Quarterly Financial Report - For the period ended September 30, 2019

Revised on March 2, 2020

Table of contents

• Erratum
• Statement outlining results, risks and significant changes in operations, personnel and programs
  • 1. Introduction
    • Basis of Presentation
  • 2. Highlights of fiscal quarter and fiscal year to date (YTD) results
    • A. Significant changes to Authorities
    • B. Significant changes to budgetary expenditures by standard object
  • 3. Risks and Uncertainties
  • 4. Significant changes in relation to operations, personnel and programs
• Approval by Senior Officials

Erratum

Date: January 29, 2020

Location: Table 1 - Significant changes to Authorities.
Revision:

• "Fiscal year 2018-2019 - Non-budgetary authorities $28,224 thousands” replaces “Non-budgetary authorities $28,244 thousands”.
• “Fiscal year 2018-2019 - Total authorities $6,814,593 thousands” replaces “Total authorities $6,814,613 thousands”.
• “Variance $ - Total authorities $66,555 thousands” replaces “Total authorities $66,535 thousands”.

Rationale for the revision: Original amounts reported were not correct. 

Location: Table 3 - Statement of Authorities (unaudited)
Revision:

• “Total available for use for the year ending March 31, 2020 - Total authorities $6,881,148 thousands” replaces “Total authorities $6,881,147 thousands”.
• “Total available for use for the year ending March 31, 2019 - Total authorities $6,814,593 thousands” replaces “Total authorities $6,817,327 thousands”.
• “Used during the quarter ended September 30, 2018, Budgetary statutory authorities -Payments to International Financial Institutions –Direct Payments $42,585 thousands” replaces “Payments to International Financial Institutions –Direct Payments $174,384 thousands”.

Rationale for the revision: Original amounts reported were not correct. 

Location: Table 4 - Departmental budgetary expenditures by Standard Object (unaudited), Planned expenditures for the year ending March 31, 2020.
Revision:

• “Salaries and employee benefits $1,224,803 thousands” replaces “Salaries and employee benefits $1,205,436 thousands”.
• “Transportation and communications $152,920 thousands” replaces “Transportation and communications $145,046 thousands”.
• “Information $27,788 thousands” replaces “Information $26,564 thousands”.
• “Professional and special services $344,542 thousands” replaces “Professional and special services $327,335 thousands”.
• “Rentals $230,445 thousands” replaces “Rentals $218,617 thousands”.
• “Repair and maintenance $33,710 thousands” replaces “Repair and maintenance $31,959 thousands”.
• “Utilities, materials and supplies $57,042 thousands” replaces “Utilities, materials and supplies $54,114 thousands”.
• “Acquisition of land, buildings and works $61,429 thousands” replaces “Acquisition of land, buildings and works $49,209 thousands”.
• “Acquisition of machinery and equipment $68,246 thousands” replaces “Acquisition of machinery and equipment $54,882 thousands”.
• “Other $29,215 thousands” replaces “Other $28,848 thousands”.
• “Total gross budgetary expenditures $6,891,042 thousands” replaces “Total gross budgetary expenditures $6,802,912 thousands”.
• “Total net budgetary expenditures $6,843,707 thousands” replaces “Total net budgetary expenditures $6,755,577 thousands”.

Rationale for the revision: Original amounts reported were not correct. 

Location: Table 4 - Departmental budgetary expenditures by Standard Object (unaudited)
Revision:

• “Expended during the quarter ended September 30, 2019 - Professional and special services $72,147 thousands” replaces “Professional and special services $72,150 thousands”.
• “Expended during the quarter ended September 30, 2019 - Total gross budgetary expenditures $1,630,260 thousands” replaces “Total gross budgetary expenditures $1,630,263 thousands”.
• “Expended during the quarter ended September 30, 2019 - Total net budgetary expenditures $1,603,927 thousands” replaces “Total net budgetary expenditures $1,603,930 thousands”.
• “Planned expenditures for the year ending March 31, 2019 - Total net budgetary expenditures $6,786,369 thousands” replaces “Total net budgetary expenditures $686,369 thousands”.
• “Expended during the quarter ended September 30, 2018 – Salaries and employee benefits $319,335 thousands” replaces “Salaries and employee benefits $319,355 thousands”.
• Fiscal year 2018-2019, Year-to-date used at quarter-end - Information $7,445 thousands” replaces “Information $7,455 thousands”.

Rationale for the revision: Original amounts reported were not correct.

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

1. Introduction

This quarterly report for the period ending September 30, 2019 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 2019-2020 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.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

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 September 30, 2019 are included. 

i. Budgetary Authorities

Authorities for Operating Expenditures have increased by $10.1 million. Items contributing to changes in operating expenditure authorities include:

• Funding received in 2019-20 for the Export Diversification Strategy;
• Adjustments to account for the impact of foreign currency fluctuations incurred on expenditures at missions abroad;
• An increase related to the Duty of Care initiative to support mission security abroad;
• Funding received to implement the Feminist International Assistance Agenda;
• Adjustments to account for the effects of inflation on overseas operations;
• Transfers from other government departments to provide support to departmental staff located at missions abroad; and
• Funding received for the Creative Export Strategy.

These increases were partly offset by:

• The sunset of funding received to support the 2018 G7 summit;
• A decrease in the Operating Budget Carry-Forward amount received in 2019-20 compared to 2018-19; and
• A decrease due to funding received in 2018-19 for compensation related to Collective Agreements.

Capital Expenditures authorities have decreased by $42.0 million. This is attributable to:

• The sunset of funding required to complete the New-York Chanceries' co-location and relocation project; and
• A decrease in the Capital Budget Carry-Forward amount received in 2019-20 compared to 2018-19.

Grants and Contributions authorities have increased by $144.5 million. Items contributing to changes in grants and contributions expenditures authorities include:

• Funding received to implement the Feminist International Assistance Agenda;
• Funding received for Canada’s commitment under the Food Assistance Convention;
• A net increase in funding received for Renewing Canadaʼs Middle East Strategy; and
• Funding received for Grants and Contributions in support of the CanExport Program.

These increases were partially offset by:

• A decrease related to funding received in previous years to help developing countries to address the impact of climate change; and
• A decrease related to the cost of assessed contributions, due to changes in the international organizations’ budgets and the impact of currency fluctuations. Payments to these international organizations are made in the prescribed currency of the assessed contributions.

Locally engaged staff pensions, insurance and social security authorities have increased by $18.1 million which is attributable to funding received 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 decreased by $34.0 million. This is due to technical adjustments to contributions to employee benefit plans. This was partially offset by a net increase due to the variation in the salary component of funding received.

Debt forgiveness to Pakistan of $22.2 million represents the available balance from previous years. For 2018-19, the opening balance was $60.1 million of which $37.9 million was used during the year.

iii. Non-budgetary Authorities

The Department’s non-budgetary authorities have increased by $9.2 million. This is attributable to a net increase in funds available for use from previous years of the Working Capital Advances to missions and employees abroad, as well as 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 period and their comparison with the same period last year.

i. Operating Expenditures

Salaries and employee benefits – The decrease of $2.8 million is related to the salary costs for the G7 summit that took place in 2018-19.

Professional and special services – The increase of $17.1 million is explained by:

• The collaboration of Global Affairs Canada with Canada Council for the Arts in an Arts and Culture Program throughout Germany, leading up to and during the Frankfurt Book Fair in October 2020;
• Payments made to support the departmental Duty of Care initiative related to mission security abroad; and
• An increase in the cost of security services provided by another government department abroad.

These payments were partially offset by a decrease in professional and special services costs related to the G7 summit that took place in 2018-19.

Rentals – The decrease of $7.8 million is explained by rent payments inherent to the New York Chanceries’ co-location and relocation project incurred in 2018-19 and a timing difference for the payment made for software contracts as well as expenses related to the 2018 G7 summit. These decreases were partially offset by regular rent increases.

Utilities, materials and supplies – The decrease of $1.4 million is explained by a timing difference in the purchase of materials and supplies at missions, as well as the costs related to the G7 summit that took place in 2018-19.

Other – The increase of $14.3 million is explained by the settlement of claims against the Crown in fiscal year 2019-20 and a loss resulting from the revaluation of monetary assets at quarter-end.

ii. Capital Expenditures

Acquisition of land, buildings and works – The decrease of $5.0 million is caused by the costs that were incurred in 2018-19 for the construction of the Chancery in New York.

Acquisition of machinery and equipment – The decrease of $1 million is due to projects related to mission security abroad of GAC’s real-property portfolio in relation to the Duty of Care initiative that occurred in 2018-19 and a change in machinery and equipment needs and requirements at headquarters and missions.

iii. Transfer Payments

The increase of $266.8 million is mostly explained by a timing difference in payments to the Global Fund to Fight AIDS, Tuberculosis & Malaria.

iv. Revenues

The increase of $3.5 million in revenues originates mainly from a timing difference in the recovery of costs from other organizations that share the department’s space and services at missions abroad (Co-locators).

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. The department’s CRP identifies unique pressures associated with resource management and fiduciary oversight due to its geographically dispersed operations.

GAC continues to be more pragmatic and versatile in its management of risks and uncertainties associated with resources. Across the department, branches and program areas have 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. GAC also continues to closely monitor salary expenditures since the federal government’s transition to centralized pay services. The department is continually looking for opportunities to improve financial management practices, including those related to financial forecasting, and ensuring resources are available to implement priority activities.

Global Affairs Canada has applied a range of measures to manage the risks associated with fraud, such as increased training on fraud awareness and detection; the use of mission management audits and inspections to identify specific areas of risk; outreach to missions through the development of a three dimensional Cube depicting six risk areas in the management of the common services program and a Case Study to raise awareness; an updated procurement and contracting framework, which includes the establishment of regional contract review boards for missions; and improved coordination on investigations and administrative measures.

The Global Affairs Canada Fraud Risk Management Action Plan for 2019-20 will continue to focus on the areas of: communications, data analytics and client tools; ensuring the department’s fraud risk management framework is comprehensive and up-to-date, including for grants and contributions; and, addressing system vulnerabilities and gaps in oversight.

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

During the quarter, a change was made to the following position:

• The Associate Deputy Minister of Foreign Affairs

Approval by Senior Officials

Approved, as required by the TB Policy on Financial Management:

Marta Morgan
Deputy Minister of Foreign Affairs

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

Ottawa, Ontario
Date: February 28, 2020

Statement of Authorities (Unaudited)

This table includes authorities available for use and granted by Parliament as at September 30, 2019.

Departmental budgetary expenditures by standard (Unaudited)

This table includes authorities available for use and granted by Parliament as at September 30, 2019.