PPSC Financial Statements 2011–2012

Office of the Director of Public Prosecutions

Financial Statements

Management Responsibility Including Internal Control over Financial Reporting

Reporting Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2012, and all information contained in these statements rests with the management of the Office of the Director of Public Prosecutions (ODPP), also known as the Public Prosecution Service of Canada (PPSC). These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the ODPP’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the PPSC’s Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) 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 ODPP; and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR 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.

A risk-based assessment of the system of ICFR for the year ended March 31, 2012 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of the ODPP’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the ODPP's operations, by the work of the financial officers who conduct quality assurance review and by the Finance and Acquisitions Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting.

The financial statements of the ODPP have not been audited.

Original signed by Brian Saunders and Lucie Bourcier

 

__________________________
Brian Saunders
Director of Public Prosecutions

 

__________________________
Lucie Bourcier, CPA, CGA
Chief Financial Officer

Ottawa, Canada

__________________________
Date

Statement of Financial Position (unaudited)

As at March 31
(In thousands of dollars)
  2012 2011
Restated
(Note 11)
Departmental net financial position (15,762) (15,839)
Liabilities
Accounts payable and accrued liabilities (Note 7) 20,624 18,987
Vacation pay and compensatory leave 4,874 4,414
Employee severance benefits (Note 8) 17,426 16,411
Total liabilities 42,924 39,812
Financial assets
Due from Consolidated Revenue Fund 14,575 12,351
Accounts receivable (Note 5) 6,362 6,722
Total gross financial assets 20,937 19,073
Financial assets held on behalf of Government
Account receivable and advances (Note 5) (612) (404)
Total financial assets held on behalf of Government (612) (404)
Total net financial assets 20,325 18,669
Departmental net debt 22,599 21,143
Non-financial assets
Tangible capital assets (Note 6) 6,837 5,304
Total non-financial assets 6,837 5,304

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

Original signed by Brian Saunders and Lucie Bourcier

 

__________________________
Brian Saunders
Director of Public Prosecutions

 

__________________________
Lucie Bourcier, CPA, CGA
Chief Financial Officer

Ottawa, Canada

__________________________
Date

Statement of Operations and Departmental Net Financial Position (unaudited)

For the year ended March 31
(In thousands of dollars)
  2012
Planned Results		 2012 2011
Restated
(Note 11)
Departmental net financial position - Beginning of year   (15,839) (14,802)
Departmental net financial position - End of year   (15,762) (15,839)
Expenses
Drug, Criminal Code and terrorism prosecution program 123,793 125,380 114,389
Regulatory offences and economic crime prosecution program 33,762 34,189 31,191
Internal services 30,010 30,391 27,969
Total expenses 187,565 189,960 173,549
Revenues
Prosecution Services 13,742 18,617 15,503
Fines and forfeitures 663 1,059 1,184
Rent from residential housing provided to employees 352 422 356
Other 11 95 20
Revenues earned on behalf of Government   (1,576) (1,560)
Total revenues 14,768 18,617 15,503
Net cost of operations before funding and transfers 172,797 171,343 158,046
Government funding and transfers
Net cash provided by Government   151,992 145,330
Change in due from Consolidated Revenue Fund   2,224 (4,039)
Services provided without charge by other government departments (Note 10)   17,204 15,718
Net cost of operations after government funding and transfers   (77) 1,037

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

Statement of Change in Departmental Net Debt (unaudited)

For the year ended March 31
(In thousands of dollars)
  2012 2011
Departmental net debt - Beginning of year 21,143 20,404
Departmental net debt - End of year 22,599 21,143
Net cost of operations after government funding and transfers (77) 1,037
Change due to tangible capital assets
Acquisition of tangible capital assets 3,510 1,316
Amortization of tangible capital assets (1,977) (1,614)
Total change due to tangible capital assets 1,533 (298)
Net increase (decrease) in departmental net debt 1,456 739

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

Statement of Cash Flows (unaudited)

For the year ended March 31
(In thousands of dollars)
  2012 2011
Restated
(Note 11)
Net cash provided by Government of Canada 151,992 145,330
Operating activities
Net cost of operations before government funding and transfers 171,343 158,046
Non-cash items
Amortization of tangible capital assets (Note 6) (1,977) (1,614)
Services provided without charge by other government departments (Note 10) (17,204) (15,718)
Variations in Statement of Financial Position
Increase (decrease) in accounts receivable and advances (568) 2,119
Decrease (increase) in liabilities (3,112) 1,181
Cash used by operating activities 148,482 144,014
Capital investing activities
Acquisitions of tangible capital assets (Note 6) 3,510 1,316
Cash used by capital investment activities 3,510 1,316

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

Notes to the Financial Statements (unaudited)
For the Year Ended March 31

1. Authority and objectives

On December 12, 2006, the Office of the Director of Public Prosecution (ODPP) also, known as the Public Prosecution Service of Canada, was created by the Director of Public Prosecutions Act which is Part 3 of the Federal Accountability Act. This Office took over the duties of the former Federal Prosecution Service within the Department of Justice.

The Office has three (3) program activities:

1- Drug, Criminal Code and terrorism prosecution program

This program supports the protection of society against crime through the provision of legal advice and litigation support during police investigations, and the prosecution of: all drug offences under the Controlled Drugs and Substances Act and any related organized crime offences throughout Canada, except in Quebec and New Brunswick, where the Office of the Director of Public Prosecutions prosecutes such offences only where charges are laid by the Royal Canadian Mounted Police; proceeds of crime offences; pursuant to understandings with the provinces, Criminal Code offences where they are related to drug charges; all Criminal Code offences in the three territories; terrorism offences; and war crimes and crimes against humanity offences. This program activity also involves the promotion of federal/provincial/territorial cooperation on criminal justice issues of mutual concern.

2- Regulatory offences and economic crime prosecution program

This program supports the protection of society against crime through the provision of legal advice and litigation support to federal investigative agencies, and the prosecution of: offences under federal statutes aimed at protecting the environment and natural resources as well as the country’s economic and social health (e.g., Fisheries Act, Income Tax Act, Copyright Act, Canada Elections Act, Canadian Environmental Protection Act, Competition Act, Customs Act, Excise Act, and the Excise Tax Act); offences involving fraud against the government; capital market fraud offences; and any organized crime offences related to the foregoing offences. This program also includes the recovery of outstanding federal fines and the promotion of federal/provincial/territorial cooperation on criminal justice issues of mutual concern.

3- Internal 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. These groups are: Management and Oversight Services; Communications Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Material Services; Internal Audit; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

2. Summary of significant accounting policies

These financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

(a) Parliamentary authorities

The Office is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Office do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2011–2012 Report on Plans and Priorities.

(b) Net cash provided by Government

The Office operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Office is deposited to the CRF and all cash disbursements made by the Office 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 Government.

(c) Amount due to/from CRF

Amounts due from/to the CRF 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 Office is entitled to draw from the CRF without further appropriations to discharge its liabilities.

(d) Revenues

  • Revenues derived from the provision of legal services are recognized in the year the services are rendered.
  • Fines, forfeitures and court costs are recognized upon receipt of payment by the department.

Revenues that are non-respendable are not available to discharge the Office's liabilities. While the Deputy Head is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

(e) Expenses - Expenses are recorded on the accrual basis:

  • Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
  • Expenses related to the provision of advisory and prosecution functions are limited to those costs borne and settled directly by the Office. These functions may or may not be recovered as revenue from the government department and agencies. The costs of the provision of advisory and prosecution services which are paid directly by government departments and agencies to outside suppliers such as legal agents, are not included in the expenses.
  • Services provided without charge by other government departments for accommodation and the employer’s contribution to the health and dental insurance plans are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

i. Pension benefits

Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Office's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Office's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

ii. Severance benefits

Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whol e.

(g) Receivables

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

(h) 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 financial statements.

(i) Tangible capital assets

All tangible capital assets and leasehold improvements having an initial cost of $1,000 or more are recorded at their acquis ition cost. The Office does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, 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 the asset as follows:

Asset class Acquisition cost equal or greater than Amortization period
Informatics hardware $1,000 3 to 5 years
Informatics software $10,000 3 to 5 years
Furniture and furnishings $1,000 10 years
Motor vehicles $10,000 5 years
Leasehold improvements $10,000 Lesser of useful life or term of the lease

(j) Measurement uncertainty

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

3. Parliamentary Authorities

The Office receives most of its funding through annual Parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through Parliamentary authorities in prior, current or futu re years. Accordingly, the Office 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)
  2012 2011
Restated
(Note 11)
Current year authorities used 156,444 146,336
Net cost of operations before government funding and transfers 171,343 158,046
Adjustments for items affecting net cost of operations but not affecting authorities
Add (Less)
Services provided without charge by other government departments (Note 10) (17,204) (15,718)
Amortization of tangible capital assets (Note 6) (1,977) (1,614)
Increase in employee severance benefits (1,015) (915)
Increase in vacation pay and compensatory leave (460) (853)
Employee benefits plan (EBP) 2,177 1,929
Refunds and reversals of previous year expenses 70 3,145
Adjustment on contingent liabilities - 1,000
Sub-total (18,409) (13,026)
Adjustments for items not affecting net cost of operations but affecting authorities
Add
Acquisitions of tangible capital assets (Note 6) 3,510 1,316

(b) Authorities provided and used

(In thousands of dollars)
  2012 2011
Restated
(Note 11)
Current year authorities used 156,444 146,336
Vote 35 - program expenditures 171,651 158,747
Statutory amounts 14,966 14,146
Sub-total 186,617 172,893
Less
Voted authorities lapsed (30,173) (26,557)

4. Segmented information

Presentation by segment is based on the Office'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)
  Drug, Criminal Code and terrorism prosecution program Regulatory offenses and economic crime prosecution program Internal services 2012 Total 2011
Restated
(Note 11)
Total
Net cost of operations 125,380 17,192 28,771 171,343 158,046
Operating Expenses
Salaries and employee benefits 80,964 22,081 19,628 122,673 112,844
Professional and special services- Counsel fees 24,176 6,593 5,861 36,630 36,168
Professional and special services- Other 3,799 1,036 921 5,756 5,609
Accommodation 7,911 2,157 1,918 11,986 9,903
Travel and relocation 3,407 929 826 5,162 4,957
Utilities, materials and supplies 1,129 308 273 1,711 1,257
Amortization of tangible capital assets 1,305 356 316 1,977 1,614
Communication 1,622 442 392 2,457 1,660
Information 555 151 135 841 801
Repairs and maintenance 90 24 22 136 590
Machinery and equipment 246 67 59 372 452
Other (46) (13) (11) (70) (2,854)
Rentals 209 58 51 316 274
Claims and ex-gratia payments 13 - - 13 274
Total expenses 125,380 34,189 30,391 189,960 173,549
Revenues
Prosecution Services - 16,997 1,620 18,617 15,503
Fines and forfeitures 2 - 1,057 1,059 1,184
Rent from residential housing provided to employees 418 - 4 422 356
Other 90 4 1 95 20
Revenues earned on behalf of Government (510) (4) (1,062) (1,576) (1,560)
Total revenues - 16,997 1,620 18,617 15,503

5. Receivables and Advances

(In thousands of dollars)
  2012 2011
Restated
(Note 11)
Net accounts receivable 5,750 6,318
Federal government departments and agencies (include GST) 6,045 6,633
External parties 314 87
Standing advances held by employees for petty cash 3 3
Gross accounts receivable 6,362 6,722
Accounts receivable held on behalf of Government (612) (404)

6. Tangible capital assets

(In thousands of dollars)
Capital asset class Opening balance Acquisitions Disposals and transfers Closing balance
Total 14,107 3,510 7,527 10,090
Informatics hardware 3,088 428 1,221 2,295
Informatics software 1,231 31 222 1,040
Furniture and furnishings 2,624 576 402 2,798
Motor vehicles 69 48 - 117
Leasehold improvements 7,095 2,427 5,682 3,840

Accumulated amortization
(In thousands of dollars)
Capital asset class Opening balance Current Year amortization Disposals and transfers Closing balance
Total 8,803 1,977 7,527 3,253
Informatics hardware 1,740 485 1,221 1,004
Informatics software 493 280 222 551
Furniture and furnishings 790 330 402 718
Motor vehicles 11 20 - 31
Leasehold improvements 5,769 862 5,682 949

Net book value
(In thousands of dollars)
Capital asset class 2012 2011
Total tangible capital assets 6,837 5,304
Informatics hardware 1,291 1,348
Informatics software 489 737
Furniture and furnishings 2,080 1,834
Motor vehicles 86 58
Leasehold improvements 2,891 1,325

7. Accounts payable and accrued liabilities

(In thousands of dollars)
  2012 2011
Total accounts payable and accrued liabilities 20,624 18,987
Federal government departments and agencies
Accounts payable 800 941
External parties
Accounts payable 19,212 17,750
Accrued salaries 612 296
Sub-total 19,824 18,046

8. Employee future benefits

(a) Pension benefits

The Office's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. 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 fiv e consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and the Office contribute to the cost of the Plan. The 2011 -2012 expense amounts to $10,760 ($9,931 in 2010–2011), which represents approximately 1.8 times (1.9 times in 2010–2011) the contributions by employees.

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

(b) Severance benefits

The Office provides severance benefits to its employees based on eligibility, years of service and salary at termination of e mployment. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non- represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or 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.

(In thousands of dollars)
  2012 2011
Accrued benefit obligation, end of year 17,426 16,411
Accrued benefit obligation, beginning of year 16,411 15,496
Expense for the year 5,067 1,478
Benefits paid during the year (4,052) (563)

9. Contingent liabilities

Claims and litigation

Claims have been made against the Office in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Office will record an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approxima tely $9,050,000 ($8,515,000 in 2010–2011) at March 31, 2012.

10. Related party transactions

The Office is related as a result of common ownership to all Government departments, agencies, and Crown Corporations. The Of fice enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Office rece ived 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 Office received services without charge from certain common service organizations, related to accommodat ion, legal services and the employer's contribution to the health and dental insurance plans. These services provided without charge have been recorded in the Office's Statement of Operations and Departmental Net Financial Position as follows:

(In thousands of dollars)
  2012 2011
Total 17,204 15,718
Accommodation provided by Public Works and Government Services Canada 10,815 9,022
Employer’s contributions to the health and dental insurance plans paid by Treasury Board Secretariat 6,389 6,696

The Government has centralized some of its administrative activities for efficiency, cost -effectiveness purposes and economic de livery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department perform s services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provid ed by Public Works and Government Services are not included in the Office's Statement of Operations and Departmental Net Financial Position.

b) Common services provided without charge to other government departments

During the year, the Office provided services without charge to other government departments, related to the provision of legal services, in the amount of $8,424,085 ($8,424,085 in 2010–2011).

c) Other transactions with related parties

(In thousands of dollars)
  2012 2011
Expenses - Other Government departments and agencies 26,321 23,471
Revenues - Other Government departments and agencies 19,139 16,384

11. Accounting changes

During 2011, amendments were made to Treasury Board Accounting Standard 1.2 - Departmental and Agency Financial Statements to improve financial reporting by government departments and agencies. The amendments are effective for financial reporting of fiscal years ending March 31, 2012, and later. The significant changes to the Office's financial statements are described below. These changes have been applied retroactively, and comparative information for 2010-11 has been restated.

Net debt (calculated as liabilities less financial assets) is now presented in the Statement of Financial Position. Accompanying this change, the Office now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.

Revenues and related accounts receivable are now presented net of non-respendable amounts in the Statement of Operations and Departmental Net Financial Postition and Statement of Financial Position. The effect of this change was to increase the net cost of operations before government funding and transfers by $1,576,000 for 2012 ($1,560,000 for 2011) and decrease total financial assets by $612,000 for 2012 ($404,000 for 2011).

Government funding and transfers, as well as the credit related to services provided without charge by other government departments, are now recognized in the Statement of Operations and Departmental Net Financial Position below "Net cost of operations before government funding and transfers." In previous years, the Office recognized these transactions directly in the Statement of Equity of Canada. The effect of this change was to decrease the net cost of operations after government funding and transfers by $171,420,000 for 2012 ($157,009,000 for 2011).

(In thousands of dollars)
  2011 as previously stated Effect of change 2011 Restated
Statement of Financial Position:
Assets held on behalf of Government - (404) (404)
Departmental financial position (15,435) (404) (15,839)
Statement of Operations and Departmental Net Financial Position:
Revenues 17,063 (1,560) 15,503
Expenses 173,549 - 173,549
Government funding and transfers
Net cash provided by Government - 145,330 145,330
Change in due from Consolidated Revenue Fund - (4,039) (4,039)
Services provided without charge by other departments - 15,718 15,718

12. Comparative information

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

Annex – Assessment of Internal Control over Financial Reporting

With the Treasury Board Policy on Internal Control, effective April 1, 2009, departments are now required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR).

As part of this policy, departments are expected to conduct annual assessments of their system of ICFR, establish action plan(s) to address any necessary adjustments, and to attach to their Statement of Management Responsibility, a summary of their assessment results and action plans.

Effective systems of ICFR aim to achieve reliable financial statements and to provide assurance that:

  • Transactions are appropriately authorized;
  • Financial records are properly maintained;
  • Assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement; and
  • Applicable laws, regulations and policies are followed.

It is important to note that the system of ICFR is not designed to eliminate all risks, rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.

The maintenance of the ICFR systems is an on-going process designed to identify key risks and assess the effectiveness and adjust as required key controls. It also serves to monitor performance in support of continuous improvement. As a result, the scope, pace and status of departmental assessments of the effectiveness of their respective ICFR system varies from one organization to the other based on risks and taking into account their unique circumstances.

1. Introduction

This document is an annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting for the Fiscal Year 2011-12 of the Office of the Director of Public Prosecutions (ODPP), also known as the Public Prosecution Service of Canada (PPSC). The ODPP is part of a third wave of implementation of the Treasury Board Policy on Internal Control, which came into effect April 1, 2009, and requires the Director of Public Prosecutions (DPP) and the Chief Financial Officer (CFO) to sign the Statement for the first time for the 2011-12 financial statements.

This annex provides summary information on the measures taken by the ODPP to maintain an effective system of ICFR. In particular, it provides summary information on the assessments conducted by the ODPP as at March 31, 2012, including progress, results and related action plans, along with some financial highlights pertinent to understanding the control environment of the Office.

1.1 Authority, mandate and program activities

Detailed information on the ODPP’s authority, mandate and program activities can be found in the PPSC Departmental Performance Report and in Section I of the PPSC Report on Plans and Priorities.

1.2 Financial highlights

Additional organizational financial information for Fiscal Year 2011-12 can be found under Section III – Supplementary Information of the PPSC Departmental Performance Report and in the ODPP Public Accounts of Canada.

1.2.1 Financial environment

The ODPP’s entire budget is dedicated to operations. The ODPP has neither major capital and projects funds, nor grants and contributions. The key financial highlights from the 2011-12 financial statement include:

  • $42.9 million in liabilities including accounts payables at year end (48% of the total liabilities) and employee vacation pay and benefits (remaining 52%);
  • $6.8 million in capital assets with leasehold improvements representing 42% of the total assets; furniture and furnishings representing 30%; informatics representing 26% and motor vehicles 2%;
  • The net cost of operations is $171.3 million representing an increase of 8.4% compared to $158 million in 2010-11;
  • The expenses ($190 million) by activity are apportioned at 66% for the Drug, Criminal Code, and Terrorism Prosecution Program ($125.4 million), 18% for the Regulatory offences and economic crime prosecution program ($34.2 million) and 16% for internal services ($30.4 million).
  • The revenues from prosecutions services are $18.6 million.
1.2.2 Operational environment

The ODPP has 988 employees, in 11 regional offices and at Headquarters. In additional, the ODPP retained the services of 492 private-sector lawyers as agents from 210 law firms to conduct prosecutions where it does not have a regional office or where it is impractical or otherwise not cost-effective for staff counsel to handle cases. The key operational highlights for the fiscal year ending March 31, 2012, include:

  • The ODPP worked on 78,698 files including 48,140 files opened during the fiscal year and 30,558 carried over from previous fiscal years. The volume is similar to the number of files in 2010-11 (78,817 which 48,504 were new) the same split between the new files (61%) and carried files (39%);
    • The total of files includes 41,232 files handled by agents: 22,735 new files and 18,497 carried over from previous years.
    • The files by offenses are divided: files involving drug-related offences (72%), criminal code offences (14%), regulatory offences, economic offences (11%), proceeds of crime and offence-related property (2%) and other offence types (1%).
  • The ODPP continued to support and advance relations with key national and international stakeholders involved in the criminal justice field throughout the year. The ODPP participated to at least 7 international events (i.e., conferences, summit and workshops). The ODPP provided training to the RCMP and other police forces and was the host for an internship program for three Latin American prosecutors.

1.3 Service arrangements relevant to financial statements

The ODPP relies on other organizations for the processing of certain transactions or the provision of information, which impacts its financial statements:

  • Public Works and Government Services Canada centrally administers the payments of salaries and benefits, the procurement of some goods and services, and the provision of accommodations, on behalf of the ODPP;
  • Treasury Board Secretariat (TBS) provides the ODPP with an annual dollar figure for the centrally funded health and dental insurance plans, and with information used to calculate various accruals and allowances, such as the employee severance benefit; and
  • The Department of Justice provides certain corporate (internal) services for all regional offices, except those situated in the Northern Region. These services include human resources operation service, financial services, administration services, security services, information management and technology services. The two main information technology systems that are administered by the Department of Justice related to financial reporting include the Integrated Financial Management System (IFMS) and iCase. Although the Department of Justice administers the preceding systems, they are beyond the scope of the ODPP’s ICFR efforts. Nevertheless, the ODPP relies upon these systems for the purpose of its own financial statements.

Other organizations also rely on the Office of the Director of Public Prosecution as follows:

  • The ODPP is the common service provider of prosecution services to government departments and agencies and as such, the ODPP charges these organizations with the cost of providing prosecution services related to regulation and economic crimes. The ODPP provides certain corporate (internal) services to the Department of Justice’s Northern Region similar to the services provided by the Department of Justice to the ODPP, excluding the Northern Region.

Further information on service arrangements is available in the financial statements under Note 10 – Related party transactions.

1.4 Material changes in Fiscal Year 2011-12

There have been no material changes from the previous year.

2. ODPP’s control environment relevant to ICFR

The ODPP recognizes the importance of setting the tone from the top to help ensure that staff at all levels understand their roles in maintaining effective systems of ICFR and are well equipped to exercise these responsibilities effectively. The ODPP’s focus is to ensure risks are managed well through a responsive and risk-based control environment that enables continuous improvement and innovation.

2.1 Key positions, roles and responsibilities

Below are the ODPP’s key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.

Director of Public Prosecutions (DPP)
The DPP is the Accounting Officer and assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the DPP chairs the Departmental Audit Committee.
Chief Financial Officer (CFO)
The CFO reports directly to the DPP and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective and integrated system of ICFR, including its annual assessment. The CFO co-chairs the Finance and Acquisitions Committee.
Senior Departmental Managers
Senior Departmental Managers in charge of services and program delivery are responsible for maintaining and reviewing the effectiveness of their system of ICFR falling within their mandate.
Chief Audit Executive (CAE)
The CAE reports directly to the DPP and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR. The CAE is an ex-officio member at the Departmental Audit Committee meetings.
Departmental Audit Committee (DAC)
The DAC is an advisory committee that provides objective views on the Department’s risk management, control and governance frameworks. It is comprised of three external members and the DPP. The DAC will review the corporate risk profile and the system of internal control, including the assessment and action plans relating to the system of ICFR.
Executive Council (EC)
Establishes the strategic directions and priorities of the ODPP and monitors their implementation. The Council is chaired by the DPP, and includes the two Deputy Directors of Public Prosecutions, three Chief Federal Prosecutors, and Corporate Counsel.
Senior Advisory Board (SAB)
Makes recommendations to the EC on emerging issues; discusses strategic directions and priorities taking into account regional, national and horizontal perspectives, and serves as a forum for horizontal integration of “lessons learned” (i.e. performance management frameworks). The SAB is chaired by the DPP and includes all Chief Federal Prosecutors; all Associate Chief Federal Prosecutors, all Headquarter Directors, and Corporate Counsel.
Finance and Acquisitions Committee (FAC)
Recommends  resource allocations to the EC; approve  resources reallocations and  provide a challenge function on financial management (planning, budgeting, monitoring and reporting) and acquisition matters (procurement and material management) and use of public resources across the ODPP; and approves financial management and acquisition directives.
National People Management Committee (NPMC)
Recommends vision, direction, strategic plans and related change management strategies to the EC in order to foster an environment that values the management of people. The NPMC is co-chaired by the DPP and the Director General of Human Resources. Members include three Chief Federal Prosecutors, the Director of Law Practice Management, the Director of Administration Services, and the CFO.
Information Management and Technology Committee (IMTC)
Recommends information management and information technology vision, direction and strategic plans to the Executive Council to foster a culture that values knowledge sharing, good information management practices and the preservation of corporate memory. In addition, the Committee recommends protocols and practices for records management. The Committee is co-chaired by the Deputy DPP responsible for Regulatory and Economic Prosecutions and Management Branch and the Chief Information Officer. It also includes three Chief Federal Prosecutors.
Security Committee (SC)
Develops and recommends to EC procedures and policies for a security program including the following elements: employee protection, information security, information technology security and security investigations. The SC is chaired by the Deputy DPP responsible for Regulatory and Economic Prosecutions and Management Branch, and includes three Chief Federal Prosecutors and the Director of Administration Services Division.

