Quarterly Financial Report

For the period ended September 30, 2022

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
    • i. Authorities for Operating expenditures
    • ii. Authorities for Capital expenditures
    • iii. Authorities for Grants and contributions
  • B. Significant changes to budgetary expenditures by standard object
    • i. Operating expenditures
    • ii. Transfer payments
• 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 September 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 Global Affairs Canada's (GAC) 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 GAC's spending authorities granted by Parliament, and those used by GAC, 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.

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 GAC. Only authorities available for use and granted by Parliament as at September 30, 2022 are included.

i. Authorities for Operating expenditures

Authorities for operating expenditures increased by $16 million, which is mainly explained by:

• Increase of $36 million in the current funding for the Duty of Care Special Purpose Allotment, to support mission security abroad;
• Increase of $20 million in the Operating Budget Carry Forward amount received in 2022-23 compared to 2021-22;
• Increase of $19 million due to inflation on overseas operating costs;
• Increase of $9 million in the funding for locally engaged staff salaries and related benefits incurred at missions abroad;
• Decrease of $40 million due  to foreign currency fluctuations incurred on expenditures at missions abroad;                                                               
• Decrease of $23 million relating to a reduction in GAC’s available travel budget; and
• Remaining decrease of $5 million is due to multiple smaller decreases.         

ii. Authorities for Capital expenditures

Authorities for capital expenditures increased by $87 million, which is mainly explained by:

• Increase of $95 million in the capital portion of the Duty of Care Special Purpose Allotment to support mission security abroad;
• Decrease totalling $4 million in the funding for the Trade Commissioner Service Electronic Client Relationship Management and in the Capital Budget Carry-Forward amount received in 2022-23 compared to 2021-22; and
• Remaining decrease of $4 million is due to multiple smaller decreases.

iii. Authorities for Grants and contributions

Authorities for grants and contributions increased by $554 million, which is mainly explained by:

• Increase of $352 million in the funding to help developing countries to address the impact of climate change;
• Increase of $269 million in the funding to support Canada's Feminist International Assistance Policy;
• Increase of $40 million in the funding for the Strategic Priorities Fund;
• Decrease of $75 million in the funding to support access by developing countries to vaccines, therapeutics and diagnostics (COVID-19);
• Decrease of $35 million in assessed contributions due to changes in the international organizations’ budgets and the impact of currency fluctuations; and
• Remaining increase of $3 million due to multiple smaller increases.

B. Significant changes to budgetary expenditures by standard object

The following table shows the budgetary expenditures and revenues netted against expenditures of GAC for the period and their comparison with the same period last year.

i. Operating expenditures

Operating expenditures increased by $54 million, which is mainly explained by:

• Increase of $25 million in salaries and employee benefits due to:
• Renewal of collective agreements which resulted in increases to Canada based staff regular pay;
• Increase in contributions to the pension plan for locally engaged staff; and
• Increase in Foreign Service Directives’ allowances;
• Increase of $11 million in transportation and communications due to an increase in travel due to the resumption of normal activities suspended during the COVID-19 pandemic;
• Increase of $12 million in rentals increased due to a timing difference in expenditures for rental buildings and an increase in application development software licensing and maintenance expenditures; and
• Remaining increase of $6 million due to multiple smaller increases.

ii. Transfer payments

Transfer payments increased by $413 million, which is mainly explained by:

• A timing difference resulting in an increase in payments to the United Nations and related organizations;
• A timing difference resulting in an increase in payments for Development Assistance to Canadian non-governmental organizations; and
• Increases partly offset by a timing difference resulting in a decrease in multilateral advances to international financial institutions.

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 GAC, whether domestically, abroad or both. As such, effective risk management is critical to GAC’s ability to deliver results for Canadians.

For such reasons, GAC 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 exercises 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. GAC’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 GAC’s workforce and assets. These risks have also been reflected in GAC’s Corporate Management Agenda, a recent initiative to ensure senior-level and department wide engagement on key corporate priorities in support of a more agile and responsive department.

GAC 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. GAC 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. GAC 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. GAC 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.

GAC 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, GAC continues to assess the internal controls at headquarters and at missions (virtually and onsite), and will be assessing and 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, GAC continues to build the capacity of the Fraud Management Unit.

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

During the quarter, change occurred in relation to the following position:

• The departure of the Deputy Minister of Foreign Affairs

Approval by Senior Officials

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

David Morrison
Deputy Minister of Foreign Affairs

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

Ottawa, Ontario
Date: November 21, 2022

Statement of Authorities (Unaudited)

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

Departmental budgetary expenditures by standard object (Unaudited)

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