Financial Statements 2010-11

Report on the Financial Statements

I have audited the accompanying financial statements of the Office of the Commissioner of Official Languages, which comprise the statement of financial position as at 31 March 2011, and the statement of operations, statement of equity of Canada and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Report on Other Legal and Regulatory Requirements

In my opinion, the transactions of the Office of the Commissioner of Official Languages 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 Official Languages Act.

  25 July 2011
  Ottawa, Canada

1. Authority and Objectives

The Parliament of Canada adopted the first Official Languages Act in 1969. This Act provided that English and French would henceforth have “equality of status and equal rights and privileges as to their use in all the institutions of the Parliament and Government of Canada.”

A new Official Languages Act came into force in 1988 and was amended on November 25, 2005. The Act sets out three basic objectives of the Government of Canada:

1. ensure respect for English and French as official languages of Canada, and ensure equality of status and equal rights and privileges as to their use in all federal institutions;
2. set out the powers, duties and functions of federal institutions with respect to the official languages of Canada;
3. support the development of English and French linguistic minority communities and generally advance the equality of status and use of the English and French languages within Canadian society.

The Office of the Commissioner of Official Languages (OCOL), which serves the public from its offices in Ottawa and its five regional offices, supports the Commissioner of Official Languages in fulfilling his mandate. The mandate of the Commissioner consists of taking all necessary measures to ensure recognition of the status of each of the official languages and compliance with the letter and the spirit of the Official Languages Act in the administration of the affairs of federal institutions, including any of their activities relating to the advancement of English and French in Canadian society.

OCOL has three program activities which are described below:

Through the Protection Through Compliance Assurance activity, OCOL investigates complaints filed by citizens who believe their language rights have not been respected, evaluates compliance with the Official Languages Act by federal institutions and other organizations subject to the Act through performance measurements and audits, and intervenes proactively to prevent non-compliance with the Act. As well, OCOL may intervene before the courts in cases that deal with non-compliance with the Act.

Through the Promotion Through Policy and Communications activity, OCOL works with parliamentarians, federal institutions and other organizations subject to the Official Languages Act, official language communities and the Canadian public in promoting linguistic duality. OCOL builds links between federal institutions, official language communities and the different levels of government to help them better understand the needs of official language communities, the importance of bilingualism and the value of respecting Canada's linguistic duality. In order to fulfill its promotion role, OCOL conducts research, studies and public awareness activities as well as intervenes with senior federal officials so that they instil a change in culture to fully integrate linguistic duality in their organizations.

The Internal Services activity involves groups of related activities and resources that are administered to support the needs of the organization's programs and other corporate obligations. It includes Management and Oversight Services, Human Resources Management Services, Financial Management Services, Information Management Services, Information Technology Services, Real Property Services, Materiel Services, Acquisition Services, Travel Management Services and Other Administrative Services.

OCOL is named in Schedule I.1 of the Financial Administration Act (FAA) and is funded through annual authorities.

The Commissioner of Official Languages is appointed after approval of the appointment by resolution of the Senate and the House of Commons for a seven-year term (renewable). The Commissioner reports directly to Parliament.

2. Significant Accounting Policies

These financial statements have been prepared in accordance with the Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accounting principles, except as disclosed in Note 11 – Net Debt Indicator.

Significant accounting policies are as follows:

1. Parliamentary authorities

   OCOL is funded through annual parliamentary authorities. Financial reporting of authorities provided to OCOL do not parallel financial reporting according to Canadian generally accepted accounting principles since authorities 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 authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting.

2. Net cash provided by Government

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

3. Due from the Consolidated Revenue Fund (CRF)

   Amounts due from 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 OCOL is entitled to draw from the CRF without further authorities in order to discharge its liabilities.

4. Accounts receivable

   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.

5. Tangible capital assets

   All tangible capital assets and leasehold improvements having an initial cost of $1,000 or more are recorded at their acquisition cost. OCOL does not capitalize intangibles.

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

   Asset Class	Amortization Period
   Machinery and equipment	5 years
   Informatics hardware	4 years
   Furniture	5 years
   Informatics software	3 years
   Motor vehicles	7 years
   Leasehold improvements	Lesser of the remaining term of the lease or the useful life of the improvement

6. Expenses

   Expenses are recorded on the accrual basis.

   1. Vacation pay and compensatory leave

      Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

   2. Services provided without charge by other government departments

      Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans, audit and payroll services are recorded as operating expenses at their estimated cost.

   3. Workers' compensation benefits

      The Government of Canada sponsors workers' compensation benefits available across Canada. OCOL is charged for its share of the annual benefit payments incurred under this Plan. These amounts represent OCOL's contribution to the Plan and they are recorded by OCOL as an expense in the period incurred.

7. Employee future benefits

   1. Pension benefits

      Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government of Canada. OCOL's contributions to the Plan are charged to expenses in the year incurred and represent the total pension obligation of OCOL to the Plan. Current legislation does not require OCOL to make contributions with respect to any actuarial deficiencies of the Plan.

   2. Severance benefits

      Employees are entitled to severance benefits, as provided for under labour contracts or conditions of employment. The cost of these benefits is 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.

8. 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.

9. 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 in determining the expected useful life of tangible capital assets and in determining the liability for employee severance benefits. 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

OCOL receives its funding through annual Parliamentary authorities. Items recognized in the Statement of Operations and the Statement of Financial Position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, OCOL 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:

4. Tangible Capital Assets

Amortization expense for the year ended March 31, 2011 is $775,658 (2010 - $769,381).

5. Accounts Payable and Accrued Liabilities

6. Employee Future Benefits

1. Pension benefits

   OCOL'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 Plan benefits and they are indexed to inflation.

   Both the employees and OCOL contribute to the cost of the Plan. The 2010-11 expense amounts to $1,561,957 ($1,665,868 in 2009-10), which represents approximately 1.9 times (1.9 times in 2009-10) the contributions by employees.

   OCOL'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.

2. Severance benefits

   OCOL 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 authorities. Information about the severance benefits, estimated as at March 31, is as follows:

   Severance benefits
   (in dollars)

   	2011	2010
   Accrued benefit obligation, beginning of year	2,913,346	2,978,330
   Expense for the year	389,907	203,962
   Benefits paid during the year	(191,068)	(268,946)
   Accrued benefit obligation, end of year	3,112,185	2,913,346

7. Related Party Transactions

OCOL is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. OCOL enters into transactions with these entities in the normal course of business and on normal trade terms.

1. Common services provided without charge by other government departments

   During the year, OCOL received services without charge from certain common service organizations, related to accommodation, the employer's contribution to the health and dental insurance plans, audit and payroll services. These services provided without charge have been recorded in the Statement of Operations as follows:

   Common services provided without charge by other government departments (in dollars)

   	2011	2010
   Accommodation	1,752,052	1,730,473
   Employer's contribution to the health and dental insurance plans	1,129,490	1,164,830
   Audit services	118,000	112,000
   Payroll services	9,500	7,000
   Total	3,009,042	3,014,303

2. Other transactions with related parties

   Other transactions with related parties (in dollars)

   	2011	2010
   Accounts receivable from other government departments	90,007	44,362
   Accounts payable to other government departments	74,009	265,471
   Expenses - Other government departments	2,730,159	2,990,391

8. Contingent Liabilities

In the normal course of its operations, OCOL may become involved in various legal actions. Some of these legal actions may result in actual liabilities when one or more future events occur. To the extent that the future event is likely to occur, and a reasonable estimate of the loss can be made, a liability is accrued and an expense recorded in the financial statements. No contingent liabilities are recognized in OCOL's financial statements for the fiscal year ended March 31, 2011.

9. Contractual Obligations

OCOL has obligations arising in the normal course of operations for future years. These obligations include equipment rental, service contracts, as well as the obligation for workers' compensation death benefits which is explained hereafter.

OCOL employees are covered by workers' compensation benefits across Canada. This plan is managed by Human Resources and Skills Development Canada (HRSDC). As plan manager, HRSDC has authority to charge to OCOL its share of the annual workers' compensation benefit payments incurred under the plan. These amounts are expensed by OCOL and charged to authorities when OCOL becomes liable to HRSDC in the year the amounts are billed.

In April 2002, the death of an employee resulted in the payment of benefits under the workers' compensation death benefit plan. The total cost is expected to be approximately 693,000, including a fee of 20% for administration costs, and is payable under the plan by OCOL to HRSDC, over the 13-year period following the death. The 2010-11 expense in relation to this claim amounts to $43,142 ($42,276 in 2009-10). It is estimated that HRSDC will bill OCOL $261,000 over the next six years.

Significant contractual obligations that can be reasonably estimated are summarized as follows:

10. Segmented Information

Presentation by segment is based on OCOL's program activity architecture as described in note 1 and on the same accounting policies as described in note 2. The following table presents the expenses incurred for the program activities, by major object of expenses. The segment results for the period are as follows:

11. Net Debt Indicator

The presentation of the net debt indicator and a statement of change in net debt is required under Canadian generally accepted accounting principles.

Net debt is the difference between a government's liabilities and its financial assets and is meant to provide a measure of the future revenues required to pay for past transactions and events. A statement of change in net debt would show changes during the period in components such as tangible capital assets, prepaid expenses and inventories. Departments are financed by the Government of Canada through authorities and operate within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by departments is deposited to the CRF and all cash disbursements made by departments are paid by the CRF. Under this government business model, assets reflected on OCOL financial statements, with the exception of the Due from the CRF, are not available to use for the purpose of discharging the existing liabilities of OCOL. Future authorities and any respendable revenues generated by OCOL's operations would be used to discharge existing liabilities.

12. Comparative Information

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