Financial Statements 2011-12

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 2012, and the statement of operations and net financial position, statement of change in net debt 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 2012
  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 of Linguistic Rights 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 of Linguistic Duality 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. Summary of significant accounting policies

These financial statements have been prepared using the Treasury Board'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:

1. Parliamentary authorities

   OCOL is financed by the Government of Canada through parliamentary authorities. Financial reporting of authorities provided to OCOL 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 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 Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2011–12 Report on Plans and Priorities.

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 to discharge its liabilities.

4. 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.
   • Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, payroll services and audit services are recorded as operating expenses at their estimated cost.

5. 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. OCOL's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. 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: 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 whole.

6. Accounts receivable

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

7. Contingent liabilities

   Contingent liabilities are potential liabilities that 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 if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

8. 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 intangible assets.

   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

9. Measurement uncertainty

   The preparation of these financial statements 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 future 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

OCOL receives its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Net Financial Position 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. Accounts payable and accrued liabilities

The following table presents details of OCOL's accounts payable and accrued liabilities:

5. Employee future benefits

1. Pension benefits

   OCOL'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 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 2011–12 expense amounts to $1,633,686 ($1,561,957 in 2010–11), which represents approximately 1.8 times (1.9 times in 2010–11) 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 salary at termination of employment. 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 2011–12. 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.

   Severance benefits
   (in dollars)

   	2012	2011
   Accrued benefit obligation - Beginning of year	3,112,185	2,913,346
   Expense for the year	303,107	389,907
   Benefits paid during the year	(1,903,281)	(191,068)
   Accrued benefit obligation - End of year	1,512,011	3,112,185

6. Accounts receivable and advances

The following table presents details of OCOL's accounts receivable and advances balances:

7. Tangible capital assets

Amortization expense for the year ended March 31, 2012 was $624,992 ($775,658 in 2011).

8. 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 $700,000, including a fee of 20% for administration costs, and is payable under the plan by OCOL to HRSDC. The 2011–12 expense in relation to this claim amounts to $44,171 ($43,142 in 2010–11). It is estimated that HRSDC will bill OCOL $223,000 over the next five years.

9. 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, 2012.

10. Related party transactions

OCOL is related as a result of common ownership to all government departments, agencies, and Crown corporations. OCOL enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, OCOL received common services which were obtained without charge from other government departments as disclosed below.

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, payroll services and audit services. These services provided without charge have been recorded in OCOL's Statement of Operations and Net Financial Position as follows:

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

   	2012	2011
   Accommodation	1,775,377	1,752,052
   Employer's contribution to the health and dental insurance plans	1,318,830	1,129,490
   Audit services	98,000	118,000
   Payroll services	8,600	9,500
   Total	3,200,807	3,009,042

2. Other transactions with related parties

   Other transactions with related parties (in dollars)

   	2012	2011
   Accounts receivable - Other government departments and agencies	138,432	90,007
   Accounts payable - Other government departments and agencies	63,703	74,009
   Expenses - Other government departments and agencies	3,176,719	3,066,414

Expenses disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).

11. 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:

12. Accounting changes

During 2011–12, 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 OCOL'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, OCOL now presents a Statement of Change in Net Debt and no longer presents a Statement of Equity.

Government funding, as well as the credit related to services provided without charge by other government departments, are now recognized in the Statement of Operations and Net Financial Position below “Net cost of operations before government funding”. In previous years, OCOL 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 by $25,550,163 for 2011–12 ($24,440,212 for 2010–11).

13. Comparative information

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