Financial Statements (Unaudited) for the Year Ended March 31, 2015 - 2014–15 Departmental Performance 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.

b) Management Frameworks

In support of the Treasury Board’s role as management board, the Secretariat provides the framework for the management of government operations. It does so by developing specific policies, regulations, directives and guidelines that, once approved by the Treasury Board, provide the parameters within which deputy heads manage their departments. The Secretariat also helps build understanding and capacity by reaching out to the different communities within departments and agencies (e.g., finance, human resources) that support deputy heads in implementing Treasury Board policies.

c) People Management

The People Management program supports Treasury Board activities in its role as the employer of the core public administration. The program’s primary objectives are to lead people management and promote leadership excellence, to support human resources infrastructure, and to ensure the appropriate degree of consistency in people management across the public service. In certain instances, activities extend beyond the core public administration to separate agencies, members of the Royal Canadian Mounted Police and the Canadian Forces, students and appropriation-dependent Crown corporations.

d) Expenditure Management

The Expenditure Management program helps align resources to achieve government priorities in a way that maximizes value for money and provides a whole-of-government perspective on matters related to direct program spending. Working with all federal organizations that are subject to budget appropriation, the Secretariat undertakes the review, analysis and challenge of plans and proposals that involve departmental spending, expenditure forecasting and strategies, expenditure management of total compensation, and results-based management.

e) Financial Management

The Financial Management program provides oversight and direction to federal organizations to improve the stewardship of taxpayers’ dollars and government assets.

The program works to strengthen financial management, internal audit, management of real property and materiel, investment planning, project management and procurement across the federal public service. This is accomplished by providing direction to departments; demonstrating leadership; developing and maintaining policies, guidance and practices; nurturing sustainable and professional communities (e.g., finance, procurement, audit); and helping to improve government operations.

f) 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. These include support functions such as communications, financial and human resources management, real property, information technology, legal services and procurement.

Internal Services include only those activities and resources that apply across an organization and do not include those provided for a specific program.

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 2014–15 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 2014–15 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/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.

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) Reconciliation of net cost of operations to current year authorities used

b) Authorities provided and used

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 cent 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 (EAP) 2012, employee contributors have been divided into two groups:

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

Each group has a distinct contribution rate. The 2014–15 employer expense amounts to $18.7 million ($20.4 million in 2013–14). For Group 1 members, this expense represents approximately 1.41 times (1.6 times in 2013–14) the employee contributions; for Group 2 members, it represents approximately 1.39 times (1.5 times in 2013–14) 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 2017–18.

b) Severance benefits

The Secretariat provides severance benefits to certain employee occupational groups based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at year ended March 31, is as follows (see also Note 2f (ii)):

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. The Secretariat has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $80 million ($210 million in 2013–14) as at March 31, 2015. No accrual for these contingent liabilities has been made in these financial statements.

a) 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 Works and Government Services 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 $1.7 billion in 2014–15 (compared with $1.6 billion in 2013–14).

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 the 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 health, 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 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; and
• 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, agencies and all revolving funds based on a percentage of salaries and wages incurred.

The following table presents a breakdown by major category.