Financial Statements for the Year Ended March 31, 2024

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, 2024, and all information contained in these statements rests with the management of Public Safety and Emergency Preparedness (PSEPC). These financial statements have been prepared by management using the Government of Canada'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 PSEPC's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada and included in PSEPC's Departmental Results 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 and applied throughout PSEPC 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, 2024 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the annex.

The effectiveness and adequacy of PSEPC's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of PSEPC's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting.

The financial statements of PSEPC have not been audited.

Notes to the Financial Statements (Unaudited) For the year ended March 31, 2024

1. Authority and objectives

The Department of Public Safety and Emergency Preparedness (PSEPC) was created in 2003 to ensure coordination across all federal departments and agencies responsible for national security and the safety of Canadians. PSEPC operates under the Department of Public Safety and Emergency Preparedness Act (2005, c.10) that received Royal assent on March 23, 2005.

PSEPC contributes to the public safety of Canadians through the promotion and maintenance of a just, peaceful and safe society, it has four main core responsibility programs:

• National Security: develops policy, legislation and programs to support Canada's capacity to respond to a range of national security threats directed against Canadians and our critical infrastructure.
• Community Safety: Provides national coordination to help Canadian communities and stakeholders respond to crime and build community resilience, promote the safety and security of Canadian communities and institutions, enhance the integrity of Canada's borders, and support the provision of policing services to Indigenous communities.
• Emergency Management: Works to strengthen national emergency preparedness to help prevent, mitigate, prepare for, respond to and recover from all-hazards events. PSEPC provides resources and expertise to Canadian communities in support of emergency preparedness, disaster mitigation and recovery; and
• Internal Services: Supports the work of all other programs and provides key corporate services.

2. Summary of significant accounting policies

These financial statements have been prepared using PSEPC'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

PSEPC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to PSEPC 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 2023-2024Departmental Plan. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2023-2024 Departmental Plan.

(b) Net cash provided by Government

PSEPC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the PSEPC is deposited to the CRF, and all cash disbursements made by PSEPC 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) Amounts due from or to the 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 PSEPC is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues and deferred revenues

Revenues are comprised of revenues earned from non-tax sources. They include exchange transactions where goods or services are provided for consideration where a performance obligation exists, and non-exchange transactions where no performance obligations exist to provide a good or service. These transactions can be recurring or non-recurring in nature. Recurring transactions are viewed as ongoing, routine activities that form part of the normal course of operations and can be used to indicate if they can be reasonably expected to be earned again in future years.

Deferred revenue consists of amounts received in advance of the delivery of goods and rendering of services that will be recognized as revenue in a subsequent fiscal year as it is earned. Other revenues are recognized in the period the event giving rise to the revenues occurred.

Revenues that are non-respendable are not available to discharge the department's liabilities. While the Departmental Deputy Head is expected to maintain accounting control, he or she has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are earned on behalf of the Government of Canada and are therefore presented as a reduction of the entity's gross revenues. Revenues earned on behalf of Government consist of the sale of services and gains on the sale of assets. These are recognized when earned.

(e) Expenses

Transfer payments are recorded as an expense in the year the transfer is authorized, and all eligibility criteria have been met by the recipient. 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, legal services and workers' compensation are recorded as operating expenses at their carrying value.

(f) Employee future benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer plan administered by the Government. PSEPC's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. PSEPC's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
2. Severance benefits: The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits 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 initially recorded at cost and where necessary, are discounted to reflect their concessionary terms. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts receivable to amounts that approximate their net recoverable value.

(h) Non-financial assets

The costs of acquiring land, buildings, equipment, and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in Note 8. All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, works of art, museum collection and Crown land to which no acquisition cost is attributable and intangible assets.

Inventories are valued at cost and are comprised of spare parts and supplies held for future program delivery and are not primarily intended for resale. Inventories that no longer have service potential are valued at the lower of cost or net realizable value.

(i) Contingent liabilities

Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, a provision is accrued and an expense recorded to other expenses. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in note 10 of the financial statements.

(j) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government's best estimate of the related amount at the end of the reporting period. 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.

(k) Related party transactions

Related party transactions, other than inter-entity transactions, are recorded at the exchange amount.

Inter-entity transactions are transactions between commonly controlled entities. Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:

1. Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.
2. Certain services received on a without charge basis are recorded for departmental financial statement purposes at the carrying amount.

3. Parliamentary authorities

PSEPC 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, PSEPC has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

4. Accounts payable and accrued liabilities

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

5. Employee future benefits

(a) Pension benefits

PSEPC'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 PSEPC 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 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.

The 2023-2024 expense amounts to $15,858,727 ($13,877,744 in 2022-2023). For Group 1 members, the expense represents approximately 1.02 times (1.02 times in 2022-2023) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2022-2023) the employee contributions.

PSEPC'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

Severance benefits provided to PSEPC's employees were previously based on an employee's eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2024, all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

The changes in the obligations during the year were as follows:

6. Disaster Financial Assistance Arrangements (DFAA)

In the event of a natural disaster in Canada, the federal government provides financial assistance to provincial and territorial governments through the Disaster Financial Assistance Arrangements program to help meet the basic costs of response and recovery when such expenditures exceed what an individual province or territory could reasonably be expected to bear on its own. The current outstanding liabilities of $5,245,938,170 is the estimated cost to PSEPC of 76 natural disaster events for which the Federal Government has agreed to share the costs and final payments have not yet been made.

7. Accounts receivable and advances

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

8. Tangible capital assets

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. PSEPC does not process intangible capital assets such as, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

Assets under construction are recorded in the applicable asset class in the year they are put into service and are not amortized until they are put into service.

9. Contractual obligations

The nature of PSEPC's activities may result in some large multi-year contracts and obligations whereby PSEPC will be obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

10. Contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown.

Claims and litigation

Claims have been made against PSEPC 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. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management is NIL at March 31, 2024 (NIL in 2022-2023).

11. Related party transactions

PSEPC is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family member of that individual.

PSEPC enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, PSEPC has agreements with Correctional Services Canada and with Royal Canadian Mounted Police related to the provision of human resources and finance system services. During the year, PSEPC received 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, PSEPC received services without charge from certain common service organizations related to accommodation, legal services, the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded in PSEPC's Statement of Operations and Departmental Net Financial Position as follows:

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 services organization so that one department performs services for all other departments and agencies without charge. The costs of these services, such as payroll and cheque issuance services provided by Public Services and Procurement Canada and audit services provided by the Office of the Auditor General are not included in PSEPC's Statement of Operations and Departmental Net Financial Position.

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

12. Segmented information

Presentation by segment is based on PSEPC's core responsibility. 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 revenue generated for the main core responsibilities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

13. COVID-19 pandemic

In March 2020, the World Health Organization officially declared the outbreak of COVID-19 as a global pandemic. The COVID-19 pandemic continues to have a significant adverse impact on the global economy. The overall economy continues to navigate the pandemic with continuing uncertainty.

The departmental financial statements for the fiscal year ending March 31, 2024, reflect the impacts resulting from the COVID-19 pandemic to the extent known and estimable at the reporting date.

During the year, the department led various transfer payment programs to support Canada's Economic Response Plan which are included within Emergency Management on the Statement of Operations. The most significant of which include:

1. $8.5 million for supporting the Canadian Red Cross for Urgent Relief Efforts Related to COVID-19
2. $27.8 million for supporting a humanitarian workforce to respond to COVID-19.

Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting (Unaudited)

A.1 Introduction

This document provides summary information on the measures taken by Public Safety and Emergency Preparedness Canada (PSEPC) to maintain an effective system of internal controls over financial reporting, as well as information on internal control management, assessment results and related action plans.

Detailed information on the department's authority, mandate and core responsibilities can be found in the Departmental Plans 2023-2024 Departmental Plan for the 2023-2024 fiscal year and the Departmental Results Report 2022-2023 Departmental Results Report for the 2022-2023 fiscal year.

A.2 Departmental system of internal control over financial reporting

A.2.1 Internal control management

PSEPC has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its overall system of internal control. A departmental internal control management framework, is in place and comprises:

• organizational accountability structures as they relate to internal control management to support sound financial management, including the roles and responsibilities of senior departmental managers for control management in their areas of responsibility;
• values and ethics;
• ongoing communication and training on the legislative and policy requirements for sound financial management and control; and
• monitoring and regular updates on internal control management, as well as provision of related assessment results and action plans to the deputy head and senior departmental management and, as applicable, the Departmental Audit Committee.

The Departmental Audit Committee is an independent advisory committee to the deputy head. It is responsible to provide advice to the deputy head on the adequacy and functioning of the department's risk management, control and governance frameworks and processes.

A.2.2 Service arrangements relevant to financial statements

PSEPC relies on other departments for processing certain transactions that are recorded in its financial statements, as follows.

A.2.2.1 Common service arrangements

• Public Services and Procurement Canada administers the payment of salaries, the procurement of goods and services, and provides accommodation services;
• Shared Services Canada provides information technology (IT) infrastructure services;
• Department of Justice Canada provides legal services; and
• Treasury Board of Canada Secretariat provides information on public service insurance and centrally administers payment of the employer's share of contributions toward statutory employee benefit plans.

A.2.2.2 Specific arrangements

• PSEPC's financial systems of record are provided by the Royal Canadian Mounted Police (RCMP), who hosts the Department's Financial Management System (DFMS). Similarly, Correctional Service of Canada hosts the Department's Human Resources Management System (HRMS). Memoranda of Understanding are in place between PSEPC and these organizations, identifying respective roles and responsibilities. RCMP attests to PSEPC over the effective functioning and management of the DFMS Information Technology General Controls; and
• PSEPC provides corporate services to three Public Safety Portfolio Agencies, including: the Office of the Correctional Investigator, the RCMP External Review Committee and the Civilian Review and Complaints Commission for the RCMP. Memoranda of Understanding are in place between PSEPC and each of these agencies, identifying respective roles and responsibilities.

A.3 Departmental assessment results for the 2023-2024 fiscal year

A.3.1 New or significantly amended key controls

In the current fiscal year, there were no significantly amended key controls in existing processes that required a reassessment. However, in response to the risks posed by the Phoenix pay system, PSEPC continues to maintain additional controls and monitoring to mitigate risks of errors or misstatements.

A.3.2 Ongoing monitoring program

As part of its rotational ongoing monitoring plan, the department completed its reassessment of financial controls within the business processes of:

• Payroll and benefits
• Disaster Financial Assistance Arrangements
• Capital Assets
• Costing
• CFO Attestations

For the most part, the key controls that were tested performed as intended, and were shown to be effective. No remedial actions were required.

A.4 Departmental monitoring plan for the next fiscal year and subsequent fiscal years

PSEPC's rotational ongoing monitoring plan over the next three fiscal years is shown in the following table. The ongoing monitoring plan is based on:

• an annual validation of high-risk processes and controls; and
• related adjustments to the ongoing monitoring plan as required.