Quarterly Financial Report

For the period ended September 30, 2021

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

1. Introduction

This quarterly report for the period ending September 30, 2021 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 2021-2022 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 are 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, 2021 are included. 

Table 1: Significant changes to Authorities (in thousands of dollars)

i. Budgetary Authorities

Authorities for Operating Expenditures have decreased by $9.7 million. Items contributing to changes in operating expenditures authorities include:

• Decrease in the current funding for the Duty of Care Special Purpose Allotment to support mission security abroad;
• Sunset of funding received for Renewing Canadaʼs Middle East Strategy; 
• Decrease in the current funding for Canada's participation in Expo 2020 Dubai, United Arab Emirates;
• Transfers to other government departments to provide support to departmental staff located at missions abroad;
• Sunset of funding received for Advancing Clean Technology in Canada's Natural Resources Sectors; and
• Decrease in the Operating Budget Carry Forward amount received in 2021-22 compared to 2020-21.

These decreases were partly offset by:

• Funding to support security and operations at mission in Kabul, Afghanistan;
• Funding for compensation related to collective agreements;
• Adjustment relating to the impact of foreign currency fluctuations incurred on expenditures at missions abroad;
• Funding for locally engaged staff salaries and related benefits incurred at missions abroad;
• Adjustment for inflation on overseas operating costs;
• Increase related to funding to implement the Feminist International Assistance Agenda; and
• Internal reallocation of resources from the International Development Assistance for multilateral programming.

Capital Expenditures authorities have increased by $15.5 million. Items contributing to changes in capital expenditures authorities include:

• Increase in the Capital Budget Carry-Forward amount received in 2021-22 compared to 2020-21; 
• Increase in the funding for the Trade Commissioner Service Electronic Client Relationship Management; and
• Funding to support security and operations at Canada's mission in Kabul, Afghanistan.

These increases were partly offset by decrease in the capital portion of the Duty of Care Special Purpose Allotment to support mission security abroad.

Grants and Contributions authorities have decreased by $693.2 million. Items contributing to changes in grants and contributions expenditures authorities include:

• Decrease related to funding received in previous years to help developing countries to address the impact of climate change;
• Sunset of funding received for Renewing Canadaʼs Middle East Strategy;
• Decrease related to funding received for the Feminist International Assistance Agenda;
• Decrease in the current funding for the Peace and Stabilization Operations Program;
• Reprofile of the Counter-Terrorism Capacity Building Operation Impact projects under the Middle East Strategy;
• Reprofile of funding for the Canadian International Innovation Program; and
• Decrease in funding for Enhanced Export Diversification Support.

These decreases were partly offset by:

• Funding to support access by developing countries to vaccines, therapeutics and diagnostic tools (COVID-19);
• An increase 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;
• Funding for the Arctic and Northern Policy Framework; and
• Technical adjustment to increase spending authority for the International Financial Institutions.

Locally engaged staff pensions, insurance and social security authorities have increased by $14.4 million attributable to funding received to meet the expenditure requirements of the pension, insurance and social security programs and other arrangements for the locally engaged staff.

ii. Budgetary Statutory Authorities

Contributions to employee benefit plans have increased by $3.5 million. The increase is explained by transfers from other government departments to provide support to departmental staff located at missions abroad, funding locally engaged staff salaries and related benefits incurred at missions abroad as well as an increase of compensation related to Collective Agreements.

Payments under the Diplomatic Service (Special) Superannuation Act have increased by $0.4 million. The increase of the grant ceiling is explained by the increase of public officials (e.g. ambassadors, ministers, high commissioners and consuls general of Canada to other countries and such other officers of comparable status) in the past years.

Spending of proceeds from the disposal of surplus Crown assets have increased by $1.7 million explained by a lapse of available funds transferred from 2020-2021.

Payments to International Financial Institutions for Direct Payments have increased by $6.7 million in the anticipated payments to International Financial Institutions for Direct Payments.

Payments for consular assistance pursuant to the Public Health Events of National Concern Payments Act to support consular assistance for Canadians abroad affected by the COVID-19 pandemic have decreased by $41 million. The funding was only available for the fiscal year 2020-2021.

iii. Non-budgetary Authorities

The department's non-budgetary authorities have increased by $127.1 million. Items contributing to changes in non-budgetary authorities include:

• More funding in 2021-2022 compared to 2020-2021 for Loans under the International Financial Assistance Act;
• An increase in the anticipated payments to International Financial Institutions for capital subscriptions; and
• A net decrease in Working Capital Advances.

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.

Table 2: Significant changes to budgetary expenditures by standard object (in thousands of dollars)

i. Operating Expenditures

Salaries and employee benefits – The increase of $16.8 million is explained by:

• The renewal of collective agreements which resulted in increases to Canada based staff regular pay and retroactive salary payments;
• The creation of new positions at headquarters;
• An increase in Foreign Service Directives' allowances;
• An increase in the contribution to the pension plan established for locally engaged staff; and
• Lump sum payments related to the new pension plan for locally engaged staff.

These increases were partly offset by:

• A decrease in emergency evacuation allowances for Canadian employees working abroad caused by the beginning of the COVID-19 pandemic last year;
• A decrease in overtime required due to COVID-19 initiatives in place by the Government of Canada; and
• A decrease in salary expenses for locally engaged staff.

Transportation and communications – The increase of $19.2 million is mainly attributable to a significant increase in allowances and travel expenses incurred for the relocation of Canada-based staff at missions as well as a timing difference in expenditures for communications services.

Information – The increase of $1.1 million is mainly explained by an increase in expenditures for public relations, audio-visual and media analysis services.

Professional and special services – The increase of $9.3 million is mainly explained by:

• An increase in legal fees caused by the postponement of administrative reviews for the Canada-US softwood lumber dispute; and
• An increase in expenses for computer consultants, management consulting services and other professional services.

These increases were partially offset by expenses incurred last fiscal year for a construction project to improve the security of the Lester B. Pearson Building.

Rentals – The increase of $4.9 million is explained by a timing difference in expenditures for rental of buildings from the PWGSC Real Property Program as well as an increase in license and maintenance fees of application development software.

Repair and maintenance – The increase of $4.3 million is explained by an increase in expenditures related to the maintenance and repair of leased office buildings, leased residences as well as residences owned by the department.

Other – The decrease of $12.2 million is mainly explained by a decrease in the volume of salary overpayments and their gradual reimbursement by employees as well as recoverable costs for consular assistance for Canadians abroad.

ii. Capital Expenditures

Acquisition of land, buildings and works – The increase $0.9 million is explained by an increase in the acquisition and construction of residential buildings as well as expenses related to the acquisition of land, buildings and works through the Department of PWGSC.

These increases were partially offset by a decrease in acquisition and construction of office buildings.

Acquisition of machinery and equipment – The decrease of $5.7 million is explained by:

• An advance payment for the Duty of Care projects in the first quarter of last fiscal year; and
• An expense to convert several ministry-owned vehicles into armoured vehicles in the first quarter of last fiscal year.

iii. Transfer Payments

The decrease of $666.4 million is explained by:

• A decrease in grants and contributions under the International Development Assistance Program;
• A timing difference in payments to the United Nations and related organizations; and
• An unconditionally repayable contribution to the International Fund for Agricultural Development (IFAD) disbursed in fiscal year 2020-2021.

iv. Revenues

The increase of $6.1 million in revenues 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

COVID-19

Despite global vaccination progress, the rates per country remain uneven and global-scale collaboration must continue to guarantee rapid, fair and equitable access to COVID-19 vaccines worldwide.

Over 600 million doses have been pledged to COVAX by a number of countries in response to short-term supply challenges and the rise of new variants. Working with donor governments to operationalise growing numbers of dose-sharing pledges, this co-led initiative by the Coalition for Epidemic Preparedness Innovations, Gavi and the World Health Organization, alongside key delivery partner UNICEF expects to see more deliveries of donated doses. The aim is to accelerate the development and manufacturing COVID-19 vaccines, and to guarantee fair and equitable access for every country in the world.

In Canada, even with the recent announcement of the Policy on COVID-19 Vaccination for the Core Public Administration (including the Royal Canadian Mounted Police), it remains unknown how long Global Affairs Canada's (GAC) work practices will continue to be impacted.

Despite previous adjustments, department officials continue to manage risks diligently and take an agile approach to avoid undue risk to program integrity.

The department also carries on with its efforts to identify any material risks related to the COVID-19 pandemic response and their potential impact on the department's financial statements by assessing its internal controls over financial reporting on an on-going basis.

Other risks and uncertainties

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, including geopolitical and climate risks, that expose the department to a broad range of risks, both domestically and abroad, and in particular for vulnerable areas of policies, programs and operations. Effective risk management is critical to the department's ability to deliver results for Canadians. The department undertakes 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 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 the Enterprise Risk Profile identify unique pressures associated with resource management and fiduciary oversight associated with geographically dispersed operations. For 2021-22, the top risks that are being tracked and addressed by the department by allocating more resources and attention are related to the health, safety and wellbeing of the workforce; HR capacity; digital transformation; resilience and cyber/digital security; and management and security of real property. Risks linked to these areas take into account the impact of COVID-19 on the department's workforce and assets.

The Canadian Centre for Cyber Security and Shared Services Canada are responsible for the monitoring of cyber security for the Government of Canada. Furthermore, according to the applicable policy, the departmental cyber lead is the Chief Information Officer (CIO). Upon validation, the CIO is not aware of any cyber attack that would have compromised the department's financial data during the period being reported that would lead to a misstatement in the department's financial reporting.

The department continues to be pragmatic and versatile in its management of risks and uncertainties associated with resources. Branches and program areas have grown more attentive to the financial limitations, including in the area of Grants and Contributions. As a result, they are prioritizing initiatives, identifying their pressures earlier, reviewing their activities and available funds more frequently, and are increasingly utilizing forward planning. The current pandemic context, however, adds uncertainty to the level of expenditure forecasts and potential surpluses. The department is in the process of implementing certain strategies to identify investment opportunities and reduce the risk of exceeding the maximum budget carry forward. The department 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.

The department has applied a range of measures to manage the risks associated with fraud, such as training on awareness and detection. The risk of fraud is considered in audit and advisory engagements, and more directly in mission audits. This fiscal year, a sample of missions will be selected to assess procurement activities through data analytics. In addition, two on-site Mission audits are planned, dependent on health guidance and travel restrictions.

Additional measures are being implemented, including: an updated procurement and contracting framework that includes the establishment of regional contract review boards for missions; improved coordination on investigations and administrative measures; and, a 5-year pilot to enable GAC, over time, to more effectively deploy select types of non-complex conditionally repayable contributions across development programming.

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

During the quarter, changes occurred in relation to the following positions:

• The departure of the Assistant Deputy Minister for Trade Policy and Negotiations; and
• The departure of 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

Michael Collins
A/Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology

Ottawa, Ontario
Date: November 26, 2021

Table 3: Statement of Authorities (Unaudited) (in thousands of dollars)

This table includes authorities available for use and granted by Parliament as at September 30, 2021

Table 4: Departmental budgetary expenditures by standard object (Unaudited) (in thousands of dollars)

This table includes authorities available for use and granted by Parliament as at September 30, 2021