Optional Services Revolving Fund
Public Accounts of Canada 2016 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 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 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, 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 which is appended to these financial statements.
Approved by:
Julie Charron, CPA, CA
A/Chief Financial Officer
Public Works and Government Services Canada
Lisa Campbell
Assistant Deputy Minister, Defence Procurement
Acquisitions Branch
Public Works and Government Services Canada
May 27, 2016
Gatineau, Canada
Statement of authority 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)
| 2016 | 2015 | |||
|---|---|---|---|---|
| Estimates | Actual | Estimates | Actual | |
| Net results | – | 344 | – | 942 |
| Items requiring use of funds | ||||
| Employee severance benefits charged to the Fund | – | (negative 7) | – | (negative 71) |
| Transition payments for implementing salary payments in arrears (Note 8) | – | (negative 1) | – | (negative 55) |
| Net other assets and liabilities | – | (negative 1,442) | – | (negative 6,178) |
| Authority used | – | (negative 1,106) | – | (negative 5,362) |
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)
| 2016 | 2015 | |
|---|---|---|
| Debit balance in the accumulated net charge against the Fund's authority | 16,165 | 13,238 |
| Payables charged against the appropriation at year-end | (negative 23,255) | (negative 18,858) |
| Receivables credited to the appropriation at year-end | 1,158 | 887 |
| Other items | (negative 1,526) | (negative 1,619) |
| Net authority used, end of year | (negative 7,458) | (negative 6,352) |
| Authority limit (Note 1) | 35,000 | 35,000 |
| Unused authority carried forward | 27,542 | 28,648 |
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 (the "Fund"), which comprise the statement of financial position as at March 31, 2016, 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.
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 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 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 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, 2016 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 comply with 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.
Other Matter
The financial statements of the Fund as at and for the year ended March 31, 2015 were audited by another auditor who expressed an unmodified opinion on those financial statements on May 28, 2015.
Deloitte LLP
Chartered Professional Accountants,
Licensed Public Accountants
May 27, 2016
Ottawa, Canada
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)
| 2016 | 2015 | |
|---|---|---|
| Assets | ||
| Financial assets | ||
| Accounts receivable (Note 3) | 14,267 | 12,578 |
| Sales tax refundable advances | 134 | 19 |
| Total | 14,401 | 12,597 |
| Liabilities | ||
| Current liabilities | ||
| Accounts payable and accrued liabilities (Note 4) | 23,260 | 18,858 |
| Vacation pay and compensatory leave | 49 | 56 |
| Subtotal | 23,309 | 18,914 |
| Long-term liabilities | ||
| Employee severance benefits (Note 5) | 66 | 73 |
| Total | 23,375 | 18,987 |
| Net liabilities (Note 6) | (negative 8,974) | (negative 6,390) |
| Total | 14,401 | 12,597 |
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)
| 2016 | 2015 | |
|---|---|---|
| Revenues | ||
| Vaccines and drugs | 142,786 | 155,069 |
| Travel and relocation related services | 11,323 | 11,535 |
| Communication procurement services | 1,953 | 2,886 |
| Subtotal | 156,062 | 169,490 |
| Cost of sales | (negative 151,593) | (negative 164,366) |
| Gross profit | 4,469 | 5,124 |
| Operating expenses | ||
| Professional and special services | 1,835 | 1,986 |
| Salaries and employee benefits | 1,553 | 1,583 |
| Corporate and administrative services | 546 | 593 |
| Occupancy costs | 114 | 122 |
| Other expenses | 70 | (negative 31) |
| Employee severance benefits (Note 5) | 7 | (negative 71) |
| Total operating expenses | 4,125 | 4,182 |
| Net results | 344 | 942 |
| Net liabilities, beginning of year | (negative 6,390) | (negative 8,978) |
| Transfer of the transition payments for implementing salary payments in arrears (Note 8) | (negative 1) | (negative 55) |
| Net financial resources (provided) used and change in the accumulated net charge against the Fund's authority, during the year (Note 6) | (negative 2,927) | 1,701 |
| Net liabilities, end of year (Note 6) | (negative 8,974) | (negative 6,390) |
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)
| 2016 | 2015 | |
|---|---|---|
| Operating activities | ||
| Net results | 344 | 942 |
| Variations in statement of financial position | ||
| Decrease in cash in transit | – | 29 |
| Increase in accounts receivable | (negative 1,689) | (negative 6,120) |
| (Increase) decrease in sales tax refundable advances | (negative 115) | 112 |
| Increase in accounts payable and accrued liabilities | 4,402 | 3,479 |
| Decrease in vacation pay and compensatory leave | (negative 7) | (negative 17) |
| Decrease in employee severance benefits | (negative 7) | (negative 71) |
| Subtotal | 2,584 | (negative 2,588) |
| Transition payments for implementing salary payments in arrears (Note 8) | (negative 1) | (negative 55) |
| Net financial resources provided (used) and change in the accumulated net charge against the Fund's authority, during the year (Note 6) | 2,927 | (negative 1,701) |
| Accumulated net charge against the Fund's authority account, beginning of year | 13,238 | 14,939 |
| Accumulated net charge against the Fund's authority account, end of year | 16,165 | 13,238 |
Notes to the financial statements for the year ended March 31, 2016
1. Authority and purposes
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, 1991–1992 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.
The Fund received authorization from 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 requirement 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:
- no liability is recorded for sick leave; 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. Revenues
Vaccine and drug revenues are 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 incurred.
Revenue earned on communication procurement services is recognized using the completed contract method.
b. Accounts receivable
Accounts receivable are stated at amounts expected to be ultimately realized. An allowance is made on receivables where recovery is considered uncertain.
c. Expenses
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
-
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.
-
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.
f. Financial instruments
The fair value of the financial instruments approximates costs unless otherwise specified. The Fund's financial instruments consist of accounts receivable, and 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.
g. 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)
| 2016 | 2015 | |
|---|---|---|
| External parties | 13,109 | 11,691 |
| Other government departments and agencies | 1,158 | 887 |
| Net accounts receivable | 14,267 | 12,578 |
4. 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)
| 2016 | 2015 | |
|---|---|---|
| External parties | 23,223 | 18,803 |
| Other government departments and agencies | 32 | 55 |
| Subtotal | 23,255 | 18,858 |
| Accrued liabilities | 5 | – |
| Total accounts payable and accrued liabilities | 23,260 | 18,858 |
5. 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:
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)
| 2016 | 2015 | |
|---|---|---|
| Accrued benefit obligation, beginning of year | 73 | 144 |
| Expense for the year | 7 | (negative 71) |
| Benefits paid during the year | (negative 14) | – |
| Accrued benefit obligation, end of year | 66 | 73 |
6. 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)
| 2016 | 2015 | |
|---|---|---|
| Accumulated surplus, beginning of year | 6,848 | 5,961 |
| Net results | 344 | 942 |
| Transfer of the transition payments for implementing salary payments in arrears | (negative 1) | (negative 55) |
| Accumulated surplus, end of year | 7,191 | 6,848 |
| Accumulated net charge against the Fund's authority, beginning of year | (negative 13,238) | (negative 14,939) |
| Net financial resources (provided) used and change in the accumulated net charge against the Fund's authority during the year | (negative 2,927) | 1,701 |
| Accumulated net charge against the Fund's authority, end of year | (negative 16,165) | (negative 13,238) |
| Net liabilities, end of year | (negative 8,974) | (negative 6,390) |
7. 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 contractual obligations for the next five years 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)
| 2017 | 1,163 |
|---|---|
| 2018 | 625 |
| 2019 | 625 |
| 2020 | 498 |
| 2021 and thereafter | – |
| Total contractual obligations | 2,911 |
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 was issued to employees and will be recovered from them in the future. Payments issued this year relate to employees that were on leave without pay when the initial one-time transition payments were issued and have since returned to work. 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, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Works and Government Services Canada, which is responsible for the administration of the Government pay system.
9. 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.
10. Comparative figures
Comparative figures have been reclassified to conform to the current year's presentation.
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