Optional Services Revolving Fund
Public Accounts of Canada 2020 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 department's Departmental Results 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 has been appended to these financial statements.
Approved by:
Michel D'Amour, CPA, CMA
Acting Chief Financial Officer
Public Services and Procurement Canada
Arianne Reza
Assistant Deputy Minister
Procurement Branch
Public Services and Procurement Canada
July 3, 2020
Gatineau, Canada
Statement of authority provided (used) (unaudited) for the year ended March 31
(in thousands of dollars)
| 2020 | 2019 | |||
|---|---|---|---|---|
| EstimatesLink to footnote 1 | Actual | EstimatesLink to footnote 1 | Actual | |
| Net results | (negative 208) | 1,017 | – | 1,103 |
| Items not requiring use of funds | 50 | – | 50 | – |
| Operating source (use) of funds | (negative 158) | 1,017 | 50 | 1,103 |
| Items requiring use of funds | ||||
| Net other assets and liabilities | (negative 50) | 3,082 | (negative 50) | (negative 3,221) |
| Authority provided (used) | (negative 208) | 4,099 | – | (negative 2,118) |
Reconciliation of unused authority (unaudited) as at March 31
(in thousands of dollars)
| 2020 | 2019 | |
|---|---|---|
| Debit balance in the accumulated net charge against the Fund's authority | 12,531 | 10,930 |
| Payables charged against the appropriation at year-end | (negative 10,638) | (negative 22,195) |
| Receivables credited to the appropriation at year-end | 1,830 | 1,600 |
| Other items | (negative 1,551) | 7,738 |
| Net authority provided (used), end of year | 2,172 | (negative 1,927) |
| Authority limit (note 1) | 35,000 | 35,000 |
| Unused authority carried forward | 37,172 | 33,073 |
Independent auditor's report
To the Deputy Minister, Public Services and Procurement Canada
Opinion
We have audited the financial statements of the Optional Services Revolving Fund (the "Fund"), which comprise the statement of financial position as at March 31, 2020, and the statements of operations and net liabilities and of cash flow for the year then ended, and notes to the financial statements, including a summary of significant accounting policies (collectively referred to as the "financial statements").
In our opinion, the financial statements of the Fund for the year ended March 31, 2020 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 for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards ("Canadian GAAS"). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Public Services and Procurement Canada in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Basis of Accounting
Without modifying our opinion, we draw attention to Note 2 to the financial statements, which describes the basis of accounting. The financial statements are prepared to assist the Fund to meet 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.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the 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.
In preparing the financial statements, management is responsible for assessing the Fund's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Fund's financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian GAAS will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with Canadian GAAS, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
- Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
- Obtain an understanding of internal control relevant to the audit 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 Fund's internal control.
- Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
- Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Fund to cease to continue as a going concern.
- Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
Deloitte LLP
Chartered Professional Accountants,
Licensed Public Accountants
July 3, 2020
Statement of financial position as at March 31
(in thousands of dollars)
| 2020 | 2019 | |
|---|---|---|
| Assets | ||
| Financial assets | ||
| Cash in transit | 167 | 9,370 |
| Accounts receivable (note 3) | 9,154 | 12,010 |
| Sales tax refundable advances | – | 32 |
| Total assets | 9,321 | 21,412 |
| Liabilities | ||
| Accounts payable and accrued liabilities (note 4) | 10,641 | 22,208 |
| Vacation pay and compensatory leave | 92 | 71 |
| Employee severance benefits (note 5) | 80 | 41 |
| Total | 10,813 | 22,320 |
| Net liabilities (note 6) | (negative 1,492) | (negative 908) |
| Net financial position of the Fund | 9,321 | 21,412 |
Statement of operations and net liabilities for the year ended March 31
(in thousands of dollars)
| 2020 | 2019 | |
|---|---|---|
| Revenues | ||
| Vaccines and drugs | 159,301 | 161,203 |
| Travel and relocation related services | 12,565 | 12,928 |
| Communication procurement services | 3,290 | 2,958 |
| Subtotal | 175,156 | 177,089 |
| Cost of sales | (negative 169,264) | (negative 171,462) |
| Gross profit | 5,892 | 5,627 |
| Operating expenses | ||
| Salaries and employee benefits | 2,392 | 2,179 |
| Corporate and administrative services | 1,338 | 1,330 |
| Professional and special services | 940 | 834 |
| Occupancy costs | 112 | 104 |
| Employee severance benefits (note 5) | 70 | (negative 2) |
| Other expenses | 23 | 79 |
| Total operating expenses | 4,875 | 4,524 |
| Net results | 1,017 | 1,103 |
| Net liabilities, beginning of year | (negative 908) | (negative 4,213) |
| Net financial resources used (provided) and change in the accumulated net charge against the Fund's authority, during the year (note 6) | (negative 1,601) | 2,202 |
| Net liabilities, end of year (note 6) | (negative 1,492) | (negative 908) |
Statement of cash flows for the year ended March 31
(in thousands of dollars)
| 2020 | 2019 | |
|---|---|---|
| Operating activities | ||
| Net results | 1,017 | 1,103 |
| Variations in statement of financial position | ||
| Decrease (increase) in cash in transit | 9,203 | (negative 9,370) |
| Decrease (increase) in accounts receivable | 2,856 | (negative 3,860) |
| Decrease (increase) in sales tax refundable advances | 32 | 90 |
| Increase (decrease) in accounts payable and accrued liabilities | (negative 11,567) | 9,843 |
| Increase (decrease) in vacation pay and compensatory leave | 21 | (negative 6) |
| Increase (decrease) in employee severance benefits | 39 | (negative 2) |
| Subtotal | 584 | (negative 3,305) |
| Net financial resources provided (used) and change in the accumulated net charge against the Fund's authority, during the year (note 6) | 1,601 | (negative 2,202) |
| Accumulated net charge against the Fund's authority, beginning of year | 10,930 | 13,132 |
| Accumulated net charge against the Fund's authority, end of year | 12,531 | 10,930 |
Notes to the financial statements for the year ended March 31, 2020
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 the 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 mainly because:
- no liability is recorded for sick leave
- the net debt indicator and statement of changes in net debt are not presented in the financial statements and
- contractual 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 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 in which they are 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 were 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)
| 2020 | 2019 | |
|---|---|---|
| Outside parties | 7,324 | 10,410 |
| Other government departments and agencies | 1,830 | 1,600 |
| Net accounts receivable | 9,154 | 12,010 |
4. Accounts payable and accrued liabilities
(in thousands of dollars)
| 2020 | 2019 | |
|---|---|---|
| Outside parties | 10,602 | 22,155 |
| Other government departments and agencies | 36 | 40 |
| Subtotal | 10,638 | 22,195 |
| Accrued liabilities | 3 | 13 |
| Total accounts payable and accrued liabilities | 10,641 | 22,208 |
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 benefits obligation.
Information about the severance benefits, measured as at March 31, is as follows:
(in thousands of dollars)
| 2020 | 2019 | |
|---|---|---|
| Employee severance benefits obligation, beginning of year | 41 | 43 |
| Expense for the year | 70 | (negative 2) |
| Benefits paid during the year | – | – |
| Employee severance benefits obligation, end of year | 80 | 41 |
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)
| 2020 | 2019 | |
|---|---|---|
| Accumulated surplus, beginning of year | 10,022 | 8,919 |
| Net results | 1,017 | 1,103 |
| Accumulated surplus, end of year | 11,039 | 10,022 |
| Accumulated net charge against the Fund's authority, beginning of year | (negative 10,930) | (negative 13,132) |
| Net financial resources used (provided) and change in the accumulated net charge against the Fund's authority during the year | (negative 1,601) | 2,202 |
| Accumulated net charge against the Fund's authority, end of year | (negative 12,531) | (negative 10,930) |
| Net liabilities, end of year | (negative 1,492) | (negative 908) |
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 | |
|---|---|
| 2021 | 470 |
| 2022 | 111 |
| 2023 | 19 |
| 2024 | – |
| 2025 and thereafter | – |
| Total contractual obligations | 600 |
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.
Public Accounts of Canada 2020 Volume III—Bottom of the page Navigation
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