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Section III—Financial Performance

Parliamentary appropriations used

In 2007–08, the Office used $82.3 million of the $86.6 million in parliamentary appropriations approved. As a result, the Office lapsed $4.3 million in 2007–08 ($0.8 million in 2006–07). The $86.6 million is composed of $80.6 million in Main Estimates and a further $6.0 million in Supplementary Estimates and adjustments and transfers. The $6.0 million was routine in nature, including the carry-forward funding ($1.9 million), various salary-related entitlements, such as economic increases and increases related to performance pay ($2.2 million), and parental leave and severance payments ($1.9 million) recovered from the Treasury Board of Canada Secretariat (through the contingency vote).

Like government departments and agencies, subject to parliamentary approval the Office may carry forward lapsed amounts of up to 5 percent of its operating budget (based on Main Estimates program expenditures) into the next fiscal year.

Cost of operations

In 2007–08, the net cost of operations before parliamentary appropriations for the Office was $92.7 million, as reported in our audited financial statements. This increase of $2.4 million (2.6 percent) from 2006–07 is mainly due to increases in salary and benefits of about $1.3 million, professional services of $0.7 million, and office accommodation of $0.3 million. The increased salary costs are mainly due to annual economic increases and increased payments for performance pay, vacation pay, and overtime. The higher costs of professional services are due to the implementation of major technology projects. Refer to financial statements note 7.

Full-time equivalents used

The Office used 608 full-time equivalent (FTE) employees in 2007–08, which represented 98.5 percent of our budget of 617 FTEs. Despite the ongoing challenges in recruiting and retaining staff, particularly accounting professionals, this represents a decrease of only 2 in the number of FTE employees used from last year. In 2006–07, we used 610 FTE employees, representing 102.5 percent of our budget of 595 FTE employees.

Analysis by subactivity

Our original 2007–08 budget of $90.3 million was reported in the 2007–08 Report on Plans and Priorities. We have since received parliamentary approval for a revised 2007–08 budget of $91.4 million as reported in our 2008–09 Report on Plans and Priorities. The 2007–08 revised budget (forecast spending) and actual spending are presented in Table 4—Financial and human resources and subactivities.

We manage costs for the Office as a whole and also for individual audits. Audit budgets are established for planned hours and planned costs of work. All direct salary, professional service, travel, and other costs associated with the delivery of individual audits and professional practice projects are charged directly to them. All other Office expenses, including employee leave, corporate services, and services provided without charge, are treated as overhead and allocated to audits and professional practice projects based on the direct hours charged to them. This year, the total direct hours charged to audits and professional practice projects were lower, and the hours charged to corporate services and employee leave were higher. As a result, the cost of the corporate services allocated to audits and professional projects is higher than in previous years. The higher costs of corporate services are mainly due to work on corporate initiatives, such as the implementation of major new technology projects, office renovations, and the independent review of the implementation of our environment and sustainable development mandate.

The largest increase in the costs of subactivities was for the financial audits of Crown corporations, territorial governments, and other organizations ($3.0 million), followed by the special examinations ($2.5 million), the audit of the financial statements for the Government of Canada ($0.5 million), and the monitoring of sustainable development activities and the environmental petitions process ($0.4 million). The largest decrease in the costs of subactivities was for the performance audits ($4.5 million). These variances between current and prior year subactivity costs are based on the Statement of Operations in our audited financial statements.

Performance audits and studies

($ millions)	2007–08		2006–07
	Actual costs	Budget	Actual costs
Performance audits and studies	39.5	39.5	44.0

The level of effort in this subactivity decreased compared with last year's effort. This decrease ($4.5 million) reflects, in part, the need to reallocate resources to special examinations, where our level of effort increased significantly this year, and the decision to table one less report in 2007–08.

Financial audits of Crown corporations, territorial governments, and other organizations

($ millions)	2007–08		2006–07
	Actual costs	Budget	Actual costs
Financial audits—Crown corporations, territorial governments, and other organizations	29.6	27.6	26.6

More overhead expenses were allocated to this subactivity, which explains the majority of the change in audit costs from last year to this year, and the difference between actual results and budgeted results. Part of the increase is also due to audits we completed for the first time, including the Public Sector Pension Investment Board (joint audit), the Yukon Hospital, the opinion to provincial governments on control procedures at the Canada Revenue Agency, and our first audit of VIA Rail Inc. as the sole auditor.

However, these increases were mostly offset by reductions in other financial audits, including the reduction attributable to the end of our mandate as auditor of the United Nations Educational, Scientific and Cultural Organization (UNESCO).

Special examinations of Crown corporations

($ millions)	2007–08		2006–07
	Actual costs	Budget	Actual costs
Special examinations of Crown corporations	6.8	7.4	4.3

The total cost of conducting special examinations of Crown corporations varies depending on the number of examinations under way each year; their nature, size, and complexity; and the risk levels of the corporations being examined. In 2007–08, we worked on 20 special examinations, of which 8 were completed, compared with the 12 we worked on in 2006–07, of which 4 were completed.

Sustainable development monitoring activities and environmental petitions

($ millions)	2007–08		2006–07
	Actual costs	Budget	Actual costs
Sustainable development monitoring activities and environmental petitions	3.2	2.1	2.8

The cost of this subactivity was higher than planned due to additional work conducted on audits of responses to environmental petitions and a detailed quality assessment of recent sustainable development strategies.

Financial tables

Table 1—Comparison of planned to actual spending (including full-time equivalents)
($ millions)	2005–06	2006–07	2007–08
	Actual	Actual	Main Estimates	Planned spending	Total authorities	Total actuals
Legislative auditing	76.8	77.8	80.6	80.6	86.6	82.3
Less: Non-respendable revenue1	(1.1)	(0.7)		(0.5)	(0.4)	(0.4)
Plus: Cost of services received without charge	9.9	11.0		10.2	11.0	11.0
Net cost of program	85.6	88.1		90.3	97.2	92.9
Full-time equivalents	577	610		617		608
1 The Office charges fees to recover direct costs for the audit of the International Civil Aviation Organization (ICAO). These fees represent the major source of non-respendable revenue.

 

Table 2—Voted and statutory items
		2007–08 ($ millions)
Vote or statutory item	Vote or statutory wording	Main Estimates	Planned spending	Total authorities1	Total actuals
15	Program expenditures	71.5	71.5	77.5	73.2
(S)	Contributions to employee benefit plans	9.1	9.1	9.1	9.1
	Total	80.6	80.6	86.6	82.3
1 The difference between Main Estimates and total authorities represents adjustments and transfers.

 

Table 3—Services received without charge
	2007–08 actual spending ($ millions)
Accommodations provided by Public Works and Government Services Canada	7.0
Contributions covering the employer's share of employees' insurance premiums and expenditures paid by the Treasury Board of Canada Secretariat (excluding revolving funds)	4.0
Services received without charge	11.0

 

Table 4—Financial and human resources and subactivities
Financial resources 2007–08 ($ millions)
Forecast spending1	Total Authorities	Net Cost of Program
$91.4	$97.2	$92.9
Human resources 2007–08 (full-time equivalents)
Planned	Actual	Difference
617	608	9
Program activity: Legislative auditing ($ millions)
Subactivities2	Forecast spending 2007–08	Actual spending 2007–08
Performance audits and studies	39.5	39.5
Financial audits of Crown corporations, territorial governments, and other organizations	27.6	29.6
Special examinations of Crown corporations	7.4	6.8
Audit of the summary financial statements of the Government of Canada	4.9	5.2
Sustainable development monitoring activities and environmental petitions	2.1	3.2
Assessments of agency performance reports	1.1	1.0
Professional practices	9.2	7.8
Subtotal	91.8	93.1
Less: Non-respendable revenue	(0.4)	(0.4)
Net cost of operations reported in our financial statements		92.7
Differences due to accrual accounting (GAAP)3		0.2
Net cost of program	91.4	92.9
1 Forecast spending is as reported in the 2008—09 Report on Plans and Priorities. 2 We have allocated the cost of audit services to each subactivity. 3 The net cost of operations reported in our audited financial statements, prepared in accordance with Canadian generally accepted accounting principles (GAAP), is $92.7 million, or $0.2 million less than the net cost of program reported above. Accounting for capital assets, employee benefits, and prepaid expenses accounts for the difference.

 

Table 5—Total value of professional services contracts
	Contracts with fees less than $25,0001			Contracts with fees $25,000 or more1
	($ thousands)	Number	Percentage	($ thousands)	Number	Percentage
Competitive contracts	781.3	62	12	2,484.1	40	100
Non-competitive contracts	3,863.9	470	88	–	–	–
Total	4,645.2	532	100	2,484.1	40	100
1All amounts include fees, expenses, and GST. Details on individual contracts are available on the OAG website. In the 2007 calendar year, the Office reported the original contract value for professional services and procurement of goods and services with values over $10,000 (with GST). For contracts issued after 1 January 2008, the total value (original value plus any amended value) over $10,000 (with GST) will be reported on our website. Table 5 highlights the Office's contracting activity for professional services in 2007. The Auditor General's power to enter into contracts for professional services is subject to subsection 15(2) of the Auditor General Act and not the Government Contracts Regulations. The Auditor General's policy on contracting for professional services requires that contracts for estimated professional fees of $25,000 or more be awarded through competition, unless they meet one of the three criteria for exemption: the need is one of pressing urgency, it is not in the public interest to solicit bids due to the nature of the work, or there is only one person capable of performing the work. Contracts that exceed the North American Free Trade Agreement (NAFTA) threshold follow NAFTA rules.

 

Table 6—Travel and hospitality expenses
Disclosure of the travel and hospitality expenses for the Auditor General, the Deputy Auditor General, the Commissioner of the Environment and Sustainable Development, and the Assistant Auditors General is available on our website under About Us. The Office follows the Treasury Board Travel Directive, rates, and allowances, the Special Travel Authority, and the Treasury Board Hospitality Policy.

 

Table 7—Office memberships1
	($ thousands)
CCAF-FCVI Inc.	380.0
Conference Board of Canada	11.8
Association of Professional Executives of the Public Service of Canada	8.5
Head of Federal Agencies Secretariat	6.0
Public Policy Forum	5.5
Association des institutions supérieures de contrôle ayant en commun l'usage du français	1.1
1 The Office participates and supports professional organizations related to its legislative auditing program. The Office also pays individual employee membership fees to a variety of professional organizations.

 

Table 8—Compensation and benefits
The following is a summary of compensation and selected benefits paid to the Office employees by level. Office employees receive benefits comparable to other federal government employees, which are not included in this table.
Position	FTEs1	Salary ($)	Bilingual bonus ($)	Performance pay2 ($)	Automobile3 ($)	Club membership4 ($)	Total ($)
Auditor General	1	299,8005			3,681	588	304,069
Deputy Auditor General	1	196,455–235,160		0–35,970			196,455–271,130
Assistant auditors general and Commissioner of the Environment and Sustainable Development	14	155,000–184,850		0–28,300			155,000–213,150
Senior principals	5	111,310–161,265		0–24,690			111,310–185,955
Principals	51	111,310–143,565		0–16,500			111,310–160,065
Senior directors	4	86,865–129,020		0–14,850			86,865–143,870
Directors	106	86,865–115,195		0–13,300			86,865–128,495
Auditors	241	42,556–94,464	800	0–3,000			42,556–98,264
Audit service officers	81	51,869–86,366	800				51,869–87,166
Audit service specialists	104	32,430–61,309	800				32,430–62,109
	608
1 Full-time equivalents (FTEs) utilized in the fiscal year 2007–08. 2 Amounts represent the range that levels are eligible to receive in performance pay. 3 Taxable benefit for the personal use of an automobile for the 2007 calendar year. 4 The Office paid a club membership for the Auditor General. 5 The salary of the Auditor General is set by statute under subsection 4(1) of the Auditor General Act and is equal to the salary of a puisne judge of the Supreme Court of Canada.

Financial statements

Management's statement of responsibility

Management of the Office of the Auditor General of Canada is responsible for the preparation of the accompanying financial statements and related information contained in this 2007–08 Performance Report. These financial statements have been prepared in accordance with Canadian generally accepted accounting principles for the public sector. Where alternative accounting methods exist, management has chosen methods that it believes to be appropriate in the circumstances. Where estimates or judgments have been required, management has determined such amounts on a reasonable basis. Financial information disclosed elsewhere in this performance report is consistent with these audited financial statements.

In meeting its reporting responsibility, management has established and followed policies and procedures and systems of internal control designed to provide reasonable assurance that assets are safeguarded from loss or unauthorized use, operations are in compliance with governing authorities, and financial information is reliable. Selected internal control systems are periodically tested and evaluated by the internal auditors, and management takes any action necessary to respond appropriately to their recommendations. Management recognizes the limits inherent in all systems of internal control but believes the Office has established effective and responsive systems of internal control through the careful selection of employees, appropriate division of responsibilities, training and other professional development activities, and development of formal policies and procedures.

The Office's Executive Committee oversees management's preparation of the financial statements and ultimately approves the financial statements and related disclosures following a recommendation from the Office's Audit Committee. As a basis for recommending approval of the financial statements to the Executive Committee, the Audit Committee reviews selected internal controls and the accounting policies employed by the Office for financial reporting purposes. The Audit Committee also meets independently with the Office's internal and external auditors to consider the results of their work.

The external auditors' report, as to the fairness of presentation of these financial statements in conformity with Canadian generally accepted accounting principles for the public sector, is included in this performance report.

 

Sheila Fraser, FCA Auditor General of Canada

Jean Landry, CGA Comptroller

Ottawa, Canada
26 June 2008

Auditors' report

To the Speaker of the House of Commons

We have audited the statement of financial position of the Office of the Auditor General of Canada as at 31 March 2008 and the statements of operations, deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Office's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we 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 our opinion, these financial statements present fairly, in all material respects, the financial position of the Office as at 31 March 2008 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 our opinion, the transactions of the Office that have come to our notice during our audit of the financial statements have, in all significant respects, been in accordance with the Financial Administration Act and regulations and the Auditor General Act.

 

Welch LLP
Lévesque Marchand S.E.N.C.
Chartered Accountants
Licensed Public Accountants

Ottawa, Canada
26 June 2008

Office of the Auditor General of Canada
Statement of Financial Position
as at 31 March

			2008	2007
Assets			(in thousands of dollars)
Current assets
	Due from the Consolidated Revenue Fund		8,242	6,642
	Accounts receivable		155	680
	Prepaid expenses		281	265
			8,678	7,587
Capital assets (note 4)			4,375	4,388
			13,053	11,975
Liabilities and Deficit
Current liabilities
	Accounts payable and accrued liabilities
		Due to employees	4,465	3,605
		Due to others	2,700	2,401
		Vacation pay	3,493	3,360
	Current portion of employee future benefits (note 5)		1,787	2,668
			12,445	12,034
Employee future benefits (note 5)			11,273	10,843
Deficit (note 6)			(10,665)	(10,902)
			13,053	11,975

Contingencies (note 9)

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

Approved by

 

Sheila Fraser, FCA Auditor General of Canada

Jean Landry, CGA Comptroller

Office of the Auditor General of Canada
Statement of Operations
for the year ended 31 March

		2008	2007
Expenses (note 7)		(in thousands of dollars)
	Performance audits and studies	39,525	43,942
	Financial audits of Crown corporations, territorial governments, and other organizations	29,603	26,600
	Special examinations of Crown corporations	6,746	4,342
	Audit of the summary financial statements of the Government of Canada	5,188	4,704
	Monitoring sustainable development activities and the environmental petitions process	3,156	2,838
	Assessments of agency performance reports	978	1,063
	Total cost of audits	85,196	83,489
	Professional practices (note 8)	7,834	7,498
Total cost of operations		93,030	90,987
Costs recovered
	International audits	274	478
	Other	89	200
Total costs recovered		363	678
Net cost of operations before parliamentary appropriations		92,667	90,309
Parliamentary appropriations used (note 3)		82,322	77,767
Net cost of operations after parliamentary appropriations		10,345	12,542

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

Office of the Auditor General of Canada
Statement of Deficit
for the year ended 31 March

	2008	2007
	(in thousands of dollars)
Deficit, beginning balance	(10,902)	(8,704)
Net cost of operations after parliamentary appropriations	(10,345)	(12,542)
Services provided without charge by other government departments (note 7)	10,945	11,022
Costs recovered	(363)	(678)
Deficit, ending balance	(10,665)	(10,902)

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

Office of the Auditor General of Canada
Statement of Cash Flows
for the year ended 31 March

		2008	2007
Operating activities		(in thousands of dollars)
	Cash payments	(80,112)	(77,267)
	Cash receipts	610	1,462
	Parliamentary appropriations used (note 3)	82,322	77,767
	Cash provided from operating activities	2,820	1,962
Capital investment activities
	Capital asset acquisitions	(1,220)	(485)
	Proceeds from the disposal of capital assets	–	4
	Cash used in capital investment activities	(1,220)	(481)
Increase in Due from the Consolidated Revenue Fund during the year		1,600	1,481
Due from the Consolidated Revenue Fund, beginning of year		6,642	5,161
Due from the Consolidated Revenue Fund, end of year		8,242	6,642

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

Office of the Auditor General of Canada
Notes to the financial statements for the year ended 31 March 2008

1. Authority and objective

The Auditor General Act, the Financial Administration Act, and a variety of other acts and orders-in-council set out the duties of the Auditor General and the Commissioner of the Environment and Sustainable Development. These duties relate to legislative auditing of federal departments and agencies; Crown corporations; territorial governments; and other organizations, which include two international organizations.

The program activity of the Office of the Auditor General of Canada is legislative auditing and consists of performance audits and studies of departments and agencies; audit of the summary financial statements of the Government of Canada; financial audits of Crown corporations, territorial governments, and other organizations; special examinations of Crown corporations; sustainable development monitoring activities and environmental petitions; and assessments of agency performance reports.

The Office is funded through annual appropriations received from the Parliament of Canada and is not taxable under the provisions of the Income Tax Act.

Pursuant to the Financial Administration Act, the Office is a department of the Government of Canada for the purposes of that Act and is listed in Schedule 1.1, and is a separate agency for the purposes of Schedule V.

2. Significant accounting policies

a) Basis of presentation

The financial statements of the Office have been prepared in accordance with Canadian generally accepted accounting principles for the public sector.

b) Parliamentary appropriations

The Office is funded by the Government of Canada through annual parliamentary appropriations. Parliamentary appropriations are reported directly in the Statement of Operations in the fiscal year for which they are approved by Parliament and used by the Office.

In prior years, the parliamentary appropriations were presented in the Statement of Deficit. In management's opinion, the new presentation better reflects the results of the Office's operations. However, this change has no effect on the Statement of Financial Position or Statement of Cash Flows.

c) Costs recovered

The costs of audits are paid from monies appropriated by Parliament to the Office. Fees for international audits generally recover direct costs and are recorded on an accrual basis. Amounts recovered are deposited in the Consolidated Revenue Fund and are not available for use by the Office. Other costs recovered represent adjustments to prior year's payables and refund of prior years' expenses.

d) Due from the Consolidated Revenue Fund

The financial transactions of the Office are processed through the Consolidated Revenue Fund of the Government of Canada. The Due from the Consolidated Revenue Fund balance 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.

e) Capital assets

Capital assets are recorded at historical cost less accumulated amortization. The Office capitalizes the costs associated with the development of software used internally including software licences, installation costs, professional service contract costs, and salary costs of employees directly associated with these projects. The costs of software maintenance, project management and administration, data conversion, and training and development are expensed in the year incurred.

Amortization of capital assets begins when assets are put into use and is recorded by the straight-line method over the estimated useful lives of the assets as follows:

Capital assets	Useful life
Furniture and fixtures	7 years
Leasehold improvements	10 years
Informatics software	3 years
Informatics Hardware and Infrastructure	3 years
Office equipment	4 years
Motor vehicle	5 years

f) Vacation pay

Vacation pay is expensed as benefits accrue to employees under their respective terms of employment using the employees' salary levels at year end. Vacation pay liabilities represent obligations of the Office that are funded through parliamentary appropriations.

g) Employee future benefits

i) Pension benefits

All eligible employees participate in the Public Service Pension Plan administered by the Government of Canada. The Office's contributions are currently based on a multiple of an employee's required contributions and may change over time depending on the experience of the Plan. The Office's contributions are expensed during the year in which the services are rendered and represent its total pension obligation. The Office is not currently required to make contributions with respect to any actuarial deficiencies of the Public Service Pension Plan.

ii) Severance benefits

Employees are entitled to severance benefits, as provided for under their respective terms of employment. The cost of these benefits is accrued as employees render the services necessary to earn them. Management determined the accrued benefit obligation using the employees' salary at year end. Severance benefits are funded through appropriations once employees' departures are confirmed.

h) Services provided without charge by other government departments

Services provided without charge by other government departments are recorded as operating expenses by the Office at their estimated cost. A corresponding amount is reported directly in the Statement of Deficit.

i) Allocation of expenses

The Office charges all direct salary, professional service, travel, and other costs associated with the delivery of individual audits and professional practice projects directly to them. All other expenses, including services provided without charge, are treated as overhead and allocated to audits and professional practice projects based on the direct hours charged to them.

j) Measurement uncertainty

These financial statements are prepared in accordance with Canadian generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Capital assets and employee severance benefits are the most significant items for which estimates are used. Actual results could differ significantly from those estimates. These estimates are reviewed annually, and as adjustments become necessary, they are recognized in the financial statements in the period in which they become known.

3. Parliamentary appropriations

The Office is funded through annual parliamentary appropriations. Items recognized in the Statement of Operations and the Statement of Deficit in one year may be funded through parliamentary appropriations in prior and future years. Accordingly, the Office's net cost of operations for the year based on Canadian generally accepted accounting principles is different than total appropriations used for the year. These differences are reconciled as follows:

a) Reconciliation of net cost of operations to current year appropriations used

		2008	2007
		(in thousands of dollars)
Net cost of operations before parliamentary appropriations		92,667	90,309
Less:	Expenses not requiring the use of appropriations
	Amortization of capital assets	(1,229)	(1,282)
	Write-off of informatics software under development	–	(578)
	Services provided without charge by other government departments	(10,945)	(11,022)
Add:	Costs recovered	363	678
		80,856	78,105
Changes in Statement of Financial Position amounts not affecting the current year use of appropriations1		246	(823)
Current year appropriations applied to operations		81,102	77,282
Capital asset acquisitions funded by appropriations		1,220	485
Current year appropriations used		82,322	77,767
1 Components of this amount are prepaid expenses, due to employees, vacation pay, and severance benefits.

b) Reconciliation of appropriations provided to current year appropriations used

		2008	2007
Appropriations:		(in thousands of dollars)
	Voted—operating expenditures	77,482	69,720
	Statutory contributions to employee benefit plans	9,146	8,834
	Proceeds from disposal of capital assets	–	4
Current year appropriations provided		86,628	78,558
Less: Lapsed appropriations1		4,306	791
Current year appropriations used		82,322	77,767
1Subject to parliamentary approval, the Office is allowed to carry forward into the next fiscal year its lapsed appropriations after adjustments up to a maximum of 5 percent of its main estimates operating budget. In 2007–08, the Office had $3.8 million ($1.9 million in 2006–07) in lapsed appropriations after adjustments. However, the maximum allowed for carry forward into 2008–09 is $3.6 million ($3.2 million in 2006–07).

4. Capital assets

	Cost				Accumulated amortization				2008	2007
	Opening balance	Acquisitions	Disposals	Closing Balance	Opening balance	Amortization	Disposals	Closing Balance	Net book value	Net book value
	(in thousands of dollars)
Furniture and fixtures	4,379	117		4,496	2,399	626		3,025	1,471	1,980
Informatics software	3,466	477	54	3,889	3,103	182	54	3,231	658	363
Leasehold improvements	2,796	492		3,288	1,014	274		1,288	2,000	1,782
Office equipment	1,043	10	14	1,039	998	32	10	1,020	19	45
Informatics hardware and infrastructure	886	124	159	851	697	108	159	646	205	189
Motor vehicle	30			30	1	7		8	22	29
	12,600	1,220	227	13,593	8,212	1,229	223	9,218	4,375	4,388
Amortization expense for the year ended 31 March 2008 is $1.2 million ($1.3 million in 2007).

