Real Property Services Revolving Fund

Public Accounts of Canada 2017 Volume III—Top of the page Navigation

Statement of management responsibility

We have prepared the accompanying financial statements of the Real Property Services Revolving Fund as required by and in accordance with the Treasury Board Policy on Special Revenue Spending Authorities. These financial statements were prepared by the management of the Fund in accordance with the significant accounting policies set out in note 2 of the financial 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. 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 accounting and financial management. 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, 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. Financial management and internal control systems are augmented by the maintenance of internal audit programs. 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.

Management has presented the financial statements to the external auditor who audited them and has provided an independent auditor's report opinion, which is appended to these financial statements.

Approved by:

Michel D'Amour
A/Chief Financial Officer
for Marty Muldoon, CPA, CMA, MBA
Chief Financial Officer
Public Services and Procurement Canada

Andrew Smith
for Kevin Radford
Assistant Deputy Minister,
Real Property Branch
Public Services and Procurement Canada

May 30, 2017
Gatineau, Canada

Statement of authority provided (used) (unaudited) for the year ended March 31

(in thousands of dollars)

  2017 2016
EstimatesLink to footnote 1 Actual EstimatesLink to footnote 1 Actual
Net results 24,474 (negative 2,200) (negative 3,992)
Items not requiring use of funds (negative 2,600)
Operating source (use) of funds 24,474 (negative 4,800) (negative 3,992)
Items requiring use of funds
Transition payments for implementing salary payments in arrears (negative 69)
Net other assets and liabilities (negative 2,600) 4,568 14,932
Authority provided (used) (negative 2,600) 29,042 (negative 4,800) 10,871

Reconciliation of unused authority (unaudited) as at March 31

(in thousands of dollars)

  2017 2016
Debit balance in the accumulated net charge against the Fund's authority 239,910 167,894
Payables charges against the appropriation at year-end (negative 355,549) (negative 302,859)
Receivables credited to the appropriation at year-end 183,041 171,958
Other items 6,649 8,016
Net authority provided, end of year 74,051 45,009
Authority limit (Note 1) 150,000 150,000
Unused authority carried forward 224,051 195,009

Independent auditor's report

To the Deputy Minister, Public Services and Procurement Canada

We have audited the accompanying financial statements of the Real Property Services Revolving Fund (the "Fund"), which comprise the statement of financial position as at March 31, 2017, and the statements of operations and net liabilities and of cash flow for the year then ended, and a summary of significant accounting policies and other explanatory information. The financial statements have been prepared by management of the Fund based on the financial reporting provisions of 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 the financial reporting provisions of 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.

Auditor's 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 from 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 auditor's 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 auditor considers internal control relevant to the entity's preparation 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 is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements of the Fund for the year ended March 31, 2017 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 describe the basis of accounting. The financial statements are prepared to assist the Fund to meet the financial reporting provisions of 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 report is intended solely for the Fund and the Treasury Board of Canada and should not be used by parties other than the Fund and the Treasury Board of Canada.

Deloitte LLP
Chartered Professional Accountants,
Licensed Public Accountants

May 30, 2017
Ottawa, Canada

Statement of financial position as at March 31

(in thousands of dollars)

  2017 2016
Assets
Financial assets
Cash in transit 86 58
Accounts receivable (Note 3) 191,988 175,542
Other assets (Note 4) 21,703 23,291
Subtotal 213,777 198,891
Non-financial assets
Prepaid expenses 115 1,404
Total 213,892 200,295
Liabilities
Current liabilities
Accounts payable and accrued liabilities (Note 5) 372,755 308,154
Vacation pay and compensatory leave 12,805 10,718
Contractors' security deposits 1,983 4,720
Subtotal 387,543 323,592
Long-term liabilities
Employee severance benefits (Note 6) 11,083 13,895
Total 398,626 337,487
Net liabilities (Note 7) (negative 184,734) (negative 137,192)
Total 213,892 200,295

Statement of operations and net liabilities for the year ended March 31

(in thousands of dollars)

  2017 2016
Revenues
Real Property services - other government departments 1,538,540 1,344,413
Real property services - Public Services and Procurement Canada portfolio 223,041 198,995
Other revenues 1,257 1,144
Subtotal 1,762,838 1,544,552
Cost of sales (negative 1,358,182) (negative 1,187,418)
Gross profit 404,656 357,134
Operating expenses
Salaries and employee benefits 273,279 218,992
Corporate and administrative services 62,930 47,728
Professional and special services 18,488 72
Occupancy costs 13,424 14,476
Utilities, materials and supplies 5,616
Purchased repairs and maintenance 3,115
Transportation and telecommunications 2,066
Rentals 1,672
Other expenses 1,358 324
Information 155
Real Property indirect activities 79,537
Employee severance benefits (Note 6) (negative 1,921) (negative 3)
Total operating expenses 380,182 361,126
Net results 24,474 (negative 3,992)
Net liabilities, beginning of year (negative 137,192) (negative 134,221)
Transfer of the transition payments for implementing salary payments in arrears (negative 69)
Net financial resources (provided) used and change in the accumulated net charge against the Fund's authority, during the year (Note 7) (negative 72,016) 1,090
Net liabilities, end of year (Note 7) (negative 184,734) (negative 137,192)

Statement of cash flows for the year ended March 31

(in thousands of dollars)

  2017 2016
Operating activities
Net results 24,474 (negative 3,992)
Variations in statement of financial position
Decrease (increase) in cash in transit (negative 28) (negative 33)
Decrease (increase) in accounts receivable (negative 16,446) (negative 31,089)
Decrease (increase) in other assets 1,588 (negative 6,133)
Decrease (increase) in prepaid expenses 1,289 (negative 28)
Increase (decrease) in accounts payable and accrued liabilities 64,601 40,003
Increase (decrease) in vacation pay and compensatory leave 2,087 (negative 102)
Increase (decrease) in contractors' security deposits (negative 2,737) 2,808
Increase (decrease) in employee severance benefits (negative 2,812) (negative 2,455)
Subtotal 47,542 2,971
Transition payments for implementing salary payments in arrears (negative 69)
Net financial resources provided (used) and change in the accumulated net charge against the Fund's authority, during the year (Note 7) 72,016 (negative 1,090)
Accumulated net charge against the Fund's authority, beginning of year 167,894 168,984
Accumulated net charge against the Fund's authority, end of year 239,910 167,894

Notes to the financial statements for the year ended March 31, 2017

1. Authority and purpose

The Real Property Services Revolving Fund (the "Fund") is the funding mechanism for the Real Property Services (RPS) program. This program provides three types of real property services: project delivery services, property and facility management services, and advisory services. These services are provided to the real property portfolios of Public Services and Procurement Canada (PSPC) and to other government departments. Pursuant to the Revolving Funds Act, the program may spend any revenue received in respect of these services and, subject to Treasury Board approval, the aggregate of expenditures shall not at any time exceed the revenues received, by more than $150,000,000.

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

2. Significant accounting policies

These financial statements have been prepared in accordance with the significant accounting policies set out below to comply with the requirements of the Treasury Board of Canada Policy on Special Revenue Spending Authorities and the reporting requirements for revolving funds prescribed by the Receiver General for Canada. The basis of accounting used in these financial statements differs from Canadian public sector accounting standards because:

The significant accounting policies are as follows:

(a) Revenue recognition

Revenues are recognized when professional and technical services are rendered. The recovery of disbursements made on behalf of other government departments, agencies, and outside parties are recognized when costs are incurred by the Fund and collection is reasonably certain.

(b) Accounts receivable

Accounts receivable are stated at amounts expected to be ultimately realized. An allowance is made for accounts receivable where recovery is considered uncertain.

(c) Expense recognition

All expenses are recorded on an accrual basis.

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

(d) Employee future benefits

  1. Pension benefits

    Eligible employees of the Fund 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.

  2. Severance benefits

    Eligible employees of the Fund are entitled to severance benefits under labour contracts or conditions of employment. These benefits are earned as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(e) Sick leave

Employees are permitted to accumulate unused sick leave. However, such leave entitlements may only be used in the event of an illness. As per current government practice, unused sick leave upon employee termination is not payable to the employee. Accordingly, no amount has been accrued in these financial statements. Payments of sick leavebenefits are included in current operations as incurred.

(f) 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 allowance for doubtful accounts on receivables from outside parties, the amount of certain liabilities , the liability for vacation pay and compensatory leave, and the liability for employee severance benefits. Actual results could significantly differ from those estimates. 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

(in thousands of dollars)

  2017 2016
Other government departments and agencies 183,041 171,958
Outside parties 9,161 3,599
Subtotal 192,202 175,557
Less: allowance for doubtful accounts on receivables from outside parties (negative 214) (negative 15)
Net accounts receivable 191,988 175,542

4. Other assets

(in thousands of dollars)

  2017 2016
Sales tax refundable advances 21,194 23,285
Other advances 509 6
Total other assets 21,703 23,291

5. Accounts payable and accrued liabilities

(in thousands of dollars)

  2017 2016
Outside parties 349,306 298,379
Other government departments and agencies 6,243 4,480
Subtotal 355,549 302,859
Accrued liabilities 17,206 5,295
Total accounts payables and accrued liabilities 372,755 308,154

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.

Information about the severance benefits, measured as at March 31, is as follows:

(in thousands of dollars)

  2017 2016
Employee severance benefit obligation, beginning of year 13,895 16,350
Expense for the year (negative 1,921) (negative 3)
Benefits paid during the year (negative 891) (negative 2,452)
Employee severance benefit obligation, end of year 11,083 13,895

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 (ANCAFA) represents the cumulative receipts and disbursements over the life of the Fund.

(in thousands of dollars)

  2017 2016
Accumulated surplus, beginning of year 30,702 34,763
Net results 24,474 (negative 3,992)
Transfer of the transition payments for implementing salary payments in arrears (negative 69)
Accumulated surplus, end of year 55,176 30,702
Accumulated net charge against the Fund's authority, beginning of year (negative 167,894) (negative 168,984)
Net financial resources (provided) used and change in the accumulated net charge against the Fund's authority, during the year (negative 72,016) 1,090
Accumulated net charge against the Fund's authority, end of year (negative 239,910) (negative 167,894)
Net liabilities, end of year (negative 184,734) (negative 137,192)

8. 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:

(in thousands of dollars)

2018 783,786
2019 113,420
2020 85,300
2021 14,561
2022 and thereafter 23,940
Total contractual obligations 1,021,007

9. Contingent liabilities

In connection with its operations, the Fund is a defendant in certain litigation. It is estimated that pending and threatened litigation amount to $12.3 million ($10.7 million in 2015-2016). Settlement, ifany, that maybe made with respect to these actions, is expected to be accounted for as a charge against income of the applicable years.

10. 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.

11. Comparative figures

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

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