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Foreign Affairs, Trade and Development Canada Quarterly Financial Report

For the quarter ended June 30, 2014

Table of Contents

Statement outlining results, risks and significant changes in operations, personnel and program

1. Introduction

This report has been prepared by management as required by section 65.1 of the Financial Administration Act in the form and manner prescribed by Treasury Board. The report has not been subject to an external audit or review, and should be read in conjunction with the Main Estimates and the Supplementary Estimates for the current year, as well as Canada’s Economic Action Plan 2012 (Budget 2012).

A summary description of the department's programs can be found in Part II of the Main Estimates.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the department's spending authorities granted by Parliament and those used by the department consistent with the Main Estimates and Supplementary Estimates for the 2014-15 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before moneys can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

The Department of Foreign Affairs, Trade and Development (DFATD) uses the full accrual method of accounting to prepare and present its annual consolidated departmental financial statements that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

2. Highlights of fiscal quarter and fiscal year to date (YTD) results

A. Significant changes to Authorities

Table 1: Significant changes to Authorities
Authorities (In thousands of dollars)Fiscal Year 2014-2015Fiscal Year 2013-2014Variance
DFATD Total Available for Use for the Year Ending March 31, 2015DFAIT Total Available for Use for the Year Ending March 31, 2014CIDA Total Available for Use for the Year Ending March 31, 2014Total$%
Vote 1 - Operating expenditures1,379,8931,368,47467,4241,435,898(56,005)(4%)
Vote 5 - Capital Expenditures278,892165,510-165,510113,38269%
Vote 10 - Grants and contributions3,431,9453,010,876404,0443,414,92017,025-
Vote 15 - Locally engaged staff pensions, insurance and social security50,77965,380-65,380(14,601)(22%)
Budgetary statutory authorities:
Contributions to employee benefit plans96,56498,5285,720104,248(7,684)(7%)
Ministers' salary and motor car allowance2432202024031%
Payments under the Diplomatic Service (Special) Superannuation Act250250-250--
Spending of proceeds from the disposal of surplus Crown assets1,291761276352869%
Refunds of amounts credited to revenues in previous years-12-12(12)(100%)
Payment to the World Bank for the Advance Market Commitment for Pneumococcal Vaccines------
Payments to International Financial Institutions245,00030,744215,256246,000(1,000)-
Passport Office Revolving Fund (4)-70,373-70,373(70,373)(100%)
Total Budgetary Authorities5,484,8574,811,128692,4665,503,594(18,737)-
Non-Budgetary Authorities79,63281,28629,291110,577(30,945)(28%)
Total Authorities5,564,4894,892,414721,7575,614,171(49,682)-
i. Budgetary Authorities

Operating expenditures authorities have decreased by $56 million. The decrease is mainly due to reductions in departmental authorities related to Budget 2012 cost containment measures ($52 millions).

Capital expenditure authorities increased by $113 million, mainly due to additional funding received for the consolidation of the Canadian High Commission at Trafalgar Square, London, approved through the 2014-15 Supplementary Estimates A. This was offset by a decrease in Strengthening Security at Missions Abroad funding; the cost requirements for security upgrades at our missions abroad rise and fall each year.

Locally engaged staff pension, insurance and social security programs authorities decreased by $14.6 million due to lower funding requirements.

a) Budgetary Statutory Authorities

Contributions to employee benefits plan statutory authorities decreased by 7.7 $million due to an adjustment (Reduction) of the EBP rate imposed by the Treasury Board Secretariat.

Passport Office Revolving Fund statutory authorities decreased by $70.4 million as a result of the Budget 2013 decision to transfer the primary responsibility for Passport Canada to Citizenship and Immigration Canada.

ii. Non-budgetary Authorities

The department’s non-budgetary authorities increased by $31 million as at June 30, 2014, compared to the same quarter of the previous year due to a reduction of anticipated payments to International Financial institutions.

B. Significant changes to budgetary expenditures by standard object

The following table shows the budgetary expenditures and revenues netted against expenditures of the combined entities (CIDA and DFAIT) over two years, on a comparable basis. Passport Canada’s first quarter results have been removed from last year’s results to facilitate the year over year variance analysis.

Table 2: Significant changes to budgetary expenditures by standard object (Unaudited)
(In thousands of dollars)April to June 2014-2015April to June 2013-2014Variance
DFATDDFAIT (a)CIDA (b)Passport (c)Total (a)+(b)-(c)Yr/Yr Variance%
Expenditures :
Salaries and Employee Benefits270,523267,12540,24046,944260,42110,1024%
Transportation and Communications17,42326,3001,2596,70720,852(3,429)(16%)
Information1,2712,49751,76373953272%
Professional and Special Services30,68542,3721,5388,81835,092(4,407)(13%)
Rentals51,67451,9565225,06147,4174,2579%
Repair and Maintenance3,3803,8963262194,003(623)(16%)
Utilities, Materials and Supplies6,84415,721539,1816,5932514%
Other21,77057329,2084529,736(7,966)(27%)
Total Operating403,570410,44073,15178,738404,853(1,283)(0%)
Acquisition of Land, Buildings and Works14,8716,554--6,5548,317127%
Acquisition of Machinery and Equipment4,2614,043152873,77149013%
Total Acquisition19,13210,5971528710,3258,80785%
Transfer Payments454,0475,761619,300-625,061(171,014)(27%)
Total Gross Budgetary Expenditures876,749426,798692,46679,0251,040,239(163,490)(16%)
Less Revenues Netted Against Expenditures
Passport Respendable Revenue-70,935-70,935---
Revenue Credited to the Vote9,42026,585--26,585(17,165)(65%)
Total Net Budgetary Expenditures867,329329,278692,4668,0901,013,654(146,325)(14%)

i. Operating expenditures

Salaries and employee benefits – The increase of $10.1 million is due to several factors, of which some are non-recurring.

The increase is due to the following factors:

  1. Regular incremental salary increases;
  2. Retroactive payments made to employees whose collective agreements have been settled;
  3. Higher casual employee costs due to a greater need for more flexible temporary staffing;  and
  4. FSD allowances increases due to the timing of allowance payments and the normal increase in NJC rates related to FSD 34 (Education Allowances) and FSD 55 (Post Living allowances).

Transportation and communications - The decrease of $3.4 million is partly due to lower travel expenditures compared to the same period last year. In addition, the adoption of the new HRG travel management solution has caused a backlog in travel claims; therefore part of this variance is due to a timing difference.

Professional and special services - The decrease of $4.4 million is mainly due to the reduction of the expenditures related to the hiring of training, IT and telecom consultants. Hospitality expenditures have also decreased as a result of the new departmental approval processes.

Rentals - The increase in rental costs ($4.2 million) is mainly due to a significant recording of prepaid rent as well as regular rent increases.

Other - The decrease of $8 million is mainly due to last year’s revaluation of former CIDA’s investments and advances to International Financial Institutions denominated in foreign currencies at the time of their transfer to DFATD partly offset by the one-time transition payment of $19 million for implementing salary payment in arrears by the Government of Canada.

ii. Capital Expenditures

Acquisition of land, building and works – The increase of $8.3 million is explained by the leasehold improvements done to the Chancery in Hong Kong in addition to construction costs incurred for the Canada House revitalization project in London.

Acquisition of machinery and equipment – The increase of $500k is mainly due to an increase of expenditures related to the acquisition of security equipment and software at missions and HQ.

iii. Grants and Contributions

The decrease of $171 million in transfer payments is mainly due to the timing of some disbursements of grants and contributions and decreased payments to the International Financial Institutions.

iv. Revenues

The variance is mainly due to the transfer of the International Experience Canada (IEC) (formerly known as the International Youth Exchange program) to CIC as of August 30, 2013. A temporary variation in Co-Location Revenues was also noted due to a change in the related accounting process. It is expected that this portion of the total variance will reverse itself in the next quarters.

3. Risks and Uncertainties

This quarterly report reflects the results of the current fiscal period in relation to the Main Estimates for which full supply was released.

Like other federal government organizations, DFATD faces budget constraints. The majority of its salary, operating, capital and grants and contributions expenditures are funded through voted authorities. Over the last few years, the federal government has announced a series of initiatives and realignment strategies to renew and modernize its expenditure management system to ensure value for money of federal expenditures while operating more efficiently.

DFATD has been examining how it can improve its alignment with government policy and management priorities, and has been looking at more efficient ways of doing business and delivering services. DFATD systematically works with its partners to identify, assess, monitor and manage inherent risks to optimize its results. The department has also taken steps to address the cumulative impact of successive rounds of government-wide reduction exercises. In managing these reductions, DFATD has rigorously examined its programs for efficiency, effectiveness and continued relevance to government priorities.

DFATD’s development portfolio works systematically with its partners to identify, assess, monitor, and manage risks to optimize development results. Because of the nature of development work, substantial risks are associated with both operating and partner activities. These risks are managed to the degree possible and closely monitored in all cases, but are inherent to pursuing development results. Management must be continually vigilant in monitoring its environment and be creative in the development of responses to risks. Proactively managing risks increases the effectiveness of the Development portfolio efforts to achieve concrete development results.

In recognition of the tightening fiscal environment, DFATD will continue to examine its departmental program spending, making reallocations against identified priorities. The department will continue to implement strategies to mitigate and manage the impact of these efficiency measures to achieve the best results for Canadians.

4. Significant changes in relation to operations, personnel and programs

Key Senior Personnel Change

On April 25, 2014, the Prime Minister appointed Malcolm Brown as Deputy Minister of International Development, effective May 20, 2014.

5. Budget 2012 Implementation

This section provides an overview of the savings announced in Budget 2012 that are being implemented in order to refocus government and programs: make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

The savings initiatives reported below comprise those announced in Budget 2012 under the former Department of Foreign Affairs and International Trade (DFAIT) and the former Canadian International Development Agency (CIDA). These savings include those resulting from the horizontal review of the International Assistance Envelope (IAE). This review was driven by three criteria: alignment to the Government of Canada’s priorities, foreign policy and international assistance commitments; demonstration of effectiveness and tangible results; and, efficiency and value for money. 

DFATD will achieve Budget 2012 savings of $516.3 million by fiscal year 2014-15. The Department achieved cumulative savings of $240.0 million in 2012-13 and 336.1$ million in 2013-14. As actual savings are presently on track with the planned savings, there is no significant variance to report.

Since April 1, 2012, the department has achieved substantial savings through modernizing its operations, restructuring its Canadian offices, foreign properties and missions, reducing the back office and transforming how it works internally to achieve efficiencies and adjusting programming. To achieve the planned savings, the Department has and continues to undertake the following key initiatives:

The department continues to implement the efficiency measures approved in Budget 2012 Canada’s Economic Action Plan, and any financial risks and uncertainties are being mitigated by sound financial management.

The department will continue to put in place rigorous planning, monitoring and financial risk management measures to achieve the budgetary savings as expected.

Approval by Senior Officials

Approved, as required by the Policy on Financial Resource Management, Information and Reporting:

Daniel Jean
Deputy Minister of Foreign Affairs

Simon Kennedy
Deputy Minister of International Trade

Malcolm Brown
Deputy Minister of International Development

Nadir Patel
Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology

Ottawa, Ontario
Date: August 29, 2014

Table 3: Statement of Authorities (Unaudited)
(In thousands of dollars)Fiscal Year 2014-2015Fiscal Year 2013-2014
Total available for use for the year ending March 31, 20151Used during the quarter ended June 30, 2014Year to date used at quarter endTotal available for use for the year ending March 31, 20141 3Used during the quarter ended June 30, 20132 3Year to date used at quarter end
1 Includes only Authorities available for use and granted by Parliament at quarter-end.
2 Excludes the Canadian International Development Agency results for the period before the amalgamation with the Department of Foreign Affairs and International Trade. Total expenditures for the first quarter of 2013-2014 represented an amount of $692,966 thousands of dollars.
3 The department had one revolving fund, Passport Canada, which was included up to July 1, 2013. The Passport revolving fund has been transferred to Citizenship and Immigration Canada effective July 2, 2013.
Vote 1 - Operating expenditures1,379,893359,844359,8441,368,474276,303276,303
Vote 5 - Capital Expenditures278,89225,92325,923165,51015,11715,117
Vote 10 - Grants and contributions3,431,945271,503271,5033,010,8765,7355,735
Vote 15 - Locally engaged staff pensions, insurance and social security50,77911,00211,00265,38010,05110,051
Budgetary statutory authorities:
Contributions to employee benefit plans96,56416,45216,45298,52813,90513,905
Ministers' salary and motor car allowance24360602204040
Payments under the Diplomatic Service (Special) Superannuation Act250772502626
Spending of proceeds from the disposal of surplus Crown assets1,291--761--
Refunds of amounts credited to revenues in previous years---121212
Payments to International Financial Institutions-182,538182,53830,744--
Passport Office Revolving Fund3245,000--70,3738,0898,089
Total Budgetary Authorities5,484,857867,329867,3294,811,128329,278329,278
Non-Budgetary Authorities79,63210,38810,38881,2864,1934,193
Total Authorities5,564,489877,717877,7174,892,414333,471333,471
Table 4: Departmental budgetary expenditures by Standard Object (unaudited)
(In thousands of dollars)Fiscal Year 2014-2015Fiscal Year 2013-2014
Planned expenditures for the year ending March 31, 20151Expended during the quarter ended June 30, 2014Year to date used at quarter endPlanned expenditures for the year ending March 31, 20141 3Expended during the quarter ended June 30, 20132 3Year to date used at quarter end
1 Includes only Authorities available for use and granted by Parliament at quarter-end.
2 Excludes the Canadian International Development Agency results for the period before the amalgamation with the Department of Foreign Affairs and International Trade. Total expenditures for the first quarter of 2013-2014 represented an amount of $692,966 thousands of dollars.
3 The department had one revolving fund, Passport Canada, which was included up to July 1, 2013. The Passport revolving fund has been transferred to Citizenship and Immigration Canada effective July 2, 2013.
Expenditures:
Salaries and employee benefits946,760270,523270,5231,110,647267,125267,125
Transportation and communications86,47617,42317,423133,60326,30026,300
Information12,1321,2711,27118,7922,4972,497
Professional and special services250,34530,68530,685279,19742,37242,372
Rentals200,26951,67451,674283,12551,95651,956
Repair and maintenance31,1323,3803,38043,2243,8963,896
Utilities, materials and supplies50,0796,8446,84474,99615,72115,721
Acquisition of land, buildings and works166,31014,87114,87176,5826,5546,554
Acquisition of machinery and equipment111,7594,2614,26189,3174,0434,043
Transfer payments3,677,195454,047454,0473,041,8715,7615,761
Other1,73821,77021,7704,458573573
Total gross budgetary expenditures5,534,194876,749876,7495,155,812426,798426,798
Less revenues netted against expenditures:
PPT Respendable Revenue---285,35970,93570,935
Revenue Credited to the Vote49,3379,4209,42059,32526,58526,585
Total Revenues Netted Against Expenditures49,3379,4209,420344,68497,52097,520
Total Net Budgetary Expenditures5,484,857867,329867,3294,811,128329,278329,278
Date Modified: