Appendix B - Financial Statements of the Office of the Secretary to the Governor General

Financial Statements of the
Office of the Secretary to the Governor General

For the Year Ended March 31, 2005

Office of the Secretary to the Governor General
Management's Responsibility for the Financial Statements

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2005, and all information contained in this report rests with the management of the Office of the Secretary to the Governor General.

These statements, which include amounts based on management's best estimates as determined through experience and judgment, have been prepared in accordance with Treasury Board Accounting Standards based upon generally accepted accounting principles in Canada. Readers of these statements are cautioned that the financial statements are not necessarily complete; certain liabilities and expenses are only recorded at a government-wide level at this time. These statements should be read within the context of the significant accounting policies set out in the Notes.

Management has developed and maintains books, records, internal controls and management practices, designed to provide reasonable assurance that the government's assets are safeguarded and controlled, resources are managed economically and efficiently in the attainment of corporate objectives, and transactions are in accordance with the Financial Administration Act and regulations as well as with the policies and statutory requirements of the Office of the Secretary to the Governor General.

_____________________________
Barbara Uteck
Secretary to the Governor General
and Herald Chancellor

_____________________________
JoAnn MacKenzie
Director General, Corporate Services

Statement of Financial Position (unaudited)
Statement of Operations and Net Liabilities (unaudited)
Statement of Cash Flows (unaudited)
Notes to the Financial Statements (unaudited)

Statement of Financial Position (unaudited)

As at March 31
(dollars)

	2005	2004
ASSETS
Financial assets:
Cash	9,512	22,273
Accounts receivable (note 3)	163,830	11,333
Gift shop inventory	66,780	71,805
	240,122	105,411
Non-financial assets:
Medals and official gifts	569,749	632,411
Capital assets (note 4)	457,594	451,131
	1,027,343	1,083,542
TOTAL ASSETS	1,267,465	1,188,953
LIABILITIES
Accounts payable and accrued liabilities (note 3)	568,384	279,005
Accrued salaries and benefits	1,597,189	1,096,952
Deferred revenue (note 5)	4,450	18,530
TOTAL LIABILITIES	2,170,023	1,394,487
NET LIABILITIES	902,558	205,534
TOTAL	1,267,465	1,188,953

Contingencies (note 7)

The accompanying notes are an integral part of these financial statements

Statement of Operations and Net Liabilities (unaudited)

For the year ended March 31
(dollars)

	2005			2004
	Revenues Note 6	Expenses Note 6	Net Cost	Revenues Note 6	Expenses Note 6	Net Cost
Business Line
Governor General	171,880	14,417,680	14,245,800	132,878	15,083,315	14,950,437
Honours	25,999	3,421,301	3,395,302	15,896	3,489,805	3,473,909
Former Governors General		568,954	568,954		773,225	773,225
Total	197,879	18,407,935	18,210,056	148,774	19,346,345	19,197,571
Net liabilities, April 1			205,534			856,234
Net cash provided by Government			17,513,032			19,848,271
Net liabilities, March 31			902,558			205,534

The accompanying notes are an integral part of these financial statements.

Statement of Cash Flows (unaudited)

(dollars)
For the year ended March 31
(dollars)

	2005	2004
Operating transactions
Net cost of operations	18,210,056	19,197,571
Adjustments for items not affecting cash Statement of Operations
Amortization of capital assets	(162,310)	(113,648)
Gain on disposal of capital assets	-	6,000
Statement of Financial Position
Decrease (increase) in liabilities	(775,536)	574,704
Increase (decrease) in assets other than capital assets	72,049	41,696
Cash applied to operating transactions	17,344,259	19,700,323

Capital transactions
Acquisitions of capital assets	168,773	147,948
Sale of capital assets	-	-
Cash applied to capital transactions	168,773	147,948
Net Cash Provided by Government	17,513,032	19,848,271

Notes to the Financial Statements (unaudited)

For the year ended March 31, 2004

1. Authority and Objectives

The Office of the Secretary to the Governor General (OSGG) was constituted through letters patent on October 1, 1947. The OSGG is defined as an agency by virtue of being listed in Schedule 1.1 of the Financial Administration Act.

The primary objectives of the OSGG are to enable the governor general to perform his or her constitutional and traditional roles and to provide the administration of Honours. The Office also provides for expenditures in respect of pensions and activities performed by former governors general. To reflect these objectives, the operations of the OSGG are divided into three business lines:

Governor General - provides for the governor general's salary; the costs of the governor general's annual program, including visits in Canada and abroad; the citizen access and visitor services program at Rideau Hall, and the operation of the office and residences;
Honours - provides for the administration of programs in the National Honours System, including the Order of Canada, the Order of Military Merit, Canadian Bravery Decorations, Meritorious Service Decorations, Exemplary Service Medals, Special Service Medals, commemorative and other medals; provides for the administration of the Governor General's Academic Medals and the Governor General's Caring Canadian Awards; and provides for the administration of the Canadian Heraldic Authority; and,
Former Governors General - provides for the activities performed by former governors general, which devolve upon them as a result of their having occupied that office, and the pensions of former governors general or their spouses.

2. Summary of Significant Accounting Policies

(a) Basis of Preparation

These financial statements have been prepared on an accrual basis of accounting in accordance with Treasury Board Accounting Standards. These Standards are based on generally accepted accounting principles in Canada. The primary source of the accounting principles is the recommendations of the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants supplemented by the recommendations of the Accounting Standards Board of the Canadian Institute of Chartered Accountants for situations not covered by the Public Sector Accounting Board. Readers of these statements are cautioned that the introduction of accrual accounting at the departmental level is evolutionary. Not all assets, liabilities and expenses applicable to the OSGG are recorded at the departmental level at this time. Items such as a portion of the Consolidated Revenue Fund, pension fund liabilities, severance pay liabilities, severance pay expenses except for cash payments, and services provided without charge are not recorded. As such, the financial statements are not necessarily complete. However, all such assets, liabilities and expenses are recorded in the financial statements of the Government of Canada. The Notes that follow provide additional detail and should be read with care.

(b) Consolidated Revenue Fund

All departments and agencies, including the OSGG, operate within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash receipts and all cash disbursements made by the OSGG flow through the CRF.

(c) Net Cash Provided by Government

This is the difference between all cash receipts and all cash disbursements, including transactions with other departments made by the OSGG during the year.

(d) Revenue

These are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues. Revenues received but not earned are recorded as deferred revenue and are primarily related to governor general events. They are recorded as revenue when the event is held and related expenditures are incurred.

(e) Expenses

The OSGG records expenses when the underlying transaction or event giving rise to the expense occurred, subject to the following:

Employee severance benefits are expensed as paid; no estimated accruals are recorded; accruals of these benefits are recognized in the consolidated financial statements of the Government of Canada;
Vacation pay and overtime are expensed in the year in which the entitlement occurs;
Contributions to superannuation plans are recognized in the period in which the contributions are made; actuarial surpluses or deficiencies are not recorded in the OSGG's books but are recognized in the consolidated financial statements of the Government of Canada. The OSGG's contribution to the Public Service Superannuation Plan in fiscal year 2004-05 was $1,388,749;
A certain number of federal departments and agencies support the activities of the governor general and the Office as part of their mandate. The level of support and services provided to the Office of the Governor General is determined by each of the contributors and funded out of the budgets of those organizations. The various contributing departments and agencies are responsible for allocating and managing the funds that they provide to support the activities of the governor general and the Office and are subject to Treasury Board guidelines. The amounts spent by the departments and agencies in question do not appear in the accounts of the Office of the Governor General.
The major departments and agencies providing support include: the Solicitor General of Canada (RCMP) for protective/security services; the Department of National Defence for transportation services, ceremonial support, logistical support and photographic services; Foreign Affairs Canada for foreign policy advice and foreign/State visit support; the Department of Canadian Heritage for planning and conduct of State and ceremonial occasions, including royal visits and State funerals; Public Works and Government Services Canada for management of La Citadelle, the Governor General's official residence in Quebec City, and for office accommodation for the Chancellery; and the National Capital Commission for property management services.
Support provided by these government departments and agencies is not recorded as operating expenses by the OSGG at the present time. The information is not currently available to the OSGG and any estimate could not be substantiated with any degree of precision. Contributions covering employer's share of employees' insurance premiums and costs paid by the Treasury Board Secretariat are also not recorded.

(f) Receivables

Receivables are stated at amounts that are expected to be ultimately realized.

(g) Gift Shop Inventory

Gift shop inventory is valued at the lower of cost and net realizable value.

(h) Medals and Official Gifts

Medals for the Order of Canada insignia and other honours, held for distribution in the future, are recorded at original cost.

(i) Capital Assets

All assets treated as capital assets under Public Sector Accounting Board Recommendations plus leasehold improvements, having an initial cost of $5,000 or more, are recorded at their acquisition cost. Only informatics software costs incurred since April 2001 are recorded as capital assets.

Capital assets do not include intangibles, works of art and historical treasures that have cultural, aesthetic or historical value.

The OSGG capitalizes capital assets on a straight-line basis over the estimated useful life of the capital asset as follows:

Asset Class	Amortization Period
Informatics hardware	3 years
Motor vehicles	5 years
Informatics software	7 years

(j) Insurance

The OSGG does not carry insurance since it is the policy of the Government of Canada to self-insure.

(k) Annuity Payments to Former Governors General

Pursuant to provisions contained within the Governor General's Act and the Supplementary Retirement Benefits Act, taxable annuities are paid to: (i) former governors general; and (ii) surviving spouses of former governors general. These annuities are indexed annually to the Consumer Price Index and are recognized in the period in which payment is due. In the 2004-05 fiscal year, such payments amounted to $288,350.

(l) Foreign currency transactions

Transactions involving foreign currencies are translated into Canadian dollar equivalents using rates of exchange in effect at the time of those transactions.

(m) Measurement Uncertainty

The preparation of 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 item where estimates are used is amortization of capital assets.

3. Accounts Receivable and Payables

The accounts receivable and accounts payable with other government departments and unrelated external parties are as follows:

	2005	2004
	(dollars)
Accounts Receivable:
External Parties	10,500	10,500
Other Government Departments	153,330	833
Total	163,830	11,333

Accounts Payable and Accrued Liabilities:
Other Government Departments	137,942	46,376
External Parties	430,442	232,629
Total	568,384	279,005

4. Capital Assets

	Informatics Software	Informatics Hardware	Vehicles	Total

	(dollars)

Opening April 1, 2004
Cost	135,776	477,712	214,860	828,348
Accumulated Amortization	19,397	244,709	113,111	377,217
Net Carrying Cost	116,379	233,003	101,749	451,131
2004-05 transactions
Additions	28,720	140,053	-	168,773
Net Disposals	-	-	-	-
Net write-downs	-	-	-	-
Amortization	19,396	122,451	20,463	162,310
Closing March 31, 2005
Cost	164,496	617,765	214,860	997,121
Accumulated Amortization	38,793	367,160	133,574	539,527
Net Carrying Cost	125,703	250,605	81,286	457,594

5. Deferred Revenue

This account has been established to record gifts, donations or bequests to Rideau Hall from private organizations and individuals to fund specific initiatives.

	2005	2004
	(dollars)
Opening Balance	18,530	4,550
Add: Deposits	-	13,980
Less: Payments	14,080	-
Closing Balance	4,450	18,530

6. Summary of Revenues and Expenses by Major Classification

A summary of revenues and expenses for the year ended March 31 is as follows:

	2005	2004
Revenues	(dollars)
Gift Shop	130,184	103,902
Other	67,695	44,872
Total Expenses	197,879	148,774
Total Expenses
Salaries and employee benefits	13,140,657	12,746,650
Materials and supplies	1,495,100	1,999,720
Other Business Services	643,647	1,112,958
Travel	895,941	1,000,978
Professional services	776,991	955,113
Information services	669,621	628,629
Telecommunications	357,058	373,779
Rentals	121,455	227,547
Postage, Freight and Cartage	162,310	117,824
Amortization of capital assets	78,198	113,648
Miscellaneous	66,957	69,499
Total	18,407,935	19,346,345

7. Contingencies

In the normal course of its operations, the OSGG may become involved in various legal actions. Some of these potential liabilities 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 that it fails to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded on the government's consolidated financial statements. These estimated liabilities are not recognized on the OSGG's financial statement as a liability until the amount of the liability is firmly established.

8. Related Party Transactions

The OSGG is related in terms of common ownership to all Government of Canada departments and agencies and Crown corporations. The OSGG enters into transactions with these entities in the normal course of business and on normal trade terms except for those services provided without charge as previously identified.

9. Parliamentary Appropriations

The OSGG receives its funding through parliamentary appropriations, which is based primarily on cash flow requirements. Items recognized on the Statement of Operations in one year may be funded through parliamentary appropriations in prior and future years. Accordingly, the OSGG has net results of operations for the year on a government-funding basis that differ from generally accepted accounting principles in Canada. These differences are reconciled below.

(a) Reconciliation to net cost of operations

	2005		2004
		(dollars)
Net cost of operations	18,210,056		19,197,571
Adjustments:
Items affecting Net Results but not affecting Appropriations
Less:Expenses not affecting appropriations
Medals and official gifts issued	282,858		272,445
Employee leave benefits earned	63,885		172,805
Amortization	162,310		113,648
Inventory used	84,411		74,241
Department of Justice legal fees	855		810
	594,319		633,949

Add: Revenue not affecting appropriations	195,170		148,774
	17,810,907		18,712,396

Items not affecting Net Results but affecting Appropriations
Add: Purchase of medals and official gifts	190,292		307,424
Capital acquisitions	168,773		147,948
Payments of employee leave benefits	115,634		104,447
Purchase of gift shop inventory	72,788		60,844
Employee advances			(1,000)
	547,487		619,663

Total Parliamentary appropriations used	18,358,394		19,332,059

(b) Parliamentary appropriations provided and used

	Appropriations Provided		Appropriations Used
	2005	2004	2005	2004
	(dollars)
Program expenditures	16,296,900	17,151,001	16,060,915	17,062,782
Statutory amounts	2,297,479	2,269,586	2,297,479	2,269,277

Total	18,594,379	19,420,587	18,358,394	19,332,059