Optional Services Revolving Fund

Public Accounts of Canada 2015 Volume III - Top of the page Navigation

Statement of Management Responsibility

We have prepared the accompanying financial statements of the Optional Services Revolving Fund as required by and in accordance with the policy of the Treasury Board on Special Revenue Spending Authorities and the reporting requirements of the Receiver General for Canada. These financial statements were prepared in accordance with the significant accounting policies set out in Note 2 of the statements, on a basis consistent with that of the preceding year.

Responsibility for the integrity and objectivity of these financial statements rests with the management of the Fund. The information included in these financial statements is based on management's best estimates and judgment with due consideration given to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts which provides a centralized record of the Fund's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the Departmental Performance Report is consistent with these financial statements.

Management develops and disseminates financial management and accounting policies and issues specific directives which maintain standards of financial management, accounting and reporting. Management maintains systems of financial management and internal control which give due consideration to costs, benefits and risks. They are designed to provide reasonable assurance that transactions are properly authorized by Parliament, are executed in accordance with prescribed regulations, and are properly recorded to maintain accountability of government funds and safeguard the assets under the Fund's administration. Management also seeks to assure the objectivity and integrity of data in its financial statements by the careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that its regulations, policies, standards and managerial authorities are understood throughout the organization.

With the exception of the Statement of Authority Provided (Used) and the Reconciliation of Unused Authority, management has presented the financial statements to external auditors who have audited them and have provided an independent opinion which is appended to these financial statements. The Statement of Authority Provided (Used) and the Reconciliation of Unused Authority were not audited as it is not required by the Treasury Board policy.

Approved by:

Alex Lakroni
Chief Financial Officer,
Public Works and Government Services Canada

Claire Caloren
Associate Assistant Deputy Minister,
Acquisitions Branch
Public Works and Government Services Canada

May 28, 2015

Statement of Authority provided (Used) (Unaudited) for the year ended March 31

Table Summary

The table presents on a comparative basis the statement of Authority provided (Used) (Unaudited). It consists of five columns: item descriptions, current year with two columns — estimates and actual, and previous year with two columns — estimates and actual. Subtotals are displayed at operating source (use) of funds and totals are displayed at authority provided (used).

(in thousands of dollars)

  2015 2014
Estimates Actual Estimates Actual
Net results   942 (negative 619) (negative 3,190)
Items not requiring use of funds   (negative 71)   (negative 294)
Operating source (use) of funds   871 (negative 619) (negative 3,484)
Items requiring use of funds        
Transition payments for implementing salary payments in arrears (Note 8)   (negative 55)    
Net other assets and liabilities   (negative 6,178) (negative 10,000) 1,875
Subtotal   (negative 6,233) (negative 10,000) 1,875
Authority used   (negative 5,362) (negative 10,619) (negative 1,609)

Reconciliation of Unused Authority (Unaudited) as at March 31

Table Summary

The table presents on a comparative basis the reconciliation of Unused Authority (Unaudited). It consists of three columns: item descriptions, current year and previous year. Subtotals are displayed at net authority provided end of year and totals are displayed at the unused authority carried forward.

(in thousands of dollars)

  2015 2014
Accumulated net charge against the Fund's authority Link to footnote 1 13,238 14,939
Payables at year‑end charged against the appropriation after March 31 (negative 20,477) (negative 16,792)
Amounts credited to the appropriation account after March 31 887 863
Net authority used, end of year (negative 6,352) (negative 990)
Authority limit (Note 1) 35,000 35,000
Unused authority carried forward 28,648 34,010

Independent Auditors' Report

To the Deputy Minister
Public Works and Government Services Canada

We have audited the accompanying financial statements of the Optional Services Revolving Fund, which comprise the statement of financial position as at March 31, 2015, and the statements of operations and net liabilities, and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. These financial statements have been prepared by management of the Optional Services Revolving Fund to comply with section 6.4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities.

Management's responsibility for the financial statements

Management is responsible for the preparation of these financial statements in accordance with section 6.4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audit is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements of the Optional Services Revolving Fund as at and for the year ended March 31, 2015 are prepared, in all material respects, in accordance with section 6.4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities.

Basis of accounting and restrictions on use

Without modifying our opinion, we draw attention to Note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist the Optional Services Revolving Fund to comply with section 6.4 of the Treasury Board of Canada's Policy on Special Revenue Spending Authorities. As a result, the financial statements may not be suitable for another purpose. Our auditors' report is intended solely for the information and use of the Optional Services Revolving Fund and the Treasury Board of Canada and should not be used by parties other than the Optional Services Revolving Fund and the Treasury Board of Canada.

Ernst & Young LLP
Chartered Professional Accountants,
Licensed Public Accountants

Ottawa, Canada
May 28, 2015

Statement of Financial Position as at March 31

Table Summary

The table presents on a comparative basis the statement of Financial Position. It consists of three columns: item descriptions, current year and previous year. Item descriptions are grouped in two: the assets and the liabilities and net liabilities, both displaying totals. Current item descriptions are grouped together for assets and for liabilities with subtotals for current and long‑term liabilities.

(in thousands of dollars)

  2015 2014
Assets    
Current    
Cash in transit   29
Accounts receivable (Note 3) 12,578 6,458
Other assets (Note 4) 19 131
Total 12,597 6,618
Liabilities and net liabilities    
Current    
Accounts payable and accrued liabilities (Note 5) 18,858 15,379
Vacation pay and compensatory leave 56 73
Subtotal 18,914 15,452
Long‑term    
Employee severance benefits (Note 6) 73 144
Total 18,987 15,596
Net liabilities (Note 7) (negative 6,390) (negative 8,978)
Total 12,597 6,618

Statement of Operations and Net Liabilities for the year ended March 31

Table Summary

The table presents on a comparative basis the statement of Operations and Net Liabilities. It consists of three columns: item descriptions, current year and previous year. Item descriptions for revenues and for operating expenses are grouped together, each displaying subtotals. Subtotals for revenues, net of direct costs are displayed at gross margin and subtotals for gross margin, net of operating expenses are displayed at net results. Totals are displayed at net liabilities end of year.

(in thousands of dollars)

  2015 2014
Revenues    
Vaccines and drugs 155,159 124,979
Travel and relocation related services 11,535 12,713
Communication procurement services 2,886 2,966
Subtotal 169,580 140,658
Cost of sales (negative 164,366) (negative 135,801)
Net Revenue 5,214 4,857
Operating expenses    
Professional and special services 1,986 5,242
Salaries and employee benefits 1,583 1,905
Corporate and administrative services 593 628
Occupancy costs 122 250
Other expenses 59 21
Employee severance benefits (negative 71) 1
Total 4,272 8,047
Net results 942 (negative 3,190)
Net liabilities, beginning of year (negative 8,978) (negative 8,239)
Transfer of the transition payments for implementing salary payments in arrears (Note 8) (negative 55)  
Net financial resources used and change in the accumulated net charge against the Fund's authority, during the year (Note 7) 1,701 2,451
Net liabilities, end of year (negative 6,390) (negative 8,978)

Statement of Cash Flows for the year ended March 31

Table Summary

The table presents on a comparative basis the statement of Cash Flows. It consists of three columns: item descriptions, current year and previous year. Subtotals are displayed at net financial resources provided and change in the accumulated net charge against the Fund's authority account during the year. Totals are displayed at accumulated net charge against the Fund's authority account end of year.

(in thousands of dollars)

  2015 2014
Operating activities    
Net results 942 (negative 3,190)
Non‑cash items:    
Provision for employee severance benefits (negative 71) 1
Total 871 (negative 3,189)
Changes in current assets and liabilities    
Decrease in cash in transit 29 109
(Increase) decrease in accounts receivable (negative 6,120) 1,795
Decrease (increase) in other assets 112 (negative 81)
Increase (decrease) in accounts payable and accrued liabilities 3,479 (negative 760)
(Decrease) in vacation pay and compensatory leave (negative 17) (negative 29)
Subtotal (negative 2,517) 1,034
Changes in other assets and liabilities    
Payments on provision for employee severance benefits   (negative 296)
Transition payments for implementing salary payments in arrears (Note 8) (negative 55)  
Total (negative 2,572) 738
Net financial resources used and change in the accumulated net charge against the Fund's authority account, during the year (Note 7) (negative 1,701) (negative 2,451)
Accumulated net charge against the Fund's authority account, beginning of year 14,939 17,390
Accumulated net charge against the Fund's authority account, end of year 13,238 14,939

Notes to the financial statements for the year ended March 31, 2015

1. Authority and purpose

The Optional Services Revolving Fund (the "Fund") provides specialized services to federal departments, agencies and provincial and territorial governments. The Fund procures vaccines and drugs, provides travel and relocation related services, as well as communication procurement services. The Fund was established under Appropriation Act No. 4, 1991‑92 which was repealed in 1996 and replaced by section 5.5 of the Revolving Funds Act.

The Fund has a continuing non‑lapsing authority from Parliament to make payments out of the Consolidated Revenue Fund for the purposes of working capital, capital acquisitions and the temporary financing of accumulated operating deficits, the total of which is not to exceed $35,000,000 at any time, as per section 5.5(3) of the Revolving Fund Act.

The Fund received authorization from Treasury Board to access its unused authority for a total amount up to $10,000,000 to temporarily fund transitory cash elements at year end.

For fiscal year 2015, the Fund requested authorization from Treasury Board to access its drawdown authority for a total amount of $6,351,328 (fiscal year 2014: $989,730) to cover the remaining amount over a total authorized amount of $10,000,000.

2. Significant accounting policies

The financial statements have been prepared in accordance with the Treasury Board accounting policies and the reporting requirements of the Receiver General for Canada. The financial statements are not presented on a basis consistent with Canadian public sector accounting standards as:

  • The liabilities for vacation pay and employee severance benefits are based on management's estimate rather than on actuarial valuations;
  • No liability is recorded for sick leave;
  • The statement of financial position does not segregate non‑financial assets; and
  • The net debt indicator and statement of change in net debt are not presented in the financial statements.

The significant accounting policies are as follows:

a. Accounts receivable

Accounts receivable are stated at amounts expected to be ultimately realized; a provision is made on receivables where recovery is considered uncertain.

b. Revenue

Vaccines and drugs revenue is recognized using a blended rate established by fixed price contracts and based on the proportion of total goods delivered at year end. Any losses on the fixed price contracts are recognized during the period in which they are identified.

Travel and relocation related services revenue consists of rebates, commissions, and fees and is recognized when services are rendered.

Revenue earned on communication procurement services is recognized using the completed contract method.

c. Employee future benefits

i. Pension benefits

Eligible employees participate in the Public Service Pension Plan (the "Plan"), a multiemployer pension plan administered by the Government of Canada. The Fund's contributions to the Plan are charged to expenses in the year incurred and represent the total Fund obligation to the Plan. The Fund's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

ii. Severance benefits

Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from management's estimate of the liability. The liability for benefits is recorded in the accounts as the benefits accrue to employees.

iii. Vacation pay and compensatory leave

Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

d. Financial instruments

The fair value of the financial instruments approximates costs unless otherwise specified. The Fund's financial instruments consist of cash in transit, accounts receivable, other assets, accounts payable and accrued liabilities. It is management's opinion that the Fund is not exposed to significant interest, currency or credit risks rising from these financial instruments.

e. Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses reported in the financial statements. At the time of preparation of these financial statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the liability for vacation pay and compensatory leave and the liability for employee severance benefits. 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. Accounts receivable

Table Summary

The table presents on a comparative basis the accounts receivable. It consists of three columns: item descriptions, current year and previous year. The last row presents the totals.

(in thousands of dollars)

  2015 2014
Other government departments and agencies 887 863
External parties 11,691 5,595
Total 12,578 6,458

4. Other assets

Table Summary

The table presents on a comparative basis the other assets. It consists of three columns: item descriptions, current year and previous year. The last row presents the totals.

(in thousands of dollars)

  2015 2014
Sales Tax refundable advances 19 131

5. Accounts payable and accrued liabilities

Table Summary

The table presents on a comparative basis the accounts payable and accrued liabilities. It consists of three columns: item descriptions, current year and previous year. The last row presents the totals.

(in thousands of dollars)

  2015 2014
Other government departments and agencies 55  
External parties and accrued liabilities 18,803 15,379
Total 18,858 15,379

6. Employee severance benefits

The Fund provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre‑funded. Benefits will be paid by future authorities.

Commencing in 2012, as part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non‑represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or to collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation. These estimates do not include expenses related to employ ee benefits pay able to Treasury Board as they cannot be reasonably determined. Information about the severance benefits, measured as at March 31, is as follows:

Table Summary

The table presents on a comparative basis the employee severance benefits. It consists of three columns: item descriptions, current year and previous year. The total accrued benefit obligation, net of expenses for the year can be found on the last row.

(in thousands of dollars)

  2015 2014
Accrued benefit obligation, beginning of year 144 439
Benefits paid during the year :    
Retirements and departures from the Public Service   (negative 65)
Employees who opted to cash out their accumulated balances as per collective agreements   (negative 231)
Subtotal   (negative 296)
Expense for the year (negative 71) 1
Accrued benefit obligation, end of year 73 144

7. Net liabilities

The accumulated surplus is the accumulation of each fiscal year's surplus net of deficits since the inception of the Fund.

The accumulated net charge against the Fund's authority represents the cumulative receipts and disbursements over the life of the Fund.

Table Summary

The table presents on a comparative basis the net liabilities. It consists of three columns: item descriptions, current year and previous year. Subtotals are displayed at accumulated surplus closing balance and totals are displayed at net liabilities end of year.

(in thousands of dollars)

  2015 2014
Accumulated surplus    
Opening balance 5,961 9,151
Net results 942 (negative 3,190)
Transition payments for implementing salary payments in arrears (negative 55)  
Closing balance 6,848 5,961
Accumulated net charge against the Fund's authority    
Opening balance (negative 14,939) (negative 17,390)
Change during the year 1,701 2,451
Closing balance (negative 13,238) (negative 14,939)
Net liabilities, end of year (negative 6,390) (negative 8,978)

8. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014–2015. As a result, a one‑time payment of $55,280 was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the Revolving Fund. However, it did result in the use of authorities by the Revolving Fund and impacted the accumulated net charge against the Fund's authority. Prior to year end, transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Works and Government Services Canada, who is responsible for the administration of the Government pay system.

9. Contractual obligations

The nature of the Fund's activities can result in some large multi‑year contracts and obligations whereby the Fund will be obligated to make future payments when the services/goods are received. Estimated future payments are as follows:

Table Summary

The table presents the total annual contractual obligations from 2016 to 2019 and then for 2020 and thereafter. It consists of two columns: the year and the respective future contractual obligation. The last row presents the total for those years.

(in thousands of dollars)

2016 1,017
2017 659
2018 663
2019 625
2020 and thereafter 625
Total 3,589

10. Comparative figures

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

11. Related party transactions

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

Footnotes

Footnote 1

Debit balance in the accumulated net charge against the Fund's authority.

Return to footnote 1 referrer

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