations under the public service pension and benefits plans.

The administration of these funds falls under the Expenditure Analysis and Allocation Management sub-program and the People Management Policy sub-program, but their financial resources are shown separately in the Secretariat’s Program Alignment Architecture for visibility and reporting purposes.

b) Decision-Making Support and Oversight

Through the Decision-Making Support and Oversight program, the Treasury Board of Canada Secretariat supports the Treasury Board in its roles as management board of the Government of Canada and as expenditure manager in the government-wide expenditure cycle. The objective is to support the government in promoting value for money and results for Canadians in programs and operations.

The Secretariat achieves program results by providing independent strategic advice, analysis, guidance and oversight of programs, operations, and expenditures. It reviews departmental submissions, provides recommendations to the Treasury Board, and coordinates and reports on the allocation of expenditures across government organizations and programs.

c) Management Policies Development and Monitoring

Through the Management Policies Development and Monitoring program, the Secretariat supports the Treasury Board in its role of establishing principles for sound governance and management by setting government-wide policy direction in targeted areas. The objective is to have a sound management policy framework for the Government of Canada.

The Secretariat achieves program results by communicating clear management expectations to deputy heads and by adopting principles-based and risk-informed approaches to monitoring policy compliance. The Secretariat provides reviews, leads implementation, and supports and monitors policies and departmental performance under several of areas of management. The Secretariat also engages with functional communities and undertakes outreach and monitoring to promote policy compliance and build the capacity of functional communities.

This program is underpinned by legislation such as the Financial Administration Act and the Public Service Employment Act.

d) Government-Wide Program Design and Delivery

Through the Government-Wide Program Design and Delivery program, the Secretariat designs and delivers activities, systems, services and operations with, for, or on behalf of other organizations in the Government of Canada. It also establishes a platform for transformational initiatives. The objective is to provide consistent and cost-controlled operations across the Government of Canada.

The Secretariat achieves program results by developing and delivering solutions where whole-of-government leadership is required, or where transformation and standardization can be achieved to improve quality and value for money.

e) Internal services

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. Internal services include only those activities and resources that apply across an organization, and not those provided for a specific program. The groups of activities 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; and Acquisition Services.

a) Parliamentary authorities

The Secretariat is financed by the Government of Canada through parliamentary authorities. Financial reporting of authorities provided to the Secretariat 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 2016–17 Report on Plans and Priorities. 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 2016–17 Report on Plans and Priorities.

b) Net cash provided by government

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

c) Amounts due from or to the Consolidated Revenue Fund (CRF)

Amounts due from or to the Consolidated Revenue Fund (CRF) are the result of timing differences at year-end between the time 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 Secretariat is entitled to draw from the CRF without further authorities to discharge its liabilities.

d) Revenues

Revenues are accounted for in the period in which the related transaction or event that gave rise to the revenues occurred.

Revenues that are non-respendable are not available to discharge the Secretariat’s liabilities. While the Secretary 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, therefore, are presented as a reduction of the entity’s gross revenues.

e) Expenses

Expenses are recorded on an accrual basis:

• Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. Transfer payments that become repayable as a result of the realization of conditions specified in the contribution agreement are recorded as a reduction to transfer payment expenses and are set up as a receivable.
• 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 and legal services are recorded as operating expenses at their estimated cost.

f) Government-wide employee benefits

g) Accounts receivable and advances

Accounts receivable and advances are stated at the lower of cost or net recoverable value. A valuation allowance has been recorded for receivables where recovery is considered uncertain.

Accounts receivable held on behalf of government are presented in these financial statements as the Secretary must maintain accounting control for these items; however, they are later presented as a reduction to the Secretariat’s gross financial assets because the receipt of these receivables cannot be used by the Secretariat to discharge existing liabilities.

h) 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 is recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

i) 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. The Secretariat does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

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.

j) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of the assets, liabilities, revenues and expenses in the financial statements. At the time of the 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 claims incurred but not yet reported under the public service health and dental care plans, the liability for employee future benefits, and the useful life of tangible capital assets. The actual results could significantly differ from the estimated results. Management’s estimates are reviewed periodically; as adjustments become necessary, they are recorded in the financial statements in the year they become known.

a) Pension benefits

The Secretariat’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% 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 the Secretariat 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:

1. Group 1 relates to existing Plan members as of December 31, 2012
2. Group 2 relates to members joining the Plan as of January 1, 2013

Each group has a distinct contribution rate. The employer expense in 2017 amounts to $18.8 million ($18.1 million in 2016). For Group 1 members, the expense represents approximately 1.12 times (1.25 times in 2016) the employee contributions; for Group 2 members, it represents approximately 1.08 times (1.24 times in 2016) the employee contributions. Employee contribution rates for both groups are gradually being increased to allow the employee-employer cost-sharing ratio to reach 50:50 by fiscal year 2018.

b) Severance benefits

Severance benefits provided to the Secretariat’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, 2017, 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:

Claims and litigations

Claims have been made against the Secretariat in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. Claims for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $15 million as at March 31, 2017 ($73 million in 2016). No accrual for these contingent liabilities has been made in these financial statements.

Common services provided without charge by other government departments

The Secretariat received accommodation and legal services from certain common service organizations. These services were provided without charge and have been recorded in the department’s Statement of Operations and Departmental Net Financial Position as follows:

In order to achieve efficiency and cost‑effectiveness and to deliver programs economically to the public, the government has centralized some of its administrative activities. As a result, the government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The cost of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada and the email, network and data centre services and the workplace technology devices provided by Shared Services Canada, are not included in the Secretariat’s Statement of Operations and Departmental Net Financial Position.

b) Common services provided without charge to other government departments

The Secretariat provided services without charge to other government departments for the provision of the employer’s contribution to health, dental and other employee insurance plans and payroll benefits in the amount of $1.8 billion in 2017 (compared with $1.6 billion in 2016).

c) Other transactions with related parties

Expenses and revenues disclosed in (c) exclude common services provided without charge, which have already been disclosed in (a) and (b). The expenses are related to various goods and services and to salary transactions with other departments and agencies. The revenues are mainly related to internal support services and recovery of public service pension administration costs.

a) Main programs

Presentation by segment is based on the Secretariat’s program alignment architecture. This presentation is based on the same accounting policies 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 category of expenses and revenues:

b) Government-wide funds and public service employer payments

The Government of Canada sponsors defined benefit pension plans covering most of its employees. The Secretariat also funds payments to, or in respect of, the following:

• employer’s share of contributions to the Public Service Death Benefit Account
• employer’s share of Canada/Québec Pension Plan contributions and Employment Insurance premiums
• employer’s share of disability and life insurance premiums and related Québec sales tax
• employer’s share of the Québec Parental Insurance Plan premium
• claims and related costs under the Public Service Health Care Plan, Public Service Dental Care Plan and the Pensioners’ Dental Services Plan
• provincial payroll taxes in respect of employees who work in the provinces of Quebec, Ontario, Manitoba, and Newfoundland and Labrador. The payroll tax is levied on employers in each province to help fund their respective health plans
• returns to certain employees of their share of the Employment Insurance premium reduction

Generally, Public Service Pension Plan contributions, Public Service Death Benefit Account contributions, Canada/Québec Pension Plan contributions and Employment Insurance premiums are recovered from all departments, agencies and revolving funds based on salaries and wages incurred. Contributions to health care plans are recovered from certain departments and agencies, and from all revolving funds, based on a percentage of salaries and wages incurred.

The following table presents a breakdown by major category: