Quarterly Financial Report

For the period ended June 30, 2017

Table of contents

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

1. Introduction

This quarterly report for the period ending June 30, 2017 has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the 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.

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 using an expenditure basis of accounting. The authority of Parliament is required before money 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 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 (as applicable) for the 2017-2018 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.

Global Affairs Canada (GAC) uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results 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

The following table shows the total budget available for use by the Department. Only authorities available for use and granted by Parliament as at June 30, 2017 are included.

Table 1: Significant changes to Authorities (in thousands of dollars)
Authorities (in thosands of dollars)Fiscal Year
2017-2018
Fiscal Year
2016-2017
Variance
Total available for use for the year ending March 31, 2018*Total available for use for the year ending March 31, 2017*$%
Operating Expenditures1,575,8741,497,12378,7515%
Capital Expenditures106,313124,444(18,131)(15%)
Grants and Contributions3,903,4873,529,677373,81011%
Locally engaged staff pensions, insurance and social security66,27350,77915,49431%
Budgetary statutory authorities
Contributions to employee benefit plans141,642108,93932,70330%
Ministers' salary and motor car allowance25325121%
Payments under the Diplomatic Service (Special) Superannuation Act250250-0%
Debt forgiveness to Pakistan84,694124,640(39,946)(32%)
Spending of proceeds from the disposal of surplus Crown assets2,4622,835(373)(13%)
Payments to International Financial Institutions – Direct Payments227,048245,000(17,952)(7%)
Total Budgetary authorities6,108,2965,683,938424,3587%
Non-budgetary authorities56,20125,08631,115124%
Total Authorities6,164,4975,709,024455,4738%

*Includes only Authorities available for use and granted by Parliament at quarter-end.

i. Budgetary Authorities

Operating Expenditures authorities have increased by $78.8 million. This is mostly related to salary and operating requirements to address the crises in Iraq and Syria and their impact on the region ($29 million), for the Peace and Stabilization Operations Program ($29 million), as well as the funding received for inflation on overseas operations ($12 million). Also contributing to the increase was the funding received through Supplementary Estimates (A) for the new departmental corporation called Investment Promotion Canada and Enhanced Trade Commissioner Services ($18 million). This was partially offset by a decrease relating to the impact of foreign currency fluctuations incurred on expenditures at missions abroad ($11 million).

Capital Expenditures authorities have decreased by $18.1 million. This is mainly caused by the decrease in funding received for the project to relocate the chancery for the combined missions to the European Union and to Belgium.

Grants and Contributions authorities have increased by $373.8 million. This is for the most part attributable to the funding for humanitarian responses to address the crises in Iraq and Syria and their impact on the region, funding for the Peace and Stabilization Operations Program, as well as funding to help developing countries in Asia and the Pacific address impact of climate change through the Climate Fund for the Private Sector. These increases were partially offset by a decrease in the cost of assessed contributions and the timing of the funding renewal related to the support to the Global Fund to Fight AIDS, Tuberculosis and Malaria.

Locally engaged staff pensions, insurance and social security funding increased by $15.5 million to meet the expenditure requirements of the pension, insurance and social security programs and other arrangements for employees locally engaged outside of Canada.

ii. Budgetary Statutory Authorities

Contributions to employee benefits plans (EBP) statutory authorities have increased by $32.7 million. This is mainly attributable to the adjustment to contributions to employee benefit plans. Also contributing to the increase was the salary component of the funding received for the Peace and Stabilization Operations Program, to cover expenditure fluctuations for allowances provided to Canadians working at diplomatic missions abroad, as well as funding received to address the crises in Iraq and Syria and their impact on the region.

Debt forgiveness to Pakistan of $84.7 million represents the available balance from previous years. In 2006-2007, the Government of Canada, as represented by the Department, entered into an agreement with the Government of Pakistan to forgive its outstanding $447.5 million loan. In order to expire its debt obligation, the Government of Pakistan is required to make corresponding investments in their education sector. For 2016-17, the opening balance was $124.6 million of which $39.9 million was used during the year.

iii. Non-budgetary Authorities

The Department’s non-budgetary authorities have increased by $31.1 million. This is attributable to an increase in the anticipated payments to International Financial Institutions for capital subscriptions.

B. Significant changes to budgetary expenditures by standard object

The following table shows the budgetary expenditures and revenues netted against expenditures of the Department for the first quarter and their comparison with the same period last year.

Table 2: Significant changes to budgetary expenditures by standard object (in thousands of dollars)
(in thousands of dollars)April to June
2017-18
April to June
2016-17
Variance
$%
Expenditures
Salaries and employee benefits280,859266,58914,2705%
Transportation and communications17,98120,594(2,613)(13%)
Information2,0081,16784172%
Professional and special services30,11536,278(6,163)(17%)
Rentals52,61855,617(2,999)(5%)
Repair and maintenance2,7363,438(702)(20%)
Utilities, materials and supplies6,7946,3834116%
Other1,9122,412(500)(21%)
Total Operating Expenditures395,023392,4782,5451%
Acquisition Expenditures
Acquisition of land, buildings and works1,90817,989(16,081)(89%)
Acquisition of machinery and equipment2,0463,393(1,347)(40%)
Total Acquisition Expenditures3,95421,382(17,428)(82%)
Transfer payments546,851687,265(140,414)(20%)
Total gross budgetary expenditures945,8281,101,125(155,297)(14%)
Less revenues netted against expenditures
Revenue Credited to the Vote4,11116,702(12,591)(75%)
Total Net Budgetary Expenditures941,7171,084,423(142,706)(13%)
i. Operating Expenditures

Salaries and employee benefits – The increase of $14.3 million is mainly attributable to the implementation of the new collective agreements that resulted in increases to Canada based staff regular pay and retro-active salary payments. Additionally, locally engaged staff salaries increased due to annual salary revisions.

Transportation and communications – The decrease of $2.6 million can be explained mostly by reduced costs of employee relocations due to fewer rotations at the missions for the same period last year.

Information – The increase of $0.8 million is attributable to electronic and database subscriptions for the Departmental Virtual Library that were processed in the first quarter this year with no equivalent in the same period last year.

Professional and special services – The decrease of $6.2 million is mainly a result of a timing difference in processing invoices for legal and security services.  Additionally, due to the relocation of the chancery in Brussels, property expenses were higher last year than for the same period this year.

Rentals – The decrease of $3.0 million can be explained by a timing difference of rental payments processed in the first quarter of 2016-17 compared to the first quarter of the current year.

Repairs and Maintenance – The decrease of $0.7 million is attributable to a timing difference related to repairs and maintenance for buildings.

ii. Capital Expenditures

Acquisition of land, building and works – The decrease of $16.1 million can be explained by costs that were incurred in 2016-17 such as the lease extension costs of the Canada High Commission and the purchase of staff quarters in London.  Additionally, the Abuja Official Residence Fit-up costs incurred in 2016-17 contributed to this variance.

Acquisition of machinery and equipment – The decrease of $1.3 million is a result of more spending incurred last year for equipment renovation work and generator recapitalization compared to this year.

iii. Transfer Payments

The decrease of $140.4 million is attributable to the timing of a payment made last year under an agreement with the African Development Bank Fund. The consolidation of the two departmental financial systems that took place in April 2017 also led to some temporary delays in transfer payment processing in the first quarter of this year.

iv. Revenues

The decrease of $12.6 million can be explained in part by a timing difference in the recovery by GAC of shared costs from other organizations that share the department’s space and services at missions abroad (Co-locators) as well as reductions in occupancy by other organizations, resulting in less revenues being collected. Also contributing to this variance was lower gains on foreign exchange in the current quarter and a temporary delay in the invoicing of the interests on loans to developing countries which will be resolved next quarter.

3. Risks and Uncertainties

As a federal department delivering a complex mandate in a rapidly changing international environment, Global Affairs Canada’s ability to deliver on its mandate is influenced by many factors. These factors include the political conditions, economic controls, social contexts and shifting global trends, which expose the department to a broad range of risks, both domestically and abroad. Effective risk management is, therefore, critical to the department’s ability to deliver results for Canadians. The department undertakes formal, risk exercises annually at headquarters, missions abroad and regional offices to review and validate the key risks in their operating environment and to assess the progress and effectiveness of their proposed risk responses.

The Corporate Risk Profile (CRP) guides the department in managing risks that affect the department’s strategic plans and priorities. It is integrated into the department’s business planning process and feeds into both the Departmental Plan and Departmental Results Report. The 2017-18 CRP identifies unique pressures associated with resource management and fiduciary oversight due to its geographically dispersed operations.  Business planning, resource allocation and prioritization are fundamental to the achievement of GAC’s strategic priorities.

GAC continues to be more pragmatic and versatile in its management of risks and uncertainties associated with resources. It has improved financial forecasting and continues to find ways to absorb or fund activities, always within approved budgets. As part of its new resource reallocation initiative and in-year financial exercises, the department reassesses the needs and demands of various program areas without compromising on the delivery of results. This approach has reinforced the importance of aligning financial and non-financial resources to departmental priorities.

Branches and program areas have also grown more attentive to the department’s financial limitations as they are identifying their pressures earlier, reviewing their activities and available funds more frequently, and are increasingly utilizing forward planning. The department also continues to closely monitor its salary expenditures in light of the federal government’s transition to centralized pay services.

The department is also implementing a Fraud Risk Management (FRM) Action Plan that provides a more integrated and coordinated approach to addressing fraud-related risk. The FRM Action Plan focuses on key elements: prevention, internal controls and training; monitoring, internal audits and detection; and, mitigation and response. Specialized training promoting sound management, increased risk awareness and good management practices will also be conducted at missions.

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

During the quarter, the following appointments were made:

Subsequent to the end of the quarter, the following appointments were made:

Approval by Senior Officials

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

Ian Shugart
Deputy Minister of Foreign Affairs

Arun Thangaraj
Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology

Ottawa, Ontario
Date: August 29, 2017

Table 3: Statement of Authorities (Unaudited)
This table includes authorities available for use and granted by Parliament as at June 30, 2017
(in thousands of dollars)Fiscal Year
2017-2018
Fiscal Year
2016-2017
Total available for use for the year ending March 31, 2018*Used during the quarter ended June 30, 2017Year to date used at quarter endTotal available for use for the year ending March 31, 2017*Used during the quarter ended June 30, 2016Year to date used at quarter end
Operating Expenditures1,575,874346,796346,7961,497,123333,888333,888
Capital Expenditures106,3136,8766,876124,44425,57525,575
Grants and Contributions3,903,487508,574508,5743,529,677476,344476,344
Locally engaged staff pensions, insurance and social security66,27312,75012,75050,77910,62310,623
Budgetary statutory authorities
Contributions to employee benefit plans141,64228,40228,402108,93927,04627,046
Ministers' salary and motor car allowance25342422512121
Payments under the Diplomatic Service (Special) Superannuation Act25025252508686
Debt forgiveness to Pakistan84,694--124,640--
Spending of proceeds from the disposal of surplus Crown assets2,462--2,835--
Refunds of amounts credited to revenues in previous years----55
Payments to International Financial Institutions – Direct Payments227,04838,25238,252245,000210,835210,835
Total Budgetary authorities6,108,296941,717 941,717 5,683,9381,084,423 1,084,423
Non-budgetary authorities56,2014,4774,47725,0868,5308,530
Total Authorities6,164,497946,194946,1945,709,0241,092,9531,092,953

*Includes only Authorities available for use and granted by Parliament at quarter-end.

Table 4: Departmental budgetary expenditures by Standard Object (unaudited)
This table includes authorities available for use and granted by Parliament as at June 30, 2017
(in thousands of dollars)Fiscal Year
2017-2018
Fiscal Year
2016-2017
Planned expenditures for the year ending March 31, 2018Expended during the quarter ended June 30, 2017Year to date used at quarter endPlanned expenditures for the year ending March 31, 2017Expended during the quarter ended June 30, 2016Year to date used at quarter end
Expenditures
Salaries and employee benefits1,109,253280,859280,8591,037,801266,589266,589
Transportation and communications124,27217,98117,98115,37420,59420,594
Information17,0032,0082,00814,0031,1671,167
Professional and special services273,87130,11530,115292,32436,27836,278
Rentals222,42252,61852,618233,30855,61755,617
Repair and maintenance30,3812,7362,73648,4393,4383,438
Utilities, materials and supplies51,1306,7946,79461,4966,3836,383
Acquisition of land, buildings and works61,5311,9081,90899,28517,98917,989
Acquisition of machinery and equipment46,8442,0462,04627,3543,3933,393
Transfer payments4,130,785546,851546,8513,774,927687,265687,265
Other86,7291,9121,912127,8522,4122,412
Total gross budgetary expenditures6,154,221945,828945,8285,732,1631,101,1251,101,125
Less revenues netted against expenditures
Revenue Credited to the Vote45,9254,1114,11148,22516,70216,702
Total revenues netted against expenditures45,9254,1114,11148,22516,70216,702
Total Net Budgetary Expenditures6,108,296941,717941,7175,683,9381,084,4231,084,423
Date Modified: