Financial Statements for 2011-2012
Table of Contents
- Statement of Management Responsibility Including Internal Control Over Financial Reporting
- Statement of Financial Position (Unaudited) as at March 31 (in dollars)
- Statement of Operations and Departmental Net Financial Position (Unaudited) for the year ended March 31 (in dollars)
- Statement of Change in Departmental Net Debt (Unaudited) for the year ended March 31 (in dollars)
- Statement of Cash Flows (unaudited) for the year ended March 31 (in dollars)
- Notes to the Financial Statements (unaudited) for the year ended March 31, 2012
- 1. Authority and Objectives
- 2. Summary of Significant Accounting Policies
- 3. Parliamentary Authorities
- 4. Accounts Payable and Accrued Liabilities (in dollars)
- 5. Employee Future Benefits
- 6. Accounts Receivable and Advances
- 7. Tangible Capital Assets (in dollars)
- 8. Contractual Obligations
- 9. Related Party Transactions
- 10. Segmented Information
- 11. Accounting Changes
- 12. Comparative information
- Annex
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, 2012 and all information contained in these statements rests with the management of the Office of the Communications Security Establishment Commissioner (Office). 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 the Office's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Office's Annual Report and its Departmental Performance Report is consistent with these financial statements.
Management is also responsible for maintaining an effective system of internal control over financial reporting (ICRF) 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 the Office; 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.
The Office will be subject to periodic Core Control Audits performed by the Office of the Comptroller General and will use the results of such audits to comply with the Treasury Board Policy on Internal Control.
In the interim, the Office has undertaken a risk-based assessment of the system of ICFR for the year ended March 31, 2012, in accordance with the Treasury Board Policy on Internal Control, and the results and action plan are summarized in the annex.
The financial statements of the Office have not been audited.
Original signed by:
Honourable Robert Décary, Q.C.
Commissioner
J. William Galbraith
Chief Financial Officer
Ottawa, Canada
Date: September 6, 2012
Statement of Financial Position (Unaudited) as at March 31 (in dollars)
| Contractual obligations (note 8) | ||
| 2012 | 2011 | |
|---|---|---|
| Liabilities | ||
| Accounts payable and accrued liabilities (note 4) | $336,681 | $118,481 |
| Vacation pay and compensatory leave | 26,962 | 30,366 |
| Employee future benefits (note 5) | 116,077 | 177,950 |
| Total net liabilities | 479,720 | 326,797 |
| Financial assets | ||
| Due from the Consolidated Revenue Fund | $298,725 | $101,211 |
| Accounts receivable and advances (note 6) | 44,962 | 17,495 |
| Total net financial assets | 343,687 | 118,706 |
| Commission net debt | 136,033 | 208,091 |
| Non-financial assets | ||
| Tangible capital assets (note 7) | 358,674 | 54,227 |
| Total non-financial assets | 358,674 | 54,227 |
| Departmental net financial position | $222,641 | ($153,864) |
The accompanying notes form an integral part of these financial statements.
Honourable Robert Décary, Q.C.
Commissioner
J. William Galbraith
Chief Financial Officer
Ottawa, Canada
Date:
Statement of Operations and Departmental Net Financial Position (Unaudited) for the year ended March 31 (in dollars)
| Segmented information (note 10) The accompanying notes form an integral part of these financial statements. |
|||
| 2012 Planned Results | 2012 | 2011 Restated (note 11) | |
|---|---|---|---|
| Expenses | |||
| CSEC Review Program | $998,563 | $1,223,966 | $1,128,895 |
| Internal Services | 515,842 | 422,598 | 433,720 |
| Total expenses | 1,514,405 | 1,646,564 | 1,562,615 |
| Net cost of operations before government funding | 1,514,405 | 1,646,564 | 1,562,615 |
| Government funding | |||
| Net cash provided by Government | 2,125,330 | 1,751,695 | 1,607,662 |
| Change in due from the Consolidated Revenue Fund | - | 197,514 | (1,478) |
| Services provided without charge by other government departments (note 9) | 64,753 | 73,860 | 64,469 |
| Net cost of operations after government funding | (675,678) | (376,505) | (108,038) |
| Departmental net financial position - Beginning of year | (153,865) | (153,864) | (261,902) |
| Departmental net financial position - End of year | $521,813 | $222,641 | ($153,864) |
Statement of Change in Departmental Net Debt (Unaudited) for the year ended March 31 (in dollars)
| The accompanying notes form an integral part of these financial statements. | |||
| 2012 Planned Results | 2012 | 2011 | |
|---|---|---|---|
| Net cost of operations after government funding | ($675,678) | ($376,505) | ($108,038) |
| Change due to tangible capital assets | |||
| Acquisition of tangible capital assets | 404,111 | 313,230 | 40,468 |
| Amortization of tangible capital assets | (6,676) | (8,783) | (2,373) |
| Total change due to tangible capital assets | 397,435 | 304,447 | 38,095 |
| Net increase (decrease) in departmental net debt | (278,243) | (72,058) | (69,943) |
| Departmental net debt - Beginning of year | 208,091 | 208,091 | 278,034 |
| Departmental net debt - End of year | ($70,152) | $136,033 | $208,091 |
Statement of Cash Flows (unaudited) for the year ended March 31 (in dollars)
| The accompanying notes form an integral part of these financial statements. | ||
| 2012 | 2011 | |
|---|---|---|
| Operating Activities | ||
| Net cost of operations before government funding | $1,646,564 | $1,562,615 |
| Non-cash items: | ||
| Services provided without charge by other government departments (note 9) | (73,860) | (64,469) |
| Amortization of tangible capital assets | (8,783) | (2,373) |
| Variations in Statement of Financial Position | ||
| Increase in accounts receivable and advances | 27,467 | 15,610 |
| (Increase) in liabilities | (218,200) | (13,905) |
| Decrease in vacation pay | 3,404 | 56,661 |
| Decrease in employee future benefits | 61,873 | 13,055 |
| Cash used in operating activities | 1,438,465 | 1,567,194 |
| Capital Investment Activities | ||
| Acquisition of tangible capital assets | 313,230 | 40,468 |
| Cash used by capital investment activities | 313,230 | 40,468 |
| Net Cash Provided by Government of Canada | $1,751,695 | $1,607,662 |
Notes to the Financial Statements (unaudited) for the year ended March 31, 2012
1. Authority and Objectives
The Office of the Communications Security Establishment Commissioner (Office) was created on June 19, 1996. It was established as a separate agency of government in April 2008. The mandate of the Communications Security Establishment Commissioner is threefold:
- to review the activities of the Communications Security Establishment Canada (CSEC) for compliance with the law and to advise the Minister of National Defence and the Attorney General of Canada of a CSEC activity that the Commissioner believes may not be in compliance with the law;
- to receive complaints about the lawfulness of CSEC activities; and
- to carry out specific duties under the 'public interest defence' provision of the Security of Information Act.
There are two programs that support the Commissioner in the discharge of his mandate. The review program entails the reviews and studies performed by the Office and the reports on these reviews and studies that are forwarded by the Commissioner to the Minister of National Defence. The internal services program entails the corporate services in place that support the review program.
2. Summary of Significant Accounting Policies
The 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:
(a) Parliamentary Authorities
The Office is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Office 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 the 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.
(b) Net Cash Provided by Government
The Office operates within the Consolidated Revenue Fund (CRF) which is administered by the Receiver General for Canada. All cash received by the Office is deposited to the CRF and all cash disbursements made by the Office 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.
(c) Due from the Consolidated Revenue Fund
Amounts Due from 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 Office is entitled to draw from the CRF without further authorities to discharge its liabilities.
(d) 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 from other government departments and agencies are recorded as operating expenses at their estimated cost.
(e) Employee Future Benefits
- Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government of Canada. The Office's contributions to the Plan are charged to expenses in the year incurred and represent its total obligation to the Plan. The Office'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.
(f) Accounts Receivable
Accounts receivable are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.
(g) Tangible Capital Assets
All tangible capital assets having an initial cost of $3,000 or more are recorded at their acquisition cost. The Office 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:
| Asset class | Amortization Period |
|---|---|
| Other equipment including furniture | 5 years |
| Informatics hardware | 3 years |
| Leasehold improvements | Remaining term of the lease |
| Other work in progress | N/A |
(h) 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 severance 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 Office receives its funding through annual Parliamentary authorities. Items recognized in the Statement of Operations and Departmental 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 Office 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 (in dollars)
| 2012 | 2011 | |
|---|---|---|
| Net cost of operations before government funding | $1,646,564 | $1,562,615 |
| Adjustments for items affecting net cost of operations but not affecting authorities: | ||
| Services provided without charge | (73,860) | (64,469) |
| Amortization of tangible capital assets | (8,783) | (2,373) |
| Change in employee severance benefits | 61,873 | 13,055 |
| Change in vacation pay | 3,404 | 56,661 |
| Other | - | 3 |
| Total items affecting net cost of operations but not affecting authorities | 1,629,198 | 1,565,492 |
| Adjustments for items not affecting net cost of operations but affecting authorities: | ||
| Acquisition of tangible capital assets | 313,230 | 40,468 |
| Current year authorities used | $1,942,428 | $1,605,960 |
(b) Authorities Provided and Used (in dollars)
| Authorities provided | 2012 | 2011 |
|---|---|---|
| Vote 25 - Operating expenditures | $1,970,519 | $1,970,519 |
| Transfer from Treasury Board Votes for program expenditures | 243,783 | 151,170 |
| Total authorities provided | 2,214,302 | 2,121,689 |
| Statutory amounts | 149,124 | 132,482 |
| Sub-total | 2,363,426 | 2,254,171 |
| Less: lapsed operating | (420,998) | (648,211) |
| Current year authorities used | $1,942,428 | $1,605,960 |
4. Accounts Payable and Accrued Liabilities (in dollars)
The following table presents details of accounts payable and accrued liabilities
| 2012 | 2011 | |
|---|---|---|
| Accounts payable - Other government departments and agencies | $210,948 | $2,975 |
| Accounts payable - external suppliers | 89,428 | 89,813 |
| Total accounts payable | 300,377 | 92,788 |
| Accrued liabilities | 36,304 | 25,693 |
| Total accounts payable and accrued liabilities | $336,681 | $118,481 |
5. Employee Future Benefits
(a) Pension benefits
The Office's employees participate in the Public Service Pension 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/Quebec Pension Plans benefits and they are indexed to inflation.
Both the employees and the Office contribute to the cost of the Plan. The 2011-12 expense amounts to $107,220 ($93,002 in 2010-11), which represents approximately 1.8 times (1.9 times in 2010-11) the contributions by employees.
The Office'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
The Office 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:
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 valued of benefits earned to date to 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.
| 2012 (in dollars) | 2011 (in dollars) | |
|---|---|---|
| Accrued benefit obligation, beginning of the year | $177,950 | $191,005 |
| Expense for the year | 83,384 | 69,889 |
| Benefits paid during the year | 145,257 | (82,944) |
| Accrued benefit obligation, end of the year | $116,077 | $177,950 |
6. Accounts Receivable and Advances
The following table presents details of accounts receivable and advances
| 2012 (in dollars) | 2011 (in dollars) | |
|---|---|---|
| Receivables from other government departments and agencies | $44,662 | $17,495 |
| Petty cash advance | 300 | - |
| Total | $44,962 | $17,495 |
7. Tangible Capital Assets (in dollars)
| Capital Asset Class | Opening Balance | Acquisitions | Disposals and write-offs | Closing Balance |
|---|---|---|---|---|
| Other equipment including furniture | $10,890 | $79,790 | - | $90,680 |
| Informatics hardware | 17,500 | 38,700 | - | 56,200 |
| Leasehold improvements | 31,053 | - | - | 31,053 |
| Other work in progress | - | 194,740 | - | 194,740 |
| Total | $59,443 | $313,230 | - | $372,673 |
| Opening Balance | Amortization | Disposals and write-offs | Closing Balance | |
|---|---|---|---|---|
| Other equipment including furniture | $2,813 | $2,178 | - | $4,991 |
| Informatics hardware | - | 3,500 | - | 3,500 |
| Leasehold improvements | 2,403 | 3,105 | - | 5,508 |
| Other work in progress | - | - | - | - |
| Total | $5,216 | $8,783 | - | $13,999 |
| 2012 | 2011 | |
|---|---|---|
| Other equipment including furniture | $85,689 | $8,077 |
| Informatics hardware | 52,700 | 17,500 |
| Leasehold improvements | 25,545 | 28,650 |
| Other work in progress | 194,740 | - |
| Total | $358,674 | $54,227 |
Amortization expense for the year ended March 31, 2012 is $8,738 (2011 - $2373)
8. Contractual Obligations
The nature of the Office's activities can result in some large multi-year contracts and obligations whereby the Office will be obligated to make future payments when the services are received. A significant contractual obligation for occupancy costs that can be reasonably estimated is summarized as follows:
| Fiscal Period | Amount |
|---|---|
| 2012-13 (including storage) | $150,524 |
| 2013-14 (including storage) | 150,524 |
| 2014-15 (including storage) | 150,524 |
| 2015-16 (expires June 30, 2015) | 36,495 |
| Total | $488,067 |
9. Related Party Transactions
The Office is related as a result of common ownership to all Government of Canada departments, agencies and Crown Corporations. The Office enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Office received common services which were obtained without charge from other Government departments and agencies as disclosed below.
(a) Common Services Provided Without Charge by Other Government Departments
During the year, the Office received services without charge from certain common service organizations related to the employer's contribution to the health and dental insurance plans. These services provided without charge have been recorded in the Office's Statement of Operations and Departmental Net Financial Position as follows:
| 2012 (in dollars) | 2011 (in dollars) | |
|---|---|---|
| Employer's contribution to the health and dental insurance plans | $73,860 | $64,469 |
| Total | $73,860 | $64,469 |
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 cost of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services Canada are not included in the Office's Statement of Operations and Departmental Net Financial Position.
(b) Other Transactions with Related Parties
| 2012 (in dollars) | 2011 (in dollars) | |
|---|---|---|
| Expenses - other government departments and agencies | $532,342 | $386,803 |
10. Segmented Information
Presentation by segment is based on the Office's program activity 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 for the main program activities, by major object of expenses. The segment results for the period are as follows:
| Operating expenses | Program | Internal Services | Total (in dollars) 2012 | Total (in dollars) 2011 Restated (note 11) |
|---|---|---|---|---|
| Salaries and employee benefits | $851,479 | $179,169 | $1,030,648 | $885,690 |
| Professional and special services | 201,384 | 185,521 | 386,905 | 434,687 |
| Accommodation | 159,936 | - | 159,936 | 156,080 |
| Transportation and telecommunications | 6,492 | 9,505 | 15,997 | 11,984 |
| Office expenses and equipment | - | 12,305 | 12,305 | 19,844 |
| Utilities, material and supplies | - | 12,164 | 12,164 | 15,194 |
| Printing and publishing | 4,675 | 6,977 | 11,652 | 22,135 |
| Amortization of tangible capital assets | - | 8,783 | 8,783 | 2,373 |
| Rentals | - | 8,174 | 8,174 | 14,628 |
| Total program expenses | $1,223,966 | $422,598 | $1,646,564 | $1,562,615 |
11. Accounting Changes
During 2011, amendments were made to Treasury Board Accounting Standard 1.2 Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendments are effective for financial reporting of fiscal years ending March 31, 2012, and later. The significant changes to the Office's financial statements are described below. These changes have been applied retroactively, and comparative information for 2010 - 11 has been restated.
Net debt (calculated as liabilities less financial assets) is now presented in the Statement of Financial Position. Accompanying this change, the Office now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.
Government funding, as well as the credit related to services provided without charge by other government departments, are now recognized in the Statement of Operations and Departmental Net Financial Position below "Net cost of operations before government funding." In previous years, the Office recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the "Net cost of operations after government funding by $2,023,069 for 2012 ($1,670,653 for 2011)
| 2011 As previously stated | Effect of change | 2011 Restated | |
|---|---|---|---|
| Net cash provided by government | - | $1,607,662 | $1,607,662 |
| Change in due from Consolidated Revenue Fund | - | (1,478) | (1,478) |
| Services provided without charge by other government departments | - | 64,469 | 64,469 |
12. 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 of the Office of the Communications Security Establishment Commissioner for Fiscal Year 2011-2012 (Unaudited)
1. Introduction
Under the Treasury Board Policy on Internal Control (PIC), departments are required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR). As such, departments are expected to conduct annual assessments of their system of ICFR, establish action plans to address any necessary adjustments, and to attach to their Statements of Management Responsibility a summary of their assessment results and action plan.
The Office of the Communications Security Establishment Commissioner (Office) will use the results of the periodic Core Control Audit performed by the Office of the Comptroller General to adhere to the Treasury Board Policy on Internal Control. Until such audit takes place, the Office will proceed with a risk-based assessment of the system of ICFR. Below is a summary of the results of the assessment conducted as at March 31, 2012.
2. Assessment Results as of March 31, 2012
The Office is in the early stages of implementing PIC and the ICFR and will continue this work over the next three fiscal years. To date, the preliminary assessment has shown that improvements are required in the documentation of processes. The majority of the testing has not yet started and no assessment results are available at this time.
3. Assessment Plan
Design effectiveness aims to identify and document key controls, to ensure that they are in place and aligned with the risks they aim to mitigate, and that required remediation is addressed appropriately and in a timely manner.
The Officeplans to complete the assessment of design effectiveness of its Entity Level Controls (ELC), General Information Technology Controls (GITC) and the significant business process level controls (BPLC), focusing on, in the first instance, procurement to payment and payroll in 2012-13.
Operating effectiveness aims to ensure that key controls are working as intended over a defined period, and that required remediation is addressed appropriately and in a timely manner.
The operational effectiveness testing of ELC and BPLC will be completed in 2013-2014 and GITC in 2014-15.
The Office will commence ongoing monitoring of the system of ICFR through the development and implementation of an on-going monitoring plan.
The Office will, as a result, fully implement the PIC over the next 3 fiscal years.
- Date modified: