Financial Statements (Unaudited)
For the Year Ended March 31, 2009

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2009, and all information contained in these statements rests with the management of the Treasury Board of Canada 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 2008–09 Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded, and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff, through organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Secretariat.

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 would advise the Deputy Head 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

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

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

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

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

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 three program activities that were updated and approved by Treasury Board in June 2007 (see note about Internal Services at the beginning of these financial statements). Therefore, figures for 2007–08 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

Through the Management Policy Development and Oversight program activity, the Secretariat provides support to the Treasury Board in its role as the management board of government and promotes good management practices across government. This includes its role as employer of the federal public service. The Secretariat supports its management board role by developing policies, directives and standards to guide good management across government; monitoring compliance and developing tools to measure and report on management performance; and providing advice and support to functional communities. To achieve its objectives under this program activity, the Secretariat also works closely with its portfolio partners, the Public Service Human Resources Management Agency of Canada and the Canada School of the Public Service.

c) Expenditure Management and Financial Oversight

The Secretariat exercises its role as the budget office and undertakes the following key functions in support of this role:

• providing advice to Ministers with respect to resource allocation and re-allocation, and the provision of expenditure authorities;
• undertaking government-wide expenditure and performance analysis, and oversight of estimates and government supply; and
• ensuring that accurate and timely financial and performance information from departments and agencies is available and reported to support Public Accounts and budget office functions.

Structural Changes

Two significant structural changes took place in early 2009 that will impact the Secretariat. Order in Council P.C. 2009-0181 approved the amalgamation of the Public Service Human Resources Management Agency of Canada with the Treasury Board Secretariat, effective March 2, 2009. 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.

Although these mergers occurred late in 2008–09, separate financial statements were produced due to the fact that parliamentary authorities remained distinct and there continued to be a requirement to provide a separate Departmental Performance Report to Parliament for the Public Service Human Resource Management Agency of Canada.  The transfer of funding to the Secretariat will occur in 2009–10, and the financial impact will be reported in the Secretariat 2009–10 Financial Statements.

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 and Management Policy Development and Oversight 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 that 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:

Treasury Board of Canada Secretariat
Notes to the Financial Statements (Unaudited)
For the year ended March 31

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

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

 b)  Appropriations provided and used

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

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

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

4. Expenses

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

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

b) 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 8.0 per cent (7.0 per cent in 2008) of salaries and wages incurred.

A breakdown by major category is as follows:

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

5. Revenues

The following table presents details of revenues by category:

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

6. Accounts Receivable and Advances

The following table presents details of accounts receivable and advances:

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

7. Tangible Capital Assets

The following table presents the details of Tangible Capital Assets:

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

Amortization expense for the year ended March 31, 2009, is $1,225 thousand ($160 thousand in 2008).

8. Accounts Payable and Accrued Liabilities

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

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

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 $15,043 thousand ($12,854 thousand in 2008) in respect of its own employees, which represents approximately 2.0 times (2.1 times in 2008) 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 2008–09 is determined using a government-wide estimate of 26.92% (compared to 23.27% in 2007–08) 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:

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

10. Contingent Liabilities

Claims and litigations

Claims have been made against the Secretariat in the normal course of operations. Legal proceedings for claims totalling approximately $62 billion ($64 billion in 2008) were still pending at March 31, 2009. 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 actions were dismissed. In February 2008, all 3 plaintiffs appealed the decisions. No appeal dates have been scheduled to date.

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:

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

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:

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

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. Comparative Information