2010-2011 Consolidated Departmental Financial Statements

Statement of Management Responsibility including Internal Control over Financial reporting

Responsibility for the integrity and objectivity of the accompanying consolidated departmental financial statements for the year ended March 31, 2011, and all information contained in these statements rests with Public Works and Government Services Canada (PWGSC) management. These consolidated departmental financial statements have been prepared by management in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector.

Management is responsible for the integrity and objectivity of the information in these consolidated departmental financial statements. Some of the information in the consolidated departmental 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 PWGSC's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada and included in PWGSC's Departmental Performance Report is consistent with these consolidated departmental 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 Department; and through conducting an annual assessment of the effectiveness of the system of internal control over financial reporting.

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

For the year ended March 31, 2011, an assessment of key controls was completed in accordance with the Policy on Internal Control and the results and action plans are summarized in Annex A — Assessment of Internal Control over Financial Reporting.

The effectiveness and adequacy of the Department's system of internal control is reviewed by internal audit staff, who conducts periodic audits of different areas of the Department's operations.

The Department's Audit and Evaluation Committee have reviewed these consolidated departmental financial statements for the purpose of advising the Deputy Minister on any apparent material concerns. The role of this committee is to provide the Deputy Minister of PWGSC with objective advice and recommendations regarding the sufficiency, quality and results of assurance on the adequacy and functioning of the Department's risk management, control, and governance frameworks and processes. The Committee also provides advice on the oversight of core areas of departmental management, control and accountability, including financial reporting.

The consolidated departmental financial statements of PWGSC have not been audited.

François Guimont, Deputy Minister
Gatineau, Canada
August 29, 2011

Alex Lakroni, Chief Financial Officer
Gatineau, Canada
August 29, 2011

Consolidated Statement of Financial Position (Unaudited )
As of March 31

(in thousands of dollars)

	2011	2010 Restated (Note 16)
Assets
Financial assets
Due from Consolidated Revenue Fund	515,156	470,813
Accounts receivable and advances (Note 4)	456,999	473,813
Inventory (Note 5)	4,915	5,537
Seized Property Working Capital Account	8,369	18,742
	985,439	968,905
Non-financial assets
Prepaid expenses	4,145	4,834
Tangible capital assets (Note 6)	5,272,803	4,787,971
	5,276,948	4,792,805
Total assets	6,262,387	5,761,710
Liabilities and Equity of Canada
Liabilities
Accounts payable and accrued liabilities (Note 7)	859,649	767,954
Other liabilities (Note 8)	76,353	92,155
Lease obligations for tangible capital assets (Note 9)	2,279,073	2,394,639
Vacation pay and compensatory leave	54,398	54,758
Employee future benefits (Note 10)	232,701	213,043
Contingent and environmental liabilities (Note 11)	337,390	367,870
Lease inducements	40,534	42,213
	3,880,098	3,932,632
Equity of Canada (Note 14)	2,382,289	1,829,078
Total liabilities and equity of Canada	6,262,387	5,761,710

Contractual obligations (Note 12)

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

François Guimont, Deputy Minister
Gatineau, Canada
August 29, 2011

Alex Lakroni, Chief Financial Officer
Gatineau, Canada
August 29, 2011

Consolidated Statement of Operations (Unaudited)
For the year ended March 31

(in thousands of dollars)

	2011	2010 Restated (Note 16)
Expenses
Accommodation and Real Property Assets Management	3,905,357	3,855,690
Internal Services	439,318	399,653
Information Technology Infrastructure Services	421,871	404,205
Acquisitions	268,916	280,605
Linguistic Management and Services	228,410	214,940
Specialized Programs and Services	199,469	152,929
Receiver General for Canada	134,653	115,444
Federal Pay and Pension Administration	99,081	94,609
Procurement Ombudsman	3,269	3,983
Total expenses	5,700,344	5,522,058
Revenues
Accommodation and Real Property Assets Management	2,318,419	2,152,349
Information Technology Infrastructure Services	281,438	298,399
Specialized Programs and Services	159,488	125,903
Linguistic Management and Services	158,401	162,841
Federal Pay and Pension Administration	127,374	124,731
Acquisitions	121,820	144,687
Receiver General for Canada	28,677	15,896
Internal Services	4,171	13,995
Total revenues	3,199,788	3,038,801
Net cost of operations before extraordinary item	2,500,556	2,483,257
Extraordinary item	—	9,991
Net cost of operations	2,500,556	2,493,248

Segmented information (Note 15)

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

Consolidated Statement of Equity of Canada (Unaudited)
For the year ended March 31

(in thousands of dollars)

	2011	2010 Restated (Note 16)
Equity of Canada, beginning of year	1,829,078	1,747,176
Net cost of operations	(2,500,556)	(2,493,248)
Net cash provided by Government of Canada	2,959,765	2,525,718
Change in amount due from Consolidated Revenue Fund	44,343	58,508
Services provided without charge from other government departments (Note 13)	67,118	61,564
Other transactions with related parties (Note 13)	(17,459)	(70,640)
Equity of Canada, end of year (Note 14)	2,382,289	1,829,078

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

Consolidated Statement of Cash Flow (Unaudited)
For the year ended March 31

(in thousands of dollars)

	2011	2010 Restated (Note 16)
Operating Activities
Net cost of operations	2,500,556	2,493,248
Non cash items:
Amortization of tangible capital assets (Note 6)	(456,982)	(459,971)
Gain or loss on disposals / Adjustments of tangible capital assets	28,970	(88,095)
Services provided without charge from other government departments (Note 13)	(67,118)	(61,564)
Variations in Consolidated Statement of Financial Position:
Increase (decrease) in financial assets other than amount due from Consolidated Revenue Fund	(27,809)	6,953
Increase (decrease) in prepaid expenses	(689)	1,735
(Increase) decrease in liabilities other than lease obligations for tangible capital assets	(63,032)	(149,303)
Cash used by operating activities	1,913,896	1,743,003
Capital investment activities
Acquisitions of tangible capital assets (Note 6)	827,446	579,232
Acquisitions of assets under construction for capital leases (Note 6)	49,442	54,485
Proceeds on disposal of tangible capital assets	(107)	(75)
Cash used by capital investing activities	876,781	633,642
Financing activities
Payments on lease obligations for tangible capital assets	169,088	149,073
Cash used by financing activities	169,088	149,073
Net cash provided by Government of Canada	2,959,765	2,525,718

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

Notes to the Consolidated Financial Statements (Unaudited)
For the year ended March 31

1. Authority and Objectives

The department of Public Works and Government Services Canada (PWGSC) was established effective June 20, 1996, under the Department of Public Works and Government Services Act. This legislation specifies that PWGSC shall provide common, central and shared services to other government departments and agencies, thereby enabling them to provide programs and services to Canadians. These services are delivered through the following program activities:

• Accommodation and Real Property Assets Management program activity provides departments and agencies with office and common use accommodation and acts as stewards for various public works such as buildings, bridges and dams, and national treasures such as the Parliamentary Precinct and other heritage assets across Canada. PWGSC also provides other federal departments and agencies with expert professional and technical real property services;
• Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. Internal Services include only those activities and resources that apply across an organization and not those provided specifically to a program;
• Information Technology Infrastructure Services program activity provides leadership in supporting government-wide IT transformation initiatives. It works closely with client federal organizations to understand and respond to their IT requirements, while delivering secure IT services and solutions. It includes the brokering, developing and/or managing of products and services for distributed computing services, data centre services, telecommunications services and Information Technology Security Services;
• Acquisitions program activity identifies PWGSC as the government's primary procurement service provider offering federal organizations a broad base of procurement solutions such as specialized contracts, standing offers and supply arrangements. The role of PWGSC in this area is to provide timely, value-added acquisitions and related common services to the federal government and Canadians;
• Linguistic Management and Services program activity identifies the Translation Bureau as the manager of the government's terminology and linguistic authority mandated with the development, standardization and distribution of Terminology. The Bureau also ensures that there is a sustainable, qualified and secure supply of linguistic resources available to support any linguistic requirements of the government and to support Canada's economic and social agenda. The Translation Bureau is the sole internal linguistic services provider offering federal organizations a broad base of linguistic solutions such as translation, interpretation and terminology. This program is mandated under the Translation Bureau Act;
• Specialized Programs and Services program activity ensures high quality, timely and accessible specialized services and programs to federal institutions in support of sound, prudent and ethical management and operations. It includes activities such as, Industrial Security Program, Greening of Government Operations, Sydney Tar Ponds and Coke Ovens Remediation Project, Government Information Services, Government Consulting Services, Audit Services Canada, Seized Property, Canadian General Standards Board, Forensic Accounting, Crown Assets Distribution, Shared Travel Services Initiative, Marine Inspection and Technical Services, Document Imaging Services and Shared Services Integration;
• Receiver General for Canada program activity manages the operations of the federal treasury and the preparation of the Accounts of Canada. It provides optional financial management systems, document imaging, and bill payment services;
• Federal Pay and Pension Administration program activity administers the government's pay and pension processes. Through this activity, PWGSC provides payroll services to 110 departments, separate employers and other federal organizations, and administers the pension accounts for about 229,000 former public servants, 110,500 former members of the Canadian Forces and 1,350 former Members of Parliament and judges;
• Procurement Ombudsman program activity, operating at arm's length from the government, reviews procurement practices across federal departments and agencies, investigates complaints from potential suppliers with respect to awards of contracts for goods and services below certain thresholds as well as complaints concerning the administration of contracts; and ensures the provision of an alternative dispute resolution program for contracts. This activity helps to promote fairness and transparency of the procurement process.

2. Summary of Significant Accounting Policies

These consolidated financial statements have been prepared in accordance with the Treasury Board accounting policies stated below, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

A. Parliamentary Authorities

PWGSC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to PWGSC does not parallel financial reporting according to Canadian generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Consolidated Statement of Operations and the Consolidated Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.

B. Consolidation

These consolidated financial statements include the accounts of seven revolving funds as listed below, one of them being inactive. Six revolving funds prepare a complete set of financial statements annually that are audited and published in the Public Accounts of Canada. The accounts of these revolving funds have been consolidated with those of PWGSC and intradepartmental balances and transactions have been eliminated.

The PWGSC revolving funds are as follows:

• Consulting and Audit Canada Revolving Fund
• Defence Production Revolving Fund (inactive)
• Optional Services Revolving Fund
• Real Property Disposition Revolving Fund
• Real Property Services Revolving Fund
• Telecommunications and Informatics Common Services Revolving Fund
• Translation Bureau Revolving Fund

C. Net Cash Provided By Government

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

D. Amounts Due From The Consolidated Revenue Fund (CRF)

These are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Department is entitled to draw from the CRF, without further appropriations, in order to discharge its liabilities.

E. Revenues

Revenues are presented on an accrual basis:

• Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
• Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.

F. Expenses

Expenses are recorded on the accrual basis of accounting.

• Grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized when the Government announces a decision to make a nonrecurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements.
• Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement, provided that the transfer is authorized and a reasonable estimate can be made.
• Services provided without charge by other government departments for the employer's contribution to the health and dental insurance plans, worker's compensation and legal services are recorded as operating expenses at their estimated cost.
• Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
• Generally, PWGSC does not provide grants and contributions to individuals or organizations to fund specific programs and services. PWGSC administers the Payments in Lieu of Taxes Program (PILT) on behalf of all federal departments under the statutory authority of the Payments in Lieu of Taxes Act , which is disclosed under Grants in the Main Estimates. The Government of Canada voluntarily pays a fair share of the costs of local government, from which it is exempt, to municipalities and other taxation authorities having jurisdiction to levy and collect real property taxes in locations where federal lands and buildings are situated. The PILT issued by PWGSC on behalf of other participating federal departments are recovered from them and are recorded as Grants in the Public Accounts of Canada.

G. Employee Future Benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. The Department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the Department to make contributions for any actuarial deficiencies of the Plan.
2. 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 is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

H. Accounts Receivable and Advances

Accounts receivable and advances are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

I. Lease Inducements

Lease inducements represent incentives received by PWGSC to enter into a lease. Lease inducements include incentives such as: free rent cash received to be applied to rent lump sum cash leasehold improvements and moving costs paid by the lessor. Lease inducements are accounted for as follows:

• Rent-free periods or periods of significantly reduced rent are allocated over the term of the lease on a straight-line basis;
• Cash payments from the lessor to the lessee are accounted for by the lessee, as reductions in rental expense over the term of the lease;
• Leasehold improvements are amortized over the remaining life of the lease or the useful life of the improvement, whichever is shorter;
• Moving costs absorbed by the lessor are amortized over the term of the lease.

J. 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 consolidated financial statements.

K. Environmental Liabilities

Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management's best estimates, a liability is accrued and an expense recorded when the contamination occurs or when the Department becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the Department's obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the consolidated financial statements.

L. Inventory

• Inventory held for resale consists of physical items that will be sold in the future in the ordinary course of business to parties outside of the government reporting entity. Inventory held for re-sale is measured at the lower of cost and net realizable value;
• Work in process includes direct costs, and recovered costs incurred for sales or transfers of properties not yet finalized at the fiscal year end.

M. Tangible Capital Assets

Tangible capital assets are recorded at their acquisition cost, and the following is the capitalization threshold for tangible capital assets:

• Betterments and leasehold improvements carried out on buildings and on works and infrastructure, having an initial cost of $25,000 or more;
• All other tangible capital assets having an initial cost of $10,000 or more.

The department does not capitalize intangibles and non-operational heritage assets such as, works of art and historical treasures that have cultural, aesthetic or historical value, as well as immovable assets located on Indian Reserves and museum collections.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of each asset as follows:

Asset Class	Amortization period
Buildings	25 years
Works and infrastructure	40 years
Machinery and equipment	3 to 15 years
Informatics hardware and software	3 to 10 years
Vehicles	6 to 20 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
Leased tangible capital assets	In accordance with asset class if ownership is likely to transfer to PWGSC; otherwise, over the lease term

N. Measurement Uncertainty

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the consolidated financial statements. At the time of preparation of these consolidated statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the allowance for doubtful accounts, contingent liabilities, environmental 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 consolidated financial statements in the year they become known.

O. Seized Property Working Capital Account

The Seized Property Working Capital Account was established pursuant to section 12 of the Seized Property Management Act. Expenses incurred, and advances made, to maintain and manage any seized or restrained property and other properties subject to a management order or forfeited to Her Majesty, are charged to this account. The Seized Property Working Capital Account is credited when expenses and advances to third parties are repaid or recovered and when revenues from these properties or proceeds of their disposal are received and credited with seized cash upon forfeiture.

Any shortfall between the proceeds from the disposition of any property forfeited to Her Majesty and the related amounts that were charged to the Seized Property Working Capital Account is charged to the Seized Property Proceeds Account.

The total amount authorized to be charged against the Seized Property Working Capital Account at any time is $50,000,000.

3. Parliamentary Authorities

PWGSC receives most of its funding through annual Parliamentary authorities. Items recognized in the Consolidated Statement of Operations and the Consolidated Statement of Financial Position in one year may be funded through Parliamentary authorities in prior, current or future years.

Accordingly, PWGSC 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 authorities used

(in thousands of dollars)

	2011	2010 Restated (Note 16)
Net cost of operations	2,500,556	2,493,248
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (Note 6)	(456,982)	(459,971)
Reclassification of assets under construction	(54,898)	(91,783)
Services provided without charge from other government departments (Note 13)	(67,118)	(61,564)
Increase in lease inducements	(6,197)	(548)
Net revenue from Seized Property Proceeds Account (Note 14)	(24,975)	18,257
Decrease (increase) in vacation pay and compensatory leave	360	932
Decrease (increase) in employee future benefits (Note 10)	(19,658)	18,465
Revenue not available for spending	80,636	40,435
Refunds / Adjustments to previous years' expenses	9,894	9,740
Decrease (increase) in contingent and environmental liabilities	30,480	(78,238)
Other	26,012	(2,101)
	(482,446)	(606,376)
Adjustments for items not affecting net cost of operations but affecting auhorities:
Acquisitions of tangible capital assets (Note 6)	827,446	579,232
Acquisitions of assets under construction for capital leases (Note 6)	49,442	54,485
Payments on lease obligations for tangible capital assets	169,088	149,073
Other	6,107	(2,381)
	1,052,083	780,409
Current year authorities used	3,070,193	2,667,281

B. Authorities provided and used

(in thousands of dollars)

	2011	2010
Vote 1 — Operating expenditures	2,501,985	2,547,953
Vote 1 — Grants & Contributions	4,900	2 ,645
Vote 5 — Capital expenditures	689,430	426,939
Statutory items:
Revolving Funds	572,501	549,952
Other	114,960	116,272
Authorities provided	3,883,776	3,643,761
Less:
Authorities available for future years	(587,837)	(578,250)
Lapsed authorities	(215,372)	(398,325)
Current year budgetary authorities used	3,080,567	2,667,186
Seized Property Management Act	(10,374)	95
Current year authorities used	3,070,193	2,667,281

4. Accounts Receivable and Advances

The following table presents details of the Department's accounts receivable and advances:

(in thousands of dollars)

	2011	2010
Accounts receivable from other government departments and agencies	390,605	389,296
Accounts receivable from external parties	69,286	86,626
Advances	247	513
	460,138	476,435
Less: Allowance for doubtful accounts on external receivables	(3,139)	(2,622)
Total	456,999	473,813

5. Inventory

The following table presents details of the inventory:

(in thousands of dollars)

	2011	2010
Inventory held for resale	1,374	1,383
Work in Progress	3,541	4,154
Total	4,915	5,537

6. Tangible Capital Assets

(in thousands of dollars)

	Cost
	Opening balance	Acquisitions	Transfers of Assets under construction 1	Disposals, write-offs and other adjustments	Closing balance
Tangible capital assets
Land	220,955	20,952	7	10,885	252,799
Buildings	3,586,677	188,188	47,943	57,287	3,880,095
Works and infrastructure	756,002	—	80,785	—	836,787
Machinery and equipment	8,288	636	—	334	9,258
Informatics hardware and software	288,214	15,033	333	(1,000)	302,580
Vehicles	10,336	666	676	—	11,678
Leasehold improvements	568,571	—	83,809	36,037	688,417
	5,439,043	225,475	213,553	103,543	5,981,614
Assets under construction
Buildings	526,293	303,990	(68,215)	(32,735)	729,333
Works and infrastructure	209,773	83,119	(60,468)	37,314	269,738
Informatics hardware and software	126,555	48,633	(333)	—	174,855
Leasehold improvements	322,229	125,423	(84,546)	(11,233)	351,873
	1,184,850	561,165	(213,562)	(6,654)	1,525,799
Public Private Partnership
Assets under construction	—	71,046	—	—	71,046
	—	71,046	—	—	71,046
Leased tangible capital assets
Land	44,942	—	—	(13,700)	31,242
Buildings	2,282,944	54,537	6,358	(122,508)	2,221,331
Informatics equipment	2,605	—	—	—	2,605
Assets under construction	90,792	49,442	(6,349)	(1,950)	131,935
	2,421,283	103,979	9	(138,158)	2,387,113
Total	9,045,176	961,665	—	(41,269)	9,965,572

(in thousands of dollars)

	Accumulated amortization				Net Book Value
	Opening balance	Amortization	Disposals, write-offs and other adjustments	Closing balance	2011	2010 Restated (Note 16)
Tangible capital assets
Land					252,799	220,955
Buildings	2,452,402	175,296	37,235	2,664,933	1,215,162	1,134,275
Works and infrastructure	342,871	26,829	10,539	380,239	456,548	413,131
Machinery and equipment	4,837	613	(15)	5,435	3,823	3,451
Informatics hardware and software	227,237	30,705	(994)	256,948	45,632	60,977
Vehicles	6,212	968	—	7,180	4,498	4,124
Leasehold improvements	281,554	51,009	9,944	342,507	345,910	287,017
	3,315,113	285,420	56,709	3,657,242	2,324,372	2,123,930
Assets under construction
Buildings					729,333	526,293
Works and infrastructure					269,738	209,773
Informatics hardware and software					174,855	126,555
Leasehold improvements					351,873	322,229
					1,525,799	1,184,850
Public Private Partnership
Assets under construction					71,046	—
					71,046	—
Leased tangible capital assets
Land					31,242	44,942
Buildings	940,268	171,041	(78,127)	1,033,182	1,188,149	1,342,676
Informatics equipment	1,824	521	—	2,345	260	781
Assets under construction	—	—	—	—	131,935	90,792
	942,092	171,562	(78,127)	1,035,527	1,351,586	1,479,191
Total	4,257,205	456,982	(21,418)	4,692,769	5,272,803	4,787,971

7. Accounts Payable and Accrued Liabilities

	2011	2010
Accounts payable	480,814	457,636
Accrued liabilities	224,747	183,293
Accrued salaries and wages	21,355	15,032
Contractors' holdbacks and other payables	48,483	38,682
Accounts payable to other government departments and agencies	54,010	73,311
Public Private Partnership accrued liabilities	30,240	—
Total	859,649	767,954

8. Other Liabilities

The following table presents details of other liabilities:

(in thousands of dollars)

	2010	Receipts and credits	Payments and charges	2011
Seized property — cash	82,545	22,239	(34,325)	70,459
Deposits on disposals	778	7,520	(7,468)	830
Contractors' security deposits	7,902	4,348	(8,123)	4,127
Francophone summits	5	67	(60)	12
Credit card — special project fund	925	—	—	925
Total	92,155	34,174	(49,976)	76,353

Seized property — cash

This account was established pursuant to the Seized Property Management Act, to record seized cash. These funds will be deposited to the Consolidated Revenue Fund and credited to the account until returned to the owner or forfeited.

Deposits on disposals

This account was established in accordance with the terms and conditions of the Real Property Disposition Revolving Fund to record receipts on disposals of properties.

Contractors' security deposits

This account was established to record contractors' securities that are required for the satisfactory performance of work in accordance with the Government Contracts Regulations.

Francophone summits

This account was established to record funding granted since 1994 by the Agence intergouvernementale de la Francophonie (Paris), which changed its name in 2006 to the Organisation internationale de la Francophonie, for projects involving the development of French and partner languages in order to express scientific and technical modernity.

Credit card — special project fund

This account was established to record funds received from American Express (AMEX) to improve the Travel Card Program.

9. Lease Obligations for Tangible Capital Assets

PWGSC has entered into agreements to rent land, buildings and information technology equipment under capital leases with a cost of $2,387,112,915 and accumulated amortization of $1,035,526,150 as at March 31, 2011 ($2,421,282,983 and $942,092,149 respectively as at March 31, 201) (Note 6). The obligations for upcoming years consist of the following:

(in thousands of dollars)

	Total future minimum lease payments	Weighted average imputed interest rate 5.835% (6.095% in 2010)	2011	2010
Land	12,556	4,224	8,332	8,879
Buildings	3,363,336	1,092,929	2,270,407	2,384,874
Information technology equipment	340	6	334	886
Total	3,376,232	1,097,159	2,279,073	2,394,639

The following table presents the future minimum lease payments:

(in thousands of dollars)

	2012	2013	2014	2015	2016 and thereafter
Land	1,382	1,382	1,382	1,382	7,028
Buildings	280,907	264,784	290,045	219,452	2,308,148
Information technology equipment	340	—	—	—	—
Total	282,629	266,166	291,427	220,834	2,315,176

10. Employee Future Benefits

A. Pension benefits

PWGSC 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 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plan benefits and they are indexed to inflation.

Both the employees and the department contribute to the cost of the Plan. The 2010-2011 expense amounts to $123,313,793 ($125,074,567 in 2010), which represents approximately 1.9 times (1.9 times in 2010) the contributions by employees.

PWGSC's responsibility with regard to the Plan is limited to its contributions. Actuarial deficiencies are recognized in the consolidated financial statements of the Government of Canada, as the Plan's sponsor.

B. Severance benefits

The department 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 authorities and revolving funds. Information about the severance benefits, measured as at March 31 is as follows:

(in thousands of dollars)

	2011	2010
Accrued benefit obligation, beginning of year	213,043	231,508
Expense for the year	44,086	3,650
Benefits paid during the year	(24,428)	(22,115)
Accrued benefit obligation, end of year	232,701	213,043

11. Contingent and Environmental Liabilities

Contingent and environmental liabilities arise in the normal course of operations and their ultimate disposition is generally unknown. They are grouped into two categories as follows:

A. Claims and litigation

Claims have been made against PWGSC in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. Legal proceedings for claims totaling approximately $89,327,924 ($90,775,997 in 2010) were still pending at March 31, 2011. 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 in the consolidated financial statements. An amount of $21,225,000 ($35,300,000 in 2010) has been accrued in these statements.

B. Environmental liabilities –Contaminated sites

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where PWGSC is obligated or likely to be obligated to incur such costs. The department has identified approximately 168 sites (232 in 2010) where such action is possible and for which a liability of $316,165,045 ($332,570,240 in 2010) has been recorded. Of this amount, $173,575,932 ($216,193,046 in 2010) is related to environmental remediation activity for the Sydney Tar Ponds and Coke Ovens remediation project. PWGSC has estimated additional clean-up costs of $45,215,524 ($28,619,735 in 2010) that are not accrued, as these are not considered likely to be incurred at this time. PWGSC's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued by PWGSC in the year in which they become likely and are reasonably estimable.

12. Contractual Obligations

The nature of PWGSC's activities can result in some large multi-year contracts and obligations whereby the department will be obligated to make future payments when the services/goods are received.

Significant contractual obligations ($10 million or more) that can be reasonably estimated are summarized as follows:

(in thousands of dollars)

	2012	2013	2014	2015	2016 and there after	Total
Capital assets	209,579	103,246	61,427	76,776	1,927,168	2,378,196
Operating leases	173,939	181,360	152,971	122,578	522,369	1,153,217
Purchases	985,464	1,114,276	216,713	210,346	2,454,106	4,980,905
Total	1,368,982	1,398,882	431,111	409,700	4,903,643	8,512,318

13. Related party transactions

PWGSC is related as a result of common ownership to all government departments, agencies, and Crown Corporations. PWGSC enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Department received and provided common services which were obtained without charge from other Government departments as disclosed below.

A. Common services provided without charge by other Government Departments

During the year, the Department received services without charge from certain common service organizations, related to legal services, the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge by other government departments have been recorded in PWGSC's Consolidated Statement of Operations as follows:

(in thousands of dollars)

	2011	2010
Employer's contribution to the health and dental insurance plans (excluding revolving funds) paid by Treasury Board	57,977	51,938
Legal services provided by Justice Canada	6,750	7,185
Workers' compensation coverage provided by Human Resources and Social Development Canada	2,391	2,441
Total	67,118	61,564

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the audit services provided by the Office of the Auditor General are not included in PWGSC's Consolidated Statement of Operations.

B. Common services provided without charge to other Government Departments

As a federal common service provider, PWGSC provides accommodation without charge to other government departments. Throughout the fiscal year, PWGSC provided accommodation without charge to other government departments for a fair value amounting to $1,503,670,882 ($1,446,888,840 in 2010). These accommodation services are not recognized as revenues in the Consolidated Statement of Operations.

C. Other transactions with related parties

(in thousands of dollars)

	2011	2010
Expenses –Other Government departments and agencies	812,801	755,082
Revenues –Other Government departments and agencies	3,645,326	3,508,828

During the year, PWGSC transferred tangible capital assets to other federal government departments or agencies. The transfers was measured at their net book values and recorded as an adjustment to Equity of Canada in the Consolidated Statement of Equity of Canada.

(in thousands of dollars)

	2011	2010
Agriculture and Agri Food Canada	10,284
Canadian Food Inspection Agency	6,203
Library of Parliament	972
Old Port of Montreal		70,640
Total	17,459	70,640

14. Restricted Equity of Canada

A portion of PWGSC's Equity is restricted and earmarked for specified purposes. Transactions related to the Seized Property Proceeds Account are recorded in special categories of revenues, and payments and expenses are charged against such revenues.

The Seized Property Proceeds Account was established pursuant to section 13 of the Seized Property Management Act. The net proceeds received from the disposition of seized and forfeited properties to Her Majesty or fines imposed and also funds received from the government of foreign states pursuant to agreements for the purpose of the Act are to be earmarked for specified purposes. Under the Act, expenses to be charged against the revenues include: operating expenses incurred in carrying out the purpose of the Act, amounts paid as a result of claims and repayments of advances from the Minister of Finance, interest on the drawdown from the Seized Property Working Capital Account and distribution of the proceeds to the relevant jurisdictions and the Consolidated Revenue Fund.

The balance of the account at the end of the year is included in Equity of Canada. Activity in the account is as follows:

(in thousands of dollars)

	2011	2010
Seized Property Proceeds Account — restricted
Balance, beginning of year	59,980	41,723
Revenues	28,675	31,026
Expenses	(53,650)	(12,769)
	(24,975)	18,257
Balance, end of year	35,005	59,980
Unrestricted Equity of Canada, end of year	2,347,284	1,769,098
Total Equity of Canada, end of year	2,382,289	1,829,078

15. Segmented Information

Presentation by segment is based on the Department's program activity architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in Note 2. The following table presents the expenses incurred and revenues generated for the main program activities, by major object of expense and by major type of revenue. The segment results for the period are as follows:

(in thousands of dollars)

	Accommo- dation and Real Property Assets Manage- ment	Internal Services	Infor- mation Tech- nology Infras- tructure Services	Acquisi- tions	Linguistic Manage- ment and Services	Special- ized Programs and Services	Receiver General for Canada	Federal Pay and Pension Adminis- tration	Procure- ment Ombuds- man	2011	2010 Restated (Note 16
Expenses
Transfer payments
Payments in lieu of taxes to municipalities and other taxing authorities on behalf of other departments	492,432	—	—	—	—	—	—	—	—	492,432	470,300
Recovery of Payments in lieu of taxes to the other departments	(492,445)	—	—	—	—	—	—	—	—	(492,445)	(470,236)
Other grants and contributions	—	—	—	—	4,214	—	—	—	—	4,214	624
	(13)	—	—	—	4,214	—	—	—	—	4,201	688
Operating expenses
Salaries and employee benefits	350,705	324,254	106,740	166,873	156,692	92,940	28,073	79,929	2,778	1,308,984	1,217,649
Repairs and maintenance	957,536	7,689	34,868	75	556	9,935	375	1,657	—	1,012,691	1,002,809
Professional and special services	618,715	79,995	129,147	13,130	54,635	65,857	5,408	7,201	381	974,469	886,343
Rentals	919,085	1,039	936	509	(203)	1,007	86	135	15	922,609	879,018
Amortization of tangible capital assets	424,181	14,052	15,191	178	2,197	32	853	298	—	456,982	459,971
Transportation and communications	15,125	5,000	129,685	14,316	2,506	4,696	48,645	3,188	34	223,195	222,634
Utilities, material and supplies	94,111	3,622	607	71,885	744	1,324	4,477	652	32	177,454	182,133
Payments in lieu of taxes to municipalities	164,319	—	192	—	—	—	—	—	—	164,511	154,489
Interest on capital lease payments	138,124	—	40	—	—	—	—	—	—	138,164	145,408
Reclassification of assets under construction	54,898	—	—	—	—	—	—	—	—	54,898	91,783
Land, buildings and works *	159,424	—	—	—	—	—	—	—	—	159,424	88,697
Contingent and Environmental liabilities	11,137	1,000	—	—	—	(42,617)	—	—	—	(30,480)	78,238
Machinery and equipment *	34,426	7,304	17,282	1,119	2,156	1,678	509	869	2	65,345	66,998
Interest and banking fees	197	6	41	3	4	110	46,408	1	—	46,770	42,787
Other expenses	30,751	23,817	(949)	534	128	357	2	130	—	54,770	25,173
Information	2,058	677	14	144	201	10,078	91	206	27	13,496	13,275
Expenses from Seized Property Proceeds Account (Note 14)	—	—	—	—	—	53,650	—	—	—	53,650	12,769
Refunds / Adjustments to previous years' expenses	(7,653)	(4,072)	(831)	(30)	(167)	(9)	(11)	(9)	—	(12,782)	(11,723)
Recoveries of expenditures between programs or departments	(61,769)	(25,065)	(11,092)	180	4,747	431	(263)	4,824	—	(88,007)	(37,081)
TOTAL EXPENSES	3,905,357	439,318	421,871	268,916	228,410	199,469	134,653	99,081	3,269	5,700,344	5,522,058
REVENUES
Sales of goods and information products	1,483,715	—	—	533	10	4,867	—	—	—	1,489,125	1,350,308
Rentals	806,101	67	—	—	—	—	—	—	—	806,168	781,986
Services of a non-regulatory nature	16,654	3,403	281,426	115,117	158,385	84,495	—	150	—	659,630	704,324
Services of a regulatory nature	6,885	1,583	—	—	—	3,714	28,630	108,838	—	149,650	135,699
Other revenues	4,455	(1,094)	12	6,169	6	37,728	34	18,386	—	65,696	35,292
Revenue from Seized Property Proceeds Account (Note 14)	—	—	—	—	—	28,675	—	—	—	28,675	31,026
Gain on disposal of capital assets	609	212	—	1	—	9	13	—	—	844	166
TOTAL REVENUES	2,318,419	4,171	281,438	121,820	158,401	159,488	28,677	127,374	—	3,199,788	3,038,801
NET COST OF OPERATIONS BEFORE EXTRAORDINARY ITEM	1,586,938	435,147	140,433	147,096	70,009	39,981	105,976	(28,293)	3,269	2,500,556	2,483,257
Extraordinary item	—	—	—	—	—	—	—	—	—	—	9,991
NET COST OF OPERATIONS	1,586,938	435,147	140,433	147,096	70,009	39,981	105,976	(28,293)	3269	2,500,556	2,493,248

* These expenses are mainly related to tangible capital assets that are below PWGSC's capitalization threshold. (Note 2 m)

Services of a non-regulatory nature are mainly comprised of special accommodation and real property services, real property project management services, information technology and telecommunication services, translation services, professional services for consulting and audit services as well as traffic management.

Services of a regulatory nature are mainly comprised of cost recovery for services provided to administer the Public Service Superannuation Act (PSSA) and for payment services for Receiver General functions.

16. Restatement

A. Adoption of new accounting policies

During the year, the Department adopted the revised Treasury Board Accounting Standard (TBAS) 1.2: Departmental and Agency Financial Statements, which is effective for the Department for the 2010-11 fiscal year. The major change in the accounting policies of the Department required by the adoption of the revised TBAS 1.2 is the recording of amounts due from the Consolidated Revenue Fund as an asset on the Statement of Financial Position.

B. Restatement of tangible capital assets

The emergency construction of the temporary boiler plant, following the tragic accident at the Cliff Central Heating and Cooling Plant in October 2009, was recorded as expenses in the previous fiscal year and presented as an extraordinary item. After the completion of construction phases during the year, the Department adjusted the amount that should be part of an asset under construction.

The effect of both the above—mentioned changes has been accounted for retroactively with the following impact on comparatives for 2009-2010:

(in thousands of dollars)

	As previously Stated	Effect of changes		Restated
		16.A	16.B
Consolidated Statement of Financial Position
Assets
Due from Consolidated Revenue Fund	—	470,813	—	470,813
Tangible capital assets (Note 6)	4,758,315	—	29,656	4,787,971
Total assets	5,261,241	470,813	29,656	5,761,710
Equity of Canada	1,328,609	470,813	29,656	1,829,078
Total liabilities and equity of Canada	5,261,241	470,813	29,656	5,761,710
Consolidated Statement of Operations
Extraordinary item	39,647	—	(29,656)	9,991
Net cost of operations	2,522,904	—	(29,656)	2,493,248
Consolidated Statement of Operations
Equity of Canada, beginning of year	1,334,871	412,305	—	1,747,176
Net cost of operations	(2,522,904)	—	29,656	(2,493,248)
Change in due from Consolidated Revenue Fund	—	58,508	—	58,508
Equity of Canada, end of year (Note 14)	1,328,609	470,813	29,656	1,829,078
Consolidated Statement of Cash Flow
Operating activities
Net cost of operations	2,522,904	—	(29,656)	2,493,248
Cash used by operating activities	1,772,659	—	(29,656)	1,743,003
Capital investing activities
Acquisitions of tangible capital assets (Note 6)	549,576	—	29,656	579,232
Cash used by capital investing activities	603,986	—	29,656	633,642
Note 3(a) Reconciliation of net cost of operations to current year authorities used
Net cost of operations	2,522,904	—	(29,656)	2,493,248
Acquisitions of tangible capital assets (Note 6)	549,576	—	29,656	579,232
Note 6 Tangible capital assets
Assets under construction
Works and infrastructure	180,117	—	29,656	209,773
Total	4,758,315	—	29,656	4,787,971
Note 14 Restricted equity of Canada
Unrestricted Equity of Canada, end of year	1,268,629	470,813	29,656	1,769,098
Total Equity of Canada, end of year	1,328,609	470,813	29,656	1,829,078
Note 15 Segmented information
Extraordinary item	39,647	—	(29,656)	9,991
Net cost of operations	2,522,904	—	(29,656)	2,493,248

17. Subsequent Event

On June 20, 2011, as a result of the Strategic Review process, PWGSC announced the winding down of two of its Revolving Funds. The activities of Consulting and Audit Canada Revolving Fund will be eliminated while the services of the Real Property Disposition Revolving Fund will be provided by the Real Property Services Revolving Fund.

On August 4, 2011, a new agency was created as part of the PWGSC portfolio — “Shared Services Canada”. This new agency will be responsible for Information Technology (IT) services across the Government of Canada. The IT shared services and supporting functions of PWGSC will form the core of the new agency. Assets and liabilities as at August 4, 2011 will be assessed and transferred from the department to the agency.

18. Comparative Information

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

¹Transfers of Assets under construction represents assets that were put into use in the year and have been transferred to the other capital asset classes as applicable. (Return to original note 1)