2.2 Key measures taken by ODPP

The ODPP’s control environment includes a series of measures to equip its staff to manage risks. The measures do so by raising awareness, providing appropriate knowledge and tools, as well as developing skills. Key measures include:

  • Departmental Audit Committee meets at a minimum three times per year;
  • The Corporate Counsel provides a general legal advisory function to the ODPP and to its management of conflict of interest, values and ethics, government contracts and procurement, and the Financial Administration Act;
  • Regular reporting of financial performance and annual performance agreements with clearly set out financial management responsibilities;
  • Human Resources People Management Strategy addresses performance management, security, knowledge management, and recruitment and retention;
  • Regularly updated delegation of financial authorities instruments;
  • Documentation of main business processes and related key risk and control points to support the management and oversight of its system of ICFR;
  • A Policy and Quality Assurance team is responsible for addressing control weaknesses identified as a part of the implementation of the PIC;
  • A dedicated Internal Audit Division within the Headquarters region; and
  • A three-year risk-based internal audit plan developed by the Internal Audit Division with input from the ODPP’s management team and the DAC before the risk-based audit plan was adopted for 2012–2015.

3. Assessment of the ODPP’s system of ICFR

3.1 Assessment approach

In support of the Policy on Internal Control, the ODPP must be able to maintain an effective system of ICFR with the objective to provide reasonable assurance that:

  • Transactions are appropriately authorized;
  • Financial records are properly maintained;
  • Assets are safeguarded; and
  • Applicable laws, regulations and policies are followed.

Over time, this includes assessment of design and operating effectiveness of the system of ICFR leading to ensuring the on-going monitoring and continuous improvement of the departmental system of ICFR.

Design effectiveness
The key control points are identified, documented, and in place, and that they are aligned with the risks (i.e. controls are balanced with, and proportionate to, the risks they aim to mitigate), and that any required remediation is addressed. This includes the mapping of key processes and IT systems to the financial statement line items and to a relevant location, whether Headquarters or a region, depending on the significance of the control and balance at each location.
Operating effectiveness
The application of key controls has been tested over a defined period to confirm they are operating consistently and that any required remediation is addressed.
On-going monitoring
A systematic, integrated approach to monitoring is in place in support of continuous improvement, including periodic risk-based assessments and timely remediation.

3.2 Scope of ODPP’s assessment during Fiscal Year 2011-12

To satisfy the Policy on Internal Control, the ODPP has taken measures to assess its system of ICFR. It used its annual financial statements as a starting point to identify its main business processes.

During Fiscal Year 2011-12, the ODPP completed the documentation of their business processes and commenced the design effectiveness testing of the following business processes within Headquarters and regional offices:

  • Entity-level controls
  • Revenue and receivables
  • Procurement, payables and payments
  • Payroll
  • Financial reporting

For each of the business process, the following steps were accomplished as at March 31, 2012:

  • Gathered information pertaining to business processes, risk and controls relevant to ICFR, including appropriate policies and procedures;
  • Mapped out key processes with the identification and documentation of key risk and control points on the basis of materiality, volumes, complexity, geographic dispersion, susceptibility to losses/frauds, areas subject to audit observations, past history, external attention, and reliance on third parties;
  • Commenced design effectiveness for all control levels and determined control gaps; and
  • Incorporated new information available from recent audits and/or evaluations.

4. ODPP’s assessment results during Fiscal Year 2011-12

As a result of the assessment approach described above, the ODPP focused on design effectiveness which is the prerequisite to testing operating effectiveness. The following summarizes key assessment results from the design effectiveness testing completed by the ODPP in 2011-12.

4.1 Design effectiveness of key controls

When completing design effectiveness testing for its business processes, the ODPP updated business process documentation and validated key processes with stakeholders. It verified that the documented processes corresponded to actual practices. These activities covered both Headquarters and regional offices. Design effectiveness also included ensuring appropriate alignment of each key control with the risks they aim to mitigate.

The results of the following internal audits were also considered:

  • Audit of the Ontario Regional Office (December 2011)
  • Audit of Vote-Netted Revenue and Cost Recovery (June 2011)
  • Audit of the Account Verification Framework (September 2010)

As at March 31, 2012, the ODPP identified remediation requirements to be pursued in the following areas:

  • Audit of the Account Verification Framework (September 2010)
    • Design and develop a formal monitoring approach for account verification that takes into consideration the use of standardized reports, methodology, and tools.
    • Design, develop and implement a formal risk-based approach for the account verification that is consistent with the TBS Directive on Account Verification and the recommendations from the Office of the Comptroller General (OCG).
  • Audit of Vote-Netted Revenue and Cost Recovery (June 2011)
    • Document formally a risk management approach of VNR including identifying risks and acceptable risk levels (such as outstanding amounts), controls/processes in place to mitigate the risks, and formal mechanisms to report risks.
    • Publish a national standard file creation and increase Headquarters’ capacity to review the accuracy and completeness of billing information on a regular basis.
4.1.1 Entity Level Controls
Strengthening Integrity and Ethical Values
  • Engage in meaningful dialogue on ethics and conflict of interest with employees on a regular basis through training sessions, team meetings, or soliciting feedback through the intranet to increase employee awareness.
  • ODPP will consider the need of establishing standards of discipline and setting penalties based on breaches of discipline or misconduct as set out in the FAA.
  • ODPP will evaluate the need for obtaining certification from all employees on an annual basis that they are in compliance with the Values and Ethics Code for the Public Service and related statements.
Implementing Succession Planning
  • Implement succession planning for key positions.
Strengthening Risk Assessment
  • Strengthen the planning and communication of strategic objectives.
  • Incorporate fraud risk assessment through the development of the ODPP Fraud Protocol.
4.1.2 Process Level Controls
Documentation of Controls and Evidence of Controls
  • A clearer documented costing approach and reporting of corporate service costs provided by the Department of Justice.
  • Greater consistency, accuracy and detail in the documentation of controls and procedures.
  • Updating of delegation of authorities instruments.
  • Strengthening account verification procedures to include comply with the Directive on Account Verification.
  • Enhance controls related to cut-off and timing of when revenues and expenses are reported.
  • Develop controls on tracking of capital assets.
Monitoring and Segregation of Duties
  • Strengthening internal controls over segregation of duties including user access to the Integrated Financial Management System (IFMS).
Data Reconciliation
  • Greater consistency of reconciliations and source data.

4.2 Operating effectiveness of key controls

The ODPP will begin the testing of the operating effectiveness of internal controls once design effectiveness weaknesses have been remediated. The approach will involve a risk-based testing plan that identifies key controls to be tested over a defined period of time, which leverages departmental compliance.

4.3 On-going monitoring program

The ODPP has created a dedicated unit within Financial Operations called Policy and Quality Assurance to be responsible for managing the documentation and testing of internal controls. This unit will evolve, in the upcoming years, into a unit responsible for a well integrated risk-based approach for the on-going assessment of the ODPP’s ICFR. This unit will monitor any required remedial actions to its entity level, financial transaction, and financial reporting based on lessons learned from the annual assessments and the results of internal and external audits. This includes ensuring that there is a program in place that raises awareness and understanding of the ODPP's system of ICFR at all levels and ensures that employees have the knowledge, skills and tools required to carry out their responsibilities.

Key accomplishments to date include the documentation of ODPP’s business processes, the completion of an ICFR assessment of the business processes and the identification of control weaknesses.

5. ODPP’s action plan

5.1 Progress during Fiscal Year 2011-12

During 2011-12, the ODPP made significant progress in assessing its key financial controls. Below is a summary of the main progress made by the organization:

  • Completed the documentation and design effectiveness testing for entity level controls and process level controls.
  • Completed the analysis of the results of the design effectiveness testing including identified remediation requirements.

5.2 Action plan for the next fiscal year and subsequent years

Action Plan Summary – Next Fiscal Year and Subsequent Years

By end of 2012-13, the ODPP plans to:

  • Update internal control documentation to reflect changes to the procurement, payable and payments business process where account verification procedures will be centralized.
  • Finalize the development of a management action plan to address identified control weaknesses for process level and entity level controls.
  • Commence remediation of design weaknesses as per the management action plan.

End of 2013-14 and onward, the ODPP plans to:

  • Finalize remediation of design weaknesses.
  • Develop a risk-based operating effectiveness testing plan.
  • Conduct operating effectiveness testing for process level and entity level controls.
  • Commence on-going risk-based monitoring program to ensure internal controls over financial reporting are maintained, that changes to business processes are documented on a timely basis, and internal controls are tested.