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

Unaudited

For the Quarter Ended December 31, 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, Supplementary Estimates, and previous quarterly financial reports (QFR) from the current fiscal year.

1.1 Organizational Overview

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.

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.

1.2 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 (YTD) Results

This section highlights the significant items that contributed to the net increase or decrease in resources available for the year and actual expenditures for the quarter ended December 31, 2011. The explanation of variance considers that changes under 25% and amounts under $0.25M for a quarter, or under $1M for the fiscal year (FY), would have a minimal impact on the interpretation of results.

2.1 Statement of Authorities

2.1.1 Overview

As can be seen in Figure 1, FINTRAC's total authorities available for use at the end of the third quarter (Q3) of 2011-2012 are $60.6M, an increase of 9.0% when compared to the end of the same quarter of 2010-2011. This increase is due to the transfer of authorities for paylist requirements from TB Vote 30 in the amount of $3.5M. Actual YTD expenditures at the end of the third quarter showed an increase of 17.3%, from $34.1M in 2010-2011 to $40.0M in 2011-2012.

Figure 1 – FY Comparison of Actual YTD Expenditures and Total Authorities (Both to December 31)

As shown in Figure 2, FINTRAC's total authorities increase in the third quarter by $3.5M and $3.7M in 2011-12 and 2010-11, respectively. The Q3 2011-12 increases are due to the transfer of authorities for paylist requirements from TB Vote 30, largely consisting of reimbursed severance/termination benefits. The Q3 2010-11 increases in total authorities is due to a $0.3M transfer of compensation adjustments for collective agreements from TB Vote 15, and $3.4M received through Supplementary Estimates B 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.

Figure 2 – FY Comparison of Incremental Available-For-Use Authorities by Quarter

In Figure 3, FINTRAC's 2011-12 increase in actual Q1 expenditures (12.8%) is shown to be consistent with the increase in Q1 available-for-use authorities (10.3%). However, the 2011-12 increases in actual Q2 expenditures (19.7%) and actual Q3 expenditures (18.9%) exceeds the growth in Q2 available-for-use authorities (10.1%) and Q3 available-for-use authorities (9.0%), respectively, mainly due to additional spending on personnel, as further detailed in Section 2.2.

Figure 3 – FY Comparison of Actual YTD Expenditures (to December 31) by Quarter

2.1.2 Vote 30 - Program Expenditures

The primary reason for the increase in Vote 30 - 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:

2.1.3 Statutory Authorities

As explained in the first and second quarter's QFR, the primary reason for the decrease in authorities for contributions to employee benefit plans (EBP) from $4.4M to $3.9M in 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 authorities are not distributed via the Supplementary Estimates process. Instead, an adjustment will be made to increase FINTRAC's EBP authorities 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.

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

As shown in Figure 4, the most significant variance in actual Q3 expenditures between 2010-11 and 2011-12 is due to an increase in personnel expenditures of $3.4M or 43%. Unlike the first two quarters where personnel increases were a result of additional resources from Budget 2010 funding received in 2011-12 with which FINTRAC employed additional employees, this increase is primarily related to an increase in severance/termination benefits of $2.5M in this third quarter. However, these amounts have already been partially reimbursed by Treasury Board through an allotment transfer from TB Vote 30 into FINTRAC's authorities, with the remainder to be reimbursed by Treasury Board by year-end. Increases in personnel due to additional 2011-12 funding from Budget 2010 contributed an additional $1.1M increase. (Note that FINTRAC's head count has increased by 32 employees in the year since December 31, 2010.) EBP expensed in Q3 2011-12 also decreased slightly by $0.1M despite an increase in personnel expenditures, and can be explained due to the reduced EBP authorities at the beginning of the fiscal year.

Figure 4 – Q3 FY Comparison of Actual Personnel Expenditures (in millions $) by Expenditure Type

Note: Totals may not add due to rounding.

As shown in Figure 5, the overall decrease in actual Operating & Maintenance (O&M) expenditures ($1.0M or 22%) is mainly due to $0.5M in transfer payments to EGMONT sunset in 2010-11. Other notable decreases in O&M expenditures include Professional & Special Services ($0.3M) and Repairs & Maintenance ($0.2M).

Figure 5 – Q3 FY Comparison of Actual O&M (in thousands $) by Standard Object

Figure 5 – Q2 FY comparison of Actual (or Used) O&M (in thousands $) by Standard Object
  Q3 2011-12 Q3 2010-11
Transfer payments 0 499
Acquisition of machinery and equipment 831 769
Acquisition of land, buildings and works 0 0
Utilities, materials and supplies 43 77
Repair and maintenance 330 539
Rentals 1,057 1136
Professional and special services 845 1096
Information 66 62
Transportation and communications 495 531

Note 1: The standard object "Other subsidies and payments" is not included in Figure 5. In Q3 2011-12, the amount was $0.2M. In Q3 2010-11, the net amount was -$0.1M.
Note 2: Totals may not add due to rounding.

As previously explained in the first and second quarter's QFR, the Q3 2011-12 increases in O&M planned expenditures in the category of utilities, materials and supplies ($1.1M or 85%) over Q3 2010-11 is primarily attributed to the planned purchase of materials and supplies for the fit-up of newly leased office space.

All other planned and actual expenditures by standard object in the third quarter and in the YTD were materially 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 internal and 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 its resources. FINTRAC has developed a Corporate Risk Profile to identify and manage its key corporate risks. The risk profile is reviewed regularly by senior level committees and the business planning process identifies activities to mitigate the risks. This contributes to the decision making processes for investment management and budgeting.

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; including FINTRAC's operating budget carry forward and paylist requirements.

3.1 Risk Factors and Mitigation

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.

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:

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

This section highlights any significant changes which impact the estimates or expenditures of approved resources available for the year or have impacted actual expenditures for the quarter ended December 31, 2011.

4.1 Personnel

Additional funding received through Budget 2010 will ultimately lead to the hiring of 52 new FINTRAC employees over the period of FY 2010-11 and 2011-12. This is reflected in the year-on-year material increases (to December 31) in planned and actual personnel expenditures in 2011-12. These new employees will 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.

4.2 Operations

Pursuant to s. 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, FINTRAC transferred to Shared Services Canada (SSC) the control and supervision of portions of its IT services (e.g. e-mail, data centers, and network services/support). As a result, $2,651,522 is deemed to have been appropriated to SSC's Program Expenditures this fiscal year. At the end of the Q1 2012-13, it is anticipated that SSC will have a financial system in place and thus be able to publish their own expenditures in their first QFR. However, as part of the current Q3 2011-12 QFR, transferring departments were required to track and report separately on the spending incurred on behalf of SSC. As of December 31, 2011, $1,811,700 in expenditures has been incurred on behalf of SSC by FINTRAC against SSC's Program Expenditures.

5. Approval by Senior Officials

Approval by Senior Officials



Jeanne M. Flemming
Director
FINTRAC
Ottawa, Canada

February 20, 2012
Date



Danielle Scrimger
A/Chief Financial Officer
FINTRAC
Ottawa, Canada

February 20, 2012
Date


STATEMENT OF AUTHORITIES (unaudited)
For the quarter ended December 31, 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 December 31, 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 December 31, 2010 Year to date used at quarter-end
Vote 30 - Program expenditures 56,712 14,112 37,034 51,203 11,590 30,758
Budgetary statutory authorities
(S) Contributions to employee benefit plans
3,893 973 2,920 4,394 1,098 3,295
Total budgetary authorities $ 60,605 $ 15,085 $ 39,953 $ 55,597 $ 12,688 $ 34,053
Non-budgetary authorities $ - $ - $ - $ - $ - $ -
Total authorities $ 60,605 $ 15,085 $ 39,953 $ 55,597 $ 12,688 $ 34,053

Note: Totals may not add due to rounding.

Pursuant to s. 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, $2,651,522 is deemed to have been appropriated to Shared Services Canada Program Expenditures, which results in a reduction for the same amount in the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Vote 30, Appropriation Act No.1, 2011-2012. To date $1,811,700 expenditures have been incurred on behalf of Shared Services Canada by FINTRAC against Shared Services Canada Program Expenditures.

DEPARTMENTAL BUDGETARY EXPENDITURES BY STANDARD OBJECT (unaudited)
For the quarter ended December 31, 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 December 31, 2011 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2011 Expended during the quarter ended December 31, 2010 Year to date used at quarter-end
Expenditures:            
Personnel 36,666 11,417 29,710 31,070 7,980 23,606
Transportation and communications 2,940 495 1,216 3,204 531 1,173
Information 550 66 115 561 62 91
Professional and special services 4,580 845 2,146 5,619 1,096 2,281
Rentals 4,688 1,057 2,952 5,029 1,136 2,640
Repair and maintenance 4,148 330 2,191 3,994 539 2,332
Utilities, materials and supplies 2,299 43 248 1,244 77 256
Acquisition of land, buildings and works 564 0 0 98 0 0
Acquisition of machinery and equipment 4,169 831 1,370 3,972 769 874
Transfer payments 0 0 0 800 499 800
Other subsidies and payments 0 2 4 5 -1 0
Total budgetary expenditures $ 60,605 $ 15,085 $ 39,953 $ 55,597 $ 12,688 $ 34,053

Note: Totals may not add due to rounding.

Date Modified: