Severance Pay Liability for Public Service Employees - March 31, 2009

Message sent on behalf of Ms. Suzie Gignac, Executive Director, Government Accounting Policy and Reporting, Office of the Comptroller General

To: Deputy Chief Financial Officers (DCFOs)

The purpose of this communication is to notify departments of a revision to the ratio previously provided (see communication from Bill Matthews, A/Assistant Comptroller General) for the calculation of departmental severance pay liability as at .

The Government-wide liability for severance pay is determined on an actuarial basis each year for presentation in the Public Accounts of Canada. One of the key factors required for the calculation of this liability is the gross payroll eligible for severance pay as at March 31. In order to provide departments with sufficient time to record a departmental liability for severance pay in extended period 12-1, the ratio for the liability is determined using the gross payroll from the previous year projected forward to the current year using various assumptions. Subsequently, the actual liability for severance pay that is presented in the Public Accounts of Canada is determined on a Government-wide basis using the actual gross payroll as at March 31 of the current year. In prior years, the estimated liability used to calculate the ratio for departments has been comparable to the final actual liability for Public Accounts.

For fiscal year 2008-09, the final Government-wide liability for severance pay calculated on an actuarial basis using the actual gross payroll is higher than the estimated liability used to determine the ratio originally communicated to departments on . The actual departmental liability for severance pay as at should have been calculated using a ratio of 26.92% of gross payroll (as compared to the ratio of 23.19% of gross payroll provided on ).

Departments are encouraged to evaluate the materiality of the increase in the ratio when preparing their departmental financial statements in order to determine if the severance pay liability and the related expense should be adjusted accordingly. Since the CFMRS trial balance for extended period 12-2 has already been submitted, any adjustment to the severance pay liability should be made for the purposes of presentation in departmental financial statements only.

Should you have any questions regarding the revised ratio for severance pay liability, please contact Michael Hammond at (613) 952-5460 or Any questions related to the departmental financial statements can be addressed to Hamid Haffaf at (613) 957-9676 or

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