Quarterly Financial Report - For the period ended December 31, 2019

Table of contents

• 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

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

1. Introduction

This quarterly report for the period ending December 31, 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 December 31, 2019 are included.

i. Budgetary Authorities

Authorities for Operating Expenditures have decreased by $13.7 million. Items contributing to changes in operating expenditure authorities include:

• 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;
• A net decrease for compensation related to Collective Agreements; and
• A net decrease in funding for Renewing Canadaʼs Middle East Strategy.

These decreases were partly offset by:

• Funding received in 2019-20 for the Export Diversification Strategy;
• Funding received for Canada’s participation in Expo 2020 Dubai, United Arab Emirates;
• Adjustments to account for the impact of foreign currency fluctuations incurred on expenditures at missions abroad;
• A net increase related to the Duty of Care initiative to support mission security abroad; and
• Funding received to implement the Feminist International Assistance Agenda.

Capital Expenditures authorities have decreased by $42.6 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 $356.8 million. Items contributing to changes in grants and contributions expenditures authorities include:

• Funding received to implement the Feminist International Assistance Agenda;
• A net increase in funding received to help developing countries to address the impact of climate change;
• A net increase in funding received for Renewing Canadaʼs Middle East Strategy; and
• A net increase in funding received for Grants and Contributions in support of the CanExport Program

These increases were partially offset by:

• A net decrease in funding received to support Operation IMPACT through the Middle East Strategy;
• A net decrease in funding received for the Crisis Pool Quick Release Mechanism;
• 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; and
• The sunset of current funding for the Counter-Terrorism Capacity Building Program in Africa.

ii. Budgetary Statutory Authorities

Contributions to employee benefits plans (EBP) statutory authorities have decreased by $34.5 million. This is due to adjustments to contribution rates of the employee benefit plans. This was partially offset by a net increase due to 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 increase of $20.1 million is explained by:

• The creation of new initiatives (Canada’s Feminist International Assistance Policy and Innovative financing);
• The implementation of the new collective agreements which resulted in increases to Canada based staff regular pay and retroactive salary payments; and
• The regular increase in locally engaged staff salaries and related benefits paid at missions abroad.

These expenditures were partially offset by a decrease related to the salary costs for the 2018 G7 summit that took place in 2018-19 and adjustments to contribution rates of the employee benefit plans.

Transportation and communications – The decrease of 2.7 million is explained by the transportation and communications costs related  to the 2018 G7 summit that took place in 2018-19 and a timing difference in the invoicing of relocation costs. These expenditures were partially offset by an increase related to a budget transfer received from Shared Services Canada since most expenditures for communications were paid by SSC last year.

Information – The increase of 1.7 million is explained by annual subscription payments, high resolution footage for major projects (Women Deliver 2019 Conference) and an increase in spending for expositions due to the undertaking of activities in support of the Foreign Direct Investment (FDI) program. These expenditures were partly offset by a decrease in costs related to the 2018 G7 summit that took place in 2018-19.

Professional and special services – The increase of $28 million is explained by:

• Incremental expenses of police deployments under the Canadian Police Arrangement;
• The collaboration of Global Affairs Canada with Canada Council for the Arts in an Arts and Culture Program;
• Payments made to support the Duty of Care initiative related to mission security abroad; and
• An increase in the cost of security services provided by other government departments abroad.

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

Rentals – The decrease of $17.7 million is explained by rent payments inherent to the New York Chanceries’ co-location and relocation project incurred in 2018-19 and the prepayment of rent in Manila and Damascus. Also contributing to the decrease are rent disbursements made in advance last year to take advantage of rental discounts and exchange rates and expenses related to the 2018 G7 summit in 2018-19.

Other – The decrease of $17.4 million is primarily attributed to a timing difference caused by the debt forgiveness to the Government of Pakistan. A portion of the debt was written-off in the third quarter of last fiscal year but no similar transaction has been recorded as of the end of the reporting period this year.

This decrease was partially offset by a settlement of a claim 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 $6.6 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 increase of $2.9 million is due to the interior design costs related to Capital projects at missions, acquisition of security equipment for the Duty of Care projects and a timing difference in the reception of various invoices.

iii. Transfer Payments

The increase of $36.4 million is explained by a timing difference in the payment cycle for numerous projects including payments to NATO for the Afghanistan National Army and an increase in the client demand for the CanExport program due to ongoing promotion and outreach.

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 on 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. A Fraud Risk Assessment update has been completed as per a recommendation from the Office of the Auditor General.

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

During the quarter, changes were made to the following position:

• The Deputy Minister of International Development

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 December 31, 2019.

Departmental budgetary expenditures by standard object (Unaudited)

This table includes authorities available for use and granted by Parliament as at December 31, 2019.