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Section III - PSC Financial Statements

PUBLIC SERVICE COMMISSION
Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements of the Public Service Commission (PSC) for the year ended March 31, 2007 and all information contained in these statements rests with PSC's management. 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.

Some of the information in the financial statements is based on management's best estimates and judgment and gives due consideration to materiality. To fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of PSC's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the PSC'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 and with prescribed regulations and the Public Service Employment Act, are 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 PSC.

Management is also supported and assisted by a program of internal audit services. The PSC has an Internal Audit Committee. The responsibilities of the Committee are to provide the President with independent, objective advice, guidance and deliberation on the adequacy of the PSC's control and accountability processes.

The PSC's financial statements have been audited by the Auditor General of Canada, the independent auditor for the Government of Canada.

Ottawa, Canada 
July 6, 2007

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 Public Service Commission as at March 31, 2007 and the statements of operations, equity of Canada and cash flow for the year then ended. These financial statements are the responsibility of the Commission'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 amounts 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 Commission as at March 31, 2007 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 Commission 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 and regulations and the Public Service Employment Act.

Sheila Fraser, FCA
Auditor General of Canada

Ottawa, Canada
July 6, 2007

PUBLIC SERVICE COMMISSION  
Statement of Financial Position
At March 31
(in thousands of dollars)

	2007		2006
Assets
Financial assets
Due from the Consolidated Revenue Fund	6,562		10,529
Accounts receivable and advances (Note 4)	5,497		2,135
	12,059		12,664
Non-financial assets
Prepaid expenses	439		635
Tangible capital assets (Note 5)	18,740		14,557
	19,179		15,192
Total assets	31,238		27,856
Liabilities
Accounts payable and accrued liabilities (Note 6)	7,124		8,755
Accrued salary	3,263		3,090
Accrued vacation leave	3,715		3,749
Employee severance benefits (Note 7)	14,988		14,872
	29,090		30,466
Equity of Canada	2,148		(2,610)
Total liabilities and Equity of Canada	31,238		27,856

Contingent liabilities (Note 8)
Contractual obligations (Note 9)

The accompanying notes form an integral part of these financial statements.

Approved by:

PUBLIC SERVICE COMMISSION  
Statement of Operations
For the year ended March 31
(in thousands of dollars)

	2007		2006
Expenses (Note 10)
Recruitment and assessment services
Recruitment and staffing services	35,920		38,477
Assessment services	22,361		19,380
Client services	13,449		13,324
	71,730		71,181
Appointment integrity and political neutrality
Audits and studies	12,270		11,357
Investigations, appeals and inquiries	10,810		10,138
Appointment delegation and accountability	9,734		10,194
Policy, regulation and exclusion approval orders	7,835		9,650
Non-delegated authorities	5,018		4,535
	45,667		45,874
Total expenses	117,397		117,055
Revenues
Assessment and counselling services and products	6,511		4,812
Activities on behalf of:
Canada School of Public Service	333		1,081
Treasury Board Secretariat of Canada	341		327
	674		1,408
Less: Costs recovered	(674)		(1,408)
Net cost of operations	110,886		112,243

The accompanying notes form an integral part of these financial statements.

PUBLIC SERVICE COMMISSION 
Statement of Equity of Canada
For the year ended March 31
(in thousands of dollars)

		2007		2006
Equity of Canada, beginning of year		(2,610)		1,077
Net cost of operations		(110,886)		(112,243)
Net cash provided by Government of Canada		103,347		88,183
Change in Due from the Consolidated Revenue Fund		(3,967)		3,464
Services received without charge from other government departments and agencies (Note 12)		16,264		16,909
Equity of Canada, end of year		2,148		(2,610)

The accompanying notes form an integral part of these financial statements.

