Quarterly Financial Report - For the period ended June 30, 2020

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 June 30, 2020 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 2020-2021 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 June 30, 2020 are included.

i. Budgetary Authorities

Authorities for Operating Expenditures have increased by $112.2 million. Items contributing to changes in operating expenditure authorities include:

• A transfer from Shared Services Canada for the cost of providing core information technology services to missions abroad;
• Transfers from other government departments to provide support to departmental staff located at missions abroad;
• An increase due to funding received for compensation related to Collective Agreements;
• Funding received for Canada’s participation in Expo 2020 Dubai, United Arab Emirates;
• Adjustments to account for Locally Engaged Staff salaries and related benefits incurred at missions abroad;
• Funding received for the new Export Diversification Strategy;
• Adjustments to account for the effects of inflation on overseas operations;
• Funding received to implement the Feminist International Assistance Policy; and
• Funding received for the International Education Strategy.

These increases were partly offset by a net decrease in funding received for Ensuring Rules-Based and Responsible Trade (softwood lumber).

Capital Expenditures authorities have increased by $10.7 million. This is attributable to the capital portion of the Duty of Care Special Purpose Allotment to support mission security abroad.

Grants and Contributions authorities have increased by $616.2 million. Items contributing to changes in grants and contributions expenditures authorities include:

• Funding received for the Feminist International Assistance Policy; and
• A net increase in funding received to help developing countries to address the impact of climate change.

These increases were partially offset by:

• A decrease related to the 2015-2020 Strategy for Maternal, Newborn and Child Health;
• A technical adjustment to the spending authorities for International Financial Institutions – Direct payments; 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.

ii. Budgetary Statutory Authorities

Payments to International Financial Institutions for Direct Payments have increased by $18.2 million in the anticipated payments to International Financial Institutions.

Payments for consular assistance pursuant to the Public Health Events of National Concern Payments Act have increased by $41.0 million to support consular assistance for Canadians abroad affected by the COVID-19 pandemic.

iii. Non-budgetary Authorities

The Department’s non-budgetary authorities have increased by $62.9 million. Items contributing to changes in non-budgetary authorities include:

• Funding received for Loans under the International Financial Assistance Act; and
• A net increase in Working Capital Advances.

These increases were partially offset by a decrease 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 $26.0 million is explained by:

• The regular increase in locally engaged staff salaries and related benefits paid at missions abroad;
• Timing difference in processing Employee Benefit Plans;
• Overtime required due to initiatives in place by the Government of Canada (consular inquiries, repatriation of rotational staff, loans and general inquiries); and
• Creation of new security program positions and common service support.

Transportation and communications – The increase of $8.0 million is explained by financial agreements made with airlines in order to repatriate Canadian citizens and permanent residents. These expenditures were partly offset by a significant decrease in travel costs due to the COVID-19 pandemic.

Information – The decrease of $0.8 million is explained by the ongoing global COVID-19 pandemic. A lot of initiatives have been postponed to the next fiscal year  2021-2022 or  have been delivered virtually, which considerably reduced costs.

Professional and special services – The decrease of $7.8 million is explained by:

• A timing difference in payments for fixed annual fees related to the establishment and operation of 10 Canadian Representation Offices to assist in the development of trade;
• A significant decrease in hospitality costs and bilateral visits managed by the Office of Protocol; and
• Timing differences in the payments to Other Government Departments (OGDs) to deliver Global Affairs Canada’s projects. Payments to OGDs were made earlier last fiscal year.

The decrease was partly offset by a timing difference in the reception of various invoices and COVID-19 pandemic expenditures.

Repair and maintenance – The decrease of $1.0 million is explained by a timing difference in the purchases for repair and maintenance at missions as well as expenses incurred last year for the optimisation project of the International Civil Aviation Organization (ICAO).

Utilities, materials and supplies – The decrease of $1.4 million is explained by a timing difference in the purchases for utilities, materials and supplies at missions.

Other – The increase of $9.6 million is explained by payments made under a special financial assistance program: the COVID-19 Emergency Loan Program for Canadians Abroad.

ii. Capital Expenditures

Acquisition of land, buildings and works – The decrease of $3.2 million is attributable to the acquisition of the new Official Residence in Warsaw in 2019-2020.

Acquisition of machinery and equipment – The increase of $2.2 million is due to the acquisition of equipment to accommodate teleworking and an advance payment for the Duty of Care projects. These expenditures were partly offset by a timing difference in the reception of various invoices.

iii. Transfer Payments

The decrease of $76.8 million is explained by a timing difference in the payment cycle and delays in numerous projects resulting from the COVID-19 pandemic.

iv. Revenues

The increase of $16.1 million originates 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

The coronavirus (COVID-19) is impacting organizations globally; including Global Affairs Canada. As the Department navigates through this new reality, our risk management specialists offer continuous support to officials throughout the organization in view of optimizing assessment / mitigation strategies.

As a federal department delivering a complex mandate in a rapidly changing international environment, GAC’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 Enterprise Risk Management Strategy guides the department in managing risks that affect strategic plans and priorities. The department’s Strategic Risk Landscape and Enterprise Risk Profile 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.

GAC 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 (a pilot remote mission audit will be conducted this year) 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 Department has fully implemented the recommendations from the Office of the Auditor General audit on Fraud Risk Management. These actions include improvements in the areas of training, communications, data analytics and client tools; the development of a comprehensive fraud risk management framework (including for grants and contributions); addressing system vulnerabilities and gaps in oversight; and updating the departmental Fraud Risk Assessment. A Grants and Contributions Fraud Protocol Framework was approved and procedures are currently being developed on how to deal with potential cases of fraud. In addition, a new grants and contributions Fraud Management Unit has been established to manage all allegations of fraud and mismanagement, as well as to build capacity to prevent and identify fraud.

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

During the quarter, changes occured in relation to the following position:

• The Assistant Deputy Minister of Global Issues and Development Branch.

Approval by Senior Officials

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

Marta Morgan
Deputy Minister of Foreign Affairs

Shirley Carruthers
A/ Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology

Ottawa, Ontario
Date: August 28, 2020

Statement of Authorities (Unaudited)

This table includes authorities available for use and granted by Parliament as at June 30, 2020

Departmental budgetary expenditures by standard object (Unaudited)

This table includes authorities available for use and granted by Parliament as at June 30, 2020