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Section IV - Other Items of Interest

Financial Statements for the Year Ended March 31, 2007

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Privy Council Office
Financial Statements (Unaudited)

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Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2007, and all information contained in these statements rest with departmental management. These statements have been prepared by management in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector.

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 department’s financial transactions. Financial information submitted to the Public Accounts of Canada and included in the department’s Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable; that assets are safeguarded; and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the department.

The financial statements of the department have not been audited.

Kevin G. Lynch Clerk of the Privy Council and Secretary to the Cabinet

Marilyn MacPherson Assistant Deputy Minister Corporate Services

Ottawa, Ontario
August 10, 2007

Privy Council Office Statement of Operations (Unaudited)
for the year ended March 31, 2007
Expenses (Note 4)	2007		2006
			(Note 13)
	(in thousands of dollars)
Support for Cabinet decision making and the legislative agenda	6,989		7,133
Advice to the Prime Minister and ministers on issues, policies, machinery and appointments	64,806		77,091
Provide Cabinet with sound advice on the development, coordination and implementation of the policy agenda	30,788		35,375
As its head, the Clerk leads the Public Service in effectively supporting Cabinet and serving Canadians	7,305		10,091
Provide the Prime Minister's Office and the offices of the portfolio ministers with financial and administrative support	33,284		42,349
Provide Commissions of Inquiry with appropriate administrative support	13,538		16,334
Total Expenses	156,710		188,373
Revenues (Note 5)
Support for Cabinet decision making and the legislative agenda	1		1
Advice to the Prime Minister and ministers on issues, policies, machinery and appointments	10		13
Provide Cabinet with sound advice on the development, coordination and implementation of the policy agenda	4		8
As its head, the Clerk leads the Public Service in effectively supporting Cabinet and serving Canadians	10		6
Provide the Prime Minister's Office and the offices of the portfolio ministers with financial and administrative support	7		9
Provide Commissions of Inquiry with appropriate administrative support	0		0
Total Revenues	32		37
Net Cost of Operations	156,678		188,336
The accompanying notes form an integral part of these financial statements.

   

Privy Council Office Statement of Financial Position (Unaudited)
at March 31, 2007
Assets	2007		2006
	(in thousands of dollars)
Financial assets
Accounts receivable and advances (Note 6)	6,481		1,917
Total financial assets	6,481		1,917
Non-financial assets
Prepaid expenses	696		209
Tangible capital assets (Note 7)	9,376		9,727
Total non-financial assets	10,072		9,936
Total	16,553		11,853
Liabilities and Equity of Canada
Liabilities
Accounts payable and other liabilities (Note 8)	20,120		19,540
Vacation pay and compensatory leave	7,864		5,328
Employee severance benefits (Note 9)	14,679		12,895
Total liabilities	42,663		37,763
Equity of Canada	(26,110)		(25,910)
Total	16,553		11,853
Contingent liabilities (Note 10)
Contractual obligations (Note 11)
The accompanying notes form an integral part of these financial statements.

   

Privy Council Office Statement of Equity of Canada (Unaudited)
at March 31, 2007
	2007		2006
	(in thousands of dollars)
Equity of Canada, beginning of year	(25,910)		(26,452)
Net cost of operations	(156,678)		(188,336)
Refund and adjustment of previous year expenditures	(1,548)		(1,297)
Revenue not available for spending	(32)		41
Services provided without charge by other government departments (Note 12)	18,097		22,427
	(140,161)		(167,165)
Current year appropriations used (Note 3)	135,561		162,317
Change in net position in the Consolidated Revenue Fund (Note 3c)	4,400		5,390
Equity of Canada, end of year	(26,110)		(25,910)
The accompanying notes form an integral part of these financial statements.

   

Privy Council Office Statement of Cash Flow (Unaudited)
for the year ended March 31, 2007
		2007		2006
		(in thousands of dollars)
Operating Activities
Net cost of operations		156,678		188,336
Non-cash items:
	Amortization of tangible capital assets (note 7)	(3,401)		(3,032)
	(Loss) gain on disposal of tangible capital assets	0		(16)
	Services provided without charge by other government departments (Note 12)	(18,097)		(22,427)
		(21,498)		(25,475)
Variation in Statement of Financial Position:
	Increase (decrease) in accounts receivable and advances	4,564		(1,498)
	Increase (decrease) in prepaid expenses	487		(563)
	(Increase) decrease in liabilities:
	Accounts payable and accrued liabilities	(580)		5,472
	Vacation pay and compensatory leave	(2,536)		(147)
	Employee severance benefits	(1,784)		(1,784)
		151		1,480
Cash used by operating activities		135,331		164,341
Capital Investment Activities
	Acquisition of tangible capital assets (Note 7)	3,337		1,930
	Net cost of tangible capital asset transfers	(120)		0
	Work in Progress	(167)		180
Cash used by capital investment activities		3,050		2,110
Financing Activities
Net cash provided by Government of Canada		138,381		166,451
The accompanying notes form an integral part of these financial statements.

   

Privy Council Office Notes to Financial Statements (Unaudited)
for the year ended March 31, 2007
1. Authority and Objectives
The Privy Council Office (PCO) is a division of the Public Service of Canada as set out in column 1 of Schedule I.1 of the Financial Administration Act and Reports to Parliament through the Prime Minister.
The Privy Council Office reports directly to the Prime Minister and is headed by the Clerk of the Privy Council and Secretary to the Cabinet. The Clerk is also the Head of the Public Service. The mandate of the Privy Council Office is to serve Canada and Canadians by providing the best non-partisan advice and support to the Prime Minister, Ministers within the Prime Minister’s portfolio and Cabinet. PCO’s work requires close and continuous contact with other federal departments and agencies to support their ability to work effectively and to ensure overall consultation and coordination.
Commissions of Inquiry established under the Inquiries Act are designated as departments under the Financial Administration Act and the Prime Minister is designated as the "appropriate Minister" under that same act. PCO provides administrative and financial management support to Commissions. In 2006-07, these Commissions were supported by PCO: the Commission of Inquiry into the Actions of Canadian Officials in Relation to Maher Arar,  the Commission of Inquiry into the Investigation of the Bombing of Air India Flight 182 and the Commissions of Inquiry into the Actions of Canadian Officials in Relation to Abdullah Almalki, Ahmad Abou-Elmaati and Muayyed Nureddin (the Commission of Inquiry into the Sponsorship Program and Advertising Activities and Commission of Inquiry into the Actions of Canadian Officials in Relation to Maher Arar for 2005-06).
2. Summary of Significant Accounting Policies
The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.  Significant accounting policies are as follows:
a) Parliamentary appropriations: The Department is financed by the Government of Canada through Parliamentary appropriations.  Appropriations provided to the department do not parallel financial reporting according to Canadian generally accepted accounting principles since appropriations are primarily based on cash flow requirements.  Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.
b) Net Cash Provided by Government: The Privy Council Office operates within the Consolidated Revenue Fund (CRF).  The CRF is administered by the Receiver General for Canada.  All cash received by Privy Council Office is deposited to the CRF and all cash disbursements made by the Department 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 federal government.
c) Change in net position in the Consolidated Revenue Fund is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non respendable revenue recorded by the Privy Council Office.  It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.
d) Revenues:
-	Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
-	Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.
e) Expenses are recorded on the accrual basis:
-	Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement.
-	Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
-	Services provided without charge by other government departments for accommodation, the employer’s contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.
f) Employee future benefits:
i)	Pension benefits:  Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada.  The department’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan.  Current legislation does not require Privy Council Office to make contributions for any actuarial deficiencies of the Plan.
ii)	Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment.  These benefits are accrued as employees render the services necessary to earn them.  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.
g) Accounts receivables and advances are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.
h) Contingent liabilities are potential liabilities which 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 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 having an initial cost of $5,000 or more are recorded at their acquisition cost.  The capitalization of software has been done on a prospective basis from April 1, 2001. The Privy Council Office does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value.  Work in progress is only amortized when the related projects are completed and their amortization is based on the estimated useful life of the asset.  Amortization of capital assets is done on a straight line basis over the estimated useful life of the capital asset as follows:
	Asset Class	Amortization Period
	Machinery and Equipment	5 to 15 years
	Informatics Hardware	3 to 5 years
	Informatics Software	3 to 5 years
	Motor Vehicles	3 to 10 years
	Other Equipment	10 to 15 years
j) Measurement uncertainty:  The preparation of these financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector 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 these estimates and assumptions to be reasonable.  The most significant items where estimates are used are contingent liabilities, 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.
k) Foreign currency transactions:  Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions.  Monetary assets and liabilities denominated in a foreign currency are translated into Canadian dollars using the rate of exchange in effect on March 31.
3. Parliamentary Appropriations
The Privy Council Office receives most of its funding through annual Parliamentary Appropriations.  Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations in prior, current or future years.  Accordingly, the Department 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 appropriation used:
						2007		2006
						(in thousands of dollars)
Net cost of operations						156,678		188,336
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (Less):
	Amortization of tangible capital assets					(3,401)		(3,032)
	(Loss) Gain on disposal of tangible assets					0		(16)
	Services provided without charge by other government departments					(18,097)		(22,427)
	Prepaid expenses					696		(563)
	Vacation pay and compensatory leave					(2,536)		(147)
	Employee severance benefits					(1,784)		(1,784)
	Accounts payable and accrued liabilities					15		(365)
	Refund and adjustment of previous year expenditures					1,548		1,297
	Revenue not available for spending					33		(41)
	Other adjustments					(928)		(1,051)
						(24,454)		(28,129)
Adjustments for items not affecting net cost of operations but affecting appropriations:
Add:
	Acquisition of tangible capital assets					3,337		2,110
Current year appropriation used						135,561		162,317
b) Appropriation provided and used:
						2007		2006
						(in thousands of dollars)
Vote - Operating expenditures						135,698		159,981
Statutory amounts						12,661		14,592
Less:
Appropriations available for future years						(18)		(20)
Lapsed appropriations - Operating						(12,780)		(12,236)
Current year appropriation used						135,561		162,317
c) Reconciliation of net cash provided by Government to current year appropriation used:
						2007		2006
						(in thousands of dollars)
Net cash provided by the Government						138,381		166,451
Refund and adjustment of previous year expenditures						1,548		1,297
Revenue not available for spending						32		(41)
						139,961		167,707
Change in net position in the Consolidated Revenue Fund
	Variation in accounts receivable and advances					(4,561)		1,498
	Variation in prepaid expenses					209		563
	Variation in accounts payable and accrued liabilities					596		(5,837)
	Other adjustments					(644)		(1,614)
						(4,400)		(5,390)
Current year appropriation used						135,561		162,317
4. Expenses
The following table presents details of expenses by category:
						2007		2006
						(in thousands of dollars)
Salaries and employee benefits						96,900		110,349
Professional and special services						20,926		31,907
Accommodation						13,244		14,176
Transportation and telecommunications						6,578		8,849
Acquisition of machinery and equipment						5,879		4,493
Information						3,886		5,856
Amortization of tangible and capital assets						3,401		3,032
Purchased repair and maintenance						2,683		4,029
Utilities, materials,and equipment						1,617		1,768
Rental						703		1,984
Other expenses						485		1,037
Transfer payments						408		877
Loss on disposal of tangible assets						0		16
Total						156,710		188,373
5. Revenues
The following table presents details of revenues by category:
						2007		2006
						(in thousands of dollars)
Gain on disposal of tangible assets						17		22
Regulatory fees						10		8
Miscellaneous revenues						4		7
Gain on foreign exchange						1		0
Total						32		37
6. Accounts Receivable and Advances
The following table presents details of accounts receivable and advances by category:
						2007		2006
						(in thousands of dollars)
Receivables from other federal government departments and agencies						6,057		1,693
Receivables from external parties						465		272
Employee advances						23		20
Sub-total						6,545		1,985
Less: allowance for doubtful accounts on external receivables						64		68
Total						6,481		1,917

 

7. Tangible Capital Assets
	Cost								Accumulated amortization
	Opening Balance		Acquisitions1		Disposals and write-offs		Closing Balance		Opening Balance		Amortization2		Disposals and write-offs		Closing Balance		Net Book Value 2007		Net Book Value 2006
(in thousands of dollars)
Machinery and equipment	40		0		0		40		26		2		0		28		12		14
Informatics hardware	9,445		1,947		(150)		11,242		6,286		1,729		(17)		7,998		3,244		3,159
Informatics software	3,830		510		0		4,340		2,327		1,006		0		3,333		1,007		1,503
Other equipment	4,967		2,377		0		7,344		1,966		602		0		2,568		4,776		3,001
Motor vehicles	318		97		0		415		198		62		12		272		143		120
Work-in-progress - Software	67		95		(148)		14		0		0		0		0		14		67
Work-in-progress - Other	1,863		181		(1,864)		180		0		0		0		0		180		1,863
	20,530		5,207		(2,162)		23,575		10,803		3,401		(5)		14,199		9,376		9,727
(1) Total acquisitions of $5,207K is comprised of regular acquisitions of capital assets ($3,337), capitalization and creation of new work-in-progress (WIP) ($1,845K), and a transfer from another department ($25K).
(2) Amortization expense for the year ended March 31, 2007 is $3,401K (2006 - $3,032K).

 

8. Accounts payable and other liabilities
The following table presents details of accounts payable and other liabilities:
						2007		2006
						(in thousands of dollars)
Accounts payable to external parties						12,890		14,978
Accounts payable to other federal government departments and agencies						5,960		3,421
Other liabilities						920		776
Contingent liabilities (Note 10)						350		365
Total						20,120		19,540
9. Employee Benefits
a) Pension benefits:  The Privy Council 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/Québec Pension Plans benefits and are indexed to inflation.
Both the employees and the department contribute to the cost of the Public Service Pension Plan.  The 2006-07 expense amounts to $9,079,000 ($10,800,000 in 2005-06), which represents approximately 2.2 times (2.6 in 2005-06) the contributions by employee.
The Department’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 Privy Council Office provides severance benefits to its employees based on eligibility, years of service and final salary.  These severance benefits are not pre-funded.  Benefits will be paid from future appropriations.  Information about the severance benefits, measured as at March 31, is as follows:
						2007		2006
						(in thousands of dollars)
Accrued benefits obligation, beginning of year						12,895		11,111
Expenses for the year						2,923		3,612
Benefits paid during the year						(1,139)		(1,828)
Accrued benefits obligation, end of year						14,679		12,895
10. Contingent Liabilities
Claims and litigations
Claims have been made against the Privy Council Office in the normal course of operations.  Legal proceedings for claims totaling approximately $350,000 were still pending at March 31, 2007 ($365,000 in 2005-2006).  Some of these potential liabilities 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 in the financial statements.

 

11. Contractual Obligations
The nature of the Privy Council Office’s activities can result in large multi-year contracts and obligations whereby the Department will be obligated to make future payments when the services/goods are received.  Significant contractual obligations that can be reasonably estimated are summarized as follows:
(in thousands of dollars)		2008	2009	2010	2011	2012 and thereafter	Total
Privy Council Office
Transportation and telecommunications		425	5	0	0	0	430
Information		1,666	0	0	0	0	1,666
Professional and special services		5,007	36	0	0	0	5,043
Rental		588	620	425	318	399	2,350
Purchased repair and maintenance		407	166	2	4	0	579
Other		751	0	0	0	0	751
		8,844	827	427	322	399	10,819
Commissions of Inquiry
Information		371	0	0	0	0	371
Professional and special services		6,646	0	0	0	0	6,646
Other		731	0	0	0	0	731
		7,748	0	0	0	0	7,748
Total		16,592	827	427	322	399	18,567

 

12. Related Party Transactions
The department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations.  The Privy Council Office enters into transactions with these entities in the normal course of business and on normal trade terms.
Services provided without charge: During the year, the Privy Council Office received, without charge from other government departments, accommodation, the employer’s contribution to the health and dental insurance plans,  legal services and worker's compensation coverage.  These services without charge have been recognized in the Department’s Statement of Operations as follows:
				2007	2006
				(in thousands of dollars)
Accommodation				10,847	13,164
Employer's contribution to the health and dental insurance plans				6,007	6,243
Legal services				1,232	3,010
Worker's compensation coverage				11	10
Total				18,097	22,427
The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge.  The costs of these services, which include payroll and cheque issuance services provided by Public Work and Government Services Canada and audit services provided by the Office of the Auditor General, are not included as an expense in the Department’s Statement of Operations.
13. Comparative information
For the year ended March 31, 2007, PCO redefined its program activities.  As a result, comparative figures have been reclassified to conform with the new presentation.
14. Program Activity Structure
The 2006-2007 Financial Statements for the Privy Council Office were prepared based on the Treasury Board Secretariat reporting requirements for the program activities.  As a result, charges for Corporate Services activities have been distributed between Program Activities.

List of Statutory Reports

Annual Report to the Prime Minister on the Public Service
Pursuant to section 47.1 of the Public Service Employment Act, the Clerk of the Privy Council, as Head of the Public Service, shall submit a report on the state of the Public Service each fiscal year to the Prime Minister. This report is then tabled in the House of Commons by the Prime Minister.

The Clerk’s current Annual Report to the Prime Minister on the Public Service of Canada is available online at http://www.pco-bcp.gc.ca/default.asp?Language=E&Page=clerk&Sub=AnnualReports

Annual Report to Parliament on the Access to Information Act
PCO submitted its annual report to Parliament on the administration of the Access to Information Act in the Privy Council Office. This report is required by section 72(1) of the Act.

Annual Report to Parliament on the Privacy Act
PCO submitted its annual report to Parliament on the administration of the Privacy Act in the Privy Council Office. This report is required by section 72(1) of the Act.

Legislation Administered

Prime Minister

Constitution Acts
Conflict of Interest Act	2006, c.9, s.2
Governor General’s Act	R.S. 1985, c.G-9, as amended
Inquiries Act	R.S. 1985, c.I-11, as amended
Ministries and Ministers of State Act	R.S. 1985, c.M-8
Public Service Rearrangement and Transfer of Duties Act	R.S. 1985, c.P-34
Royal Style and Titles Act	R.S. 1985, c.R-12
Royal Style and Titles (Canada) Act	1947, c.72 (see also R.S.C. 1970, c.12)
Salaries Act	R.S. 1985, c.S-3, as amended

President of the Queen’s Privy Council for Canada

Canadian Transportation Accident Investigation and Safety Board Act	1989, c.3, as amended
Oaths of Allegiance Act	R.S. 1985, c.O-1
Royal Assent Act	2002, c.15

Leader of the Government in the House of Commons

Canada Elections Act	2000, c.9, as amended
Electoral Boundaries Readjustment Act	R.S. 1985, c.E-3, as amended
Parliament of Canada Act	R.S., 1985, c.P-1, as amended
Referendum Act	1992, c.30, as amended
An Act to amend the Canada Elections Act and the Income Tax Act	2004, c. 24, as amended.

Leader of the Government in the Senate

Federal Law-Civil Law Harmonization Act, No.2	2004, c.21
Highway 30 Completion Bridges Act	2005, c. 37

Further Information

General Inquiries and Publications	613-957-5153
Telephone device for the hearing impaired	613-957-5741
PCO Public Inquiries (email)	info@pco-bcp.gc.ca
Prime Minister	http://pm.gc.ca/
Leader of the Government in the House of Commons	www.pco-bcp.gc.ca/lgc/
President of the Queen’s Privy Council and Minister of Intergovernmental Affairs	www.pco-bcp.gc.ca/aia/
Leader of the Government in the Senate	www.pco-bcp.gc.ca/lgs/
Privy Council Office	http://www.pco-bcp.gc.ca/
Speech from the Throne	http://www.sft-ddt.gc.ca/
Orders-in-Council	www.pco-bcp.gc.ca/oic-ddc
Governor-in-Council Appointments	http://www.appointments-nominations.gc.ca/
Commission of Inquiry into the Actions of Canadian Officials in Relation to Maher Arar	http://www.ararcommission.ca/
Commission of Inquiry into the Investigation of the Bombing of Air India Flight 182	http://www.majorcomm.ca/
Internal Inquiry into the Actions of Canadian Officials in Relation to Abdullah Almalki, Ahmad Abou-Elmaati and Muayyed Nureddin	http://www.iacobucciinquiry.ca/

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