PPSC Financial Statements 2014–2015

Office of the Director of Public Prosecutions

Financial Statements

Statement of Management Responsibility Including Internal Control over Financial Reporting 2014-15

Reporting responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2015, 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 controls, and to make any necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 2015 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 are included as part of internal audit staff's risk-based approach to evaluate and improve the effectiveness of risk management, control and governance processes and supported by the Departmental Audit Committee, which oversees management responsibilities for maintaining control systems and the quality of financial reporting, and, which recommends the financial statements to the Director of Public Prosecution Services.

The financial statements of the ODPP have not been audited.

Original version was signed by Brian Saunders and Lucie Bourcier



___________________________
Brian Saunders, Q.C.
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)
  2015 2014
Restated
(Note 13)
Liabilities
Accounts payable and accrued liabilities (note 4) 25,355 21,511
Employee future benefits (note 5) 8,250 6,100
Vacation pay and compensatory leave 4,499 4,363
Total liabilities 38,104 31,974
Financial assets
Due from the Consolidated Revenue Fund 21,627 17,756
Accounts receivable and advances (note 6) 4,157 8,971
Total gross financial assets 25,784 26,727
Financial assets held on behalf of Government
Accounts receivable and advances (note 6) (378) (174)
Total financial assets held on behalf of Government (378) (174)
Total net financial assets 25,406 26,553
Departmental net debt 12,698 5,421
Non-financial assets
Prepaid expenses - -
Tangible capital assets (note 7) 13,098 12,894
Total non-financial assets 13,098 12,894
Deparmental net financial position 400 7,473

Contingent liabilities (note 8)

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

Original version was signed by Brian Saunders and Lucie Bourcier



___________________________
Brian Saunders, Q.C.
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)
  2015
Planned
Results
2015 2014
Restated
(Note 13)
Expenses
Drug, Criminal Code and terrorism prosecution program 137,435 139,871 139,148
Regulatory offences and economic crime prosecution program 37,482 38,146 37,949
Compliance (Commissioner of Canada Elections) - 1,306 -
Enforcement (Commissioner of Canada Elections) - 489 -
Internal services 33,317 33,908 33,733
Total expenses 208,234 213,720 210,830
Revenues
Prosecution Services 22,742 21,431 22,911
Fines, forfeitures and court costsTable note * 1,300 902 868
Rent from residential housing provided to employeesTable note * 500 498 498
OtherTable note * 30 90 15
Revenues earned on behalf of Government (1,830) (1,490) (1,381)
Total revenues 22,742 21,431 22,911
Net cost of operations before government funding and transfers 185,492 192,289 187,919
Government funding and transfers
Net cash provided by Government - 164,164 181,490
Change in due from Consolidated Revenue Fund - 3,871 808
Services provided without charge by other government departments (note 9) - 21,050 19,994
Transfer of tangible capital assets from (to) other government departments - - 3
Transfer of the transition payments for implementing salary payments in arrears (note 10) - (3,869) -
Net cost of operations after government funding and transfers - 7,073 (14,376)
Departmental net financial position - Beginning of year - 7,473 (6,903)
Departmental net financial position - End of year - 400 7,473

Segmented information (note 12)

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

Statement of Change in Departmental Net Debt (Unaudited)

For the year ended March 31
(in thousands of dollars)
  2015
Planned
Results
2015 2014
Restated
(Note 13)
Net cost of operations after government funding and transfers - 7,073 (14,376)
Change due to tangible capital assets
Acquisition of tangible capital assets (note 7) - 2,841 6,156
Amortization of tangible capital assets (note 7) - (2,637) (2,225)
Transfer of tangible capital assets from/to other government departments - - 3
Total change due to tangible capital assets - 204 3,934
Net increase (decrease) in departmental net debt - 7,277 (10,442)
Departmental net debt - Beginning of year - 5,421 15,863
Departmental net debt - End of year - 12,698 5,421

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

Statement of Cash Flows (Unaudited)

For the year ended March 31
(in thousands of dollars)
  2015 2014
Restated
(Note 13)
Operating activities
Net cost of operations before government funding and transfers 192,289 187,919
Non-cash items:
Amortization of tangible capital assets (note 7) (2,637) (2,225)
Services provided without charge by other government departments (note 9) (21,050) (19,994)
Transition payments for implementing salary payments in arrears (note 10) 3,869 -
Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and accountable advances (5,019) (2,889)
Decrease (increase) in accounts payable and accrued liabilities (3,844) 1,596
Decrease (increase) in vacation pay and compensatory leave (136) 213
Decrease (increase) in employee future benefits (2,149) 10,714
Cash used in operating activities 161,323 175,334
Capital investing activities
Acquisitions of tangible capital assets (note 7) 2,841 6,156
Cash used in capital investing activities 2,841 6,156
Net cash provided by Government of Canada 164,164 181,490

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

Notes to the Financial Statements (Unaudited)

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. The ODPP took over the duties of the former Federal Prosecution Service within the Department of Justice.

On October 1, 2014, by virtue of the coming into force of amendments to the Canada Elections Act, the Office of the Commissioner of the Canada Elections (OCCE) was transferred from Elections Canada to the ODPP. The Commissioner and the Director exercise their respective statutory duties independently from each other, even while operating within the same organization.

The ODPP has two strategic outcomes and four program activities in addition to internal services:

Strategic Outcome: Criminal and regulatory offences under federal law are prosecuted in an independent, impartial and fair manner.

Strategic Outcome: Compliance and enforcement activities under the Canada Elections Act and Referendum Act are conducted by the Commissioner of Canada Elections in an independent, impartial and fair manner.

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 ODPP is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the ODPP 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 "Expenses" and "Revenues" sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2014-15 Report on Plans and Priorities. Planned results are not presented in the "Government funding and transfers" section of the Statement of Operations and Departmental Net Financial Position and the Statement of Change in Departmental Net Debt because these amounts were not included in the 2014-15 Report on Plans and Priorities.

(b) Net cash provided by Government

The ODPP 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 ODPP 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) Due from/to the 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 ODPP is entitled to draw from the CRF without further appropriations to discharge its liabilities.

(d) Revenues

(e) Expenses

Expenses are recorded on the accrual basis:

(f) Employee future benefits

(g) 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.

(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 are recorded at their acquisition cost according to the table below. The ODPP 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 the remaining term of lease or useful life of the improvement

(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 ODPP 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 future years. Accordingly, the ODPP 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)
  2015 2014
Restated
(Note 13)
Net cost of operations before government funding and transfers 192,289 187,919
Adjustments for items affecting net cost of operations but not affecting authorities:
Services provided without charge by other government departments (21,050) (19,994)
Amortization of tangible capital assets (2,637) (2,225)
Decrease (increase) in employee future benefits (2,149) 10,714
Decrease (increase) in vacation pay and compensatory leave (136) 213
Employee benefits plan (EBP) 2,219 2,373
Refunds and reversals of previous year expenses 76 138
Bad debt expense (75) -
  (23,752) (8,781)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets 2,841 6,156
Transition payments for implementing salary payments in arrears 3,869 -
  6,710 6,156
Current year authorities used 175,247 185,294

(b) Authorities provided and used

(in thousands of dollars)
  2015 2014
Authorities provided:
Vote 1 - Program expenditures 157,419 172,337
Statutory amounts 19,259 17,672
Total authorities provided 176,678 190,009
Lapsed: Operating (1,431) (4,715)
Current year authorities used 175,247 185,294

4. Accounts payable and accrued liabilities

The following table presents details of the ODPP’s accounts payable and accrued liabilities:

(in thousands of dollars)
  2015 2014
Accounts payable - Other government departments and agencies 571 1,007
Accounts payable - External parties 19,300 19,404
Total accounts payable 19,871 20,411
Accrued liabilities 5,484 1,100
Total accounts payable and accrued liabilities 25,355 21,511

5. Employee future benefits

(a) Pension benefits

The ODPP's employees participate in the Public Service Pension Plan (the "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/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and the ODPP contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into groups - Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2014-15 expense amounts to $11,528,894 ($12,413,512 in 2013-14). For Group 1 members, the expense represents approximatelly 1.41 times (1.6 times for 2013–2014) the employee contributions and, for Group 2 members, approximately 1.39 times (1.5 times for 2013-14) the employee contributions.

The ODPP'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 ODPP 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 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)
  2015 2014
Accrued benefit obligation, beginning of year 6,100 16,814
Expense for the year 2,834 (1,162)
Benefits paid during the year (684) (9,552)
Accrued benefit obligation, end of year 8,250 6,100

6. Accounts receivable and advances

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

(in thousands of dollars)
  2015 2014
Restated
(Note 13)
Receivables - Other government departments and agencies 4,000 8,701
Receivables - External parties 229 267
Employee advances 3 3
Gross accounts receivable and advances 4,232 8,971
Less: Allowances for doubtful accounts on external receivables (75) -
Net accounts receivable and advances 4,157 8,971
Accounts receivable held on behalf of Government (378) (174)
Total net accounts receivable and advances 3,779 8,797

7. Tangible capital assets

Cost
(in thousands of dollars)
Capital asset class Opening Balance Acquisitions Disposals and transfers Closing Balance
Informatics hardware 2,783 520 - 3,303
Informatics software 1,040 243 - 1,283
Furniture and furnishings 4,733 275 - 5,008
Motor vehicles 117 46 - 163
Leasehold improvements 11,764 1,757 - 13,521
Total Cost 20,437 2,841 - 23,278


Accumulated amortization
(in thousands of dollars)
Capital asset class Opening Balance Amortization Disposals and transfers Closing Balance
Informatics hardware 2,023 266 - 2,289
Informatics software 936 17 - 953
Furniture and furnishings 1,555 469 - 2,024
Motor vehicles 84 28 - 112
Leasehold improvements 2,945 1,857 - 4,802
Total accumulated amortization 7,543 2,637 - 10,180


Net book value
(in thousands of dollars)
Capital asset class 2014 2015
Informatics hardware 760 1,014
Informatics software 104 330
Furniture and furnishings 3,178 2,984
Motor vehicles 33 51
Leasehold improvements 8,819 8,719
Total net book value 12,894 13,098

8. Contingent liabilities

Claims have been made against the Office in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The ODPP 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 of approximately $11,650,000 ($11,270,000 at March 31, 2014) at March 31, 2015 are not determinable.

9. Related party transactions

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

(in thousands of dollars)
  2015 2014
Accommodation 13,432 12,547
Employer's contribution to the health and dental insurance plans 7,618 7,447
Total services provided without charge 21,050 19,994

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services Canada are not included in the Statement of Operations.

(b) Common services provided without charge to other government departments

During the year, the ODPP provided services without charge to other government departments, related to the provision of legal services, in the amount of $10,084,340 ($10,097,085 in 2013-14).

(c) Other transactions with related parties

(in thousands of dollars)
  2015 2014
Expenses - Other Government departments and agencies 23,640 28,220
Revenues - Other Government departments and agencies 22,193 23,660

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

10. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-15. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay process. This charge to the pay system had no impact on the expenses of the ODPP. However, it did result in the use of additional spending authorities by the ODPP. Prior to year end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Works and Government Services Canada, who is responsible for the administration of the Government pay system.

11. Transferred operations

On October 1, 2014, by virtue of the adoption of an Order in Council providing for the coming into force of amendments to the Canada Elections Act, the Office of the Commissioner of Canada Elections (OCCE) was transferred from Elections Canada to the ODPP. The OCCE is responsible for ensuring that the Canada Elections Act and the federal Referendum Act are complied with and enforced. The transferred expenses amounted to $30,674. These expenses are recorded in these financial statements. No assets or liabilities were transferred as part of this restructuring.

12. 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 offences and economic crime prosecution program Compliance Enforcement Internal services 2015 2014
Expenses
Salaries and employee benefits 88,143 24,039 720 477 21,368 134,747 127,747
Professional and special services - Counsel fees 28,253 7,706 2 - 6,849 42,810 45,161
Accommodation 9,631 2,627 113 - 2,335 14,706 13,641
Professional and special services- Other 4,074 1,110 349 8 990 6,531 7,929
Travel and relocation 4,314 1,177 32 1 1,046 6,570 6,052
Amortization of tangible capital assets 1,669 491 - - 477 2,637 2,225
Utilities, materials and supplies 1,368 373 15 3 330 2,089 2,338
Communication 1,196 326 9 - 290 1,821 3,744
Information 461 126 14 - 113 714 837
Rental 233 63 21 - 56 373 528
Machinery and equipment 160 44 31 - 39 274 373
Repairs and Maintenance 131 35 - - 32 198 281
Claims and ex-gratia payments 185 - - - - 185 -
Bad debts 46 29 - - - 75 -
Other 7 - - - (17) (10) (26)
Total expenses 139,871 38,146 1,306 489 33,908 213,720 210,830
Revenues
Prosecution Services - 21,241 - - 190 21,431 22,911
Fines, forfeitures and court cost 8 1 - - 893 902 868
Rent from residential housing provided to employees 498 - - - - 498 498
Other 58 - - - 32 90 15
Revenues earned on behalf of Government (564) (1) - - (925) (1,490) (1,381)
Total revenues - 21,241 - - 190 21,431 22,911
Net cost of operations 139,871 16,905 1,306 489 33,718 192,289 187,919

13. Adjustments to Prior Year's Results

During 2014-15 the ODPP has reviewed its financial reporting method and some of the assets should have been reported differently in financial statements. The changes to the ODPP's financial statements has been applied retroactively, and comparative information for 2013-14 has been restated.

The following table presents the effect of the prior year's results adjustments:

(in thousands of dollars)
  2014 Effect of the adjustments 2014
Restated
Statement of Financial Position
Due from the Consolidated Revenue Fund 12,821 4,935 17,756
Financial assets held on behalf of Government (6,848) 6,674 (174)
Total net financial assets 14,944 11,609 26,553
Departmental net debt 17,030 (11,609) 5,421
Departmental net financial position (4,136) 11,609 7,473
Statement of Operations and Net Financial Position
Net cash provided by Government 180,810 680 181,490
Change in due from Consolidated Revenue Fund 1,136 (328) 808
Net cost of operations after government funding and transfers  (14,024) (352) (14,376)
Departmental net financial position - beginning of the year (18,160) 11,257 (6,903)
Departmental net financial position - end of the year (4,136) 11,609 7,473
Statement of Change in Net Debt
Net cost of operations after government funding and transfers  (14,024) (352) (14,376)
Net increase (decrease) in departmental net debt (10,090) (352) (10,442)
Departmental net debt - beginning of the year 27,120 (11,257) 15,863
Departmental net debt - end of the year 17,030 (11,609) 5,421
Statement of Cash Flows
Decrease in accounts receivable and accountable advances (3,569) 680 (2,889)
Cash used in operating activities 174,654 680 175,334
Net cash provided by Government of Canada 180,810 680 181,490

14. Comparative information

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

Annex – Assessment of Internal Control over Financial Reporting

Note to the reader

In accordance with the Treasury Board Policy on Internal Control, departments are required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR).

Under 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 Statements of Management Responsibility a summary of their assessment results and action plan.

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

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

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 the effectiveness of associated controls and to adjust, as required, as well as to monitor the system in support of continuous improvement. As a result, the scope, pace and status of those departmental assessments of the effectiveness of their system of ICFR will vary from one organization to another 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 (ICFR) for the Fiscal Year 2014-15 of the Office of the Director of Public Prosecutions (ODPP), also known as the Public Prosecution Service of Canada (PPSC). This document provides summary information on the measures taken by the ODPP to maintain an effective system of ICFR, including information on internal control management, assessment results and related action plans.

1.1 Authority, Mandate and Program Activities

Detailed information on the authority, mandate and program activities can be found in the 2014-15 Department Performance Report and the 2014-15 Report on Plans and Priorities for the Public Prosecution Service of Canada.

2. ODPP’s system of internal control over financial reporting

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 well managed through a responsive and risk-based control environment that enables continuous improvement and innovation.

2.1 Internal control management

The Deputy Head has approved a governance and accountability structure to support the assessment efforts and oversight of its system of internal control. It includes:

2.2 Service arrangements relevant to financial statements

The ODPP relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:

Common Arrangements
Specific Arrangements
Service Arrangements where the ODPP is the common or specific service provider

3. ODPP’s assessment results during fiscal year 2014-15

During 2014-15, the ODPP progressed substantially with the implementation of the policy on internal control. Most design effectiveness weaknesses remaining from previous years have been addressed. However, due to a realignment of financial functions, major business processes have to be reassessed. Consequently, the design effectiveness will need to be re-evaluated before we fully examine the operating effectiveness and implement the ongoing monitoring.

3.1 Design effectiveness remediation of key controls

In 2014-15, the ODPP completed the remedial actions identified at the design effectiveness phase. The following table provides a summary of the key controls that have been addressed:

Key Control Areas Completed Activities
Entity Level Controls
  • Control Environment
  • Updated Corporate Counsel’s Intranet, developed and provided mandatory training to strengthen values and ethics;
  • Created an internal disclosure of wrongdoing protocol to manage the disclosure of wrongdoings;
  • Implemented succession planning.
Process level controls
  • Procurement, Payables and Payment
  • Strengthened the process of receipt of goods and FAA Section 34 accounting verification review;
  • Discussed solutions for the implementation of a material tracking system for moveable capital assets;
  • Reviewed the validation of vendor information creation.

3.2 Other design effectiveness activities re-evaluated

During the course of fiscal year 2014-15, the ODPP undertook to re-evaluate the design effectiveness of the following processes. Thus far, no significant deficiencies have been identified.

Control Areas Completed Activities
Process Level Controls
  • Procurement, Payables and Payment
  • Focused on major payable and travel processes,
  • Completed flowcharts and narratives,
  • Confirmed processes with sampled transactions,
  • Developed tools to improve recorded documentation,
  • Analysed results in order to provide recommendations.
  • Payroll and Benefits
  • Evaluated all payroll and benefits processes,
  • Completed flowcharts and narratives,
  • Confirmed processes with sampled transactions,
  • Developed tools to improve recorded documentation,
  • Analysed results in order to provide recommendations,
  • Communicated relevant information to business process owners and management.
  • Financial Close and Reporting
  • Collected and reviewed documentation related to financial statements, public accounts, yearend accounting entries;
  • Analysed the impact of yearend accounting entries over financial statements.

3.3 Operating effectiveness testing of key controls

During fiscal year 2014-15, the ODPP has started performing operating effectiveness testing. The testing is ongoing and will continue during 2015-16. Thus far, no significant deficiencies have been identified.

Key Control Areas Completed Activities
Payroll and Benefits
  • Tested transactions and recommended changes in lieu of the transfer of payroll administration to Miramichi and the implementation of the new payroll system and processes in fiscal year 2015-16;
  • Analysed, verified and re-performed sampled transactions.

3.4 On-going monitoring of key controls

During fiscal year 2014-15, the ODPP did not conduct any monitoring of key controls. This phase will be carried as per the action plan.

4. ODPP’s action plan

The ODPP takes a risk-based approach to correct significant control deficiencies. It should be noted the ODPP accepts that certain corrective actions may require a reasonable amount of time to complete due to the level of complexity and/or effort. For low risk items, management may choose to accept the stated risk, with no further corrective action being undertaken. All remediation actions are tracked through management action plans (MAPs) which are regularly monitored and reported to senior management and the Departmental Audit Committee.

4.1 Action plan for subsequent fiscal years

During 2015-16, the ODPP will continue to make progress in assessing key internal controls and implementing remedial actions of all significant gaps identified to maintain an effective system of ICFR. The following actions will be taken:

Key Control Areas Design effectiveness testing and remediation Operational effectiveness testing and remediation On-going monitoring rotation
Entity Level Controls Complete 2015-16 Future years
IT General Controls under Departmental Management 2015-16 2015-16 Future years
Payroll and Benefits Complete for old process
(old pay system)
Complete for old process
(old pay system)
Future years
New process *
(new pay system)
2016-17
Procurement, Payables and Payment Complete 2015-16 Future years
Revenue and Accounts Receivables Complete 2015-16 Future years
Financial Close and Reporting Complete 2015-16 Future years

* Pending transfer of payroll services to Miramichi in 2015-16 and the new payroll system implementation

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