Quarterly Financial Report of the
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC)
For the Quarter Ended December 31, 2011
Statement outlining results, risks and significant changes in operations, personnel and program
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:
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.
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.
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
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:
- an increase in authorities of $3.5M for paylist requirements reimbursed from TB Vote 30 in 2011-12;
- a decrease in authorities of $3.4M for initial in-year funding of the Budget 2010 initiatives in 2010-11;
- a decrease in authorities of $1.3M in 2011-12 related to funds re-profiled from 2009-10 to 2010-11 for FINTRAC's Disaster Recovery Site (DRS); and
- a decrease in authorities of $0.8M for transfer payments in 2011-12 as contributions to the Egmont Group of Financial Intelligence Units had sunset in 2010-11.
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
|Q3 2011-12||Q3 2010-11|
|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|
|Professional and special services||845||1096|
|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:
- FINTRAC has developed a comprehensive plan to ensure that the cost containment measures outlined in Budget 2010, which include the freezing of operating budgets at 2010-11 levels and funding the annual wage increases for employees from the currently approved operating budgets, are respected.
- FINTRAC has implemented a planning exercise for fiscal years 2010-11 to 2014-15, wherein the sectors and directorates within FINTRAC are asked to identify opportunities for efficiencies.
- FINTRAC has developed rigorous control and reporting mechanisms to monitor spending, including additional approval and monitoring activities to ensure that spending for travel, conferences and hospitality remain within reasonable levels.
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.
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.
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, $1,811,700 in expenditures has been incurred on behalf of SSC by FINTRAC against SSC's Program Expenditures.
5. Approval by Senior Officials
Approval by Senior Officials
Jeanne M. Flemming
February 20, 2012
A/Chief Financial Officer
February 20, 2012
|Fiscal Year 2011-2012||Fiscal Year 2010-2011|
|Total available for use for the year ending March 31, 2012 Footnote1||Used during the quarter ended December 31, 2011||Year to date used at quarter-end||Total available for use for the year ending March 31, 2011 Footnote1||Used during the quarter ended December 31, 2010||Year to date used at quarter-end|
|Vote 30 - Program expenditures||56,712||14,112||37,034||51,203||11,590||30,758|
|Budgetary statutory authorities
(S) Contributions to employee benefit plans
|Total budgetary authorities||$ 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 $1,811,700 expenditures have been incurred on behalf of Shared Services Canada by FINTRAC against Shared Services Canada Program Expenditures.
|Fiscal Year 2011-2012||Fiscal Year 2010-2011|
|Planned expenditures for the year ending March 31, 2012||Expended during the quarter ended December 31, 2011||Year to date used at quarter-end||Planned expenditures for the year ending March 31, 2011||Expended during the quarter ended December 31, 2010||Year to date used at quarter-end|
|Transportation and communications||2,940||495||1,216||3,204||531||1,173|
|Professional and special services||4,580||845||2,146||5,619||1,096||2,281|
|Repair and maintenance||4,148||330||2,191||3,994||539||2,332|
|Utilities, materials and supplies||2,299||43||248||1,244||77||256|
|Acquisition of land, buildings and works||564||0||0||98||0||0|
|Acquisition of machinery and equipment||4,169||831||1,370||3,972||769||874|
|Other subsidies and payments||0||2||4||5||-1||0|
|Total budgetary expenditures||$ 60,605||$ 15,085||$ 39,953||$ 55,597||$ 12,688||$ 34,053|
Note: Totals may not add due to rounding.
- Date Modified: