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

Unaudited

For the Quarter Ended September 30, 2012


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, as well as Canada’s Economic Action Plan 2012 (Budget 2012).

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. FINTRAC reports to the Minister of Finance and operates within the ambit of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations.

Further information on the mandate, roles, responsibilities and program of FINTRAC can be found in the FINTRAC 2012-13 Main Estimates, available on the following website:
http://publiservice.tbs-sct.gc.ca/est-pre/20122013/me-bpd/me-bpd-eng.pdf.

A. 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 2012-13 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.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-13, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

The Centre 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 (or used) expenditures for the quarter ended September 30, 2012. The explanation of variance considers that changes related to expenditures 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.

A. Significant Changes to Authorities

FINTRAC’s total authorities available for use at the end of the second quarter of 2012-13 are $56.1M, a decrease of approximately $1M, or 1.7% (a decrease of $2.8M of the budgetary authorities and an increase of $1.8M of the statutory authorities), when compared to the same quarter of the prior year.

Comparison of Authorities by Fiscal Year
View the text equivalent for Comparison of Authorities by Fiscal Year
Comparison of Authorities by Fiscal Year

  2012-13 2011-12
Budgetary Authorities 50.4 53.2
Statutory Authorities 5.7 3.9
i. Budgetary Authorities

FINTRAC’s budgetary authorities have decreased by $2.8M when compared to the same period last year. This is primarily due to the following changes:

ii. Statutory Authorities

FINTRAC’s statutory authorities have increased by $1.8M compared to the previous fiscal year. FINTRAC’s contributions to employee benefit plans (EBP) increased from $3.9M in FY 2011-12 to $5.7M this year.

In fiscal year 2011-12 the reinstatement of ongoing FINTRAC funding of $16.2M was contingent upon the approval of the 10-year evaluation of the AML/ATF Regime. This funding came after the Main Estimates and was provided as part of Supplementary Estimates A. As EBP costs are not normally included as part of Supplementary Estimates exercises, FINTRAC’s EBP expenditure levels will be lower when comparing year over year expenditures.

B. Significant Changes to Budgetary Expenditures by Standard Object

Actual year-to-date expenditures at the end of the second quarter showed a negligible decrease of $0.3M, or 1.2%, from $24.9M in 2011-12 to $24.6M in 2012-13.

The majority of the expenditures by standard object remained constant when compared to the same quarter of the previous fiscal year, and as a percentage of planned expenditures, with a few exceptions detailed below.

i. Planned Expenditures

FINTRAC has increased its rate of spending in the category of Rentals due to increased spending on software maintenance during the first two quarters of this fiscal year.

FINTRAC has also increased its rate of spending in the category of Utilities, Materials and Supplies. However, this is not a factor of increased spending (spending in this category is consistent with the previous fiscal year), rather it is a factor of the planned spending amount. Last year planned spending in this category was much higher due to fit-up costs for office space in one of the satellite offices. This year, planned spending is much lower and therefore spending to date makes up a higher proportion of the planned spending.

ii. Year-to-Date Expenditures

When comparing year-to-date expenditures at Q2 of this fiscal year to last fiscal year, we note increased spending in the category of Rentals ($1.0M or 53%) primarily due to spending on software maintenance. Conversely, there was decreased spending in the category of Repair and Maintenance ($-1.0M or -53%) primarily due to the transfer of hardware maintenance contracts to Shared Services Canada (SSC).

Comparison of Year-to-Date Expenditures by Standard Object
View the text equivalent for Comparison of Year-to-Date Expenditures by Standard Object
Comparison of Year-to-Date Expenditures by Standard Object

  2012-13 2011-12
Other subsidies and payments 3 2
Transfer payments 0 0
Acquisition of machinery and equipment 116 540
Acquisition of land, buildings and works 0 0
Utilities, materials and supplies 180 205
Repair and maintenance 881 1,861
Rentals 2,894 1,896
Professional and special services 1,459 1,302
Information 65 49
Transportation and communications 479 721

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 that 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 that could adversely affect its ability to effectively manage its resources. FINTRAC has developed a Corporate Risk Profile (CRP) to identify and manage its key corporate risks. The CRP 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.

A. Risk Factors and Mitigation

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, and take into account career development objectives. Personnel spending is closely monitored to ensure fiscal stewardship.

The government announced through Budget 2010 that operating budgets would be frozen at their 2010-11 levels for fiscal years 2011-12 and 2012-13. Management is continuing to review various management 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 Program

A. Key Personnel Change

Effective October 15, 2012, Gérald Cossette became the Director of FINTRAC.

B. Transfer to Shared Services Canada (SSC)

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 SSC the control and supervision of portions of its IT services (e.g. e-mail, data centers, and network services/support). As a result, $5.7M ($0.3M in EBP, $1.7M in Salary and $3.7M in O&M) was transferred to SSC on an on-going basis as of April 1, 2012.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs, which will be achieved in 2012-13; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

FINTRAC will achieve Budget 2012 savings of $3.4 million by fiscal year 2014-15 through efficiency measures and program reductions.

In the first year of implementation, FINTRAC will achieve savings of approximately $0.9 million. Savings will increase to $1.3 million ongoing, beginning in 2013-14. Specifically savings will be achieved in 2012-13 through the following initiatives:

There are no financial risks or uncertainties related to these savings.

6. Approval by Senior Officials

___________________
Gérald Cossette
Director
FINTRAC
Ottawa, Canada

Date: November 21, 2012
___________________
Gerry Derouin
Acting Chief Financial Officer
FINTRAC
Ottawa, Canada

Date: November 21, 2012


STATEMENT OF AUTHORITIES (unaudited)
For the quarter ended September 30, 2012

(in thousands of dollars)
  Fiscal Year 2012-2013 Fiscal Year 2011-2012
  Total available for use for the year ending March 31, 2013 Footnote1 Footnote2 Used during the quarter ended September 30, 2012 Year to date used at quarter-end Total available for use for the year ending March 31, 2012 Footnote1 Used during the quarter ended Septebmber 30, 2011 Year to date used at quarter-end
Vote 30 - Program expenditures 50,432 11,481 21,719 53,215 12,300 22,922
Budgetary statutory authorities
(S) Contributions to employee benefit plans
5,698 1,424 2,849 3,893 973 1,946
Total budgetary authorities $ 56,130 $ 13,587 $ 24,568 $ 57,108 $ 13,273 $ 24,869
Non-budgetary authorities $ - $ - $ - $ - $ - $ -
Total authorities $ 56,130 $ 13,587 $ 24,568 $ 57,108 $ 13,273 $ 24,869

Note: Totals may not add due to rounding.

DEPARTMENTAL BUDGETARY EXPENDITURES BY STANDARD OBJECT (unaudited)
For the quarter ended September 30, 2012

(in thousands of dollars)
  Fiscal Year 2012-2013 Fiscal Year 2011-2012
  Planned expenditures for the year ending March 31, 2013 Footnote3 Expended during the quarter ended September 30, 2012 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2012 Expended during the quarter ended September 30, 2011 Year to date used at quarter-end
Expenditures:            
Personnel 37,988 9,813 18,492 33,169 9,930 18,293
Transportation and communications 1,668 236 479 2,940 332 721
Information 240 33 65 550 40 49
Professional and special services 4,596 849 1,459 4,580 851 1,302
Rentals 3,769 1,576 2,894 4,688 1,020 1,896
Repair and maintenance 3,519 875 881 4,148 794 1,861
Utilities, materials and supplies 361 105 180 2,299 154 205
Acquisition of land, buildings and works 11 0 0 564 0 0
Acquisition of machinery and equipment 3,969 96 116 4,169 152 540
Transfer payments 0 0 0 0 0 0
Other subsidies and payments 10 1 3 0 0 2
Total budgetary expenditures $ 56,130 $ 13,587 $ 24,569 $ 57,108 $ 13,273 $ 24,869

Note: Totals may not add due to rounding.

Date Modified: