Audited Financial Statements 2008-2009

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Office of the Privacy Commissioner of Canada

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Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2009 and all information contained in these statements rests with the management of the Office of the Privacy Commissioner of Canada. These financial statements have been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

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 fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Office’s financial transactions. Financial information submitted to the Public Accounts of Canada and included in the Office’s Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that the Office’s assets are safeguarded and that transactions are in accordance with the Financial Administration Act, are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by 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 regulations, policies, standards and managerial authorities are understood throughout the Office.

The financial statements of the Office of the Privacy Commissioner of Canada have been audited by the Auditor General of Canada, the independent auditor for the Government of Canada.

Ottawa, Canada
July 17, 2009

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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 31 March 2009 and the statements of operations, equity of Canada 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 31 March 2009 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
17 July 2009

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Statement of Financial Position

OFFICE OF THE PRIVACY COMMISSIONER OF CANADA

As at March 31		2009	2008
(in thousands of dollars)				(Restated, see Note 3)
Assets
Financial assets
	Due from the Consolidated Revenue Fund	3,079		1,364
	Accounts receivable and advances (Note 5)	554		701
	Total financial assets	3,633		2,065
Non-financial assets
	Prepaid expenses	157		57
	Tangible capital assets (Note 6)	1,469		1,161
	Total non-financial assets	1,626		1,218
TOTAL		5,259		3,283
Liabilities and Equity of Canada
Liabilities
	Accounts payable and accrued liabilities	2,700		1,700
	Accrued employee salaries	863		363
	Vacation pay and compensatory leave	561		464
	Employee severance benefits (Note 7)	2,986		1,517
	Total liabilities	7,110		4,044
Equity of Canada (Note 10)		(1,851)		(761)
TOTAL		5,259		3,283
Contractual obligations (Note 8)
The accompanying notes form an integral part of these financial statements.

Ottawa, Canada
July 17, 2009

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Statement of Operations

OFFICE OF THE PRIVACY COMMISSIONER OF CANADA

For the year ended March 31					2009	2008
(in thousands of dollars)						(Restated, see Note 3)
Expenses		Compliance	Public Outreach	Research & policy development	Total	Total
Operating expenses
	Salaries and employee benefits	8,670	3,283	2,927	14,880	10,962
	Professional and special services	3,580	1,099	943	5,622	3,831
	Accommodation	722	312	267	1,301	988
	Transportation and communications	364	282	317	963	909
	Amortization	222	96	82	400	370
	Information	32	540	63	635	412
	Repairs and maintenance	318	137	118	573	274
	Utilities, materials and supplies	86	32	31	149	126
	Rentals	51	19	13	83	64
	Equipment	351	157	130	638	193
	Other	55	24	22	101	4
	Total operating expenses	14,451	5,981	4,913	25,345	18,133
Contributions		-	-	358	358	451
Adjustment to prior years' expenses		(99)	(43)	(87)	(229)	-
Net cost of operations		14,352	5,938	5,184	25,474	18,584
The accompanying notes form an integral part of these financial statements.

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Statement of Equity of Canada

OFFICE OF THE PRIVACY COMMISSIONER OF CANADA

For the year ended March 31		2009	2008
(in thousands of dollars)				(Restated, see Note 3)
Equity of Canada, beginning of the year		(761)		(729)
	Change in accounting policy (Note 3)	-		(245)
Equity of Canada, beginning of the year, restated		(761)		(974)
	Net cost of operations	(25,474)		(18,584)
	Net cash provided by Government (Note 4 (c))	20,337		17,029
	Change in Due from Consolidated Revenue Fund	1,715		61
	Services received without charge from other government departments (Note 9)	2,332		1,707
Equity of Canada, end of the year		(1,851)		(761)
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

For the year ended March 31		2009	2008
(in thousands of dollars)				(Restated, see Note 3)
Operating activities
Net cost of operations		25,474		18,584
Non-cash items:
Amortization of tangible capital assets		(400)		(370)
Services received without charge (Note 9)		(2,332)		(1,707)
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances		(147)		9
Increase in prepaid expenses		100		40
Increase in liabilities		(3,066)		(116)
Cash used by operating activities		19,629		16,440
Capital investment activities
Acquisition of tangible capital assets		708		589
Net cash provided by Government of Canada		20,337		17,029
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 and objectives

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 listed under Schedule I.1 of the Financial Administration 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 sectors;
• conducting research into privacy issues; and
• promoting awareness and understanding of privacy issues by the Canadian public.

2. Summary of significant accounting policies

These financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Due from the Consolidated Revenue Fund
Due from the Consolidated Revenue Fund (CRF) 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.

(b) Parliamentary appropriations
The Office of the Privacy Commissioner of Canada is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the Office do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 4 provides a high-level reconciliation between the bases of reporting.

(c) Net cash provided by Government
The Office operates within the Consolidated Revenue Fund, 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 federal government.

(d) Expenses
Expenses are recorded on the accrual basis:

• Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement.
• Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
• Services received without charge from other government departments are recorded as operating expenses at their estimated cost.

(e) Employee future benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer pension plan administered by the Government of Canada. The Office’s contributions to the Plan are charged to expenses in the year incurred and represent the total obligation of the Office to the Plan. Current legislation does not require the Office to make contributions for any actuarial deficiencies of the Plan.
2. Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. 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.

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

(g) Tangible capital assets
All tangible capital assets and leasehold improvements having an initial cost of $2,500 or more are recorded at their acquisition cost.

The amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

Asset Class	Amortization Period
Machinery and equipment	3 years
Informatics hardware	3 years
Computer software	3 years
Other equipment	10 years
Leasehold improvements	Lesser of useful life or term of the lease

(h) Measurement uncertainty
The preparation of these financial statements in accordance with Treasury Board accounting policies, which are consistent with Canadian generally accepted accounting principles for the public sector, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, 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. Change in accounting policy

In 2008-09, the Office changed its accounting for capital assets. The Office has adopted a policy of capitalizing individual acquisitions having a cost of $2,500 or more. This represents a change, as in prior years, the Office capitalized collections of individual items with a combined invoice value of $2,500 or more. Management believes that this new policy provides more useful information. As a result, certain items previously recorded as capital assets no longer meet policy requirements.

This change was applied retrospectively. Consequently, the comparative financial statements presented for the year ended March 31, 2008 have been restated. The effect of the change is presented in the table below:

(in thousands of dollars)		As previously stated	Effect of the adjustment	Revised amount
Statement of Operations
	Amortization	467	(97)	370
	Equipment	53	140	193
	Total operating expenses	18,090	43	18,133
	Net cost of operations	18,541	43	18,584
Statement of Financial Position
	Tangible capital assets	1,449	(288)	1,161
	Total Assets	3,571	(288)	3,283
	Equity of Canada	(473)	(288)	(761)
	Total Liabilities and Equity of Canada	3,571	(288)	3,283

4. Parliamentary appropriations

The Office receives most of its funding through annual Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations in prior, current or future 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 appropriations used:

(in thousands of dollars)		2009	2008
				(Restated, see Note 3)
Net cost of operations		25,474		18,584
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (Less):
	Services received without charge	(2,332)		(1,707)
	Amortization on tangible capital assets	(400)		(370)
	Previous years' accounts payable	99		78
	Vacation pay and compensatory leave	(97)		(82)
	Employee severance benefits	(1,469)		(53)
	Other	54		51
		21,329		16,501
Adjustments for items not affecting net cost of operations but affecting appropriations:
Add (Less):
	Acquisition of tangible capital assets	708		589
	Change in prepaid expenses	100		40
		808		629
Current year appropriations used		22,137		17,130

(b) Appropriations provided and used:

(in thousands of dollars)		2009		2008
	Vote 45 - Program expenditures	20,703		17,503
	Statutory contributions to employee benefit plans	1,664		1,453
		22,367		18,956
	Lapsed Appropriations: Operating	(230)		(1,826)
Current year appropriations used		22,137		17,130

