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2009-10
Departmental Performance Report

Treasury Board of Canada Secretariat

Supplementary Information (Tables)

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Table of Contents

• Sources of Respendable and Non-respendable Revenue
• User Fees/External Fees
• Green Procurement
• Response to Parliamentary Committees and External Audits
• Internal Audits and Evaluations
• Financial Statements
• Appendix A—Votes
• Appendix B—Definitions of Criteria for Performance Status Rankings
• Annex to Statement of Management Responsibility including Internal Control over Financial Reporting

Sources of Respendable and Non–Respendable Revenue

Respendable Revenue
($ thousands)

Program Activity	Actual 2007–08	Actual 2008–09	2009–10
			Main Estimates	Planned Revenue	Total Authorities	Actual
Management Policy Development and  Oversight
Revenue related to the administration of the Public Service Superannuation Act1	2,681	3,182	3,980	3,980	5,853	3,913
Government–Wide Funds and Public  Service Employer Payments
Revenue related to public service insurance2	280,817	333,858	302,200	302,200	361,321	361,321
Total Respendable Revenue	283,498	337,040	306,180	306,180	367,174	365,234

1. Respendable revenue is received to cover salaries and operating costs from public service superannuation with respect to chargeable costs associated with administering the Public Service Superannuation Act.

2. Respendable revenue is received to cover health care insurance plans' costs from revolving funds and from departments and agencies that pay for employee benefit plans from a non–statutory appropriation. This account is also used to record pensioners' share of Pensioners' Dental Services Plan contributions.

Non–Respendable Revenue
($ thousands)

Program Activity	Actual 2007–08	Actual 2008–09	2009–10
			Main Estimates	Planned Revenue	Total Authorities	Actual
Revenue from parking fees1	11,466	11,643		11,742	11,595	11,595
External revenue from access to information	1	1			1	1
Revenue related to the administration of the Public Service Superannuation Act2	596	854		899	860	860
Refunds of previous year's expenditure	706	744			384	384
Disciplinary penalties	24	33			63	63
Proceeds from the disposal of surplus Crown assets	9	7			1	1
Other	229	34			15	15
Total Non–Respendable Revenue	13,031	13,316	–	12,641	12,919	12,919

1. The revenue represents parking fees that are collected from public servants in government–owned or government–leased facilities. This revenue is deposited directly into the Consolidated Revenue Fund and cannot be used to offset operating expenditures.

2. The non–respendable revenue represents the portion received from public service superannuation with respect to chargeable costs associated with administering the Public Service Superannuation Act and covers the costs of employee benefit plans, health plans, and accommodation.

User Fees Reporting

User Fees

External Fees

Green Procurement

Meeting Policy Requirements

Green Procurement Targets

Response to Parliamentary Committees and External Audits

Response to Parliamentary Committees

Standing Committee on Government Operations and Estimates: The Right Pay for Valuable Employees

(Adopted by the Committee on April 30, 2009; presented to the House on May 4, 2009)

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Committee considered the problems in the federal government's compensation system from the perspective of the public interest. Recommendations were made to the government to address the classification of compensation advisors, the upgrading of the compensation system's technological infrastructure, and the turnover rate in the public service.	The government has undertaken or will undertake actions with respect to most of the recommendations to ensure equity and timeliness of compensation for all employees in the federal public sector. The government introduced the Public Sector Equitable Compensation Act as part of the Budget Implementation Act, 2009 and is also committed to developing an approach to modernize technology and processes to simplify the administration of pay for the Government of Canada. The 2009–10 Public Service Renewal Action Plan emphasized linking human resources needs with organizational business needs, one outcome of which would be more stability and fewer turnovers in the public service.	Government Response to the Second Report of the Standing Committee on Government Operations and Estimates (Third Report of the Committee presented to the House during the Second Session of the 39th Parliament) (Presented to the House on September 14, 2009)

Standing Committee on the Status of Women: An Analysis of the Effects of the Public Sector Equitable Compensation Act

(Adopted by the Committee on 18, 2009; presented to the House on June 19, 2009)

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Committee recommended that the government repeal the Public Sector Equitable Compensation Act and replace it with a proactive federal pay equity law, as recommended by the Pay Equity Task Force (Task Force) in its 2004 report, Pay Equity: A New Approach to a Fundamental Right. The Conservative Party members of the Committee issued a Dissenting Opinion to the report. These members have many reservations about the recommendation put forward and are concerned that the draft report was written and discussed before the Committee had the opportunity to hear from all witnesses.	The Government Response indicates that the Government of Canada respects the principle of equal pay for work of equal value and that the government strongly believes the Public Sector Equitable Compensation Act is the best means to proactively apply this principle to ensure that federal public sector employees receive equitable compensation. The Act makes pay equity an integral part of collective bargaining and wage-setting in the federal public sector and ensures that parties with responsibilities in wage-setting are accountable for achieving equal pay for work of equal value and that employees receive equitable compensation from the moment wages are set.	Government Response: Seventh Report of the Standing Committee on the Status of Women, An Analysis of the Effects of the Public Sector Equitable Compensation Act (Presented to the House on October 7, 2009)

Standing Committee on the Status of Women: Towards Gender Responsive Budgeting: Rising to the Challenge of Achieving Gender Equality  

(Adopted by the Committee on February 10, 2009; presented to the House on February 26, 2009 )

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Committee recommended that the other central agencies, namely the Privy Council Office and the Secretariat, establish specialized units on gender analysis. The Committee recommended that senior government officials, namely deputy ministers, assistant deputy ministers, and director generals, be held accountable for their implementation of a true gender-based analysis in all government departments by tying their performance assessment, and thereby pay increases and promotions, to the implementation of gender-based analysis, including the Clerk of the Privy Council, the Secretary of the Treasury Board, and the Deputy Minister of Finance. The Committee recommended that the Secretariat develop a policy requiring departments to report on gender-based analysis through the Reports on Plans and Priorities and the Departmental Performance Reports by January 2009.	Since 2005, the Government of Canada has been working on the integration of gender‑based analysis into instruments of authority, e.g., Treasury Board submissions and the Management, Resources and Results Structure. There is now a complete inventory of all government programs, which can be searched to identify programs by subject including those explicitly identifying gender issues. Status of Women Canada, with support from the Secretariat and the Privy Council Office, has committed to assessing the performance of gender‑based analysis across the federal government and the effectiveness of gender-based analysis practices on a yearly basis to ensure that government policy and program development and budgets achieve gender equality goals and are gender-responsive.	Government Response: Second Report of the Standing Committee on the Status of Women (recommendations contained in the 11th Report of the Committee presented to the House during the Second Session of the 39th Parliament) (Presented to the House on August 19, 2009)

Standing Committee on Accounts: Public Accounts of Canada 2008

(Adopted by the Committee on March 5, 2009; presented to the House on March 24, 2009)

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Committee recommended that: i) the Canada Revenue Agency provide a plan to improve its methodology to calculate the allowance for doubtful tax receivables; and ii) the Canada Border Services Agency provide a detailed plan on how it will improve its tax revenue accounting systems. The Committee also recommended that the Comptroller General of Canada ensure that federal government departments have adequate internal control systems to prevent losses of public money and property and plans in place for recovering losses in the case of criminal offences; and that the government provide a firm timeline for implementing accrual appropriations.	i)  The Canada Revenue Agency developed and implemented a new methodology to estimate the allowance for doubtful accounts based on the age of tax accounts receivable during the 2007–08 year. ii) The Canada Border Services Agency has developed a project to improve its accounting systems. The Treasury Board submission went to the Board in June 2010. Several initiatives will result in improved internal controls over financial reporting. For example, policies on internal control, governance and internal audit have been approved and will now result in strengthened controls over financial reporting, oversight and governance. Significant progress has been made on the development of a plan for the staged approach to the implementation of accrual budgeting and appropriations.	Government Response to the Sixth Report of the Standing Committee on Public Accounts: Public Accounts of Canada 2008 (Presented to the House on August 19, 2009)

Standing Committee on Public Accounts: Governance of Small Federal Entities

(Adopted by the Committee on May 28, 2009; presented to the House on June 10, 2009)

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Committee recommended that the Secretariat provide a progress report followed by an action plan on how it intends to implement the recommendations contained in Chapter 2 of the Auditor General's December 2008 Report, including specific elements in its action plan to show how it will reduce the reporting burden on small federal entities and what issues it will address with respect to administrative shared services in small federal entities.	The management response to this chapter includes a full description of measures taken or intended with respect to each of the recommendations, including a list of specific measures that have been undertaken to reduce reporting requirements on departments, including small entities.	Government Response to the 14th Report of the Standing Committee on Public Accounts, Governance of Small Federal Entities, Chapter 2 of the December 2008 Report of the Auditor General of Canada (Presented to the House on October 7, 2009)

Standing Committee on Public Accounts: A Study of Federal Transfers to Provinces and Territories

(Adopted by the Committee on May 7, 2009; presented to the House on May 27, 2009)

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Committee recommended that the Government of Canada, when announcing transfers to provinces and territories, clearly explain whether there are ongoing conditions for the use of the funds and, if not, explain why not; and that when designing future trust agreements, to ensure that mechanisms are in place to verify results achieved.	The government makes every effort to ensure that the purpose, objectives and conditions associated with each transfer are clearly communicated. The government has established clear and precise eligibility conditions that must be met before a funding agreement is established and the funds transferred. For example, in the transfer of funds by individual federal departments, conditions are explicitly stated in agreements between the federal government and provincial or territorial governments, and can include financial and compliance audits, progress reports, program evaluation, and/or public acknowledgement of federal support for the program. To ensure that trust arrangements are clear and transparent, the government established new accountability mechanisms through a political commitment and public accountability approach. Actions to enhance public accountability have been taken through the new Treasury Board Policy on Transfer Payments and its supporting directive.	Government Response to the 11th Report of the Standing Committee on Public Accounts: "Chapter 1, A Study of Federal Transfers to Provinces and Territories of the December 2008 Report of the Auditor General of Canada" (Presented to the House on September 28, 2009)

Standing Committee on on Public Accounts: Management of Fees in Selected Departments and Agencies

(Adopted by the Committee on April 28, 2009; presented to the House on May 13, 2009)

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Committee made six recommendations: (1) The Committee recommended that the Secretariat develop and present to the Treasury Board a comprehensive policy on the management of fees; and report progress on this initiative to the Committee by September 30, 2009. (2) The Committee recommended that the Treasury Board amend the Policy on Service Standards for External Fees to require departments to publicly report annually on the full costs, revenues, service standards, and performance results for all external fees; and that departments be required to regularly carry out and report on public consultations with those affected by fees. (3) The Committee recommended that the Secretariat clarify the method of comparing fee revenues to associated costs when updating its guidance on factors to consider in determining the amount of a fee; and that the Secretariat report progress on this initiative to the Committee by September 30, 2009. (4)  The Committee recommended that the Comptroller General work with departments to ensure that they are accurately calculating their costs associated with fees and report progress on this initiative by September 30, 2009. (5) The Committee recommended that Secretariat provide a list of all fees that are set by contract by September 30, 2009. (6)  Finally, the Committee recommended that the Secretariat clarify the review and reporting requirement for fees set by contract by September 30, 2009.	As per the recommendations of the Committee, the Secretariat tabled a response to all six recommendations on September 14, 2009. A summary of each of the six commitments follows: (1) The government completed an examination of the available guidance and policies relating to the practices supporting user fee management. (2) Further to the examination, the development of a comprehensive policy on user fee management will be initiated in 2010–11. (3) In May 2009, the Secretariat released the Guide to Establishing the Level of a Cost-Based User Fee or Regulatory Charge, which provides a consistent approach for departments when establishing an appropriate fee level. (4) In March 2008, the Secretariat released the Guide to Costing and continues to work with departments to promote its use in user fee and other financial management settings. (5) Given that fees set by contract are not subject to the reporting provisions of either the User Fees Act or the Policy on Service Standards for External Fees, the government initiated a plan to gather information on fees set by contract from individual departments. The government provided the compiled information to the Committee by December 31, 2009, as stated in the government's response. (6) The development of the new comprehensive policy will include within its scope, practices and reporting related to fees set by contract.	Government Response to the Tenth Report of the Standing Committee on Public Accounts, "Chapter 1, Management of Fees in Selected Departments and Agencies of the May 2008 Report of the Auditor General of Canada" (Presented to the House on September 14, 2009)

Standing Committee on Public Accounts: Requested information on the progress of government action on 13 recommendations contained in the following reports:

Administration of the RCMP's Pension and Insurance Plans (Adopted by the Committee on December 6, 2007; presented to the House on December 10, 2007)

The Expenditure Management System at the Government Centre and the Expenditure Management System in Departments (Adopted by the Committee on February 12, 2008; presented to the House on February 25, 2008)

Protection of Public Assets - Office of the Correctional Investigator (Adopted by the Committee on February 12, 2008; presented to the House on February 25, 2008)

Large Information Technology Projects (Adopted by the Committee on February 14, 2008; presented to the House on February 25, 2008)

Passports Services - Passport Canada (Adopted by the Committee on February 28, 2008; presented to the House on March 5, 2008)

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Standing Committee on Public Accounts requested information on the progress of government action on 13 recommendations contained in the 2nd, 4th, 5th, 7th and 9th reports of the Standing Committee on Public Accounts, presented to the House of Commons during the 2nd Session of the 39th Parliament.	The Secretariat provided an update on the actions taken to the commitments made to all 13 recommendations contained in the following Government Responses: Second Report of the Standing Committee on Public Accounts, "Restoring the Honour of the Royal Canadian Mounted Police: Addressing Problems in the Administration of the RCMP's Pension and Insurance Plans" (Presented to the House on April 7, 2008) Fourth Report of the Standing Committee on Public Accounts, "The Expenditure Management System at the Government Centre and the Expenditure Management System in Departments" (Presented to the House on July 16, 2008) Fifth Report of the Standing Committee on Public Accounts, "Protection of Public Assets: Office of the Correctional Investigator" (Presented to the House on July 16, 2008) Seventh Report of the Standing Committee on Public Accounts, "Large Information Technology Projects" (Presented to the House on July 16, 2008) Ninth Report of the Standing Committee of Public Accounts, "Passports Services B Passport Canada" (Presented to the House on June 6, 2008)	Progress report received from the Secretariat in October 2009 relating to the following studies: Chapter 9, Pension and Insurance Administration - Royal Canadian Mounted Police of the November 2006 Report of the Auditor General of Canada (39th Parliament, 2nd Session) Chapter 1, Expenditure Management System at the Government Centre and Chapter 2 Expenditure Management System in Departments of the November 2006 Report of the Auditor General of Canada (39th Parliament, 2nd Session) Chapter 11, Protection of Public Assets - Office of the Correctional Investigator of the November 2006 Report of the Auditor General of Canada (39th Parliament, 2nd Session) Chapter 3, Large Information Technology Projects of the November 2006 Report of the Auditor General of Canada (39th Parliament, 2nd Session) Chapter 5, Passports Services - Passport Canada of February 2007 Report of the Auditor General of Canada (39th Parliament, 2nd Session)

Standing Committee on Public Accounts: Financial Management and Control - National Defence

(Adopted by the Committee on November 18, 2009; presented to the House on December 3, 2009)

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Committee recommended that the Treasury Board, in consultation with the Department of Finance Canada, consider raising the limit on the amount that National Defence can carry forward from one fiscal year to another.	The Government accepts this recommendation. The Department of Finance Canada and the Secretariat are reviewing National Defence's current carry-forward authority. The Secretariat will report back to the Committee if any changes are made to the current authority following this review.	Government Response to the Report of the Standing Committee on Public Accounts , Chapter 5, Financial Management and Control – National Defence of the Spring 2009 Report of the Auditor General of Canada (20th Report of the Standing Committee on Public Accounts) (Presented to the House on March 31, 2010)

Standing Committee on Public Accounts: Managing the Delivery of Legal Services to Government - Department of Justice Canada

(Adopted by the Committee on February 12, 2009; presented to the House on February 25, 2009)

Summary of Report	Discussion of progress made to address recommendations	Link to the Secretariat's response
The Committee recommended that the Secretariat study the feasibility of reporting the Government of Canada's total costs for legal services.	The Secretariat has reviewed the existing reporting of the costs of legal services to Parliament and the possibility of the future use of the Management, Resources and Results Structure to further capture the costs of legal services. The Public Accounts of Canada 2007 and the Department of Justice's Departmental Performance Report provide details on the majority of these costs.	Government Response: Chapter 5, Managing the Delivery of Legal Services to Government – Department of Justice Canada of the May 2007 Report of the Auditor General of Canada, Fourth Report of the Standing Committee on Public Accounts (recommendations contained in the 17th Report of the Committee presented to the House during the Second Session of the 39th Parliament) (Presented to the House on June 19, 2009)

Response to External Audits

Government-wide audit of executive appointments by the Public Service Commission of Canada (October, 2008)

The audit^[1] focused on executive appointments made within the first year of implementing the Public Service Employment Act, from January to December 2006, and included 100 per cent of appointment processes of executives at levels four and five (which includes assistant secretaries) and 50 per cent of executives at levels one to three (which includes directors, executive directors and directors general).

The Secretariat did not have any significant issues, and a formal response was not required.

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[1] The Secretariat's results did not include the Office of the Chief Human Resources Officer as the audit was conducted prior to the reorganization.

Internal Audits and Evaluations

Internal Audits (current reporting period)

Name of Internal Audit	Audit Type	Status	Completion Date
Audit of the Management of Treasury Board Vote 35	Assurance	Completed	November 2009
Audit of Treasury Board of Canada Secretariat Governance Framework	Assurance	Completed	February 2010
Audit of Account Verification	Assurance	Completed	April 2010
Audit of the Management of the Disability Insurance Plan	Assurance	In progress	June 2010

Evaluations (current reporting period)

Name of Evaluation	Program Activity	Program Type	Status	Completion Date
Five-Year Evaluation of the Management Accountability Framework	Management Policy Development and Oversight	Summative	Completed	November 2009
Evaluation of the Treasury Board Submission Process	Expenditure Management and Financial Oversight; and Management Policy Development and Oversight	Summative	Completed	March 2010
Evaluation of the Cabinet Directive on Streamlining Regulation	Regulatory Management	Formative	In progress	July 2010
Evaluation of the Centre of Regulatory Expertise	Regulatory Management	Formative	In progress	July 2010
Evaluation of pilot project on Non-lapsing Capital Appropriations	Real Property and Materiel Management	Formative	In progress	July 2010
Evaluation of the PSMA Strategic Investment Framework	Former Canada Public Service Agency	Summative	In progress	September 2010
Evaluation of Policy on Internal Audit	Internal Audit Policy	Summative	Planned	March 2011

Treasury Board of Canada Secretariat
Financial Statements (Unaudited)
For the Year Ended March 31, 2010

Statement of Management Responsibility Including Internal Control over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2010, and all information contained in these statements rests with the management of the Treasury Board Secretariat. 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.

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 Secretariat's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada and included in the Secretariat's Departmental Performance Report is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff, through organizational arrangements that provide appropriate divisions of responsibility, through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Secretariat, and through conducting an annual assessment of the effectiveness of the system of internal control over financial reporting. 

An assessment for the year ended March 31, 2010, was completed in accordance with the Policy on Internal Control and the results and action plans are summarized in the attached annex.

The system of internal control over financial reporting is designed to mitigate risks to a reasonable level based on an on-going process to assess key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

The system of internal control is augmented by Internal Audit, which conducts periodic audits and reviews of different areas of the Secretariat's operations. In addition, the Chief Audit Executive has free access to the Audit Committee, which provides advice on management's responsibilities for maintaining adequate control systems and the quality of financial reporting. The Committee undertakes a review of the financial statements, including all significant accounting estimates and judgments therein, and advises the Secretariat on any apparent material concerns.

The financial statements of the Treasury Board of Canada Secretariat have not been audited.

 

 

 

Treasury Board of Canada Secretariat
Statement of Operations (Unaudited)
For the year ended March 31
($ thousands)

	2010 Planned Results	2010	2009
Expenses (Note 4)
Government-Wide Funds and Public Service Employer Payments	2,112,764	2,067,613	1,743,227
Management Policy Development  and Oversight	126,179	159,056	120,253
Expenditure Management and Financial  Oversight	41,856	40,054	37,009
Internal Services	72,660	100,863	71,110
Total Expenses	2,353,459	2,367,586	1,971,599
Revenues (Note 5)
Government-Wide Funds and Public Service  Employer Payments	11,762	11,667	11,697
Management Policy Development  and Oversight	4,879	4,772	4,036
Expenditure Management and Financial  Oversight	-	-	-
Internal Services	-	8	20
Total Revenues	16,641	16,447	15,753
Net Cost of Operations	2,336,818	2,351,139	1,955,846

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

Treasury Board of Canada Secretariat
Statement of Financial Position (Unaudited)
At March 31
($ thousands)

	2010	2009
Assets
Financial assets
Accounts receivable and advances (Note 6)	659,454	230,049
Non-financial assets
Prepaid expenses	64	-
Tangible capital assets (Note 7)	14,722	13,126
Total Assets	674,240	243,175
Liabilities
Accounts payable and accrued liabilities (Note 8)	566,775	439,214
Vacation pay and compensatory leave	10,137	6,547
Employee severance benefits (Note 9)	36,126	28,888
	613,038	474,649
Equity of Canada	61,202	(231,474)
Total Liabilities and Equity	674,240	243,175
Contingent liabilities (Note 10) Contractual obligations (Note 11)

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

Treasury Board of Canada Secretariat
Statement of Equity of Canada (Unaudited)
At March 31
($ thousands)

	2010	2009
Equity of Canada, beginning of year	(231,474)	(356,265)
Net cost of operations	(2,351,139)	(1,955,846)
Current year appropriations used (Note 3)	2,341,557	1,959,625
Revenue not available for spending	(12,534)	(12,571)
Change in net position in the Consolidated Revenue Fund  (Note 3)	311,070	116,365
Services received without charge from other government  departments (Note 12)	23,839	17,218
Transferred from Public Service Human Resource Management  Agency of Canada, effective April 1, 2009 (note 13)	(20,117)	-
Equity of Canada, end of year	61,202	(231,474)

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

Treasury Board of Canada Secretariat
Statement of Cash Flow (Unaudited)
For the year ended March 31
($ thousands)

	2010	2009
Operating activities
Net cost of operations	2,351,139	1,955,846
Non-cash items:
Amortization of tangible capital assets	(3,341)	(1,225)
Gain on disposal of tangible capital asset	1	7
Services received without charge from other  government departments	(23,839)	(17,218)
Variations in Statement of Financial Position:
Increase in accounts receivable and advances	429,405	126,865
(Decrease) increase in prepaid expenses	64	(36)
(Decrease) increase in accounts payable and  accrued liabilities	(127,561)	2,291
(Increase) in vacation pay and compensatory leave	(3,590)	(470)
(Increase) in employee severance benefits	(7,238)	(5,185)
Transferred from Public Service Human Resource  Management Agency of Canada, effective April 1, 2009 (note 13)	20,117	-
Cash used by operating activities	2,635,157	2,060,875
Capital investment activities
Acquisition of tangible capital assets	1,263	2,551
Transfer of capital assets from Department of Finance and Public Service Human Resource Management Agency of Canada	3,687	-
Proceeds from disposition of tangible capital assets	(14)	(7)
Cash used by capital investment activities	4,936	2,544
Total Operating and Capital Investment Activities	2,640,093	2,063,419
Net cash provided by the Government of Canada	(2,640,093)	(2,063,419)

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

1. Authority and Objectives

Under the broad authority of sections 5 to 13 of the Financial Administration Act, the Secretariat supports the Treasury Board as a committee of ministers in its role as the general manager and employer of the public administration. It is headed by a Secretary, who reports to the President of the Treasury Board.

The mission of the Secretariat is to ensure that the rigorous stewardship of public resources achieves results for Canadians.

The core business of the Secretariat is currently organized into four programs. Therefore, figures for 2008-2009 in the Statement of Operations are redistributed for comparison purposes.

The Program activities are described as follow:

a) Government-Wide Funds and Public Service Employer Payments

Primarily payments and receipts made on behalf of other government departments for the employer's share of Public Service Pension Plan and group insurance obligations.

B) Management Policy Development and Oversight

The Secretariat provides support to the Treasury Board in its role as management board. This includes the promotion of improved management performance and the development of policies that support the prudent and effective management of the government's assets and its human, financial, information, and technology resources.

c) Expenditure Management and Financial Oversight

The Secretariat's role is to provide advice and recommendations to Treasury Board on the allocation and reallocation of resources to ensure that they are aligned with the government's priorities and responsibilities and that federal programs are effective, efficient, and provide value for money.

d) Internal Services

The Internal Services program activity includes the following key functions and costs that support Treasury Board and the internal management of the Secretariat: Minister's office operations, senior departmental management, strategic planning, communications, legal services, finances, human resources, accommodation, security, information management and information technology support, as well as some centrally administered services (e.g. translation).

2. Summary of Significant Accounting Policies

The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

a) Parliamentary appropriations

The Secretariat is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the Secretariat 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 to these financial statements provides a high-level reconciliation between the bases of reporting.

b) Net cash provided by the Government of Canada

The Secretariat operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Secretariat is deposited to the CRF and all cash disbursements made by the Secretariat are paid from the CRF. The net cash provided by the Government of Canada is the difference between all cash receipts and all cash disbursements, including transactions between departments of the federal government.

c) Change in net position in the Consolidated Revenue Fund

The change in net position in the CRF is the difference between net cash provided by the Government and appropriations used in a year, excluding the amount of non-respendable revenue recorded by the Secretariat. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

d) Revenues

Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.

e) 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 for accommodation and legal services are recorded as operating expenses at their estimated cost.

f) Government-wide employee benefits

Eligible public service employees participate in the Public Service Pension Plan sponsored by the Government of Canada. Contributions to the Plan for all departments and agencies, including additional contributions in respect of any actuarial deficiencies, are funded by the Secretariat as centrally managed funds, and they are expensed in the year incurred. The Secretariat recovers a portion of the pension contributions from other departments and agencies.

The Government of Canada also sponsors a variety of other benefit plans that the Secretariat is responsible to administer and or fund through its centrally managed funds. These benefits are recognized to expenses when they become due. A portion of these benefits is also recovered from other departments and agencies.

For the pension benefits and other future employee benefits covered by these plans, actuarially determined liabilities and related disclosure are presented in the financial statements of the Government of Canada, the ultimate sponsor of these benefits. As administrator of the centrally managed funds, the Secretariat expenses these benefits or contributions as they become due and records no accruals for future benefits. This accounting treatment corresponds to the funding provided to the department through Parliamentary appropriations.

g) Departmental employee future benefits

Pension benefits: Eligible employees of the Secretariat participate in the Public Service Pension Plan. The Secretariat's share of contributions pertaining to the current service cost of its employees is allocated to the expenses of the program activities of Expenditure Management and Financial Oversight, Management Policy Development and Oversight, and in Internal Services in the year incurred.

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 of the Secretariat is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government of Canada as a whole.

h) Accounts receivable and advances

Accounts receivable and advances are stated at amounts expected to be ultimately realized.

i) 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.

j) Tangible capital assets

All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. The Secretariat does not capitalize intangibles, works of art, and historical treasures that have cultural, aesthetic, or historical value.

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	3 to 10 years
Motor vehicles	3 years
Leasehold improvements	Lesser of the remaining term of the lease or useful life of the improvement
Assets under construction	Once in service, in accordance with asset class

k) Measurement uncertainty

The preparation of these financial statements in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses reported in the financial statements. At the time of preparation of these statements, management believes 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 Secretariat 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 a prior, current or future year. Accordingly, the Secretariat 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

	2010	2009
	($ thousands)
Net cost of operations	2,351,139	1,955,846
Adjustments for items affecting net cost of operations but not affecting appropriations: Add (Less):
Services received without charge from other   government departments	(23,839)	(17,218)
Revenue not available for spending	12,534	12,571
(Increase) in vacation pay and compensatory leave	(3,590)	(470)
(Increase) in employee severance benefits	(7,238)	(5,185)
Amortization of tangible capital assets	(3,341)	(1,225)
Other	14,038	13,169
	(11,436)	1,642
Adjustments for items not affecting net cost of operations but affecting appropriations: Add (Less):
Acquisitions of tangible capital assets	1,263	2,551
Advances	591	(414)
	1,854	2,137
Current year appropriations used	2,341,557	1,959,625

b) Appropriations provided and used

	2010	2009
	($ thousands)
Appropriations provided
Vote 1 — Program expenditures	263,987	196,337
Vote 5 — Government contingencies	712,117	651,565
Vote 10 — Government-Wide initiatives	7,511	7,141
Vote 15 — Compensation adjustments	-	1
Vote 20 — Public service insurance	2,164,302	1,862,944
Vote 25 — Operating budget carry forward	481,554	113,426
Vote 30 — Pay list Requirements	4,543	-
Vote 35 — Budget implementation initiatives	883,489	-
	4,517,503	2,831,414
Statutory authorities:
Contributions to employee benefit plans	31,286	20,835
Unallocated employer contributions made under the Public  Service Superannuation Act and other retirement acts, and  the Employment Insurance Act	6,471	9,481
Payments for the pay equity settlement pursuant to section  30 of the Crown Liability and Proceedings Act	(517)	(972)
President of the Treasury Board - salary and car allowance	78	77
Other statutory authorities	24	20
	37,342	29,441
Less:
Lapsed authorities:
Vote 1 — Program expenditures	(21,901)	(12,129)
Vote 5 — Government contingencies	(712,117)	(651,565)
Vote 10 — Government-Wide initiatives	(7,511)	(7,141)
Vote 15 — Compensation adjustments	-	(1)
Vote 20 — Public service insurance	(102,152)	(116,951)
Vote 25 — Operating budget carry forward	(481,554)	(113,426)
Vote 30 — Pay list Requirements	(4,543)	-
Vote 35 —  Budget implementation initiatives	(883,489)	-
Spending of proceeds from the disposal of surplus crown assets	(21)	(17)
	(2,213,288)	(901,230)
Current year appropriations used	2,341,557	1,959,625

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

	2010	2009
	($ thousands)
Net cash provided by the Government of Canada	2,640,093	2,063,419
Revenue not available for spending	12,534	12,571
Change in net position in the Consolidated Revenue Fund:
(Increase) in accounts receivable and advances	(429,405)	(126,865)
(Decrease) increase in prepaid expenses	(64)	36
(Decrease) increase in accounts payable and accrued liabilities	127,561	(2,291)
Increase in vacation pay and compensatory leave	3,590	470
Transferred from Public Service Human Resource Management Agency of Canada, effective April 1, 2009 (note 13)	(20,117)	-
Other	7,365	12,285
	(311,070)	(116,365)
Current year appropriations used	2,341,557	1,959,625

4. Expenses

a) The following table presents details of expenses by category:

	2010	2009
	($ thousands)
Transfer payments	220	228
Operating expenses:
Centrally Managed Funds (Note 4b)	2,067,613	1,743,227
Departmental salaries and employee benefits	212,981	160,983
Professional and special services	47,675	39,519
Accommodation	19,263	13,523
Transportation and telecommunications	5,795	5,064
Machinery and equipment	4,698	3,257
Utilities, materials and supplies	1,921	1,524
Rentals	1,312	969
Information	1,033	733
Repairs and maintenance	1,354	342
Amortization	3,341	1,225
Other	380	1,005
Total operating expenses	2,367,366	1,971,371
Total Expenses including Transfer Payments	2,367,586	1,971,599

b) Public Service Human Resource Management Agency of Canada Merger

As identified in Note 13, the Public Service Human Resource Management Agency of Canada (Canada Public Service Agency) was merged with Treasury Board Secretariat effective April 1, 2009. The expenses for the Treasury Board Secretariat for 2008-09 were not restated to reflect the merged department. A substantial portion of the increase in operating expenses for the Treasury Board of Canada Secretariat from 2008-09 to 2009-10, apart from centrally managed funds, is related to the merger.

c) Centrally Managed Funds

The Government of Canada sponsors defined benefit pension plans covering most of its employees. The Secretariat funds the employer's contributions to the Public Service Pension Plan and Retirement Compensation Arrangement, including additional contributions in respect of actuarial deficiencies.

The Secretariat also funds payments to or in respect of:

• the employer's share of contributions to the Public Service Death Benefit Account;
• the employer's share of Canada/Quebec Pension Plan contributions and Employment Insurance premiums;
• the employer's share of health, disability, and life insurance premiums and related Quebec sales tax;
• the employer's share of the Quebec Parental Insurance Plan premium;
• claims and related costs under the Public Service Dental Care Plan and the Pensioners' Dental Services Plan;
• provincial payroll taxes;
• pension, benefit, and insurance plans for employees engaged locally outside Canada by Canadian missions abroad; and
• returns to certain employees of their share of the Employment Insurance premium reduction.

Generally, Public Service Pension Plan contributions, Public Service Death Benefit Account contributions, Canada/Quebec Pension Plan contributions, and Employment Insurance premiums are recovered from all departments, agencies, and revolving funds pro-rata, based on salaries and wages incurred. Contributions to health care plans are recovered from certain departments and agencies, and all revolving funds based on 8.5 per cent (8.0 per cent in 2009) of salaries and wages incurred.

A breakdown by major category is as follows:

	2010	2009
	($ thousands)
Expenses
Public Service Pension Plan and Retirement Compensation  Arrangement contributions (Statutory)	2,687,405	2,323,497
Public Service Health Care Plan (Vote 20)	909,815	790,469
Canada/Quebec Pension Plan contributions (Statutory)	666,590	590,851
Provincial payroll taxes (Vote 20)	524,764	464,549
Group disability and life insurance (Vote 20)	472,401	355,677
Employment Insurance premiums (Statutory)	274,641	248,404
Public Service Dental Care Plan (Vote 20)	269,608	227,128
Pensioners' Dental Services Plan (Vote 20)	122,031	110,840
Pension and other government employee benefits in  respect of locally engaged staff employed in Canadian  missions abroad (Vote 20)	50,330	47,384
Provincial Health Insurance Plan premiums (Vote 20)	31,068	35,626
Quebec Parental Insurance Plan premiums (Vote 20)	32,333	27,307
Public Service Death Benefit Account contributions (Statutory)	11,582	10,430
Public Service Pension Plan and Retirement Compensation  Arrangement contributions in respect of actuarial deficits  (Statutory)	6,200	9,500
Operating expenses (Vote 20)	5,584	5,566
Pension and similar payments to former government employees  (Vote 20 & Statutory)	3,297	2,689
Employment Insurance premium reduction (Vote 20)	1,749	1,341
Miscellaneous special payments (Statutory)	(517)	(972)
Total Expenses	6,068,881	5,250,286
Recoveries
Employer's contributions to government employee benefit  plans recovered from government departments and agencies  (Statutory)	3,639,946	3,173,201
Employer's contributions to government employee insurance  plans recovered from government departments and agencies  (Vote 20)	177,942	156,180
Employee's contributions to Public Service Health Care Plan  recovered from government departments and other organizations  (Vote 20)	132,159	129,256
Pensioners' contributions to the Pensioners' Dental Services Plan  (Vote 20)	51,221	48,422
Total Recoveries	4,001,268	3,507,059
Net Expenses	2,067,613	1,743,227

5. Revenues

The following table presents details of revenues by category:

	2010	2009
	($ thousands)
Parking fees	11,595	11,643
Recovery of pension administration costs	4,772	4,036
Other	80	74
Total Revenues	16,447	15,753

6. Accounts Receivable and Advances

The following table presents details of accounts receivable and advances:

	2010	2009
	($ thousands)
Receivables from other Federal Government departments and agencies	657,819	229,142
Advances to external parties	1,054	564
Receivables from external parties	473	271
Advances to employees	105	60
Deposits in transit to the Receiver General	3	12
Total Accounts Receivable and Advances	659,454	230,049

7. Tangible Capital Assets

The following table presents the details of Tangible Capital Assets:

Amortization expense for the year ended March 31, 2010, is $3,341, thousand ($1,225 thousand in 2009).

The Transfer of Assets columns take into account all assets and related amortization as a result of the merger with the Public Service Human Resource Management Agency of Canada and the transfer from Department of Finance (Note 13).

($ thousands)	Cost
Capital asset class	Opening balance	Transfer Assets (note 13)	Acqui-sitions	Disposals & write-offs	Closing balance
Machinery and  equipment	15,084	8,816	1,227	(104)	25,023
Motor vehicles	102	59	36	(72)	125
Leasehold  improvements	1,952	-	-	-	1,952
Assets under  construction	-	-	-	-	-
Total	17,138	8,875	1,263	(176)	27,100

($ thousands)	Accumulated amortization
Capital asset class	Opening balance	Transfer Assets (note 13)	Amorti-zation	Disposals & write-offs	Closing balance
Machinery and  equipment	2,005	5,158	3,307	(96)	10,374
Motor vehicles	55	30	34	(67)	52
Leasehold  improvements	1,952	-	-	-	1,952
Assets under  construction	-	-	-	-	-
Total	4,012	5,188	3,341	(163)	12,378

($ thousands)	Net book value
Capital asset class	2010	2009
Machinery and equipment	14,649	13,079
Motor vehicles	73	47
Leasehold improve-ments	-	-
Assets under construction	-	-
Total	14,722	13,126

8. Accounts payable and accrued liabilities

The following table presents the details of accounts payable and accrued liabilities:

	2010	2009
	($ thousands)
Accounts payable to other government departments and agencies	321,929	254,804
Accounts payable to external parties	244,846	184,410
Total accounts payable and accrued liabilities	566,775	439,214

9. Employee Benefits

a) Pension benefits

Eligible public service 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 per cent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with the Canada/Québec Pension Plans benefits and they are indexed to inflation.

The Secretariat funds the employer contributions to the Public Service Pension Plan, including additional contributions in respect of actuarial deficiencies, on behalf of all government departments and agencies, and recovers a portion of those costs.

During the year, the Secretariat contributed $22,589 thousand ($15,043 thousand in 2009) in respect of its own employees, which represents approximately 1.9 times (2.0 times in 2009) the contributions made by its employees.

b) Severance benefits

The Secretariat 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. The liability for severance for 2009-2010 is determined using a Government-Wide estimate of 23.27% (compared to 26.92% in 2008-2009) and applying it to the Secretariat annual gross payroll related to indeterminate employees. Information about the severance benefits, measured as at March 31, is as follows:

	2010	2009
	($ thousands)
Accrued benefit obligation, beginning of year	28,888	23,703
Expense for the year	1,070	7,149
Benefits paid during the year	(3,935)	(1,964)
Transferred from other government department,  effective April 1, 2009 (note 13)	10,103	-
Accrued benefit obligation, end of year	36,126	28,888

10. Contingent liabilities

Claims and Litigations

Claims have been made against the Secretariat in the normal course of operations. Legal proceedings for claims totaling approximately $67 billion ($62 billion in 2009) were still pending at March 31, 2010. 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 on the financial statements. No accrual for these contingent liabilities has been made in the financial statements.

The most significant of these legal actions is described as follows:

In September 1999, the Public Sector Pension Investment Board Act (Bill C-78) was passed by Parliament, providing for improvements in the financial management of federal public service pension plans, including the Public Service (PSSA), RCMP (RCMPSA), and Canadian Forces (CFSA) superannuation plans. The new Act authorized the President of the Treasury Board to debit the accounts in order to reduce the amount of certain excess balances in the superannuation accounts. In late 1999, the major public service unions and pensioner associations launched three lawsuits against the Crown challenging the validity of the legislation. On November 20, 2007, the plaintiffs' actions were dismissed. In February 2008, all 3 plaintiffs appealed the decisions. The appeal was heard on April 19, 20 and 21, 2010. A decision is pending.

11. Contractual Obligations

The nature of the Secretariat's activities can result in some large multi-year contracts and obligations whereby the Secretariat 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:

	2011	2012	2013	2014	2015 and there-after	Total
	($ thousands)
Public Service Health/Dental Plans	33,381	34,134	24,644	26,494	28,777	147,430
Other professional services	5,491	1,514				7,005
Management consulting	1,718					1,718
Protection services	2,107					2,107
Computer services	1,160					1,160
Total	43,857	35,648	24,644	26,494	28,777	159,420

12. Related-party transactions

Services received without charge

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

Also, during the year, the Secretariat received without charge services from other departments as shown in the following table:

	2010	2009
	($ thousands)
Accommodation	19,263	13,523
Legal services	4,576	3,695
Total	23,839	17,218

The government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all departments without charge. The costs of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included as an expense in the Statement of Operations.

13. Transfer from other government department

a) Order in Council P.C. 2009-0181 approved the amalgamation of the Public Service Human Resources Management Agency of Canada (Canada Public Service Agency) with the Treasury Board Secretariat, effective March 2, 2009.  The financial impact of this merger on assets, liabilities and equity has been reported effective April 1, 2009 and the following assets and liabilities have been transferred from the Public Service Human Resources Management Agency of Canada to the Treasury Board Secretariat:

	2010
	($ thousands)
Assets
Accounts receivable and advances	2,438
Tangible capital assets	76
	2,514
Liabilities
Accounts payables and accrued liabilities	9,670
Vacation pay and compensatory leave	2,858
Employee severance benefits	10,103
	22,631
Adjustment to Equity of Canada	(20,117)

b) Order in Council P.C. 2009-0112 approved the transfer from the Department of Finance to the Treasury Board of Canada Secretariat of the control and the supervision of portions of the federal public administration related to shared corporate services in the Department of Finance, effective February 1, 2009. Assets of a net book value of $3,611 thousand have been transferred from the Department of Finance to the Treasury Board Secretariat in 2009-2010.

14. Comparative information

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

Appendix A—Votes

Planned spending in Program Activity 3 relates mainly to the following vote:

• Vote 20—Public Service Insurance

Other contingency funds are available to departments and agencies if required, and expenditures will be identified under their program activities. The following votes are therefore excluded from the Treasury Board of Canada Secretariat's (the Secretariat's) planned spending:

• Vote 5—Government Contingencies

• Vote 10—Government-Wide Initiatives

• Vote 25—Operating Budget Carry Forward

• Vote 30—Paylist Requirements

• Vote 35—Budget Implementation Initiatives

Appendix B—Definitions of Criteria for Performance Status Rankings

The following definitions of the performance status ratings used in the DPR correspond to the level of performance achieved for priorities and expected results.

• Exceeded

• Met all

• Mostly met

• Somewhat met

• Not met

Annex to Statement of Management Responsibility
including Internal Control over Financial Reporting
Treasury Board of Canada Secretariat
Fiscal year 2009-10

Note to the reader

With the new Treasury Board Policy on Internal Control, effective April 1, 2009, departments are now required to demonstrate the measures they are taking to maintain effective systems of internal control over financial reporting (ICFR).

As part of this policy, departments are expected to conduct annual assessments of their system of ICFR, establish action plan(s) to address any necessary adjustments, and to attach to their Statements of Management Responsibility a summary of their assessment results and action plan.

Effective systems of ICFR aim to achieve reliable financial statements and to provide assurances that:

• Transactions are appropriately authorized;
• Financial records are properly maintained;
• Assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement;
• Applicable laws, regulations and policies are complied with.

It is important to note that the system of ICFR is not designed to eliminate all risks, rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.

The maintenance of an effective system of ICFR is an ongoing process designed to identify, assess effectiveness and adjust as required key risks and associated key controls, as well as to monitor its performance in support of continuous improvement. As a result, the scope, pace and status of those departmental assessments of the effectiveness of their system of ICFR will vary from one organization to the other based on risks and taking into account their unique circumstances.

Table of Contents

1. Introduction 2. Treasury Board of Canada Secretariat's control environment relevant to ICFR 3. Assessment of system of ICFR 4. Assessment results 5. Action plan

1. Introduction

This document is an annex to the Treasury Board of Canada Secretariat's Statement of Management Responsibility Including Internal Control Over Financial Reporting for the fiscal year 2009-2010. As required by the new Treasury Board Policy on Internal Control, effective April 1, 2009, this document provides summary information on the measures taken by the Treasury Board of Canada Secretariat to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the internal control assessments conducted by the Treasury Board of Canada Secretariat as at March 31, 2010, including progress, results and related action plans along with some financial highlights pertinent to understanding the control environment unique to the Treasury Board of Canada Secretariat.

It is important to note that the system of ICFR is not designed to eliminate every possible risk, rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate. The maintenance of an effective system of ICFR is an ongoing process designed to identify and prioritize risks and the controls to mitigate those risks, as well as to monitor its performance in support of continuous improvement.

1.1 Authority, Mandate and Program Activities

The Treasury Board of Canada Secretariat is the administrative arm of the Treasury Board. The Treasury Board is a Cabinet committee of ministers invested with a broad range of responsibilities for management excellence, policy development, and budget and human resources oversight. The Treasury Board of Canada Secretariat supports Treasury Board ministers and strengthens the way government is managed to better serve Canadians and ensure value-for-money in government spending. The Secretariat achieves these objectives by:

While both of these roles are important, the overwhelming majority of the expenditures, in these financial statements, relate to the central payments for pension and benefits.

Detailed information on the Treasury Board of Canada Secretariat's authority, mandate and program activities can be found in its Departmental Performance Report and in its Report on Plans and Priorities.

1.2 Financial highlights

Financial statements (unaudited) of the Treasury Board of Canada Secretariat for fiscal-year 2009-2010 can be found on the Treasury Board of Canada Secretariat website. Information can also be found in the Public Accounts of Canada website.

Financial Highlights of Treasury Board of Canada Secretariat:

• Government-wide funds and Public Service Employer Payments accounted for 87% or $2.067B of total expenses ($2.367B). Public Service Employer Payments relate to the Secretariat's role as employer of the core public administration. These funds are used for the public service pension, benefits, and insurance, including payment of the employer's share of health, income maintenance, and life insurance premiums as well as payments to, or in respect of, provincial health insurance and other related costs. The Pension and Benefits Sector within the Secretariat manages most of these expenditures.
• Parking fee revenue was $11.6M or 71% of total revenues ($16.4M). These fees are paid by public servants across government for renting parking spaces in government owned or leased facilities. The Secretariat fulfills a central accounting function by recording all fees deposited by other government departments. These fees are deposited directly to the Consolidated Revenue Fund and are not available for re-spending by the Treasury Board of Canada Secretariat.
• Accounts receivable related to other departments' shares of employee benefit costs account for 98% or $658M of total assets ($674M). Also, accounts payable which relate to adjustments for other departments' share of employee benefit costs comprise 51% or $291M of total liabilities ($613M). Of the remaining accounts payable, 39% or $220M are end-year payables set up for the Public Service Health Care Plans, Public Service Dental Care Plan and Pensioners Dental Services Plan. These significant payables and receivables result from the requirement for year end adjustments to ensure the appropriate distribution of employee benefit costs to government departments.
• Treasury Board of Canada Secretariat assets and liabilities were increased by $2.5M and $22.6M respectively, and operating budget resources increased by $56M as a result of a merger with the Public Service Human Resource Management Agency of Canada.

1.3 Service arrangements relevant to financial statements

1.3.1 Secretariat reliance on other government service providers:

The Secretariat relies on other organizations for the processing of certain transactions that are recorded in its financial statements. These arrangements include but are not limited to:

1.3.2 Secretariat reliance on non-governmental service providers:

• The Secretariat relies on the internal controls of a number of companies which provide specific services such as medical plan administration, dental plan administration, and insurance services.

1.3.3 Secretariat services upon which other departments rely:

Other government departments rely on the Treasury Board of Canada Secretariat for the processing of certain transactions or the provision of information which impact their financial statements:

1.4 Material changes in fiscal year 2009-2010

Effective March 2, 2009, the Public Service Human Resources Management Agency of Canada was amalgamated with the Treasury Board of Canada Secretariat. The financial impact of this amalgamation was not reflected in the fiscal year 2008-09 financial statements. The amalgamation with the Public Service Human Resources Management Agency of Canada resulted in additional budgetary resources being recorded in the Financial Statements of the Secretariat of $56M. In addition, effective February 1, 2009, a significant portion of the Corporate Services Branch in the Department of Finance was transferred to the Secretariat and as a result, TBS now provides corporate shared services to the Department of Finance. The expense for the Secretariat's share for most of these services had already been reflected in the Treasury Board of Canada Secretariat's Financial Statements.

2. The Treasury Board of Canada Secretariat's control environment relevant to ICFR

Treasury Board of Canada Secretariat recognizes the importance of senior management leadership in ensuring that staff at all levels understand their roles in maintaining effective systems of ICFR and are well equipped to exercise these responsibilities. The Treasury Board of Canada Secretariat's objective is to continually improve its internal control environment using a risk-based approach and targeted resource investment so that the required level of effectiveness is achieved at a manageable cost.

2.1 Key positions, roles and responsibilities

Below are the Secretariat's key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.

Secretary – Treasury Board of Canada Secretariat's Deputy Head, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the Secretary chairs the Treasury Board of Canada Secretariat Executive Committee and is a member of the Departmental Audit Committee.

Chief Financial Officer (CFO) – The Treasury Board of Canada Secretariat's CFO reports directly to the Secretary and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR, including its annual assessment.

Assistant Secretaries and other Senior Departmental Managers - The Treasury Board of Canada Secretariat's senior departmental managers in charge of program delivery are responsible for maintaining and reviewing effectiveness of their system of ICFR falling within their mandate.

Chief Audit Executive (CAE) – The Treasury Board of Canada Secretariat's CAE reports directly to the Secretary and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR.

Government of Canada Audit Committee (GCAC) - The GCAC is an advisory committee that provides objective views on the Treasury Board of Canada Secretariat's financial statements, risk management, control and governance frameworks and it is comprised of three external members, a deputy minister external to the Secretariat, and the Secretary of the Treasury Board. As such, it reviews the Treasury Board of Canada Secretariat's Corporate Risk Profile, its internal audit reports, and its system of internal control, including the assessment and action plans relating to the system of ICFR.  

2.2 Key organization-wide controls in the Treasury Board of Canada Secretariat

The Secretariat's control environment includes measures and tools to help raise awareness and to develop employees' internal control knowledge and skill sets. These include:

• Values and Ethics Office which provides educational/awareness programs;
• A Secretariat Corporate Risk Profile that is updated annually;
• A requirement for accounting designations in key financial management positions as well as a section within the Financial Management Directorate focused on ICFR;
• Financial management policies as well as the documentation of its main business processes and related key risk and control points to support the management and oversight of its system of ICFR;
• A risk-based internal audit plan;
• Training programs and regular communication to employees on core areas of financial and contracting management;
• Regularly updated delegated authorities matrix; and
• Secure financial and contracting IT processing systems to achieve enhanced security, data integrity, and efficiency and effectiveness of transactions.

3. Assessment of system of ICFR

3.1 Assessment baseline

In 2004, the Government of Canada commenced an initiative to determine the ability of departments to sustain controls-based audits of their financial statements, thus placing reliance on well functioning internal controls. As a result, in 2007, the Treasury Board of Canada Secretariat received an audit readiness assessment that had been conducted by an independent external consulting firm. This assessment provided the baseline for the Treasury Board of Canada Secretariat to move forward in reviewing its internal controls and preparing for controls-based audited financial statements.

Whether it is to support controls-based audits or meet the requirements of the Policy on Internal Control, the Secretariat must be able to maintain an effective system of ICFR with the objectives to provide reasonable assurance that a) transactions are appropriately authorized, b) financial records are properly maintained, c) assets are safeguarded and d) applicable laws, regulations and policies are complied with.

Over time, this includes assessment of design and operating effectiveness of the departmental system of ICFR leading to ensuring the on-going monitoring and continuous improvement of its departmental system of ICFR.

Design effectiveness means to ensure that key control points are identified, documented, in place and that they are aligned with the risks (i.e. controls are balanced with and proportionate to the risks they aim to mitigate) and that any remediation is addressed. This includes the mapping of key processes and IT systems to the main accounts.

Operating effectiveness means that the application of key controls has been tested over a defined period and that any required remediation is addressed. Such testing covers all departmental control levels which include corporate or entity, general computer and business process controls.

The Secretariat, as a department, has assessed the design of its system of ICFR and has a monitoring process in place to sustain and continually improve on this system.

3.2 Assessment methodology

In proceeding with the preparation for sustaining a controls-based audit, the Treasury Board of Canada Secretariat, with the assistance of an independent external consulting firm, reviewed its Financial Statements, identifying the significant business processes and key control points. Potential gaps in the internal control framework were then identified along with the level of associated risks. The review started with general entity-level controls and continued with business process controls which were separated into nine key processes. These business processes were grouped into two categories: 1) those that concerned the Treasury Board of Canada Secretariat as a Department and 2) those that concerned the Treasury Board of Canada Secretariat in its role of managing government-wide funds and Public Service Employer payments.

Business processes for the Treasury Board of Canada Secretariat as a department:

• Operating Expenses including contracting
• Payroll and Benefits
• General Computer Controls
• Financial Reporting and Closing Cycle
• Budgeting and Forecasting

Business processes for the Treasury Board of Canada Secretariat as the manager for government-wide funds and Public Service Employer Payments:

• Pension Payments
• Insurance Benefit Plans
• Employee Benefit Plan Recoveries
• Parking Revenue

For each business process for the Secretariat as a department, the following steps were substantially completed:

• confirmed the effectiveness of the organization-wide control environment as this is critical in supporting internal controls at the business process level;
• updated internal control documentation based on changes made to processes, and controls relevant to ICFR, including appropriate linkages to policies and procedures and confirmed that these changes mitigated the identified risks from a design perspective;
• mapped out key processes using flowcharts and various narrative approaches to identify key risk and control points; and
• conducted reviews of each business process to confirm that the controls were functioning as specified in the design documentation.

For each business process related to the Secretariat as the manager for government-wide funds and Public Service Employer Payments, the following steps were partially completed:

• documented some of the business processes for the insurance benefit plans;
• established a working group to review the internal controls for the employee benefit and employee insurance plans, and began meeting with program managers and support staff;
• initiated reviews of control activities;
• identified which processes had components where there was reliance on other government departments internal controls and documented the specific circumstances.

The Secretariat also took into account information from relevant audits and evaluations. The following internal audit reports were considered:

• Audit of Pay and Related Benefits
• Audit of Leave and Overtime
• Audit of Account Verification
• Office of the Comptroller General Horizontal Audit of High Risk Expenditure Controls in Large Departments and Agencies
• Office of the Comptroller General Horizontal Audit on Delegation of Financial Authorities in Large Departments and Agencies

4. Assessment results

In assessing its key controls, the Secretariat looked at both design effectiveness and operating effectiveness, and initiated confirmation of control implementation.

4.1 Design effectiveness of key controls

When completing design effectiveness testing, the Secretariat updated business process documentation and validated the key processes with management. It verified that the documented processes corresponded to actual practices and adjustments were made to documentation and/or the actual process, as required. As a result of these assessments, the Secretariat identified the need for remediation in the following areas:

Documentation of Controls and Evidence of Controls:

• consistency, accuracy and detail in the documentation of controls and procedures.
• adequacy of documentation for some business processes.
• consistency in the use of validation stamps, checklists, approval signatures and other tools and procedures to demonstrate evidence of control.

Accounting:

• consistency and frequency in the completion of reconciliations.
• frequency and thoroughness in the monitoring and review of financial information.

Computer system security and access control:

• adequacy of controls related to Systems Security including user access, segregation of duties and the monitoring of user roles.
• currency of documentation such as the IM/IT Strategic Plan and the Disaster Recovery Plan.
• consistency in the use of automated controls.

Review function

• consistency of the review function for accounting transactions.
• frequency in the review of all monitoring reports by management.

Monitoring and quality assurance of financial statement preparation:

• clarity of roles and responsibilities as well as increased challenge by Corporate Accounting regarding quality assurance over the trial balance or amounts and disclosures in the financial statements.
• adequacy of review of key changes to business processes and of new programs which may have an impact on internal controls over financial reporting.

Reliance on Other Government Departments

• existence and adequacy of documentation where the Secretariat relies on the internal control systems of, and financial information provided by, other government departments.

4.2 Operating effectiveness of key controls

In 2009-10, the Secretariat reconfirmed that almost all controls related to the Treasury Board of Canada Secretariat as a department were functioning. Those that were not functioning properly were identified and corrective actions initiated. Controls related to Secretariat as manager for government-wide funds and Public Service Employer Payments are being reassessed as processes have been updated since the audit readiness assessment. Operating effectiveness assessment of internal controls will be conducted, as required in 2010-11 and 2011-12.

4.3 On-going monitoring program

The Treasury Board of Canada Secretariat has created a dedicated unit responsible for a well integrated risk based approach for the ongoing assessment of the Secretariat's internal controls over financial reporting. The Secretariat's Internal Control section will monitor any required remediation actions to entity level, business processes and general computer controls based on lessons learned from the annual assessments and audits. This includes promoting awareness of ICFR and clarifying roles and responsibilities of employees within the Secretariat who are involved with ICFR.

5. Action Plan

5.1 Progress as at March 2010

During 2009-2010, the Secretariat continued to make significant progress in assessing and improving its controls. Below is a summary of the main progress made by the Secretariat:

The Secretariat, as a department, completed work to address the following necessary adjustments:

• Substantially completed the documentation of the existing entity level controls and confirmation that processes are in place.
• Completed the documentation of all departmental business processes and controls.
• Identified gaps in internal controls and the related documentation.
• Undertook action to address the identified gaps, for example:
  • identified high risk and low risk transactions for purposes of account verification which permits a targeted approach on higher risk transactions and use of statistical sampling methodologies on lower risk transactions.
  • reviewed user profiles to ensure segregation of duties and implemented monitoring of user access through regular review of access logs and reports.
  • developed a variety of checklists to ensure specific steps in the account verification process are followed.
  • restricted the number of users with access to maintain the employee and supplier tombstone data records and commenced daily monitoring by a financial officer to determine what changes have been made to the records.
• Reviewed the documented key processes and controls by conducting reviews of each process to confirm controls are functioning as specified in the supporting documentation.

The Secretariat as the manager for government-wide funds and Public Service Employer Payments has commenced work to address the following necessary adjustments:

• Documented the business processes for the insurance benefit plans and the pension plan.
• Identified gaps in internal control documentation and the approach to address those gaps.

5.2 Action plan – future years

By end of 2010-11:

By end of 2011-12: