Quarterly Financial Report for the quarter ended December 31, 2014

Unaudited


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 2014–15 Main Estimates, available on the following website:
http://www.tbs-sct.gc.ca/ems-sgd/me-bpd/20142015/me-bpd-eng.pdf.

A. Organizational Overview

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. 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.

FINTRAC is one of several domestic partners in Canada’s Anti-Money Laundering/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.

B. 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 for the 2014–15 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 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.

2. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

A. Statement of Authorities

i. Overview

FINTRAC’s total authorities available for use at the end of the third quarter of 2014–15 are $53.0M, a decrease of $0.4M or 0.8%, when compared to the same quarter of 2013–14.

Comparison of Authorities by Fiscal Year ($M)
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View the text equivalent for Comparison of Authorities by Fiscal Year
FINTRAC's total authorities available (in millions)
  2014–15 2013–14
Budgetary Authorities 47.8 47.7
Statutory Authorities 5.4 5.7

ii. Budgetary Authorities

FINTRAC’s budgetary authorities have decreased by $0.2M when compared to the same period last year due primarily to the following changes:

iii. Statutory Authorities

Authorities for contributions to employee benefit plans (EBP) decreased by $0.2M when compared to the same period last year due to an adjustment of the contribution rate used for EBP.

B. Statement of Departmental Budgetary Expenditures by Standard Object

Total actual expenditures at the end of the third quarter have increased by $0.7M or 1.9%, from $35.6M in 2013–14 to $36.3M in 2014–15.

i. Planned Expenditures

FINTRAC has decreased its planned spending in the category of Professional and Special Services, in line with FINTRAC’s Budget 2012 savings measures.

FINTRAC has also decreased its planned spending in the categories of Repair and Maintenance as well as Acquisition of Machinery and Equipment. This decrease is reflective of a recent downward trend in spending in the above mentioned categories due to the recent completion of a fit-up to FINTRAC’s headquarters and commensurate with a decrease in authorities available for use compared to 2013–14.

FINTRAC has increased its planned spending in the category of Rentals in order to align with recent historical spending as well as planned spending for 2014–15.

ii. Year-to-Date Expenditures

In line with FINTRAC’s Budget 2013 savings measures, spending transportation and communications has decreased by $0.1M or 16% compared to the same period last year due to a reduction in international travel and moving expenses.

Personnel spending has decreased by $0.9M due to an adjustment of the contribution rate used for EBP as well as savings achieved due to hiring restraint exercised by the Centre.

The increase of $1.2M for Other Subsidies and Payments is due to a one-time transition payment of $1.2M for implementing salary payment in arrears by the Government of Canada.

An increase of $0.3M in spending in the category of Acquisition of Machinery and Equipment is due to expenses related to the modernization of FINTRAC’s analytical system. Spending in the category of Rentals has increased by $0.3M due to a change in billing schedule related to an office lease.

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. Leadership development opportunities are an important consideration not only for retention and succession management, but also to ensure the Centre has the leadership expertise and skills to adapt to its evolving business context. Individual learning plans support employee performance, and take into account career development objectives. Personnel spending is closely monitored to ensure fiscal stewardship.

It is expected that there will be increasing pressures in operating budget authorities over the next fiscal years due to a variety of government initiatives (e.g. cost containment measures outlined in Budget 2010, the freeze on departmental operating budgets for fiscal years 2014–15 and 2015–16, the funding of the Canada School of Public Service, the web renewal initiative, etc.). 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. Funding Authorities

Through Budget 2010, the Government committed to increase ongoing funding for FINTRAC 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. In accordance with the funding profile, FINTRAC received funding of $8.0M in 2014–15 ($3.0M in O&M and $5.0M in Salary and EBP) compared to $10.0M in 2013–14 and $10.5M in 2012–13.

Budget 2014 directed resources (up to $22.5M over 5 years) to FINTRAC in order to support the implementation of legislative amendments and to modernize its analytical system. FINTRAC sought and has obtained funding of $1.8M (excluding EBP) for the first year of these initiatives through this year’s Supplementary Estimates B.

In 2014-15 Supplementary Estimates B, FINTRAC was granted Vote Netting authority to expend revenues received in a fiscal year through the provision of internal support services to other organizations to offset associated expenditures incurred in the fiscal year for the sharing of information management and information technology processes and systems.

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; 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 $3.4MFootnote 1 by fiscal year 2014–15 through efficiency measures and program reductions.

In the first year of implementation FINTRAC achieved savings of $0.9M. Savings have increased to $1.3M in 2013–14 and will continue to result in ongoing savings of $1.3M in 2014–15.These savings will be achieved 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: February 19, 2015

Hélène Filion
Chief Financial Officer
FINTRAC
Ottawa, Canada

Date: February 19, 2015

STATEMENT OF AUTHORITIES (unaudited)
For the quarter ended December 31, 2014

(in thousands of dollars)
  Fiscal Year 2014–15 Fiscal Year 2013–14
  Total available for use for the quarter ending March 31, 2015See the note below for Total available for use for the quarter ending March 31, 2015* Used during the quarter ended December 31, 2014 Year to date used at quarter-end Total available for use for the year ending March 31, 2014See the note below for Total available for use for the year ending March 31, 2014* Used during the quarter ended December 31, 2013 Year to date used at quarter-end
Vote 30 – Program expenditures 47,814 10,898 32,496 47,705 10,583 31,357
Less: Revenues netted against expenditures (284) (274) (274) - - -
Net Vote 30 – Program expenditures  47,530 10,624 32,221 47,705 10,583 31,357
Budgetary statutory authorities
(S) Contributions to employee benefit plans
5,424 1,346 4,039 5,659 1,415 4,244
Total budgetary authorities $52,954 $11,970 $36,261 $53,364 $11,997 $35,601
Non-budgetary authorities - - - - - -
Total authorities $52,954 $11,970 $36,261 $53,364 $11,997 $35,601

Note: Totals may not add due to rounding.


DEPARTMENTAL BUDGETARY EXPENDITURES BY STANDARD OBJECT (unaudited)
For the quarter ended December 31, 2014

(in thousands of dollars)
  Fiscal Year 2014–15 Fiscal Year 2013–14
  Planned expenditures for the year ending March 31, 2015 Expended during the quarter ended December 31, 2014 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2014 Expended during the quarter ended December 31, 2013 Year to date used at quarter-end
Expenditures:            
Personnel  38,051 9,278 27,471 38,179 9,640 28,363
Transportation and communications 1,414 226 594 1,213 210 705
Information 261 27 71 185 19 56
Professional and special services 3,320 834 2,129 3,599 686 2,044
Rentals 5,545 1,233 4,148 3,358 1,152 3,801
Repair and maintenance 1,712 185 304 3,164 144 294
Utilities, materials and supplies 856 15 98 175 54 116
Acquisition of land, buildings and works 14 - - 13 - -
Acquisition of machinery and equipment 2,062 439 521 3,474 95 231
Transfer payments - - - - - -
Other subsidies and paymentsFootnote 2 4 7 1,200 4 (3) (8)
Total gross budgetary expenditures $53,238 $12,244 $36,535 $53,364 $11,997 $35,601
Less: revenues netted against expenditures (284) (274) (274) - - -
Total budgetary expenditures $52,954 $11,970 $36,261 $53,364 $11,997 $35,601

Note: Totals may not add due to rounding.


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