5. Employee future benefits

a) Pension benefits

The Office and all eligible employees contribute to the Public Service Pension Plan. This pension plan provides benefits based on years of service and average earnings at retirement. The benefits are fully indexed to the increase in the Consumer Price Index. The Office's and employees' contributions represent the total pension obligation to the Public Service Pension Plan, and are as follows:

	2008	2007
	(in thousands of dollars)
Office's contributions	6,667	6,511
Employees' contributions	2,884	2,825

b) Severance benefits

The Office provides severance benefits to its employees based on years of service and salary at termination of employment. This benefit plan is not pre-funded and thus has no assets, resulting in a plan deficit equal to the accrued benefit obligation. Benefits will be paid from future appropriations. Information about the plan, measured as at 31 March, is as follows:

	2008	2007
	(in thousands of dollars)
Severance benefit obligation, beginning of year	13,511	13,059
Expense for the year	1,223	1,317
Benefits paid during the year	(1,674)	(865)
Severance benefit obligation, end of year	13,060	13,511

6. Deficit

The deficit represents liabilities incurred by the Office, net of capital assets and prepaid expenses, that have not yet been funded through appropriations. Significant components of this amount are employee severance benefits and vacation pay liabilities.

7. Summary of expenses by major classification

Summary of expenses by major classification for the years ended 31 March are as follows:

	2008	2007
	(in thousands of dollars)
Salaries and employee benefits	69,599	68,332
Professional services	8,343	7,587
Office accommodation	6,975	6,661
Travel and communication	4,269	4,187
Informatics, informatics maintenance and repairs, office equipment, and furniture and fixtures	2,470	2,273
Materials, supplies, and other payments	773	616
Printing and publications services	601	753
Write-off of informatics software under development1	–	578
Total cost of operations	93,030	90,987
In 2008, the total cost of operations included services provided without charge by other government departments totalling $11.0 million ($11.0 million in 2007). This is composed of $7.0 million ($6.7 million in 2007) for accommodation and $4.0 million ($4.4 million in 2007) for the employer's contributions to the Public Service Health Care Plan and the Public Service Dental Plan. 1A data warehouse software under development to integrate financial information from several source systems was written-off in 2006–07 due to the upcoming implementation of a new financial system.

8. Professional practices

The Office works with other legislative audit offices and professional associations such as the Canadian Institute of Chartered Accountants to advance legislative audit methodology, accounting and auditing standards, and best practices. International activities include participation in organizations and events that have an impact on our work as legislative auditors. External review includes the cost of participating in the external reviews of other national legislative audit offices and being the subject of an external review.

	2008	2007
	(in thousands of dollars)
Methodology and knowledge management	3,183	2,711
International activities	3,112	3,711
External review	531	86
Canadian Council of Legislative Auditors	525	541
Participation in standard-setting activities	483	449
Professional practices	7,834	7,498

9. Contingencies

In 2000–01, the Public Service Alliance of Canada filed a pay equity suit against the Crown alleging that discrimination based on sex had occurred between 1982 and 1997 in seven separate employers. The Office, although not a party to the suit, is one of the seven employers named in the suit. The Alliance requests that the Treasury Board of Canada Secretariat or the responsible employer retroactively increase the wage rates of employees of specific separate employers to remedy the discrimination. No amount is specified in the claim. In the opinion of management, the estimated amount of the contingent liability for employees of the Office of the Auditor General employed by the Office between 1982 and 1997 is about $5.9 million. Further, in the opinion of management, the outcome of the suit is not determinable at this time and, accordingly, no liability has been recognized in the financial statements.

10. 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 organizations in the normal course of business and on normal trade terms. As Parliament's auditor, the Office is mindful of its independence and objectivity when entering into any such transactions. The Office provides audit services without charge to federal departments and agencies; Crown corporations; territorial governments; and other organizations.

In 2008, the Office incurred expenses of $22.7 million ($22.4 million in 2007) and recovered expenses of $2.0 million ($3.7 million in 2007) from transactions in the normal course of business with other government departments, agencies, and Crown corporations. These expenses include services provided without charge of $11.0 million ($11.0 million in 2007) as described in note 7.

As at 31 March, the accounts receivable and payable with other government departments and Crown corporations are as follows:

	2008	2007
	(in thousands of dollars)
Accounts receivable	86	510
Accounts payable	316	619

These amounts are included respectively in accounts receivable and due to others on the statement of financial position.

11. Financial instruments

The fair value of Due from the Consolidated Revenue Fund, accounts receivable, accounts payable, and accrued liabilities approximates their respective book values due to their short term to maturity.

12. Comparative figures

Certain 2006–07 comparative figures have been reclassified to conform to the presentation adopted in 2007–08.

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