Quarterly Financial Report for the period ended June 30, 2023

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
     1. Significant changes to Authorities
        1. Authorities for Operating Expenditures
        2. Authorities for Grants and Contributions
     2. Significant Changes to Quarterly Budgetary Expenditures by Standard Object and by Authorities
        1. Operating and Acquisition Expenditures
        2. Transfer Payments
  3. Risks and Uncertainties
  4. Significant Changes in Operations, Personnel and Programs
     • Approval by Senior Officials

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

1. Introduction

This report for the quarter ended June 30, 2023 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 2023-2024. 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 Results

A. Significant Changes to Authorities

The following table shows the total budget available for use by GAC, and only authorities available for use and granted by Parliament as at June 30, 2023 are included.

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

* Only includes authorities available for use and granted by Parliament at quarter-end.

i. Authorities for Operating Expenditures

Authorities for operating expenditures increased by $70 million or 4%, which is mainly explained by:

• Increase of $30 million in transfers from Other Government Departments (OGDs) to cover common services costs for new employees posted abroad, including costs related to the Foreign Services Directives and relocation, real property, security, information management and information technology;
• Increase of $27 million due to inflation in the cost of foreign operations and foreign service allowances;
• Increase of $14 million for locally engaged staff salaries and related benefits incurred at missions abroad, in order to adjust their salaries based on market practices;
• Increase of $13 million to reinforce and modernize core consular capacity to assist Canadians abroad, which will allow the Consular Program to adapt and modernize service delivery and improve prevention efforts to raise awareness of consular services;
• Increase of $10 million for Canada's participation in World Exposition Osaka 2025;
• Increase of $8 million for the compensation of the executive (EX) group;
• Decrease of $21 million due to the effects of foreign currency fluctuations on expenses incurred at missions abroad;
• Decrease of $19 million due to the ending of the Softwood Lumber Initiative in 2022-2023; and
• The remaining increase of $8 million is due to an amalgam of items of lesser value.

ii. Authorities for Grants and Contributions

Authorities for grants and contributions increased by $42 million or 1%, which is mainly explained by:

• Increase of $77 million to support Canada's Feminist International Assistance Policy;
• Increase of $27 million for the Peace and Stabilization Operations Program;
• Increase of $23 million to help developing countries in addressing the impact of climate change;
• Increase of $18 million related to a transfer from payments to international financial institutions (IFIs) to the grants and contributions vote. This is the main reason for the decrease of $16M in the statutory authorities for payments to IFIs;
• Decrease of $97 million in the funding for the Strategic Priorities Fund, as the funding was transferred to the Department of Finance to support announced funding by the Prime Minister at the G20 Leader’s Summit for the International Monetary Fund’s Poverty Reduction and Growth Trust; and
• The remaining decrease of $6 million is due to an amalgam of items of lesser value.

B. Significant Changes to Quarterly Budgetary Expenditures by Standard Object and by Authorities

The following table shows the net budgetary expenditures and authorities for the quarter ended June 30, 2023 and the comparison for the same period last year.

Table 2: Cumulative expenses and authorities (in thousands of dollars)

i. Operating and Acquisition Expenditures

The variance for total operating and acquisition expenditures is not significant, as it represents a small increase of 1% compared to the same quarter in previous year. This small variance is consistent with variances observed for quarters ending June 30^th, before the COVID-19 pandemic. Although significant variances exist in the previous two fiscal years, these were due to exceptional needs in programming and funding in response to the global pandemic.

ii. Transfer Payments

Transfer payments decreased by $80 million or 10%, which is mainly explained by the fact, that a significant final payment was made in June 2022 to an international financial institution, which did not occur in June 2023.

3. Risks and Uncertainties

As a federal department delivering a complex mandate in a rapidly changing international environment, GAC 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 reviews, either annually or every two years, to validate key operational risks 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.

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. Key risks that are being tracked and addressed by allocating more resources are related to: 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. These risks have also been reflected in GAC’s Corporate Management Agenda, an internal process put in place 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. 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 manage the financial pressures related to non-discretionary activities and absorb the recent budget reductions announced in the budget 2023 which have an impact on the current year and the coming years.

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 and four audits of missions are planned during this fiscal year. GAC continues to assess, on a risk basis, its internal controls over financial reporting at headquarters and at missions, 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, GAC continues to strengthen the capacity of recipient organizations via the Fraud Management Unit.

4. Significant Changes in Operations, Personnel and Programs

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

• Creation of a new position and appointment of a new Senior Assistant Deputy Minister, People and International Platform;
• Creation of a new position and appointment of a new Assistant Deputy Minister, Chief Transformation Officer.

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