Quarterly Financial Report of the
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)

Unaudited

For the Quarter Ended June 30, 2011


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

1. Introduction

This quarterly report 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.  This report should be read in conjunction with the Main Estimates and Supplementary Estimates.

Raison d'être

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada's financial intelligence unit, exists to detect and deter money laundering and terrorist financing.  An independent Agency, FINTRAC reports to the Minister of Finance and was established and operates within the ambit of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations.

FINTRAC is one of several domestic partners in Canada's Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime, which also includes the Department of Finance as the policy lead.  FINTRAC is also part of the Egmont Group, an international network of financial intelligence units that collaborate to combat money laundering and terrorist activity financing.

FINTRAC's Mission

To contribute to the public safety of Canadians and help protect the integrity of Canada's financial system through the detection and deterrence of money laundering and terrorist financing.

FINTRAC's Vision

To be recognized as a world class financial intelligence unit in the global fight against money laundering and terrorist financing.

Further information on the mandate, roles, responsibilities and program of FINTRAC can be found in the FINTRAC 2011-12 Main Estimates, available on the following website:
http://www.tbs-sct.gc.ca/est-pre/20112012/me-bpd/docs/me-bpd-eng.pdf.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting.  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 for the 2011-2012 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.

The authority of Parliament is required before moneys 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.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund.  A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental performance reporting process.  However, the spending authorities voted by Parliament remain on an expenditure basis.

The transactions and financial statements of FINTRAC have not been subject to an external audit or review.

2. Highlights of Fiscal Quarter and Fiscal Year to Date Results

Statement of Authorities

Overview

As can be seen in Figure 1, FINTRAC's total authorities available for use at the end of the first quarter of 2011-2012 are $54.9M, an increase of $5.1M when compared to the same quarter of 2010-2011.

Figure 1 – First Quarter (to June 30th) Expenditures Compared to Annual Authorities

Program Expenditures

The primary reason for the increase in program expenditures is the $8.0M received in 2011-12 to enhance the Centre's ability to ensure compliance with the PCMLTFA and meet new responsibilities related to tax evasion becoming a predicate offence to money laundering under Canada's Criminal Code.  Other significant changes include:

Statutory Authorities

The primary reason for the decrease in authorities for contributions to employee benefit plans (EBP) from $4.4M to $3.9M in the first quarter of 2010-11 and 2011-12, respectively, can be attributed to the renewal of funding for the Anti-Money Laundering (AML) and Anti-Terrorist Financing (ATF) Regime through the 2011-12 Supplementary Estimates A.  EBP is not distributed via the Supplementary Estimates process.  Instead, an adjustment will be made to increase FINTRAC's EBP by the amount related to the AML/ATF funding received in Supplementary Estimates A prior to the preparation of the Government's Public Accounts of Canada for 2012.

Statement of Departmental Budgetary Expenditures by Standard Object

Total actual expenditures at the end of the first quarter have increased by 13%, from $10.3M in 2010-2011 to $11.6M in 2011-2012.

The significant variance in expenditures between years is mainly due to an increase in personnel expenditures of $0.6M or 8%.  This increase can be attributed to the additional resources from Budget 2010 funding received in 2010-11 and 2011-12 with which FINTRAC has employed additional FTEs.  (FINTRAC's head count has increased by 49 employees since June 30, 2010.)  Other significant changes to personnel include increased severance/termination benefits and maternity/paternity allowances disbursed and accrued.  This increase has been partially offset by a decline in term & part-time employee salaries in the first quarter of 2011-12.

Increases in O&M actual spending in the categories of repairs and maintenance ($0.2M or 26%) and acquisition of machinery and equipment ($0.3M or 426%) can be attributed to renovations at FINTRAC headquarters, as well as the purchase of IM/IT equipment and software licenses.

Increases in O&M planned expenditures in the categories of utilities, materials and supplies ($1.7M or 437%) and acquisition of land, building and equipment ($0.5M) can be mainly attributed to the purchase of equipment, materials and supplies for the fit-up of newly leased office space.

There are no planned expenditures in 2011-12 for transfer payments as funding for the contribution for the establishment of the Egmont Group Secretariat had sunset in 2010-2011.

All other expenditures by standard object were consistent with prior year spending trends.

3. Risks and Uncertainties

As Canada's financial intelligence unit and a partner in Canada's Anti-Money Laundering/Anti-Terrorist Financing Initiative, FINTRAC is a unique organization and will continue to face unique challenges.  In seeking to be proactive in identifying risks and opportunities, FINTRAC must anticipate and assess external risk factors that can affect the design and delivery of its program and the achievement of its strategic outcome.  Additionally, FINTRAC must identify factors and risks which could adversely affect its ability to effectively manage internal operations and management.

This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates A for which full supply was released on June 27, 2011.

Internal Factors

Labour market demographics are evolving and the competition for highly qualified talent is becoming increasingly more intense.  Furthermore, given the agency's small size, the departure or hiring of even a small number of employees can have a significant impact on the quarter's expenditures.  To ensure that FINTRAC is able to attract and retain the talent needed to deliver on its mandate, the organization strives to create an engaging work environment that encourages excellence, offers competitive salaries and benefits, provides learning and development opportunities, and demonstrates a commitment to work/life balance.  Employee development opportunities are an important consideration for retention and succession management.  Individual learning plans support employee performance in their current role, and promote growth in support of career progression. Personnel spending is closely monitored to ensure fiscal stewardship.

External Factors

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-11 levels for the fiscal years 2011-12 and 2012-13.  Management is continuing to review various options to adjust to this constraint in funding.  To date, however, the impact on departmental activities has been managed through the following actions and mitigation strategies:

Risk Management & Mitigation

Risk management is a key component of decision making, business planning, resource allocation and operational management.  FINTRAC's risk analysis is supported by the regular update of the Centre's Corporate Risk Profile (CRP).  The CRP is an important tool that identifies the Centre's key strategic risks, the likelihood and impact for each of the risks; risk rankings; risk responses/mitigation strategies; and identifies risk owners from within the Centre.  By regularly updating the CRP, FINTRAC is more easily able to integrate risk information into all aspects of FINTRAC's business and facilitate the development of systematic risk mitigation approaches that are tailored to the Centre's specific environment and needs.

4. Significant changes in Relation to Operations, Personnel and Programs

Funding Authorities

The Government committed additional funding through Budget 2010 and has committed to increase ongoing funding for FINTRAC by a total of $8.0M annually to enhance the Centre's ability to ensure compliance with the PCMLTFA and meet new responsibilities related to tax evasion becoming a predicate offence to money laundering under Canada's Criminal Code. FINTRAC received funding of $8.0M in 2011-12, $4.3M in O&M and $3.7M in Salary and EBP.  The salary funding received through Budget 2010 will ultimately lead to the hiring of 52 new FINTRAC employees.

Furthermore, on-going funding of $16.2M for the Anti-Money Laundering (AML) and Anti-Terrorist Financing (ATF) Regime was renewed through the 2011-12 Supplementary Estimates A, to which supply was released on June 27th, 2011.

Approval by Senior Officials



Jeanne M. Flemming
Director
FINTRAC
Ottawa, Canada

August 25, 2011
Date



Margaret Baxter
Chief Financial Officer
FINTRAC
Ottawa, Canada

August 25, 2011
Date


STATEMENT OF AUTHORITIES (unaudited)
For the quarter ended June 30, 2011

(in thousands of dollars)
  Fiscal Year 2011-2012 Fiscal Year 2010-2011
Total available for use for the year ending March 31, 2012 Footnote1 Used during the quarter ended June 30, 2011 Year to date used at quarter-end Total available for use for the year ending March 31, 2011 Footnote1 Used during the quarter ended June 30, 2010 Year to date used at quarter-end
Vote 30 - Program expenditures 50,986 10,622 10,622 45,380 9,178 9,178
Budgetary statutory authorities            
(S) Contributions to employee benefit plans  3,893 973 973 4,394 1,098 1,098
Total budgetary authorities $ 54,879 $ 11,595 $ 11,595 $ 49,774 $ 10,276 $ 10,276
Non-budgetary authorities $ - $ - $ - $ - $ - $ -
Total authorities $ 54,879 $ 11,595 $ 11,595 $ 49,774 $ 10,276 $ 10,276

Note: Totals may not add due to rounding.

DEPARTMENTAL BUDGETARY EXPENDITURES BY STANDARD OBJECT (unaudited)
For the quarter ended June 30, 2011
(in thousands of dollars)
  Fiscal Year 2011-2012 Fiscal Year 2010-2011
  Planned expenditures for the year ending March 31, 2012 Expended during the quarter ended June 30, 2011 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2011 Expended during the quarter ended June 30, 2010 Year to date used at quarter-end
Expenditures:            
Personnel 33,169 8,363 8,363 30,239 7,720 7,720
Transportation and communications 2,674 389 389 2,244 364 364
Information 500 9 9 513 10 10
Professional and special services 4,167 450 450 4,427 380 380
Rentals 4,290 876 876 4,351 849 849
Repair and maintenance 3,759 1,067 1,067 3,257 847 847
Utilities, materials and supplies 2,147 51 51 400 30 30
Acquisition of land, buildings and works 461 0 0 0 0 0
Acquisition of machinery and equipment 3,711 388 388 3,537 74 74
Transfer payments 0 0 0 800 0 0
Other subsidies and payments 0 2 2 5 2 2
Total budgetary expenditures $ 54,879 $ 11,595 $ 11,595 $ 49,774 $ 10,276 $ 10,276

Note: Totals may not add due to rounding.

Date Modified: