Audited Financial Statements 2005-2006

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Office of the Privacy Commissioner of Canada


Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2006 and all information contained in these statements rests with the management of the Office of the Privacy Commissioner of Canada. These financial 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, and year-end instructions issued by the Office of the Comptroller General.

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 to the Public Accounts of Canada and included in the Office’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 the Office’s 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 Office.

The financial statements of the Office of the Privacy Commissioner of Canada have been audited by the Auditor General of Canada, the independent auditor for the Government of Canada.

(Original signed by)

Jennifer Stoddart
Privacy Commissioner of Canada

(Original signed by)

Tom Pulcine, CMA
Director General, Corporate Services and
Chief Financial Officer

Ottawa, Canada
July 21, 2006


Auditor's Report

To the Speaker of the House of Commons and the Speaker of the Senate

I have audited the statement of financial position of the Office of the Privacy Commissioner of Canada as March 31, 2006 and the statements of operations, equity of Canada and cash flow for the year then ended. These financial statements are the responsibility of the Office’s management. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In my opinion, these financial statements present fairly, in all material respects, the financial position of the Office as at march 31, 2006 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.

Further, in my opinion, the transactions of the Office that have come to my notice during my audit of the financial statements have, in all significant respects, been in accordance with the Financial Administration Act regulations and the Privacy Act.

(Original signed by)

Sheila Fraser, FCA
Auditor General of Canada

Ottawa, Canada
July 21, 2006


Statement of Financial Position

Office of the Privacy Commissioner of Canada

(in thousands of dollars) 2006 2005
Assets
 
  Financial assets
  Petty cash advances 2
  Due from the Consolidated Revenue Fund 1,597 1,983
  Accounts receivable (Note 4) 48 295
  Total financial assets 1,645 2,280
 
  Non-financial assets
  Prepaid expenses 47 25
  Tangible capital assets (Note 5) 810 905
  Total non-financial assets 857 930
 
Total 2,502 3,210
 
 
Liabilities
 
  Accounts payable and accrued liabilities 1,413 1,738
  Accrued employee salaries 246 409
  Vacation pay and compensatory leave 370 360
  Employee severance benefits (Note 6 ) 1,282 1,280
  Total liabilities 3,311 3,787
   
Equity of Canada (809) (577)
 
Total 2,502 3,210
   
Contingent liabilities (Note 7 )
Contractual obligations (Note 8 )
The accompanying notes form an integral part of these financial statements.

Approved by:

(Original signed by)

Jennifer Stoddart
Privacy Commissioner of Canada

(Original signed by)

Tom Pulcine, CMA
Director General — Corporate Services and Chief Financial Officer


Statement of Operations

Office of the Privacy Commissioner of Canada

(in thousands of dollars)  
  2006 2005
 
  Assess and Investigate Privacy Education Research and Policy Total Total
 
Operating Expenses
  Salaries and employee benefits 5,518 1,290 1,385 8,193 8,449
  Professional and special services 1,371 675 351 2,397 1,960
  Accommodation 557 73 103 733 704
  Transportation and communications 277 126 80 483 389
  Amortization 280 37 51 368 337
  Information 22 142 4 168 180
  Repairs and maintenance 119 16 22 157 223
  Utilities, materials and supplies 73 17 16 106 116
  Rentals 54 15 10 79 40
  Machinery and equipment 41 10 8 59 194
  Other 3 1 4 2
Total Operating Expenses 8,315 2,401 2,031 12,747 12,594
 
Transfer Payments 154 154 318
 
Net cost of operations 8,315 2,401 2,185 12,901 12,912
 
The accompanying notes form an integral part of these financial statements.

Statement of Equity of Canada

Office of the Privacy Commissioner of Canada

(in thousands of dollars)
  2006 2005
 
Equity of Canada, beginning of the year (577) (744)
Net cost of operations (12,901) (12,912)
Net cash provided by Government 11,680 10,195
Change in Due from Consolidated Revenue Fund (386) 1,474
Services received without charge from other government departments (Note 9) 1,375 1,410
 
Equity of Canada, end of the year (809) (577)
 
The accompanying notes form an integral part of these financial statements.

Statement of Cash Flow

Office of the Privacy Commissioner of Canada

(in thousands of dollars)
  2006   2005
Operating activities
 
Net cost of operations 12,901   12,912
 
Non-cash items
  Amortization of tangible capital assets (368)   (337)
  Services received without charge (Note 9) (1,375)   (1,410)
 
Variations in Statement of Financial Position:
  Increase (decrease) in accounts receivable and advances (249)   42
  Increase (decrease) in prepaid expenses 22   (27)
  Decrease (increase) in liabilities 476   (1,429)
 
Cash used by operating activities 11,407   9,751
 
Capital investment activities
Acquisition of tangible capital assets 273   444
 
Net cash provided by Government of Canada 11,680   10,195
 
The accompanying notes form an integral part of these financial statements.

Notes to the Financial Statements

Office of the Privacy Commissioner of Canada

1. Authority and Objectives

The Office of the Privacy Commissioner of Canada (the Office), was created under the Privacy Act, which came into force on July 1, 1983. The Privacy Commissioner is an independent officer of Parliament appointed by the Governor-in-Council following approval of her nomination by resolution of the Senate and the House of Commons. The Office is designated, by Order-in-Council, as a department for purposes of the Financial Administration Act. As such, it is established under the authority of Schedule I.1 of the Act and is funded through annual appropriations. The Commissioner is accountable for, and reports directly to Parliament on the results achieved.

The objectives of the Office of the Privacy Commissioner of Canada are:

  • investigating complaints and conducting audits;
  • publishing information about personal information-handling practices in the public and private sector;
  • conducting research into privacy issues; and
  • promoting awareness and understanding of privacy issues by the Canadian public.

2. Summary of Significant Accounting Policies

These 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, and year-end instructions issued by the Office of the Comptroller General.

Significant accounting policies are as follows:

  1. Due from the Consolidated Revenue Fund

    Due from the Consolidated Revenue Fund (CRF) represents the amount of cash that the Office is entitled to draw from the Consolidated Revenue Fund without further appropriations, in order to discharge its liabilities.

  2. Parliamentary appropriations

    The Office of the Privacy Commissioner of Canada is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the Office do not parallel financial reporting according to 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.

  3. Net cash provided by Government

    The Office operates within the Consolidated Revenue Fund, 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 federal government.

  4. Expenses

    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 received without charge from other government departments are recorded as operating expenses at their estimated cost.
  5. Employee future benefits

    (i) Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer pension plan administered by the Government of Canada. The Office’s contributions to the Plan are charged to expenses in the year incurred and represent the total obligation of the Office to the Plan. Current legislation does not require the 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.

  6. Accounts receivable

    Accounts receivable are stated at amounts expected to be ultimately realized. A provision is made for receivables where recovery is considered uncertain.

  7. Contingent liabilities

    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.

  8. Tangible capital assets

    All tangible capital assets and leasehold improvements having an initial cost of $2,500 or more are recorded at their acquisition cost. The capitalization of software and leasehold improvements has been done on a prospective basis from April 1, 2001.

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

    Tangible capital asset class

    Amortization period

    Informatics hardware

    3 years

    Computer software

    3 years

    Other equipment

    10 years

    Motor vehicles

    10 years

    Leasehold improvements

    Term of the lease

  9. 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, and year-end instructions issued by the Office of the Comptroller General, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, 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 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.

3. Parliamentary Appropriations

The 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 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 appropriations used:

(in thousands of dollars) 2006 2005
     
Net cost of operations 12,901 12,912
     

Adjustments for items affecting net cost of operations but not affecting appropriations
Add (Less):

   
  Services received without charge (1,375) (1,410)
  Amortization of tangible capital assets (368) (337)
  Revenue not available for spending 122
  Vacation pay and compensatory leave (10) 7
  Employee severance benefits (2) (42)
Sub-Total 11,268 11,130
     

Adjustments for items not affecting net cost of operations but affecting appropriations
Add (Less):

   
  Acquisition of tangible capital assets 273 444
  Change in prepaid expenses 22 (27)
  Other adjustments 68 (7)
Sub-Total 363 410
     
     
Total appropriations used 11,631 11,540

b) Appropriations provided and used:

(in thousands of dollars) 2006 2005
 
  Vote 45 - Program expenditures 10,744 10, 881
  Statutory contributions to employee benefit plans 1,163 1,189
  11,907 12,070
     
Less:
  Lapsed appropriations: Operating (276) (530)
     
Current year appropriations used 11,631 11,540

c) Reconciliation of net cash provided by Government to current year appropriations used:

(in thousands of dollars)

2006 2005
     

Net cash provided by Government

11,680

10,195

Revenue not available for spending

122

Variation in accounts receivable and advances

249

(42)

Variation in accounts payable and accrued liabilities

(325)

1,214

Variation in accrued employee salaries

(163)

180

Other adjustments

68

(7)

 

(171)

1,345

     

Current year appropriations used

11,631

11,540

4. Accounts Receivable

The following table presents details of accounts receivable:

(in thousands of dollars) 2006 2005
     

Receivables from other Federal Government departments and agencies

261

Receivables from external parties

48

34

Total

48

295

5. Tangible Capital Assets

(in thousands of dollars)

  Informatics hardware Computer software Other equipment Motor vehicles Leasehold improvements Total
 

Opening Cost

931

317

515

24

73

1,860

Acquisitions

198

48

4

23

273

Disposals

Closing Cost

1,129

365

519

24

96

2,133

Opening Accumulated Amortization

564

129

232

12

18

955

Disposals

Current Year Amortization

193

106

48

2

19

368

Closing Accumulated Amortization

757

235

280

14

37

1,323

 

Net Book Value 2006

372

130

239

10

59

810

 

Net Book Value 2005

367

188

283

12

55

905

Amortization expense for the year ended March 31, 2006 is $368,000 (2005 — $337,000).

6. Employee 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/Québec Pension Plans benefits and they are indexed to inflation.

Both the employees and the department contribute to the cost of the Plan. The 2005-06 expense amounts to $860,000 ($872,000 in 2004-05), which represents approximately 2.4 times 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 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:

(in thousands of dollars) 2006 2005
 
  Accrued benefit obligation, beginning of the year 1,280 1,238
  Expense for the year 131 94
  Benefits paid during the year (129) (52)
 
  Accrued benefit obligation, end of the year 1,282 1,280

7. Contingent Liabilities

Claims and litigation – Claims have been made against the Office in the normal course of operations. Legal proceedings for claims totaling approximately $50,000 were still pending at March 31, 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.

8. Contractual Obligations

The nature of the Office’s activities can result in some 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 consist of operating leases, which are summarized as follows:

(in thousands of dollars) Total
   

2006-2007

41

2007-2008

36

2008-2009

27

2009-2010

27

2010-2011

4

Total

135

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 expensed $2,659,314 ($3,382,383 in 2005) from transactions with other government departments, agencies and Crown corporations. These expenses include services received without charge in the amount of $1,375,000 ($1,410,000 in 2005), as presented in part (a).

a) Services received without charge:

During the year, the Office received without charge from other departments, accommodation, the employer’s contribution to the health and dental insurance plans, payroll services, and audit services. These services without charge have been recognized in the Office’s Statement of Operations as follows:

(in thousands of dollars)

2006 2005
 

Accommodations provided by Public Works and Government Services Canada

733 704

Contributions covering employer's share of employees' insurance premiums and expenditures paid by Treasury Board Secretariat

529 528

Payroll services provided by Public Works and Government Services Canada

3 3

Audit services provided by the Office of the Auditor General of Canada

110 175

Total

1,375 1,410

b) Payables and receivables outstanding at year-end with related parties:

(in thousands of dollars)

2006 2005
 

Accounts receivable with other government departments and agencies

261

Accounts payable to other government departments and agencies

468 421

10. Equity of Canada

The Equity of Canada, which is currently in a deficit position, represents liabilities incurred by the Office, net of capital tangible assets, which have not yet been funded through appropriations. Significant components of this amount are employee severance benefits and vacation pay liabilities. These amounts are expected to be funded by appropriations in future years as they are paid.

11. Comparative Information

Comparative figures have been reclassified to conform to the current year’s presentation.

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