Quarterly Financial Report for the quarter ended December 31, 2024

Table of contents

Quarterly Financial Report for the quarter ended December 31, 2024

• Statement outlining results, risks and significant changes in operations, personnel and programs
  • Introduction
  • Basis of Presentation
• Highlights of Fiscal Quarter Results
  1. Significant Changes to Authorities
  2. Significant Changes to Cumulative Budgetary Expenditures by Standard Object and by Authorities
  3. Significant Changes to Quarterly Budgetary Expenditures by Standard Object and by Authorities
  4. Risks and Uncertainties
  5. Significant Changes in Operations, Personnel and Programs

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

Introduction

This report for the quarter ended December 31, 2024 has been prepared 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 GAC’s Main Estimates and Supplementary Estimates for the current fiscal year.

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 current 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.

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.

Highlights of Fiscal Quarter Results

1. Significant Changes to Authorities

The following table shows the total budget available for use by GAC, which includes authorities available for use and granted by Parliament as at December 31.

1. Authorities for Operating Expenditures

Authorities for operating expenditures increased by $186 million or 9%, which is mainly explained by:

• Increase of $51 million as approval was obtained from Treasury Board, for GAC to use eligible lapsed funds from previous fiscal year in the current fiscal year;
• Increase of $49 million due to multiple compensation adjustments for locally-engaged staff (LES);
• Increase of $41 million related to inflation on overseas operations and foreign service allowance;
• Increase of $20 million to implement Canada's Indo-Pacific Strategy;
• Increase of $17 million for to the presidency of the 2025 G7 Summit in Canada;
• Increase of $17 million to strengthen Canada's sanctions capacity and leadership; and
• Remaining decrease of $9 million is due to decreases of lesser value.

2. Authorities for Grants and Contributions

Authorities for grants and contributions increased by $486 million or 9%, which is mainly explained by:

• Increase of $221 million for Canada's International Biodiversity Program;
• Increase of $150 million for additional international humanitarian assistance priorities;
• Increase of $69 million to support international security assistance efforts in Haiti;
• Increase of $44 million related to funding to advance humanitarian demining and promote cyber resilience in Ukraine; and
• Remaining increase of $2 million is due to increases of lesser value.

2. Significant Changes to Cumulative Budgetary Expenditures by Standard Object and by Authorities

The following table shows the net budgetary expenditures and authorities used for the first nine months of the fiscal year and their comparison for the same period last fiscal year.

1. Operating and Acquisition Expenditures

Operating and acquisition expenditures increased by $125 million or 7%, which is mainly explained by:

• Increase of $47 million in transportation and communications due to:
  • Increase of charter flights paid for the evacuation of Canadians abroad due to overseas conflicts and political instability;
  • Increase of relocation expenses as per the foreign service directives (FSD).
• Increase of $26 million in professional and special services due to:
  • Increase of engineering and architectural services for renovations completed in certain missions abroad, of which $14 million was capitalized;
  • Increase of expenditures for protection services at missions abroad as well as for military guards.
• Increase of $14 million in acquisition of land, buildings and works due to:
  • Acquisition of a new chancery;
  • Acquisition of a new residential unit and storage space.
• Increase of $12 million in acquisition of machinery and equipment due to:
  • Acquisitions of video communication equipment at headquarters and missions abroad;
  • Acquisitions of security control equipment at missions abroad;
  • Acquisitions of computers and equipment.
• Increase of $4 million in other expenditures, which is mainly due to:
  • Expenses related to pending transactions with acquisition cards;
  • Settlements for damages and other claims against the Crown.
• Remaining increase of $22 million is due to increases of lesser value.

2. Transfer Payments

Transfer payments increased by $355 million or 12%, which is mainly explained by:

• Increase of $303 million in payments to organizations for development assistance programs due to timing differences and new projects;
• Increase of $36 million due to the signature of a new unconditionally repayable contribution; and
• Remaining increase of $16 million is due to increases of lesser value.

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

The following table shows the net budgetary expenditures and authorities used for the quarter ended December 31, 2024 and the comparison for the same period last fiscal year.

1. Operating and Acquisition Expenditures

The variance for total operating and acquisition expenditures is not significant, as it represents a small decrease of less than 1% compared to the same quarter in previous year.

2. Transfer Payments

Transfer payments increased by $171 million or 12%, which is mainly explained by:

• Increase of $125 million in payments to organizations for development assistance programs due to timing differences and new projects;
• Increase of $65 million for payments to the United Nations and related organizations for international development assistance due to timing differences;
• Decrease of $20 million in payments to international financial institutions due to the ending of an agreement; and
• Remaining increase of $1 million is due to increases of lesser value.

4. 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 and security conditions, economic controls, global inflation, social contexts and shifting global trends, including geopolitical dynamics and climate risks.

At any time, the aforementioned factors could affect GAC’s operations, whether domestically or abroad, with the potential for significant impacts including on the safety and security of its personnel at missions. As such, effective risk management is critical to GAC’s ability to deliver results for Canadians. On the operational level, GAC regularly undertakes reviews to examine operational risks and assess the progress and effectiveness of ongoing responses. Risks are managed diligently by program leads, and an agile approach is used to avoid undue risk to program integrity. On the strategic front, the top risks facing GAC are established bi-annually in the Enterprise Risk Profile. In intervening years, a supplemental assessment of emerging risks facing GAC is conducted through global trend analysis. GAC also reviews the implementation of responses to the top strategic risks on a semi-annual basis by having risk leads assess progress and report to senior management.

The GAC Enterprise Risk Management Strategy guides departmental officials in managing risks that affect strategic plans and priorities. With this approach, GAC’s Strategic Risk Landscape and the Enterprise Risk Profile serve to identify unique pressures associated with GAC’s operating environment. The current key strategic risks that are tracked closely by senior management and receive extra support for their mitigation are around: constant change and high workloads; ability to allocate and prioritise resources in the context of increasing financial pressure; staffing, performance management, and training; the evolving cyber security landscape; IT infrastructure at mission and HQ; and the maintenance and recapitalisation of our real property assets. Work on these risks is also incorporated into GAC’s governance committee agendas 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 has a five-year investment and procurement plan, which includes a comprehensive strategy for how risks will be managed throughout the timeframe. GAC is also implementing strategies to manage the financial pressures related to non-discretionary activities and absorb 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 risks associated with fraud, such as training on awareness and detection. The risk of fraud is considered in audit and advisory engagements. Specifically, the audit of US mission network is 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 considers fiduciary risk to guide the allocation of grants and contributions, as well as its recipient organizations audit planning. Additionally, the department continues to strengthen the financial management capacity of these organizations

5. Significant Changes in Operations, Personnel and Programs

During the quarter, a new organizational structure and governance improvements were put in place to aim to build a strategic, agile, open and connected GAC, fit to support the prosperity and security of Canadians now and into the future.

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

David Morrison
Deputy Minister of Foreign Affairs

Shirley Carruthers
Assistant Deputy Minister and Chief Financial Officer, Corporate Planning, Finance and Information Technology

Ottawa, Ontario