PUBLIC SERVICE COMMISSION 
Statement of Cash Flow
For the year ended March 31
(in thousands of dollars)

	2007		2006
Operating activities
Cash received from:
Assessment and counselling services and products	5,278		4,743
Cash paid for:
Salaries and employee benefits	79,603		67,719
Professional and special services	10,835		9,268
Transportation and telecommunications	3,973		3,352
Informatics, office equipment, furniture and fixtures	2,218		2,111
Repair and maintenance	1,738		1,540
Rentals	1,335		581
Utilities, materials and supplies, and other payments	721		1,070
Printing and publications services	562		561
	100,985		86,202
Cash used by operating activities	95,707		81,459
Capital investment activities
Acquisitions of tangible capital assets	7,642		6,729
Proceeds from disposal of tangible capital assets	(2)		(5)
Cash used by capital investment activities	7,640		6,724
Net cash provided by Government of Canada	103,347		88,183

The accompanying notes form an integral part of these financial statements.

PUBLIC SERVICE COMMISSION
Notes to the Financial Statements
For the year ended March 31, 2007

1. Authority and objectives

The Public Service Commission (PSC) of Canada is an independent agency established under the Public Service Employment Act (PSEA) and listed in schedules 1.1 and IV of the Financial Administration Act (FAA). The PSC is dedicated to building a public service that strives for excellence by protecting merit, non-partisanship, representativeness of Canadian society and the use of both official languages. This responsibility is performed in the best interests of the public service as part of Canada's governance system, by administering and applying the provisions of the PSEA and by carrying out responsibilities as provided for in the Employment Equity Act and the Official Languages Act. The new PSEA came into force in December 2005. This legislation emphasizes the PSC's accountability to Parliament and delegates staffing authority to deputy heads who in turn are accountable to the PSC for exercising this power. The Commission also carries out audits and investigations and administers measures under the new PSEA regarding political activities of public servants.

The PSC, from its offices in Ottawa and its seven regional offices, offers recruitment services that allow talented Canadians, drawn from across the country, to join the public service and continually renews staffing services to meet the needs of a modern and innovative public service. The PSC has two program activities that contribute to the achievement of its objectives:

The Appointment Integrity and Political Neutrality activity develops, maintains and monitors the implementation of a policy and regulatory framework for safeguarding the integrity of public service staffing and ensuring political neutrality. This activity includes establishing policies and standards, delegation and oversight of appointment authorities to departments and agencies, and administering non-delegated authorities such as executive appointments and priority administration. This activity also includes conducting audits, studies, investigations and inquiries as well as administering the appeal process and reporting to Parliament on the integrity of public service staffing.

The Recruitment and Assessment Services activity develops and maintains the resourcing systems that link Canadians and public servants seeking employment opportunities in the federal public service with hiring departments and agencies. It provides assessment-related products and services in the form of research and development, consultation, assessment operations and counselling for use in recruitment, selection and development throughout the federal public service. This activity also includes delivering resourcing services, programs and products to departments and agencies, to Canadians and public servants, through client service units located across Canada.

2. Summary of significant accounting policies

• (a) Basis of presentation
  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, and year-end instructions issued by the Office of the Comptroller General.
  
• (b) Parliamentary appropriations
  The PSC is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the PSC do not parallel financial reporting according to Canadian generally accepted accounting principles for the public sector 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.
  
• (c) Due from the Consolidated Revenue Fund
  The PSC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the PSC is deposited to the CRF and all cash disbursements made by the PSC are paid from the CRF. Due from the CRF represents amounts of cash that the PSC is entitled to draw from the CRF, without further appropriations, in order to discharge its liabilities. 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.
  
• (d) Accounts receivable
  Accounts receivable are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.
  
• (e) Tangible capital assets
  All tangible capital assets and leasehold improvements having an initial cost of $5,000 or more are recorded as capital assets at their acquisition cost. Similar items under $5,000 are expensed in the statement of operations. The PSC does not capitalize intangibles. The cost of assets under development by the PSC includes material, direct labour and related overhead. Amounts included in assets under development are transferred to the appropriate class of asset upon completion, and are then amortized. 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
Office equipment	3 and 10 years
Informatics hardware and infrastructure	4 and 5 years
Computer software	3 years
In-house developed software	3 to 10 years
Furniture and fixtures	15 years
Vehicles	6 years
Leasehold improvements	Lesser of 10 years or term of lease

• (f) Salaries and benefits, and vacation leave
• Salaries and benefits, and vacation leave are expensed as the salary benefits accrue to employees under their respective terms of employment. The employee salaries and benefits liability is calculated based on the respective terms of employment using the employees' salary levels at year end, and the number of days remaining unpaid at the end of the year. The liability for vacation leave is calculated at the salary levels in effect at March 31st for all unused vacation leave benefits accruing to employees. Employee vacation pay liabilities payable on cessation of employment represent obligations of the PSC that are normally funded through future years' appropriations.
   
• (g) Employee future benefits
  • 
    i. Pension benefits
    The PSC's eligible employees participate in the Public Service Pension Plan administered by the Government of Canada. The PSC's contributions to the Plan are charged to expenses in the year incurred and represent the total pension obligation of the PSC. The PSC is not required under current legislation to make contributions with respect to 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.
    
• (h) Revenues
  Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues. Revenues that have been received but not yet earned are presented as deferred revenues.
  
  (i) Services received without charge
  Services received without charge from other federal government departments and agencies are recorded as operating expenses at their estimated cost. A corresponding amount is reported directly in the Statement of Equity of Canada.
  
• (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 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 contingent liabilities, the liability for employee severance benefits and the estimated 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 PSC 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 PSC 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):

	2007		2006
Net cost of operations	110,886		112,243
Adjustments for items affecting net cost of operations but not affecting appropriations:
Services received without charge	(16,264)		(16,909)
Amortization of tangible capital assets	(3,416)		(2,558)
Revenue not available for spending 1	34		4,812
Employee severance benefits	(116)		(468)
Vacation leave	34		(104)
Other	272		(276)
	91,430		96,740
Adjustments for items not affecting net cost of operations but affecting appropriations:
Acquisitions of tangible capital assets	7,642		6,729
Prepaid expenses	(196)		518
	7,446		7,247
Current year appropriations used	98,876		103,987

¹For 2006-2007, Treasury Board approved a vote netting authority allowing PSC to respend revenues from Assessment and counselling services and products provided to other federal government departments and agencies under the PSC's jurisdiction and extended jurisdiction.

(b) Appropriations provided and used (in thousands of dollars):

	2007		2006
Parliamentary appropriations provided:
Voted - Operating expenditures	96,448		96,427
Statutory contributions to employee benefit plans	11,370		11,937
Spending of proceeds from disposal of surplus assets	2		8
	107,820		108,372
Less: Lapsed appropriations - operating expenditures1	(8,944)		(4,385)
Current year appropriations used	98,876		103,987

¹The lapse in 2006-2007 is principally due to the transition period and related capacity building associated with the implementation of the new Public Service Employment Act, staffing delays resulting from staff turnover and less than anticipated expenditures for an information technology project (Public Service Staffing Modernization Project). The latter accounts for approximately $7,470,000 of the total lapse, $4,917,000 of which was re-profiled (carried forward) to 2007-2008.

(c) Reconciliation of net cash provided by Government to current year appropriations used (in thousands of dollars):

	2007		2006
Net cash provided by Government	103,347		88,183
Revenue not available for spending	34		4,812
Variation in accounts payable, accrued liabilities and accrued salary	(958)		3,370
Variation in accounts receivable and advances	(3,362)		7,895
Other adjustments	(185)		(273)
Current year appropriations used	98,876		103,987

4. Accounts receivable and advances (in thousands of dollars)

	2007		2006
Receivables- Federal Government departments, agencies and Crown corporations	5,479		2,030
Receivables - External parties	12		98
Advances to PSC's Employees	6		7
Total	5,497		2,135

5. Tangible capital assets (in thousands of dollars)

	Cost: March 31, 2006	Cost: Acquisitions	Cost: Disposals, write-offs & transfers	Cost:March 31, 2007		Net book value - 2007	Net book value - 2006
Office equipment	842	28	127	743		350	407
Informatics hardware and infrastructure	6,372	1,676	(364)	8,412		2,891	1,401
In-house developed software	10,061	656	(4,638)	15,355		10,263	7,204
Furniture and fixtures	243	527	-	770		579	76
Vehicles	25	-	-	25		12	16
Leasehold improvements	302	38	-	340		203	197
Assets under development	5,256	4,717	5,531	4,442		4,442	5,256
Total	23,101	7,642	656	30,087		18,740	14,557

2007 Accumulated amortization (in thousands of dollars)

	March 31, 2006		Amortization		Disposals, write-offs	March 31, 2007
Office equipment	435		61		103	393
Informatics hardware and infrastructure	4,971		1,021		471	5,521
In-house developed software	2,857		2,274		39	5,092
Furniture and fixtures	167		24		-	191
Vehicles	9		4		-	13
Leasehold improvements	105		32		-	137
Total	8,544		3,416		613	11,347

Amortization expense for the year ended March 31, 2007 is $3,416,000 ($2,558,000 in 2005-2006).

6. Accounts payable and accrued liabilities (in thousands of dollars)

	2007		2006
Payables - Federal Government departments, agencies and Crown corporations	1,957		1,666
Payables - External parties	5,167		7,089
Total	7,124		8,755

7. Employee benefits

	2007		2006
Accrued benefit obligation, beginning of year	14,872		14,404
Expense for the year	2,067		2,253
Benefits paid during the year	(1,951)		(1,785)
Accrued benefit obligation, end of year	14,988		14,872

8. Contingent liabilities

Claims have been made against the PSC in the normal course of operations. Legal proceedings for claims totalling approximately $395,000 were still pending at March 31, 2007 ($6,255,000 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. In the opinion of management, the outcome of these suits is not determinable at this time.

9. Contractual obligations

The nature of the PSC's activities can result in some large multi-year obligations whereby the PSC will be obligated to make future payments when the services 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
Service contracts	1,608	446	-	-	-	2,054
Operating leases	189	106	60	40	3	398
Total	1,797	552	60	40	3	2,452

10. Expenses by major classification (in thousands of dollars)

	2007		2006
Salaries and employee benefits	83,278		82,432
Professional and special services	10,828		12,036
Accommodation	10,032		10,532
Transportation and telecommunications	3,799		3,523
Amortization of tangible capital assets	3,416		2,558
Informatics, office equipment, furniture and fixtures	2,549		2,760
Repair and maintenance	1,660		1,721
Rentals	1,312		629
Printing and publications services	650		617
Utilities, materials and supplies, and other	373		247
Adjustment to the provision for contingent liabilities	(500)		-
Total	117,397		117,055

11. Related party transactions

The PSC is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. The PSC enters into transactions with these entities in the normal course of business and on normal trade terms.

During 2006-2007, the PSC incurred expenses of $34,208,000 ($28,867,000 in 2005-2006) and earned revenues of $6,496,000 ($4,687,000 in 2005-2006) from transactions in the normal course of business with other federal government departments, agencies and Crown Corporations.  These expenses include services received without charge as described in Note 12.

12. Services received without charge

During the year, the PSC received services that were obtained without charge from other government departments and agencies. These services without charge have been recognized in the PSC's Statement of Operations as follows (in thousands of dollars):

	2007		2006
Public Works and Government Services Canada - accommodation	10,032		10,532
Treasury Board Secretariat - employer's share of insurance premiums	5,522		5,270
Justice Canada - legal services	440		802
Human Resources and Social Development Canada - employer's portion of Worker's compensation payments	136		135
Office of the Auditor General of Canada - audit services	134		170
Total	16,264		16,909

13. Comparative information

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

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