(c) Reconciliation of net cash provided by Government to current year appropriations used:

(in thousands of dollars)		2009		2008
Net cash provided by Government		20,337		17,029
Variation in accounts receivable and advances		147		(9)
Variation in accounts payable and accrued liabilities		1,000		(96)
Variation in accrued employee salaries		500		77
Other adjustments		153		129
Current year appropriations used		22,137		17,130

5. Accounts receivable and advances

The following table presents details of accounts receivable and advances:

(in thousands of dollars)		2009		2008
Receivables from other Federal Government departments and agencies		465		693
Receivables from external parties		88		7
Employee advances		1		1
		554		701

6. Tangible capital assets

Cost	Opening Balance	Acquisitions	Disposals	Closing Balance
(in thousands of dollars)	(Restated, see Note 3)
Machinery and equipment	-	4	-	4
Informatics hardware	1,652	326	(548)	1,430
Computer software	418	78	(27)	469
Other equipment	831	300	-	1,131
Leasehold improvements	262	-	-	262
	3,163	708	(575)	3,296

Accumulated amortization	Opening Balance	Amortization	Disposals	Closing Balance
(in thousands of dollars)	(Restated, see Note 3)
Machinery and equipment	-	1	-	1
Informatics hardware	1,156	236	(548)	844
Computer software	372	36	(27)	381
Other equipment	390	82	-	472
Leasehold improvements	84	45	-	129
	2,002	400	(575)	1,827

Net book value	Opening Balance	Closing Balance
(in thousands of dollars)	(Restated, see Note 3)
Machinery and equipment	-			3
Informatics hardware	496			586
Computer software	46			88
Other equipment	441			659
Leasehold improvements	178			133
Net book value	1,161			1,469

Amortization expense for the year ended March 31, 2009 was $400,000 ($370,000 in 2008).

7. Employee Benefits

(a) Pension benefits
The Office’s employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. 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 five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation.

Both the employees and the Office contribute to the cost of the Plan. The 2008-09 expense amounts to $1,201,214 ($1,059,315 in 2007-08), which represents approximately 2.0 times (2.1 in 2007-08) 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 final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows:

(in thousands of dollars)		2009		2008
Accrued benefit obligation, beginning of year		1,517		1,464
Expense for the year		1,625		282
Benefits paid during the year		(156)		(229)
Accrued benefit obligation, end of year		2,986		1,517

8. Contractual obligations

The nature of the Office's activities can result in some large multi-year contracts and obligations whereby the Office will be obligated to make future payments when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in thousands of dollars)		2009-10	2010-11	2011-12	2012-13	2013-14
		844	13	5	-	-

9. Related party transactions

The Office is related as a result 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 and on normal trade terms. During the year, the Office expensed $5,347,659 ($4,996,533 in 2008) from transactions with other government departments, agencies and Crown corporations. These expenses include services received without charge in the amount of $2,332,172 ($1,706,775 in 2008), as presented in part (a).

(a) Services received without charge:
During the year, the Office received without charge from other departments, accommodation, the employer’s contribution to the health and dental insurance plans, payroll services, and audit services. These services without charge have been recognized in the Office’s Statement of Operations as follows:

(in thousands of dollars)		2009		2008
Accommodations provided by Public Works and Government Services Canada		1,299		980
Contributions covering employer’s share of employees’ insurance premiums and expenditures paid by Treasury Board Secretariat		915		611
Payroll services provided by Public Works and Government Services Canada		6		4
Audit services provided by the Office of the Auditor General of Canada		112		112
		2,332		1,707

(b) Payables and receivables outstanding at year-end with related parties:

(in thousands of dollars)		2009		2008
Accounts receivable with other government departments and agencies		465		693
Accounts payable to other government departments and agencies		215		429

10. Equity of Canada

The Equity of Canada, which is currently in a deficit position, represents liabilities incurred by the Office, net of capital tangible assets and prepaid expenses, 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.

11. Comparative information

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