Audited Financial Statements 2004-2005

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Management Responsibility for Financial Statements

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2005 and all information contained in this report rests with the management of the Office of the Privacy Commissioner of Canada.

These financial statements have been prepared by management in accordance with accounting standards issued by the Treasury Board of Canada Secretariat which are consistent with Canadian generally accepted accounting principles for the public sector. These statements should be read within the context of the significant accounting policies set out in Note 2 of the financial statements.

Management has developed and maintains books, records, internal controls and management practices, designed to provide reasonable assurance that the Office’s assets are safeguarded and controlled, resources are managed economically and efficiently in the attainment of the Office’s objectives, and that transactions are in accordance with the Financial Administration Act and regulations and the Privacy Act.

The transactions and financial statements of the Office of the Privacy Commissioner of Canada have been audited by the Auditor General of Canada.

Ottawa, Canada
September 22, 2005

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Auditor's Report

To the Speaker of the House of Commons and the Speaker of the Senate

I have audited the statement of financial position of the Office of the Privacy Commissioner of Canada as at March 31, 2005 and the statements of operations, accumulated deficit and cash flow for the year then ended. These financial statements are the responsibility of the Office’s management. My responsibility is to express an opinion on these financial statements based on my audit.

I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In my opinion, these financial statements present fairly, in all material respects, the financial position of the Office as at March 31, 2005 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles.

Further, in my opinion, the transactions of the Office that have come to my notice during my audit of the financial statements have, in all significant respects, been in accordance with the Financial Administration Act and regulations and the Privacy Act.

Ottawa, Canada
September 22, 2005

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Statement of Financial Position

Office of the Privacy Commissioner of Canada

(thousands of dollars)		2005	2004
ASSETS
	Financial assets
	Petty cash advances	$ 2	$ 1
	Prepaid expenses	25	52
	Due from the Consolidated Revenue Fund	1,983	509
	Accounts receivable (Note 4)	295	254
	Total financial assets	2,305	816
	Capital assets (Note 5)	905	798
Total assets		$ 3,210	$ 1,614
LIABILITIES AND ACCUMULATED DEFICIT
	Current liabilities
	Accounts payable and accrued liabilities	$ 1,738	$ 524
	Accrued employee salaries	409	229
	Accrued employee vacation and leave benefits	360	367
	Accrued employee severance benefits (Note 6)	65	47
	Total current liabilities	2,572	1,167
	Long-term liabilities
	Accrued employee severance benefits (Note 6)	1,215	1,191
	Total liabilities	3,787	2,358
	Accumulated deficit (Note 12)	(577)	(744)
Total liabilities and accumulated deficit		$ 3,210	$ 1,614
Commitments (Note 7) and Contingent liabilities (Note 8)
The accompanying notes form an integral part of these financial statements.

Approved by:

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Statement of Operations

Office of the Privacy Commissioner of Canada

(thousands of dollars)		2005	2004
Expenses
	Salaries and employee benefits	$ 8,449	$ 8,952
	Professional and special services	1,960	1,319
	Accommodation	704	647
	Transportation and communications	389	382
	Amortization	337	256
	Contributions	318	-
	Repairs and maintenance	223	271
	Machinery and equipment	194	91
	Information	180	227
	Utilities, materials and supplies	116	95
	Rentals	40	186
	Other	2	-
Cost of operations		12,912	12,426
Recoverable amounts of prior years		-	(355)
Net cost of operations		$ 12,912	$ 12,071
The accompanying notes form an integral part of these financial statements.

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Statement of Accumulated Deficit

Office of the Privacy Commissioner of Canada

(thousands of dollars)			2005	2004
Accumulated deficit, beginning of the year			$ (744)	$ (774)
Net cost of operations			(12,912)	(12,071)
Services provided without charge (Note 10)			1,410	1,432
Net cash provided by government			10,195	10,819
Increase / (decrease) in the Due from Consolidated Revenue Fund			1,474	(150)
Accumulated deficit, end of the year			$ (577)	$ (744)
The accompanying notes form an integral part of these financial statements.

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Statement of Cash Flow

Office of the Privacy Commissioner of Canada

(thousands of dollars)		2005	2004
Operating Activities
Net cost of operations		$ 12,912	$ 12,071
Adjustments for items not affecting cash
	Amortization of capital assets	(337)	(256)
	Services provided without charge (Note 10)	(1,410)	(1,432)
Changes in Statement of Financial Position:
	Decrease / (increase) in current liabilities	(1,405)	56
	Increase / (decrease) in selected financial assets	15	(70)
	Decrease / (increase) in long-term employee severance benefits	(24)	98
Cash applied to operating activities		9,751	10,467
Capital Transactions
	Acquisition of capital assets	444	352
Net cash provided by government		$ 10,195	$ 10,819
The accompanying notes form an integral part of these financial statements.

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Notes to the Financial Statements

Office of the Privacy Commissioner of Canada

1. Authority

The Office of the Privacy Commissioner of Canada (the Office), was created under the Privacy Act, which came into force on July 1, 1983. The Privacy Commissioner is an independent officer of Parliament appointed by the Governor-in-Council following approval of her nomination by resolution of the Senate and the House of Commons. The Office is designated, by Order-in-Council, as a department for purposes of the Financial Administration Act. As such, it is established under the authority of Schedule I.1 of the Act and is funded through annual appropriations. The Commissioner is accountable for, and reports directly to Parliament on the results achieved.

The objectives of the Office of the Privacy Commissioner of Canada are:

• investigating complaints and conducting audits;
• publishing information about personal information-handling practices in the public and private sector;
• conducting research into privacy issues; and
• promoting awareness and understanding of privacy issues by the Canadian public.

2. Significant Accounting Policies

1. Basis of presentation

   The financial statements of the Office of the Privacy Commissioner of Canada have been prepared in accordance with accounting standards issued by the Treasury Board of Canada Secretariat which are consistent with Canadian generally accepted accounting principles for the public sector.

2. Parliamentary appropriations

   The Office of the Privacy Commissioner of Canada is funded through annual parliamentary appropriations. Parliamentary appropriations provided do not parallel financial reporting according to Canadian generally accepted accounting principles for the public sector since appropriations are based in a large part on cash flow requirements. Consequently, items recognised in the Statement of Operations and the Statement of Financial Position are not necessarily the same as those provided through appropriations from Parliament. Note 3 to these financial statements provides information regarding the source and disposition of these appropriations and provides a high level reconciliation between the two bases of reporting.

3. Due from the Consolidated Revenue Fund (CRF)

   The Office operates within the CRF, which is administered by the Receiver General for Canada. All cash receipts are deposited to the CRF and all cash disbursements made by the Office are paid from the CRF. Due from the Consolidated Revenue Fund represents the amount of cash that the Office is entitled to draw from the Consolidated Revenue Fund, without further appropriations, in order to discharge its liabilities. Net cash provided by government is the difference between all cash receipts and all cash disbursements including transactions involving departments and agencies.

4. Accounts receivable

   Accounts receivable are stated at amounts expected to be ultimately realised. A provision is made for receivables where recovery is considered uncertain.

5. Capital assets

   The Office records as capital assets and leasehold improvements all expenses providing multi-year benefits and having an initial cost of $2,500 or more. Similar items under $2,500 are expensed in the statement of operations. The capitalisation of software and leasehold improvements has been done on a prospective basis from April 1, 2001.

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

   Capital asset class	Useful life
   Informatics hardware	3 years
   Computer software	3 years
   Other equipment	10 years
   Motor vehicles	10 years
   Leasehold improvements	Term of the lease

6. Employee salaries, vacation and benefits

   Salaries and benefits are expensed as the salary or benefits accrue to employees under their respective terms of employment. The employee salaries liability is calculated using the employees' salary levels at year end, and the number of days remaining unpaid at the end of the year. The liability for vacation leave and benefits is calculated at the salary levels in effect at the end of the year for all unused vacation leave and benefits accruing to employees. Employee vacation leave liabilities payable on cessation of employment represent obligations of the Office that are normally funded through future years' appropriations.

7. Employee severance benefits

   Employees are entitled to severance benefits, as provided for under labour contracts and conditions of employment. The cost of these benefits is accrued as employees render services necessary to earn them. The cost of 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.

8. Services provided without charge by other government departments

   Services provided without charge by other government departments are recorded as operating expenses by the Office of the Privacy Commissioner of Canada at their estimated cost. A corresponding amount is reported directly in the Statement of Accumulated Deficit.

9. Contributions to pension plan

   All eligible employees participate in the Public Service Pension Plan administered by the Government of Canada. The Office's contributions reflect the full cost as employer. This amount is currently based on a multiple of an employee's required contributions and may change over time depending on the experience of the Plan. The Office's contributions are expensed during the year in which the services are rendered and represent the total pension obligation of the Office. The Office is not currently required to make contributions with respect to any actuarial deficiencies of the Public Service Pension Plan.

10. Employee benefit plan

    The Government of Canada sponsors an employee benefit plan (health and dental) in which the Office participates. As a participant, contributions by the Office are recorded at cost and are charged to expenses in the year incurred, and represent the Office's total obligation to the plan. The Office is not required under present legislation to make contributions with respect to any future unfunded liabilities of the plan.

11. Measurement uncertainty

    These financial statements are prepared in accordance with Canadian generally accepted accounting principles for the public sector, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting year. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. Actual results could differ from those estimates. The most significant items where estimates are used are in determining the expected useful life of capital assets and employee severance benefits.

3. Parliamentary Appropriations

a) Reconciliation of net cost of operations to total parliamentary appropriations used:

(thousands of dollars)		2005	2004
Net cost of operations		$ 12,912	$ 12,071
Items not requiring the use of appropriations
	Amortization of capital assets	(337)	(256)
	Services provided without charge	(1,410)	(1,432)
	Change in employee vacation and leave benefits	-	47
	Change in employee severance benefits	(42)	179
Sub-Total		11,123	10,609
Items affecting appropriations
	Acquisition of capital assets	444	352
	Change in prepaid expenses	(27)	(34)
Sub-Total		417	318
Total appropriations used		$ 11,540	$ 10,927

b) Reconciliation of parliamentary appropriations voted to parliamentary appropriations used:

(thousands of dollars)		2005	2004
Parliamentary appropriations voted:
	Operating expenditures	$ 10,881	$ 10,491
	Statutory contributions to employee benefit plans	1,189	1,238
	Proceeds from disposal of capital assets	-	1
		12,070	11,730
Less:
	Lapsed appropriation	(530)	(447)
	Recoverable amounts of prior years	-	(355)
	Proceeds available for use in subsequent year	-	(1)
Total Parliamentary appropriation used		$ 11,540	$ 10,927

4. Accounts Receivable

(thousands of dollars)		2005	2004
Other government departments		$ 261	$ 226
External parties		34	28
Total		$ 295	$ 254

5. Capital Assets

(thousands of dollars)
Cost		March 31, 2004	Acquisitions	Disposals	March 31, 2005
Informatics hardware		$ 617	$ 314	$ -	$ 931
Computer software		193	124	-	317
Software under development		27	-	27	-
Other equipment		500	15	-	515
Motor vehicles		24	-	-	24
Leasehold improvements		55	18	-	73
		$ 1,416	$ 471	$ 27	$ 1,860
Accumulated Amortization		March 31, 2004	Amortization	Disposals	March 31, 2005
Informatics hardware		$ 382	$ 182	$ -	$ 564
Computer software		36	93	-	129
Software under development		-	-	-	-
Other equipment		186	46	-	232
Motor vehicles		7	5	-	12
Leasehold improvements		7	11	-	18
		$ 618	$ 337	$ -	$ 955
Net Book Value		$ 798			$ 905

6. Accrued Employee Severance Benefits

The Office provides severance benefits to its employees based on years of service and final salary. This benefit plan is not pre-funded and thus has no assets, resulting in a plan deficit equal to the accrued benefit obligation. Benefits will be paid from future appropriations. Information about the plan, measured as at year- end, is as follows:

(thousands of dollars)		2005	2004
	Obligation, beginning of the year	$ 1,238	$ 1,417
	Expense for the year	94	104
	Benefits paid during the year	(52)	(283)
	Obligation, end of the year	$ 1,280	$ 1,238
	Current portion	$ 65	$ 47
	Long-term portion	1,215	1,191
	Obligation, end of the year	$ 1,280	$ 1,238

7. Commitments

The Office of the Privacy Commissioner of Canada has commitments arising in the normal course of operations for future years. Minimum annual payments under these agreements are as follows:

(thousands of dollars)		Total
2005-2006		$ 28
2006-2007		22
2007-2008		21
2008-2009		21
2009-2010		20
Total		$ 112

8. Contingent Liabilities

In the normal course of its operations, the Office of the Privacy Commissioner of Canada may become involved in various legal actions. Some of these legal actions may result in actual liabilities. To the extent that the future event is likely to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded in the financial statements. No contingent liabilities are recognized in the financial statements for the fiscal year ended March 31, 2005.

9. Related Party Transactions

The Office is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. The Office enters into transactions with these entities in the normal course of business. During the year, the Office expensed $3,382,383 (2004 - $3,172,478) from transactions with other government departments, agencies and Crown corporations. These expenses include services provided without charge of $1,410,483 as described in Note 10.

10. Services Provided Without Charge

During the year, the Office received various services that were provided without charge from other government departments and agencies, estimated at $1,410,483. These services include:

(thousands of dollars)			2005	2004
Accommodations provided by Public Works and Government Services Canada			$ 704	$ 647
Contributions covering employer's share of employees' insurance premiums and expenditures paid by Treasury Board Secretariat			528	538
Payroll services provided by Public Works and Government Services Canada			3	3
Employee Benefit Plan adjustment absorbed by Treasury Board Secretariat			-	64
Audit services provided by the Office of the Auditor General of Canada			175	180
Total			$ 1,410	$ 1,432

11. Pension Benefits

The Office of the Privacy Commissioner of Canada and all eligible employees contribute to the Public Service Pension Plan. This pension plan provides benefits based on years of service and average earnings at retirement. The benefits are fully indexed to the increase in the Consumer Price Index. The Office's and employees' contributions to the Public Service Pension Plan for the year were as follows:

(thousands of dollars)		2005	2004
	Office's contributions	$ 872	$ 927
	Employee's contributions	$ 334	$ 351

12. Accumulated Deficit

Accumulated deficit represents liabilities incurred by the Office, net of capital assets, which have not yet been funded through appropriations. Significant components of this amount are employee severance benefits and vacation pay liabilities. These amounts are expected to be funded by appropriations in future years as they are paid.

13. Comparative Figures

Certain comparative figures have been reclassified to conform to the presentation adopted in 2005.