Financial Statements of the
Office of the Secretary to the Governor General
For the Year Ended March 31, 2006

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2006, and all information contained in these statements rests with the management of the Office of the Secretary to the Governor General (OSGG). 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. 

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 OSGG`s financial transactions. Financial information submitted to the Public Accounts of Canada 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 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 OSGG. 

The financial statements of the OSGG have not been audited.

_____________________________ Sheila-Marie Cook Secretary to the Governor General and Herald Chancellor

_____________________________ Darlene Kenny Acting Director General, Corporate Services

Ottawa, Canada
October 4, 2006

Statement of Operations (Unaudited)

For the Year Ended March 31
(dollars)

	2006	2005
Expenses (Note 4)
Constitutional, State, Ceremonial and Public Programs	20,640,004	18,733,486
Canadian Honours Program	6,212,817	6,194,551
Total Expenses	26,852,821	24,928,037
Revenues (Note 5)
Constitutional, State, Ceremonial and Public Programs	122,287	171,880
Canadian Honours Program	40,065	25,999
Total Revenues	162,352	197,879
Net Cost of Operations	26,690,469	24,730,158
The accompanying notes form an integral part of these financial statements.

Statement of Financial Position (Unaudited)

At March 31
(dollars)

		2006	2005
ASSETS
Financial assets
	Accounts receivable and advances (Note 6)	36,616	173,342
	Gift shop inventory	73,311	66,780
	Total financial assets	109,927	240,122
Non-financial assets
	Medals and official gifts	542,569	569,749
	Tangible capital assets (Note 7)	656,978	457,594
	Total non-financial assets	1,199,547	1,027,343
TOTAL ASSETS		1,309,474	1,267,465
LIABILITIES
	Accounts payable and accrued liabilities	2,030,722	1,533,037
	Vacation pay and compensatory leave	627,595	632,536
	Deferred revenue (Note 8)	14,450	4,450
	Employee severance benefits (Note 9)	2,146,651	1,909,818
TOTAL LIABILITIES		4,819,418	4,079,841
Equity of Canada		(3,509,944)	(2,812,376)
TOTAL		1,309,474	1,267,465
The accompanying notes form an integral part of these financial statements.

Statement of Equity of Canada (Unaudited)

At March 31
(dollars)

	2006	2005
Equity of Canada, beginning of year	(2,812,376)	(2,097,250)
Net Cost of operations	(26,690,469)	(24,730,158)
Current year appropriations used (Note 3)	20,199,690	18,358,394
Revenue not available for spending	(162,352)	(195,170)
Change in net position in the Consolidated Revenue Fund (Note 3)	(615,437)	(650,192)
Services received without charge from other government departments (Note 10)	6,571,000	6,502,000
Equity of Canada, end of year	(3,509,944)	(2,812,376)
The accompanying notes form an integral part of these financial statements.

Statement of Cash Flow (Unaudited)

For the Year Ended March 31
(dollars)

		2006	2005
Operating activities
	Net cost of operations	20,119,469	18,228,158
	Non-cash items:
	Amortization of tangible capital assets	(190,901)	(162,310)
	Variations in Statement of Financial Position
	Decrease in liabilities	(739,577)	(793,638)
	Increase (decrease) in accounts receivable and advances	(136,726)	139,736
	Increase (decrease) in gift shop inventory	6,531	(5,025)
	Decrease in medals and official gifts	(27,180)	(62,662)
Cash used by operating activities		19,031,616	17,344,259
Capital investment activities
	Acquisitions of tangible capital assets	390,285	168,773
Cash used by capital investment activities		390,285	168,773
Financing activities
Net Cash Provided by Government of Canada		19,421,901	17,513,032
The accompanying notes form an integral part of these financial statements.

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 forms part of the core public administration under Schedule IV of the Financial Administration Act. 

The primary objectives of the OSGG are to enable the governor general, representing the Crown in Canada, to fulfill State and ceremonial public duties, including the recognition of excellence. The OSGG 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 two program activities:

1. Constitutional, State, Ceremonial and Public Programs – support to the governor general for program planning and implementation, communications, citizen access and visitor services, and to support activities performed by former governors general; and,
2. Canadian Honours Program – The Honours Program includes the administration of Canadian orders, decorations, medals and awards as well as the Canadian Heraldic Authority.

2. Summary of Significant Accounting Policies

The 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:

1. Parliamentary appropriations—the OSGG is financed by the Government of Canada through parliamentary appropriations. Appropriations provided to the OSGG 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 3 provides a high-level reconciliation between the two bases of reporting.
2. Net cash provided by the Government—The OSGG operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the OSGG is deposited to the CRF and all cash disbursements made by the OSGG are paid from the CRF. The net cash provided by the Government is the difference between all cash receipts and all cash disbursements including transactions between other departments of the federal government.
3. Change in net position in the Consolidated Revenue Fund is the difference between the net cash provided by the Government and appropriations used in a year, excluding the amount of non-respendable revenue recorded by the OSGG. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.
4. Revenues—Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.
• Funds received from external parties for specified purposes are recorded upon receipt as deferred revenues. These revenues are recognized in the period in which the related expenses are incurred.
5. Expenses—Expenses are recorded on the accrual basis:
• Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
• Services provided without charge by other government departments and Crown corporations for accommodation, the employer`s contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated costs.
6. Employee future benefits:
• Pension benefits: Eligible employees participate in the Public Service Superannuation Plan, administered by the Government of Canada. The OSGG’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the OSGG to make contributions for any actuarial deficiencies of the Plan.
• 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.
7. Accounts receivable are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.
8. Gift shop inventory—Gift shop inventory is valued at the lower of cost or net realizable value.
9. 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.
10. Tangible capital assets—All tangible capital assets and leasehold improvements having an initial cost of $5,000 or more are recorded at their acquisition cost. The OSGG does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, or 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	Amortization period
Informatics hardware	3 years
Informatics software	7 years
Motor vehicles	5 years
Other Equipment	10 years

11. 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 as an expense in the period in which payment is due.
12. 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, 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 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 Appropriations

The OSGG 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 OSGG 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:

		2006	2005
		(dollars)
a) Reconciliation of net cost of operations to current year appropriations used
Net cost of operations		26,690,469	24,730,158
Adjustments:
Items affecting net cost of operations but not affecting appropriations
Add (Less):	Services provided without charge	(6,571,000)	(6,502,000)
	Medals and official gifts issued	(155,014)	(282,858)
	Revenue not available for spending	162,352	195,170
	Employee severance benefits	(236,833)	(18,102)
	Vacation pay and compensatory leave	4,941	(63,885)
	Amortization of tangible capital assets	(190,901)	(162,310)
	Inventory used	(70,852)	(84,411)
	Department of Justice legal fees	(18,422)	(855)
		(7,075,729)	(6,919,251)
Items not affecting net cost of operations but affecting appropriations
Add (Less):	Purchase of medals and official gifts	117,948	190,292
	Acquisitions of tangible capital assets	390,285	168,773
	Payments of employee leave benefits	-	115,634
	Purchase of gift shop inventory	76,717	72,788
		584,950	547,487
Current year appropriations used		20,199,690	18,358,394

b) Appropriations provided and used
Vote 1 - Program expenditures	18,080,331	16,296,900
Statutory amounts	2,519,565	2,297,479
Total appropriations provided	20,599,896	18,594,379
Less: Lapsed appropriations: program expenditures	(400,206)	(235,985)
Current year appropriations used	20,199,690	18,358,394

c) Reconciliation of net cash provided by the Government to current year appropriations used
Net cash provided by the Government	19,421,901	17,513,032
Revenue not available for spending	162,352	195,170
Change in net position in the Consolidated Revenue Fund
Variation in accounts receivables and advances	136,726	(139,737)
Variation in accounts payable and accrued liabilities	497,685	841,365
Variation in deferred revenue	10,000	(14,080)
Other	(28,974)	(37,356)
	615,437	650,192
Current year appropriations used	20,199,690	18,358,394

4. Expenses

A summary of expenses for the year ended March 31 is as follows:
	2006	2005
	(dollars)
Expenses
Salaries and employee benefits	14,610,665	13,737,409
Accommodation	5,655,000	5,586,000
Materials and supplies	1,677,314	1,495,100
Travel	1,166,927	895,941
Professional services	1,015,114	825,991
Other business services	865,446	643,647
Information services	614,165	669,621
Telecommunications	415,101	357,058
Annuity payments to former governors general	352,657	288,350
Amortization of tangible capital assets	190,901	162,310
Rentals	159,806	121,455
Postage, freight and cartage	113,604	78,198
Miscellaneous	16,121	66,957
Total	26,852,821	24,928,037

5. Revenues

A summary of revenues for the year ended March 31 is as follows:
	2006	2005
	(dollars)
Gift shop	118,822	130,184
Heraldic user fees	32,534	25,230
Other	10,996	42,465
Total	162,352	197,879

6. Accounts Receivable and Advances

The following table presents details of accounts receivables and advances.
	2006	2005
	(dollars)
Employee advances	10,500	10,500
Receivables from other federal government departments and agencies	26,116	162,842
Total	36,616	173,342

7. Tangible Capital Assets

(in dollars)

Cost	Informatics Hardware	Informatics Software	Motor Vehicles	Other Equipment	Totals
Opening balance	617,765	164,496	214,860	-	997,121
Acquisitions & transfers	230,095	30,000	111,768	18,422	390,285
Disposals & write-offs	-	-	-	-	-
Closing balance	847,860	194,496	326,628	18,422	1,387,406
Accumulated amortization
Opening balance	367,160	38,793	133,574	-	539,527
Amortization	146,939	23,499	20,463	-	190,901
Disposals & write-offs	-	-	-	-	-
Closing balance	514,099	62,292	154,037	-	730,428
2006 Net book value	333,761	132,204	172,591	18,422	656,978
2005 Net book value	250,605	125,703	81,286	-	457,594
Amortization expense for the year ended March 31, 2006 is $190,901 (2005 - $162,310)

8. 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.

	2006	2005
	(dollars)
Opening balance	4,450	18,530
Receipts	10,000	-
Payments	-	(14,080)
Closing balance	14,450	4,450

9. Employee Benefits

(a) Pension benefits: The employees of the OSGG 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 the Canada/Quebec pension plans benefits and they are indexed to inflation.

Both the employees and the OSGG contribute to the cost of the plan. The 2005-06 expense amounts to $1,518,288 ($1,388,749 in 2004-05), which represents approximately 2.6 times the contributions by employees.

The OSGG’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 OSGG 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:

	2006	2005
	(in dollars)
Accrued benefits obligation, beginning of year	1,909,818	1,891,716
Expense for the year	435,224	437,749
Benefits paid during the year	(198,391)	(419,647)
Accrued benefits obligation, end of year	2,146,651	1,909,818

10. Related Party Transactions

The OSGG is related as a result of common ownership to all Government of Canada departments, agencies and Crown corporations. The OSGG enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the OSGG received services that were obtained without charge from other government departments as presented in part (a).

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

	2006	2005
	(in dollars)
Accommodation provided by Public Works and Government Services Canada and the National Capital Commission	5,655,000	5,586,000
Employer's contribution to the health insurance plan and dental insurance plans paid by Treasury Board	862,000	867,000
Legal services provided by Justice Canada	54,000	49,000
Total	6,571,000	6,502,000

In addition to the above, there are a number of other government departments that support the activities of the governor general and the OSGG as part of their mandate. The level of support and services provided to the OSGG is determined by each of the contributors and funded out of the budgets of those organizations. The various contributing departments are responsible for allocating and managing the funds they provide to support the activities of the governor general and the OSGG and are subject to Treasury Board guidelines. The amounts spent by the departments in question do not appear in the accounts of the OSGG, nor are they recorded as operating expenses by the OSGG.

The major departments providing support include: Public Safety Canada (RCMP) for protective/security services; the Department of National Defence for transportation services, ceremonial support, logistical support and photographic services; Foreign Affairs and International Trade 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.

Furthermore, the Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of others without charge. The costs of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included as an expense in the OSGG's Statement of Operations.

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

	2006	2005
	(in dollars)
Accounts receivable with other government departments and agencies	26,116	162,842
Accounts payable to other government departments and agencies	236,873	137,942