Quarterly Financial Report

For the period ended June 30, 2022

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

1. Introduction

This quarterly report for the period ending June 30, 2022 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 fiscal year 2022-2023. 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 June 30, 2022 are included. 

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

i. Budgetary Authorities

Authorities for Operating Expenditures have decreased by $4.3 million. Items contributing to changes in operating expenditures authorities include:

• Adjustment related to the impact of foreign currency fluctuations incurred on expenditures at missions abroad;
• Technical adjustment reducing government travel;
• Adjustment related to the inflation on Foreign Service Allowances;
• Decrease in the current funding for the Peace and Stabilization Operations Program; and
• Transfer to Shared Services Canada to Support the Enterprise Funding Model for Government Information Technology Services.

These decreases were partly offset by:

• Increase in the current funding for the Duty of Care Special Purpose Allotment to support mission security abroad;
• Upward adjustment for inflation on overseas operating costs;
• Increase in the funding for locally engaged staff salaries and related benefits incurred at missions abroad;
• Increase related to the funding to help developing countries to address the impact of climate change;
• Increase related to the funding to support Canada's Feminist International Assistance Policy;
• Upward adjustment in the funding related to the Compensation for Collective Bargaining Agreements; and
• Increase related to the funding to Renew and Advance Clean Technology Enabling Measures.

Capital Expenditures authorities have increased by $90.5 million. This is attributable to the increase in the capital portion of the Duty of Care Special Purpose Allotment to support mission security abroad, which was reduced by a decrease in the funding for the Trade Commissioner Service Electronic Client Relationship Management.

Grants and Contributions authorities have increased by $553.9 million. Items contributing to changes in grants and contributions expenditures authorities include:

• Increase in the funding to help developing countries to address the impact of climate change;
• Increase in the funding to support Canada's Feminist International Assistance Policy; and
• Funding for the Strategic Priorities Fund.

These increases were partly offset by:

• Decrease related to the funding to support access by developing countries to vaccines, therapeutics and diagnostics (COVID-19);
• Decrease related to the cost of assessed contributions due to changes in the international organizations’ budgets and the impact of currency fluctuations; and
• Decrease in the current funding for the Peace and Stabilization Operations Program.

Locally engaged staff pensions, insurance and social security authorities have increased by $6.3 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 $4.0 million. The increase is mainly explained by new approved funding for the initiatives Protecting our People at Canadian Mission Abroad and Canada’s International Climate Finance & Biodiversity Programs.

Spending of proceeds from the disposal of surplus Crown assets have increased by $0.3 million. The increase is explained by funds available for subsequent years, from 2021-2022, being transferred to 2022-2023.

iii. Non-budgetary Authorities

The department’s non-budgetary authorities have increased by $133.9 million. Items contributing to changes in non-budgetary authorities include:

• Increase in the funding in 2022-23, compared to 2021-22, related to programming 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 $13.7 million is explained by:

• The renewal of collective agreements which resulted in increases to Canada based staff regular pay;
• An increase in overtime due to an increase in volume of protocol-related expenditures, such as official visits and events;
• An increase in Foreign Service Directives’ allowances; and
• An increase in the contributions lump sum payments contributions related to the pension plan for locally engaged staff.

These increases were partly offset by a decrease in retroactive pay to Canada based staff and locally engaged staff.

Transportation and communications – The increase of $10.6 million is mainly attributable to an increase in Foreign Service Directives’ allowances and travel expenses due to the resumption of normal activities suspended during the COVID-19 pandemic and increases in diplomatic courriers.

Information – The increase of $0.7 million is mainly explained by an increase in expenditures for public relations and advertising services.

Professional and special services – The increase of $7.5 million is mainly explained by a timing difference in legal services and management consulting services. The increase in these expenses was partially offset by a timing difference in protection service fees. 

Rentals – The increase of $8.8 million is mainly related to a timing difference in expenditures for rental buildings.

Utilities, materials and supplies – The increase of $1.7 million is mainly due to a timing difference in electricity related expenses.

Other – The increase of $0.5 million is mainly explained by an increase in the volume of salary overpayments and their gradual reimbursement by employees.

ii. Capital Expenditures

Acquisition of machinery and equipment – The decrease of $1.4 million is explained by the acquisition of equipment to accommodate teleworking, made last fiscal year;

iii. Transfer Payments

The increase of $41.3 million  is explained by:

• A timing difference in payments to the United Nations and related organizations; and
• A timing difference in payments for Development Assistance to Canadian non-governmental organization.

These increases were partly offset by:

• A decrease in payments to other international organizations for International Development Assistance; and
• A timing difference in acquisition advances payments.

iv. Revenues

The decrease of $1.1 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

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.

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, every two years, 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. These exercices are reviewed annually.

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 both 2022-2023 and 2023-2024, the top risks that are being tracked and addressed by allocating more resources and attention are related to: the health, safety and well-being of the workforce; IT Infrastructure; cyber/digital security and resilience; and the management and security of real property and assets. 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.

Moreover, the department carries on with its on-going efforts to identify any material risks, including those related to the COVID-19 pandemic, and measures 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 has been recently closed, and the report has been approved (June 2022).

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, four on-site Mission audits are planned, dependent on health guidance and travel restrictions. For 2022-2023, the department continues to assess the internal controls at headquarters and at missions (virtually and onsite), and will be reporting on its internal controls over financial management, as per the requirements of the Treasury Board Policy on financial management. On the transfer payment programming side, the department continues to build the capacity of its recently created Fraud Management Unit.

The Canadian Centre for Cyber Security and Shared Services Canada (SSC) are responsible for the monitoring of cyber security for the Government of Canada. Furthermore, the Departmental Designated Official for Cyber Security is the Chief Information Officer. In January 2022, GAC and Treasury Board Secretariat (TBS) confirmed a recent cyber incident on systems at GAC. GAC together with TBS, Canadian Centre for Cyber Security, and SSC worked to respond and mitigate the threat of this incident. In order to limit damage, access to the internet from GAC systems was severely restricted, from late January to early March. During this time, a recovery plan was developed, and Business Continuity Plans were implemented to mitigate the disruption caused by the incident and to ensure services to Canadians were maintained. GAC systems returned to normal in early March. There is no evidence that the cyber incident compromised the department’s financial data during the period being reported that would lead to a misstatement in the department’s financial reporting. In order to support mitigation of cyber risks, the department has planned a cybersecurity advisory engagement during FY 2022-2023.

Following the Taliban takeover of Afghanistan in August 2021, the department has verified all payments made on projects in Afghanistan. Under Section 83.03(b) of the Criminal Code, it is an indictable offence to provide, make available, directly or indirectly, goods or services knowing that they will be used, in whole or in part, by or for the benefit of a terrorist group. A certification from the Chief Financial Officer (CFO) or the Deputy Chief Financial Officer (DCFO) is required prior to any payment (s.33) to ensure that appropriate mitigation measures have been implemented to reduce the risk of contravening the Criminal Code.

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

During the quarter, there have been no significant changes in relation to operations, personnel and programs.

Approval by Senior Officials

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

Marta Morgan
Deputy Minister of Foreign Affairs

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

Ottawa, Ontario
Date: August 29^th, 2022

Statement of Authorities (Unaudited)

This table includes authorities available for use and granted by Parliament as at June 30, 2022

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

Departmental budgetary expenditures by standard object (Unaudited)

This table includes authorities available for use and granted by Parliament as at June 30, 2022

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