Quarterly Financial Report

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

1. Introduction

This quarterly report for the period ending December 31, 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 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 December 31, 2021 are included. 

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

i. Budgetary Authorities

Authorities for Operating Expenditures have increased by $40.8 million. Items contributing to changes in operating expenditures authorities include:

• Internal reallocation of resources made last fiscal year from operating vote to capital vote for costs associated with the renovation of 125 Sussex Drive and the development of the Export Import Control System;
• Increase in the funding for compensation related to collective agreements;
• Upward adjustment related to the impact of foreign currency fluctuations incurred on expenditures at missions abroad;
• Increase in funding for locally engaged staff salaries and related benefits incurred at missions abroad;
• Upward adjustment for inflation on overseas operating costs;
• Increase related to funding to implement the Feminist International Assistance Agenda;
• Increase in the Operating Budget Carry Forward amount received in 2021-22 compared to 2020-21; and
• Internal reallocation of resources from grants and contributions (more specifically grants for multilateral programming under the International Development Assistance Program) to the operating vote.

These increases were partly offset by:

• 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;
• Net transfers to other government departments to provide support to departmental staff located at missions abroad;
• Decrease in the current funding for the Duty of Care Special Purpose Allotment to support mission security abroad which includes $15.0 million approved in Supplementary Estimates (A) to support security and operations at Canada’s mission in Kabul, Afghanistan;
• Sunset of funding received for Advancing Clean Technology in Canada’s Natural Resources Sectors; and
• Decrease in the current funding for Consular assistance pursuant to the Public Health Events of National Concern Payments Act.

Capital Expenditures authorities have decreased by $22.5 million. Items contributing to changes in capital expenditures authorities include:

• Internal reallocation of resources made last fiscal year from operating vote to capital vote for costs associated with the renovation of 125 Sussex Drive and the development of the Export import Control System;
• Decrease in the current funding for the Duty of Care Special Purpose Allotment to support mission security abroad which includes $4.0 million approved in Supplementary Estimates (A) to support security and operations at Canada’s mission in Kabul, Afghanistan.

These decreases were partly offset by:

• Increase in the Capital Budget Carry Forward amount received in 2021-22 compared to 2020-21, and
• Increase in the funding for the Trade Commissioner Service Electronic Client Relationship Management.

Grants and Contributions authorities have decreased by $201.9 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;
• Reprofile of the IAE Crisis Pool Quick Release Mechanism;
• Decrease related to funding received in previous years to implement the Feminist International Assistance Agenda;
• Decrease in the current funding for the Peace and Stabilization Operations Program;
• Decrease related to funding to meet Canadaʼs 2019 G7 commitment to support wildfire response and preparedness in the Amazon Basin;
• 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:

• Increase in the funding to support the COVID-19 pandemic response;
• Funding for the Strategic Priorities Fund for international assistance;
• 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 $14.5 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 $3.7 million. The increase is mainly 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.

Spending of proceeds from the disposal of surplus Crown assets have increased by $1.5 million. The increase is explained by funds available for subsequent years, from 2020-2021, being transferred to 2021-2022.

Payments to International Financial Institutions for Direct Payments have decreased by $3.2 million based on 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 $59.1 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 $179.4 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 $30.4 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 number of part-time, seasonal and casual employees; and
• An increase in the contributions and lump sum payments related to the 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 $15.1 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 $2.4 million is mainly explained by an increase in expenditures for public relations and advertising services.

Professional and special services – The decrease of $2.0 million is mainly explained by a decrease in legal fees and expenses incurred last fiscal year for a construction project to improve the security at the Lester B. Pearson Building. The decrease in these expenses was partially offset by an increase in expenses for IT consultants, management consulting services and other professional services.

Repair and maintenance – The increase of $4.4 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.

Utilities, Materials and Procurement – The increase of $1.5 million is mainly due to an increase in electricity costs, property tax costs as well as furniture purchases for official residences. These increases were partially offset by a decrease in the purchase of COVID-19 protection items.

Other – The decrease of $17.5 million is mainly explained by a decrease of recoverable costs for consular assistance for Canadians abroad as well as a settlement of a claim against the Crown in fiscal year 2020-2021 for compensation paid to employees impacted by the Phoenix pay system.

ii. Capital Expenditures

Acquisition of land, buildings and works – The increase of 5.5 million is mainly attributable to the acquisition of land for the construction of a chancery in Senegal. This increase was partially offset by a decrease in payments made for the rehabilitation of the Lester B. Pearson Building.

Acquisition of machinery and equipment – The decrease of $15.3 million is explained by :

• The acquisition of equipment to accommodate teleworking, made last fiscal year; and
• Expenses to convert several vehicles into armored vehicles in the first quarter of last fiscal year.

iii. Transfer Payments

The decrease of $465.0 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 disbursed in fiscal year 2020-2021.

iv. Revenues

The decrease of $4.7 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

As a federal department delivering a complex mandate in a rapidly changing international environment, Global Affairs Canada is influenced by many factors. These factors include the political conditions, economic controls, social contexts and shifting global trends, including geopolitical and climate risks.

Moreover, although the policy on COVID-19 vaccination is now in effect, it remains unknown how long work practices will continue to be impacted.

At any time, each of the aforementioned factors, or a combination thereof, could expose the department, whether domestically, abroad or both. As such, effective risk management is critical to the department’s ability to deliver results for Canadians.

For such reasons, the department undertakes annual exercises 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. Risks are managed diligently and an agile approach is upheld to avoid undue risk to program integrity.

Moreover, the department carries on with its on-going efforts to identify any material risks, including those related to the COVID-19 pandemic, and measure their potential impact on the department’s financial statements by assessing its internal controls over financial reporting. In conjunction, an audit of the internal controls over financial management is currently underway.

The Enterprise Risk Management Strategy is the foundational piece, which guides departmental officials 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 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. These risks have also been reflected in the Corporate Management Agenda for the department, a recent initiative to ensure senior-level and department wide engagement on key corporate priorities in support of a more agile and responsive department.

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. In January 2022, the Treasury Board Secretariat confirmed and acknowledged a recent cyber incident on systems at Global Affairs Canada and a number of federal departments and agencies are working together to respond to this incident. A recovery plan is ongoing to contain potential damage and some access to internet and internet-based services are not currently available as part of the mitigation measures and work is underway to restore them. As it currently stands, the cyber incident does not compromise 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; by prioritizing initiatives, identifying pressures earlier, reviewing activities and available funds more frequently, and by increasingly utilizing forward planning. As a result, there is an even greater need to ensure sufficient fiduciary risk due diligence is performed. The current pandemic context further 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 while working to improve grants and contributions project costing analytics, by strengthening financial data capabilities. The department is also implementing strategies to ensure the optimization of the maximum budget carry forward in order to address future year pressures, in operating and capital expenditures. The department is continuously 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 as well in mission audits. This fiscal year, due to travel restrictions, the Mexico Common Service Delivery Point (CSDP) has been selected to assess procurement, practices, and activities through data analytics. A further three CSDPs (Washington, Berlin and Brussels) engagements, as well as four on-site Mission audits are planned for FY 2022-23, dependent on health guidance and travel restrictions. For 2021-22,  the department is also assessing the internal controls at headquarters and at missions (virtually), and will be reporting on its internal controls over financial management, as per the requirements of the Policy on financial management. On the transfer payment programming side, the department continues to build the capacity of its recently created Fraud Management Unit. A first Grants and Contributions Fraud Review Committee meeting was held in December 2021.

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 five-year pilot to enable, 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:

• Appointment of a new Assistant Deputy Minister of the Strategic Policy Branch;
• Appointment of a new Minister of Foreign Affairs; and
• Appointment of a new Minister of International Development and Minister responsible for the Pacific Economic Development Agency.

Approval by Senior Officials

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

Marta Morgan
Deputy Minister of
Foreign Affairs

Anick Ouellette
Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology

Ottawa, Ontario
Date: March 1^st, 2022

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

This table includes authorities available for use and granted by Parliament as at December 31, 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 December 31, 2021