Real Property Services Revolving Fund
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Statement of management responsibility
We have prepared the accompanying financial statements of the Real Property Services Revolving Fund as required by the Treasury Board Directive on Charging and Special Financial Authorities in accordance with the Receiver General reporting requirements. 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. The information included in these financial statements is based on management's best estimates and judgment with due consideration given to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts which provides a centralized record of the Fund's financial transactions. Financial information submitted to the Public Accounts of Canada and included in the Departmental Performance Report is consistent with these financial statements.
Management develops and disseminates financial management and accounting policies and issues specific directives which maintain standards of 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 ensure 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 independent external auditor who audited them and has provided an independent opinion, which is appended to these financial statements.
Approved by:
Marty Muldoon, CPA, CMA, MBA
Chief Financial Officer
Public Services and Procurement Canada
Robin Strang Lindsey
for Michael Mills
A/Assistant Deputy Minister,
Real Property Branch
Public Services and Procurement Canada
May 25, 2018
Gatineau, Canada
Statement of authority provided (used) (unaudited) for the year ended March 31
(in thousands of dollars)
| 2018 | 2017 | |||
|---|---|---|---|---|
| EstimatesLink to footnote 1 | Actual | EstimatesLink to footnote 1 | Actual | |
| Net results | (negative 3,625) | 6,290 | – | 24,474 |
| Operating source (use) of funds | (negative 3,625) | 6,290 | – | 24,474 |
| Items requiring use of funds | ||||
| Net other assets and liabilities | (negative 2,500) | (negative 13,665) | (negative 2,600) | 4,568 |
| Authority provided (used) | (negative 6,125) | (negative 7,375) | (negative 2,600) | 29,042 |
Table notesThe dash means that the amount is 0 or is rounded to 0. | ||||
Reconciliation of unused authority (unaudited) as at March 31
(in thousands of dollars)
| 2018 | 2017 | |
|---|---|---|
| Debit balance in the accumulated net charge against the Fund's authority | 264,742 | 239,910 |
| Payables charges against the appropriation at year-end | (negative 448,607) | (negative 355,549) |
| Receivables credited to the appropriation at year-end | 233,078 | 183,041 |
| Other items | 17,463 | 6,649 |
| Net authority provided, end of year | 66,676 | 74,051 |
| Authority limit (note 1) | 150,000 | 150,000 |
| Unused authority carried forward | 216,676 | 224,051 |
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, 2018, 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 for revolving funds described by the Receiver General for Canada under the Directive on Charging and Special Financial 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 for revolving funds described by the Receiver General for Canada under the Directive on Charging and Special Financial 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, 2018 are prepared, in all material respects, in accordance with the financial reporting provisions for revolving funds described by the Receiver General for Canada under the Directive on Charging and Special Financial 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 have been prepared to assist the Fund to meet the financial reporting requirements the financial reporting provisions for revolving funds described by the Receiver General for Canada under the Directive on Charging and Special Financial 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 25, 2018
Ottawa, Canada
Statement of financial position as at March 31
(in thousands of dollars)
| 2018 | 2017 | |
|---|---|---|
| Assets | ||
| Financial assets | ||
| Cash in transit | 1,220 | 86 |
| Accounts receivable (note 3) | 244,303 | 191,988 |
| Other assets (note 4) | 33,003 | 21,703 |
| Subtotal | 278,526 | 213,777 |
| Non-financial assets | ||
| Prepaid expenses | 29 | 115 |
| Total | 278,555 | 213,892 |
| Liabilities | ||
| Accounts payable and accrued liabilities (note 5) | 452,638 | 372,755 |
| Vacation pay and compensatory leave | 14,671 | 12,805 |
| Contractors' security deposits | 1,867 | 1,983 |
| Employee severance benefits (note 6) | 12,655 | 11,083 |
| Total | 481,831 | 398,626 |
| Net liabilities (note 7) | (negative 203,276) | (negative 184,734) |
| Total | 278,555 | 213,892 |
|
Contractual obligations (note 8) Contingent liabilities (note 9) The accompanying notes form an integral part of these financial statements. | ||
Statement of operations and net liabilities for the year ended March 31
(in thousands of dollars)
| 2018 | 2017 | |
|---|---|---|
| Revenues | ||
| Real Property service—other government departments | 1,689,039 | 1,538,540 |
| Real property services—Public Services and Procurement Canada portfolio | 241,466 | 223,041 |
| Other revenues | 2,228 | 1,257 |
| Subtotal | 1,932,733 | 1,762,838 |
| Cost of sales | (negative 1,507,692) | (negative 1,358,182) |
| Gross profit | 425,041 | 404,656 |
| Operating expenses | ||
| Salaries and employee benefits | 305,800 | 273,279 |
| Corporate and administrative services | 64,110 | 62,930 |
| Professional and special services | 16,944 | 18,488 |
| Occupancy costs | 14,507 | 13,424 |
| Utilities, materials and supplies | 6,261 | 5,616 |
| Research and development costs | 3,574 | – |
| Transportation and telecommunications | 2,885 | 2,066 |
| Employee severance benefits (note 6) | 2,831 | (negative 1,921) |
| Other expenses | 745 | 1,358 |
| Rentals | 675 | 1,672 |
| Information | 291 | 155 |
| Purchased repairs and maintenance | 128 | 3,115 |
| Total | 418,751 | 380,182 |
| Net results | 6,290 | 24,474 |
| Net liabilities, beginning of year | (negative 184,734) | (negative 137,192) |
| Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year (note 7) | (negative 24,832) | (negative 72,016) |
| Net liabilities, end of year (note 7) | (negative 203,276) | (negative 184,734) |
|
The dash means that the amount is 0 or is rounded to 0. The accompanying notes form an integral part of these financial statements. | ||
Statement of cash flows for the year ended March 31
(in thousands of dollars)
| 2018 | 2017 | |
|---|---|---|
| Operating activities | ||
| Net results | 6,290 | 24,474 |
| Variations in statement of financial position | ||
| Increase in cash in transit | (negative 1,134) | (negative 28) |
| Increase in accounts receivable | (negative 52,315) | (negative 16,446) |
| (Increase) decrease in other assets | (negative 11,300) | 1,588 |
| Decrease in prepaid expenses | 86 | 1,289 |
| Increase in accounts payable and accrued liabilities | 79,883 | 64,601 |
| Increase in vacation pay and compensatory leave | 1,866 | 2,087 |
| Decrease in contractors' security deposits | (negative 116) | (negative 2,737) |
| Increase (decrease) in employee severance benefits | 1,572 | (negative 2,812) |
| Subtotal | 18,542 | 47,542 |
| Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year (note 7) | 24,832 | 72,016 |
| Accumulated net charge against the Fund's authority, beginning of year | 239,910 | 167,894 |
| Accumulated net charge against the Fund's authority, end of year | 264,742 | 239,910 |
| The accompanying notes form an integral part of these financial statements. | ||
Notes to the financial statements for the year ended March 31, 2018
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 (OGDs). 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 reporting requirements for revolving funds described by the Receiver General for Canada under the Treasury Board of Canada’s Directive on Charging and Special Financial 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
- The net debt indicator and statement of change in net debt are not presented in the financial statements
- contractual rights, contingent assets and inter-entity transactions and related parties disclosures are not presented in the financial statements
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 conditions 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 in which they are occurred and represent the total Fund obligation to the Plan. The Fund's responsibility with regard to the Plan is limited to the contributions paid. 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 were 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 liability has been accrued in these financial statements. Payments of sick leave benefits 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)
| 2018 | 2017 | |
|---|---|---|
| Other government departments and agencies | 233,078 | 183,041 |
| Outside parties | 11,470 | 9,161 |
| Subtotal | 244,548 | 192,202 |
| Less: allowance for doubtful accounts on receivables from outside parties | (negative 245) | (negative 214) |
| Net accounts receivable | 244,303 | 191,988 |
4. Other assets
(in thousands of dollars)
| 2018 | 2017 | |
|---|---|---|
| Sales tax refundable advances | 32,392 | 21,194 |
| Other advances | 611 | 509 |
| Total other assets | 33,003 | 21,703 |
5. Accounts payable and accrued liabilities
(in thousands of dollars)
| 2018 | 2017 | |
|---|---|---|
| Outside parties | 434,302 | 349,306 |
| Other government departments and agencies | 14,305 | 6,243 |
| Subtotal | 448,607 | 355,549 |
| Accrued liabilities | 4,031 | 17,206 |
| Total accounts payables and accrued liabilities | 452,638 | 372,755 |
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 and changes to conditions of employment, the accumulation of severance benefits under the employee severance pay program ceased. The employees were 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)
| 2018 | 2017 | |
|---|---|---|
| Employee severance benefit obligation, beginning of year | 11,083 | 13,895 |
| Expense for the year | 2,831 | (negative 1,921) |
| Benefits paid during the year | (negative 1,259) | (negative 891) |
| Employee severance benefit obligation, end of year | 12,655 | 11,083 |
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)
| 2018 | 2017 | |
|---|---|---|
| Accumulated surplus, beginning of year | 55,176 | 30,702 |
| Net results | 6,290 | 24,474 |
| Accumulated surplus, end of year | 61,466 | 55,176 |
| Accumulated net charge against the Fund's authority, beginning of year | (negative 239,910) | (negative 167,894) |
| Net financial resources provided and change in the accumulated net charge against the Fund's authority, during the year | (negative 24,832) | (negative 72,016) |
| Accumulated net charge against the Fund's authority, end of year | (negative 264,742) | (negative 239,910) |
| Net liabilities, end of year | (negative 203,276) | (negative 184,734) |
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 goods and services are received. Estimated future payments are as follows:
(in thousands of dollars)
| 2019 | 714,691 |
|---|---|
| 2020 | 272,221 |
| 2021 | 28,717 |
| 2022 | 14,986 |
| 2023 and thereafter | 34,741 |
| Total contractual obligations | 1,065,356 |
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 $13.4 million ($12.3 million in 2016-2017). Settlement, if any, that may be 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.