Financial Statements 2013–14

For the year ended March 31, 2014

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2014, and all information contained in these statements rests with the management of the Courts Administration Service. 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 fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Courts Administration Service's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Courts Administration Service'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 Courts Administration Service 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 ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 2014 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 Courts Administration Service's system of internal control is reviewed by the work of the Chief Audit Executive, who conducts periodic audits of different areas of the Courts Administration Service's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the Deputy Head of the Courts Administration Service.

The financial statements of the Courts Administration Service have not been audited.

(Ottawa, Canada)
September 18, 2014

Statement of Financial Position (Unaudited)

As at March 31
(in thousands of dollars)

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

Ottawa, Canada
September 18, 2014

Statement of Operations and Departmental Net Financial Position (Unaudited)

For the year ended March 31
(in thousands of dollars)

Segmented information (Note 10)
The accompanying notes form an integral part of the financial statements.

For the year ended March 31
(in thousands of dollars)

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

For the year ended March 31
(in thousands of dollars)

Operating activities

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

Notes to the Financial Statements (Unaudited)

For the year ended March 31

1. Authority and objectives

The Courts Administration Service, which was established on July 2, 2003 by the Courts Administration Service Act , S.C. 2002, c.8, is responsible for providing administrative services to the Federal Court of Appeal, the Federal Court, the Court Martial Appeal Court of Canada and the Tax Court of Canada ("the Courts").

These services permit individuals, companies, organizations and the Government of Canada to submit disputes and other matters to the Courts, and enable the Courts to hear and resolve the cases before them fairly, without delay and as efficiently as possible.

The Courts Administration Service has three programs: to provide Judicial Services, to provide Registry Services and to provide Internal Services.

The Judicial Services program provides legal services and judicial administrative support to assist members of the Federal Court of Appeal, the Federal Court, the Court Martial Appeal Court of Canada and the Tax Court of Canada in the discharge of their judicial functions. These services are provided by legal counsel, judicial administrators, law clerks, jurilinguists, judicial assistants, library personnel and court attendants, under the direction of the four Chief Justices.

Registry Services are delivered under the jurisdiction of the Federal Court of Appeal, the Federal Court, the Court Martial Appeal Court of Canada and the Tax Court of Canada. The registries process legal documents, provide information to litigants on court procedures, maintain court records, participate in court hearings, support and assist in the enforcement of court orders, and work closely with the Office of the four Chief Justices to ensure that matters are heard, and decisions are rendered in a timely manner. Registry Services are offered in every province and territory through a network of permanent offices, and agreements with provincial and territorial partners.

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, Legal Services, Human Resources Management Services, Financial Management Services, Information Management Services, Information Technology Services, Real Property Services, Materiel Services, Acquisition Services, 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 Courts Administration Service is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Courts Administration Service 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 forecast amounts in the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt are the amounts reported in the Future-oriented Financial Statements included in the 2013-14 Report on Plans and Priorities.

(b) Net cash provided by Government

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

Amounts due from or 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 Courts Administration Service is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues

Revenues consist primarily of filing fees, fines and Employment Insurance Operating Account cost recoveries. All such revenue is non-respendable.

All revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

Revenues that are non-respendable are not available to discharge the Courts Administration Service's liabilities. While the Deputy Head is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government and are therefore presented as a reduction of the entity's gross revenues.

Employment Insurance Operating Account cost recoveries: At the end of each fiscal year, the Courts Administration Service determines the cost associated with the administration of Employment Insurance (EI) cases. The total cost allocated by the Courts Administration Service for handling EI cases are expended against the Department of Employment and Social Development, the department responsible for the Employment Insurance Operating Account. As such, the Department of Employment and Social Development would show an expense and the Courts Administration Service would show an equivalent, non-respendable revenue item. The purpose of this accounting exercise is to reflect more accurately the total cost of running the EI program.

(e) 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 and workers' compensation are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. The Courts Administration Service's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Courts Administration Service'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, as the Plan's sponsor.

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.

(g) 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.

(h) 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 Courts Administration Service 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:

Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

(i) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the 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 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

The Courts Administration Service receives 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 Courts Administration Service 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:

The following table presents details of the Courts Administration Service's accounts payable and accrued liabilities:

5. Deposit accounts

The Courts Administration Service maintains two deposit accounts on behalf of litigants before the Courts. Pursuant to an order of the Court, the deposit accounts will record funds paid into the Federal Court of Appeal, Federal Court and Tax Court of Canada. These amounts are held as payments and eventually released, pending judgment of the Courts. The difference between these two accounts is the calculation of interest, as described below.

Calculation of Interest:

Deposit Account for the Federal Court of Appeal and Federal Court: Pursuant to the Order in Council P.C. 1970 4/2, the account earns interest semi-annually at a rate that is equal to nine-tenths of the monthly average of tender rates for three-month Treasury bills and is calculated on the minimum monthly balance.

Deposit Account for the Tax Court of Canada: Pursuant to the Order in Council P.C. 1970-300, the account earns interest semi- annually at a rate that is equal to ninety percent of the average of the weekly three-month Treasury bills and is calculated on a daily basis.

6. Employee future benefits

(a) Pension benefits

The Courts Administration Service'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/Québec Pension Plan benefits and they are indexed to inflation.

Both the employees and the Courts Administration Service contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to EAP 2012, employee contributors have been divided into two 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. For Group 1 members, the expense represents approximately 1.6 times (1.7 times in 2012-13) the employee contributions and, for Group 2 members, approximately 1.5 times (1.6 times in 2012-13) the employee contributions. The 2013-14 expense amounts to $4,945,206 ($4,998,014 in 2012-13).

The Courts Administration Service'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, as the Plan's sponsor.

(b) Severance benefits

The Courts Administration Service 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.

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. 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.

Information about the severance benefits, measured as at March 31, is as follows:

7. Accounts receivable and advances

The following table presents details of the Courts Administration Service's accounts receivable and advances balances:

8. Tangible capital assets

(1) Adjustments include assets under construction that were transferred to the other categories upon completion of the assets.

9. Related party transactions

The Courts Administration Service is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Courts Administration Service enters into transactions with these entities in the normal course of business and on normal trade terms.

a) Common services provided without charge by other government departments

During the year, the Courts Administration Service received services without charge from certain common service organizations, related to accommodation, the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded in the Courts Administration Service's Statement of Operations and Departmental Net Financial Position as follows:

(1) Accommodation costs include the space of the court rooms, the offices of the Members of the Courts, the discovery rooms, etc.

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 Courts Administration Service's Statement of Operations and Departmental Net Financial Position.

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

10. Segmented information

Presentation by segment is based on the Courts Administration Service's program alignment 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 programs, by major object of expense and by major type of revenue. The segment results for the period are as follows:

11. Accounting changes

During the preparation of the Courts Administration Service's financial statements for the fiscal year ended March 31, 2014, errors were identified in the financial statements of prior periods. These errors are material therefore the correction of the errors has been reported retroactively and comparative information has been restated.

Error in the capitalization of salary costs

During fiscal year 2013-14, the Courts Administration Service concluded that its method of determining the salary costs associated with tangible capital assets was not reasonable. Such costs were included in the cost of tangible capital assets based on estimates. It was concluded that these estimates can not be relied upon for the purpose of capitalization and therefore salary costs should not have been included in the costs of tangible capital assets in prior fiscal years. The effect of this error for the fiscal year ended March 31, 2013 is a decrease in tangible capital assets and departmental net financial position and an increase in expenses and the net cost of operations before government funding and transfers.

Errors in accounting treatment

During fiscal year 2013-14, the Courts Administration Service identified certain tangible capital assets that should have been capitalized during prior fiscal years. The effect of this error for the fiscal year ended March 31, 2013 is an increase in tangible capital assets and departmental net financial position and a decrease in expenses and the net cost of operations before government funding and transfers.

Date modified:

2017-01-16