Future-Oriented Statement of Operations for the Years Ending March 31, 2016 and March 31, 2017

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Statement of Management Responsibility

Departmental management is responsible for the future-oriented statement of operations, including responsibility for the appropriateness of the assumptions on which this statement is prepared. This statement is based on the best information available and on assumptions adopted as at September 30, 2015. Furthermore, this statement considers significant information obtained during its preparation and reflects the plans described in the Report on Plans and Priorities.

This statement has not been subject to an external audit or review but has been shared with the Privy Council Office (PCO) Departmental Audit Committee and it reflects the committee members' comments.

Approved by the Senior Officials: (original signed by)

Michael Wernick
Clerk of the Privy Council and
Secretary to the Cabinet

Michelle Doucet
Assistant Deputy Minister
Corporate Services Branch
Chief Financial Officer






Ottawa, Canada
February 26, 2016


Privy Council Office
Future-Oriented Statement of Operations (Unaudited)


For the year ending March 31

(in thousands of dollars)
  Forecast Results
2016
Planned Results
2017
Expenses (Note 6)
Advice and support to the Prime Minister and portfolio ministers 66,327 66,435
Advice and support to Cabinet and Cabinet committees 13,482 13,963
Public service leadership and direction 4,356 4,711
Internal Services 65,783 62,297
Total Expenses 149,948 147,406
Revenues
Miscellaneous 20 16
Internal Services Support 75 75
Revenues earned on behalf of Government (4) (4)
Total Revenues 91 87
Net cost of operations before government funding and transfers 149,857 147,319

Information for the year ending March 31, 2016 includes actual amounts from April 1, 2015 to September 30, 2015. The information for the remainder of fiscal year 2015-16 and for fiscal year 2016-17 is based on forecasts.

The accompanying notes form an integral part of this future-oriented statement of operations.


Privy Council Office
Notes to the Future-Oriented Statement of Operations (Unaudited)


For the year ending March 31

1. Authority and Objectives

PCO is a division of the federal public administration as set out in column 1 of Schedule I.1 of the Financial Administration Act and reports to Parliament through the Prime Minister.

PCO 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 PCO is to serve Canada and Canadians by providing professional, non-partisan advice and support to the Prime Minister, the ministers within the Prime Minister’s portfolio and Cabinet. PCO supports the development of the Government of Canada's policy and legislative agendas, coordinates responses to issues facing the Government and the country, and supports the effective operation of Cabinet.

As the new government, elected in October 2015, carries out its mandate, PCO will advise and support the Prime Minister and portfolio ministers on issues arising from delivery of the Government’s agenda. PCO will provide and support in assessing implementation, progress and outcomes of priority initiatives and commitments as set out in the 2015 Speech from the Throne and mandate letters to ministers.

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 of inquiry. There are no active commissions of inquiry in fiscal year 2015-16 and should a Commission of inquiry be established under the Prime Minister’s responsibilities in 2016-17, PCO will support that commission by securing funding for its operations, as well as by providing timely administrative support and advice throughout the year.

To achieve its strategic outcome and to deliver results for Canadians, PCO articulates its plans and priorities based on the core programs below.

1.1 Advice and support to the Prime Minister and portfolio ministers

PCO provides professional, non-partisan advice and support to the Prime Minister and portfolio ministers on the full spectrum of issues they address on a daily basis. PCO also provides advice and support on: the structure and organization of government; government-wide communications; Governor-in-Council appointments; the development and implementation of parliamentary and legislative programs; the reform of democratic institutions; intergovernmental relations; and legal issues. In addition, PCO provides administrative advice and support pertaining to the budgets of the Prime Minister’s Office and those of the offices of portfolio ministers.

1.2 Advice and support to Cabinet and Cabinet committees

PCO supports the efficient and effective functioning of Cabinet and Cabinet committees on a day-to-day basis. As part of this work, PCO coordinates departmental policy, legislative and government administration proposals going to Cabinet and its committees; performs a challenge function during the policy development process; and prepares briefing materials and accompanying policy analysis to facilitate Cabinet’s decision-making process. PCO also provides a secretariat function for Cabinet and its committees, which includes scheduling and support services for meetings, as well as preparation and distribution of Cabinet documents. In addition, PCO supports effective policy integration across the federal government so that proposals take into account the full range of departmental and Public Service-wide perspectives and issues related to implementation, such as communications, parliamentary affairs, intergovernmental relations and budget impacts.

1.3 Public service leadership and direction

PCO supports the development and maintenance of a high-quality Public Service that meets the highest standards of accountability, transparency and efficiency. As part of this work, PCO provides advice to the Clerk of the Privy Council and the Prime Minister on the renewal of Public Service and government operations in order to position the Public Service workforce and workplace for the future as more adaptable, innovative and streamlined. PCO also supports the human resources management of senior leaders across the government, including performance management and leadership development.

1.4 Commissions of inquiry

PCO provides commissions of inquiry with financial and administrative support. As part of this work, PCO can, when necessary, provide ongoing administrative advice and support in the following areas: staffing; acquisition services; contracting; financial services; access to funding; records management; payroll support; publishing information online; translation; legal services; security; and systems support.

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. Internal Services include only those activities and resources that apply across an organization, and not those provided to a specific program. The groups of activities are Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; and Acquisition Services.

2. Methodology and Significant Assumptions

The future-oriented statement of operations has been prepared on the basis of the government priorities and the plans of PCO as described in the Report on Plans and Priorities.

The information in the forecast results for fiscal year 2015-16 is based on actual results as at September 30, 2015 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2016-17 fiscal year.

The main assumptions underlying the forecasts are as follows:

  1. PCO’s activities will be different due to the fact that 2015-16 was an election year.

  2. Expenses and revenues, including the determination of amounts internal and external to the government, are based on experience. The general historical pattern is expected to continue.

These assumptions are adopted as at September 30, 2015 and consider significant information obtained during the preparation of this future-oriented statement of operations.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2015-16 and for 2016-17, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this future-oriented statement of operations, PCO has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the future-oriented statement of operations and the historical statement of operations include the following:

  1. The timing and amounts of asset acquisitions and disposals may affect gains/losses and amortization expense;

  2. Implementation of new collective agreements; and

  3. Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.

Once the Report on Plans and Priorities is presented, PCO will not be updating the forecasts for any changes in financial resources made in ensuing Supplementary Estimates. Variances will be explained in the Departmental Performance Report.

4. Summary of Significant Accounting Policies

The future-oriented statement of operations has been prepared using the Government's accounting policies that came into effect for the 2011-12 fiscal year, 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:

  1. Expenses

    Expenses are recorded on an accrual basis. Expenses for PCO's operations are recorded when goods are received or services are rendered, including services provided without charge for accommodation, employer contributions to health and dental insurance plans, and worker's compensation, which are recorded as expenses at their estimated cost. Vacation pay and compensatory leave, as well as severance benefits, are accrued and expenses are recorded as the benefits are earned by employees under their terms of employment.

    Expenses include provisions to reflect changes in the value of assets such as bad debt on accounts receivable.

    Expenses also include the consumption of inventory and amortization of tangible capital assets, which are capitalized at their acquisition cost. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset.

  2. Revenues

    Miscellaneous revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

    Revenues that are non-respendable are not available to discharge PCO's liabilities. While the Clerk of the Privy Council and Secretary to the Cabinet is expected to maintain accounting control, he 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 are therefore presented in reduction of PCO's gross revenues.

  3. Employee future benefits

    Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer pension plan administered by the Government. PCO's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. PCO'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.

  4. Inventory

    Inventory consists of parts, materials and supplies held for future program delivery and not intended for resale. Inventory is valued at cost using the specific identification method. If there is no longer any service potential, inventory is valued at the lower of cost or net realizable value.

  5. Tangible capital assets

    Tangible capital assets having an initial cost of $5,000 or more are recorded at their acquisition cost. PCO does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

    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
    Machinery and equipment 5 to 15 years
    Informatics hardware 3 to 5 years
    Informatics software 3 to 5 years
    Other equipment 10 to 15 years
    Motor vehicles 3 to 10 years

    Work in progress 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.

  6. Measurement uncertainty

    The preparation of this future-oriented statement of operations requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses reported in the future-oriented statement of operations. At the time of the preparation of this statement, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the liability for employee future 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 future-oriented statement of operations in the year they become known.

5. Parliamentary Authorities

PCO is financed by the Government of Canada through parliamentary authorities. Financial reporting of authorities provided to PCO do not parallel financial reporting according to generally accepted accounting principles because authorities are primarily based on cash flow requirements. Items recognized in the future-oriented statement of operations in one year may be funded through parliamentary authorities in prior, current, or future years. Accordingly, PCO has different net cost 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 requested authorities

(in thousands of dollars)
  Forecast Results
2016
Planned Results
2017
Net cost of operations before government funding and transfers 149,857 147,319
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (1,672) (1,864)
Gain on disposal of tangible capital assets 4 1
Services provided without charge by other departments (Note 9) (20,625) (20,154)
Prepaid expenses previously charged to authorities (1,108) (1,242)
Decrease in inventory (126) (126)
Decrease (Increase) in vacation pay and compensatory leave 598 (289)
Decrease (Increase) in employee future benefits 2,539 (245)
Work in progress 988 529
Refund of prior years’ expenditures 74 43
Other 10 2
Total items affecting net cost of operations but not affecting authorities (19,318) (23,345)
Adjustments for items not affecting net cost of operations but affecting authorities:
Transition payments for implementing salary payments in arrears 32 -
Acquisition of tangible capital assets 468 366
Increase in prepaid expenses 1,121 1,316
Total items not affecting net cost of operations but affecting authorities 1,621 1,682
Requested authorities 132,160 125,656

b) Authorities Requested

(in thousands of dollars)
  Forecast Results
2016
Planned Results
2017
Authorities requested:
Vote 1: Program expenditures 118,786 110,102
Statutory amounts 14,633 15,564
Less:
Authorities available for future years (13) (10)
Lapsed: Operating (1,246) -
Requested authorities 132,160 125,656

6. Forecasted Expenses

The following table presents the forecasted expenses incurred by major object. The results for the period are as follows:

(in thousands of dollars)
Forecast Results
2016
Planned Results
2017
Salaries and employee benefits 112,192 111,785
Accommodation (Note 9a) 12,904 12,817
Professional and special services 12,576 10,896
Transportation and communications 3,277 3,742
Amortization of tangible capital assets 1,672 1,864
Information 1,439 1,567
Acquisition of machinery and equipment 1,209 1,395
Purchased repair and maintenance 2,904 1,000
Other 308 889
Rentals 816 818
Utilities, materials and supplies 642 624
Loss on disposal of tangible capital assets 9 9
Total of Forecasted Expenses 149,948 147,406

7. Employee future benefits

a) Pension benefits:

PCO’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 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 Plan benefits and they are indexed to inflation.

Both the employees and PCO 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 2012, employee contributors have been divided into two groups - Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2015-16 forecasted expense amounts to $12,724,926 ($13,484,122 in 2016-17). For Group 1 members, the expense represents approximately 1.41 times the employee contributions and, for Group 2 members, approximately 1.39 times the employee contributions.

PCO’s responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the future-oriented statement of operations of the Government of Canada, as the Plan’s sponsor.

b) Severance benefits:

PCO 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.

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 value of benefits earned to date or 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.

Information about the severance benefits, estimated as at the date of this statement, is as follows:

(in thousands of dollars)
  Forecast Results
2016
Planned Results
2017
Accrued benefits obligation - Beginning of year 7,158 4,619
Expense for the year 401 1,645
Expected benefits payments during the year (2,940) (1,400)
Accrued benefits obligation - End of year 4,619 4,864

8. Contractual Obligations

The nature of PCO’s activities can result in some large multi-year contracts and obligations whereby PCO 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)
2016 2017 2018 2019 2020 and
thereafter
Total
Transport and communications 489 380 - - - 869
Information 1,058 575 - - - 1,633
Professional and special services 3,944 58 - - - 4,002
Rental 489 190 179 533 - 1,391
Purchased repair and maintenance 520 - - - - 520
Total 6,500 1,203 179 533 - 8,415

9. Related Party Transactions

PCO is related as a result of common ownership, to all government departments, agencies, and Crown corporations. PCO enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, PCO has an agreement with the Security and Intelligence Review Committee (SIRC) related to the provision of finance and administration services which is included as revenues in section b) of this note. During the year, PCO received common services which were obtained without charge from other government departments as disclosed below:

(a) Common services provided without charge by other government departments:

During the year, PCO receives services without charge from certain common service organizations, related to accommodation, employer's contribution to the health and dental insurance plans and workers' compensation. These services provided without charge have been recorded in PCO's Future-Oriented Statement of Operations as follows:

(in thousands of dollars)
Forecast Results
2016
Planned Results
2017
Accommodation 12,904 12,817
Employer’s contribution to the health and dental insurance plans 7,720 7,336
Worker’s compensation 1 1
Total 20,625 20,154

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 costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada are not included in PCO's Future-Oriented Statement of Operations. The costs of information technology infrastructure services provided by Shared Services Canada, following the transfer of responsibilities in November 2011 and April 2013, are also not included in PCO's Future-Oriented Statement of Operations.

(b) Other transactions with related parties:

(in thousands of dollars)
Forecast Results
2016
Planned Results
2017
Revenues - Other Government departments and agencies 75 75
Expenses - Other Government departments and agencies 25,686 25,251

Expenses disclosed in (b) exclude common services provided without charges which are already disclosed in (a).