Optional Services Revolving Fund
Public Accounts of Canada 2018 Volume III—Top of the page Navigation
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Statement of management responsibility
We have prepared the accompanying financial statements of the Optional 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
Arianne Reza
Assistant Deputy Minister
Procurement 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 | – | 299 | – | 1,429 |
| Items not requiring use of funds | 50 | – | 50 | – |
| Operating source of funds | 50 | 299 | 50 | 1,429 |
| Items requiring use of funds | ||||
| Net other assets and liabilities | (negative 50) | (negative 1,797) | (negative 50) | 7,717 |
| Authority provided (used) | – | (negative 1,498) | – | 9,146 |
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 | 13,132 | 17,502 |
| Payables charged against the appropriation at year-end | (negative 12,354) | (negative 15,197) |
| Receivables credited to the appropriation at year-end | 925 | 887 |
| Other items | (negative 1,512) | (negative 1,503) |
| Net authority provided, end of year | 191 | 1,689 |
| Authority limit (note 1) | 35,000 | 35,000 |
| Unused authority carried forward | 35,191 | 36,689 |
Independent auditor's report
To the Deputy Minister, Public Services and Procurement 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, 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 | ||
| Accounts receivable (note 3) | 8,150 | 6,338 |
| Sales tax refundable advances | 122 | 101 |
| Total | 8,272 | 6,439 |
| Liabilities | ||
| Accounts payable and accrued liabilities (note 4) | 12,365 | 15,197 |
| Vacation pay and compensatory leave | 77 | 86 |
| Employee severance benefits (note 5) | 43 | 38 |
| Total | 12,485 | 15,321 |
| Net liabilities (note 6) | (negative 4,213) | (negative 8,882) |
| Total | 8,272 | 6,439 |
|
Contractual obligations (Note 7). 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 | ||
| Vaccines and drugs | 154,414 | 136,221 |
| Travel and relocation related services | 13,347 | 12,091 |
| Communication procurement services | 2,348 | 3,780 |
| Subtotal | 170,109 | 152,092 |
| Cost of sales | (negative 165,145) | (negative 145,918) |
| Gross profit | 4,964 | 6,174 |
| Operating expenses | ||
| Salaries and employee benefits | 2,370 | 2,429 |
| Corporate and administrative services | 1,322 | 472 |
| Professional and special services | 844 | 1,555 |
| Occupancy costs | 120 | 185 |
| Employee severance benefits (note 5) | 5 | (negative 2) |
| Other expenses | 4 | 106 |
| Total operating expenses | 4,665 | 4,745 |
| Net results | 299 | 1,429 |
| Net liabilities, beginning of year | (negative 8,882) | (negative 8,974) |
| Net financial resources used (provided) and change in the accumulated net charge against the Fund's authority, during the year (note 6) | 4,370 | (negative 1,337) |
| Net liabilities, end of year (note 6) | (negative 4,213) | (negative 8,882) |
| 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 | 299 | 1,429 |
| Variations in statement of financial position | ||
| (Increase) decrease in accounts receivable | (negative 1,812) | 7,929 |
| (Increase) decrease in sales tax refundable advances | (negative 21) | 33 |
| Decrease in accounts payable and accrued liabilities | (negative 2,832) | (negative 8,063) |
| (Decrease) increase in vacation pay and compensatory leave | (negative 9) | 37 |
| Increase (decrease) in employee severance benefits | 5 | (negative 28) |
| Subtotal | (negative 4,669) | (negative 92) |
| Net financial resources (used) provided and change in the accumulated net charge against the Fund's authority, during the year (note 6) | (negative 4,370) | 1,337 |
| Accumulated net charge against the Fund's authority, beginning of year | 17,502 | 16,165 |
| Accumulated net charge against the Fund's authority, end of year | 13,132 | 17,502 |
| 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 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 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. 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
- contractuals rights 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
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) Expense recognition
All expenses are recorded on an accrual basis.
Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
(d) Employee future benefits
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 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 were entitled to severance benefits under labour contracts or conditions of employment. These benefits are earned as the 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 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 | |
|---|---|---|
| Outside parties | 7,225 | 5,451 |
| Other government departments and agencies | 925 | 887 |
| Net accounts receivable | 8,150 | 6,338 |
4. Accounts payable and accrued liabilities
(in thousands of dollars)
| 2018 | 2017 | |
|---|---|---|
| Outside parties | 12,340 | 15,128 |
| Other government departments and agencies | 14 | 69 |
| Subtotal | 12,354 | 15,197 |
| Accrued liabilities | 11 | – |
| Total accounts payable and accrued liabilities | 12,365 | 15,197 |
|
The dash means that the amount is 0 or is rounded to 0. | ||
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 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 | 38 | 66 |
| Expense for the year | 5 | (negative 2) |
| Benefits paid during the year | – | (negative 26) |
| Employee severance benefit obligation, end of year | 43 | 38 |
|
The dash means that the amount is 0 or is rounded to 0. | ||
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 (ANCAFA) represents the cumulative receipts and disbursements over the life of the Fund.
(in thousands of dollars)
| 2018 | 2017 | |
|---|---|---|
| Accumulated surplus, beginning of year | 8,620 | 7,191 |
| Net results | 299 | 1,429 |
| Accumulated surplus, end of year | 8,919 | 8,620 |
| Accumulated net charge against the Fund's authority, beginning of year | (negative 17,502) | (negative 16,165) |
| Net financial resources used (provided) and change in the accumulated net charge against the Fund's authority during the year | 4,370 | (negative 1,337) |
| Accumulated net charge against the Fund's authority, end of year | (negative 13,132) | (negative 17,502) |
| Net liabilities, end of year | (negative 4,213) | (negative 8,882) |
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 goods and services are received. Estimated future payments are as follows:
(in thousands of dollars)
| Year ending March 31 | |
|---|---|
| 2019 | 649 |
| 2020 | 365 |
| 2021 | – |
| 2022 | – |
| 2023 and thereafter | – |
| Total contractual obligations | 1,014 |
|
The dash means that the amount is 0 or is rounded to 0. | |
8. 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.