Quarterly Financial Report for the quarter ended June 30, 2015

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 and Supplementary Estimates.

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 2015–16 Main Estimates, available on the following website: http://www.tbs-sct.gc.ca/ems-sgd/me-bpd/20152016/me-bpdtb-eng.asp

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 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.

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 and Supplementary Estimates A for the 2015–16 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 first quarter of 2015–16 are $54.2M, an increase of $5.1M or 10.3%, when compared to the same quarter of 2014–15.

Comparison of Authorities by Fiscal Year ($M)
Comparison of Authorities by Fiscal Year. Details in text following the chart.
View the text equivalent for Comparison of Authorities by Fiscal Year
FINTRAC's total authorities available (in millions)
  2015–16 2014–15
Budgetary Authorities 48.8 43.8
Statutory Authorities 5.5 5.4
ii. Budgetary Authorities

FINTRAC’s budgetary authorities have increased by $5.0M 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) increased by $0.1M 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 budgetary expenditures at the end of the first quarter have decreased by $2.9M or 22.3%, from $13.0M in 2014–15 to $10.1M in 2015–16.

i. Planned Expenditures

Planned expenditures for professional and special services and acquisition of machinery and equipment increased primarily due to funding received in Supplementary Estimates A 2015–16 for upgrades to modernize FINTRAC’s analytical systems to strengthen Canada’s anti-money laundering and anti-terrorist financing regime.

FINTRAC has increased its planned spending in the category of Utilities, Materials and Supplies in order to align with recent historical spending trends.

Planned spending in the category of Repair and Maintenance has decreased in order to align with recent historical spending trends.

ii. Year-to-date Expenditures

Year-to-date expenditures for Rentals have decreased by $1.4M due to the timing of billing from Public Works and Government Services Canada (PWGSC) for the rental of FINTRAC’s office space.

The decrease 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 that was issued in the first quarter of fiscal year 2014–15.

Professional and special services expenditures have decreased by $0.3M due to various annual membership and conference fees that were expensed in Q1 of 2014–15 but will occur later in 2015–16, as well as the timing of invoicing of several Information Technology related license fees.

Year-to-date expenditures in the category of Repair and Maintenance have increased by $0.1M due to the repair of the generator at FINTRAC’s headquarters.

Year-to-date expenditures in the category of Utilities, Materials and Supplies have increased by $0.1M due to the timing of expenditures which have been incurred earlier in 2015–16 compared to 2014–15.

3. Risks and Uncertainties

As Canada’s financial intelligence unit and a partner in Canada’s anti-money laundering and anti-terrorist financing regime, 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

An important area of risk identified in FINTRAC’s CRP is Resource Management. FINTRAC places a strong focus on the effective management of both human and financial resources especially during periods of change and transformation. As a small organization, FINTRAC faces challenges and limitations regarding its human resources capacity and its flexibility to cash manage funds.

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.

In addition, it is expected that there will be increasing financial pressures over the next few fiscal years due to a variety of government initiatives (e.g. 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 has been managed through the following actions and mitigation strategies:

Finally, given the current state of the information technology infrastructure, namely the analytic system, it has been increasingly difficult for FINTRAC to manage the high volume of data received. To address the risk of system degradation that would impact the integrity of the Financial Intelligence Program, FINTRAC is implementing a multi-year strategy to modernize its analytic system and establish new and efficient business processes and tools. To ensure the successful implementation of such a significant project within aggressive timelines, sustained effort is being made within the Centre which includes significant planning and oversight activities, establishing processes to ensure the required technical tools and resources are available to address day-to-day operational issues and provide input into future business processes and systems, and initiatives to maintain an engaged workforce.

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

A. Funding Authorities

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 the analytical systems used to strengthen Canada's anti-money laundering and anti-terrorist financing regime. FINTRAC’s funding for these initiatives is $5.5M (excluding EBP) in 2015–16 compared to funding of $1.9M in 2014–15.

5. Approval by Senior Officials

Approved by:


Gérald Cossette, Director
Ottawa, Canada

Date: August 14, 2015

Hélène Filion, Chief Financial Officer
Ottawa, Canada



STATEMENT OF AUTHORITIES (unaudited)
For the quarter ended June 30, 2015

(in thousands of dollars)
  Fiscal Year 2015–16 Fiscal Year 2014–15
  Total available for use for the year ending March 31, 2016See the note below for Total available for use for the quarter ending March 31, 2016* Used during the quarter ended June 30, 2015 Year to date used at quarter-end Total available for use for the year ending March 31, 2015See the note below for Total available for use for the quarter ending March 31, 2015* Used during the quarter ended June 30, 2014 Year to date used at quarter-end
Budgetary authorities            
Vote 30 – Program expenditures 48,800 10,117 10,117 43,804 13,017 13,017
Less: Revenues netted against expenditures -53 0 0 0 0 0
Net Vote 30 – Program expenditures 48,747 10,117 10,117 43,804 13,017 13,017
Budgetary statutory authorities
Contributions to employee benefit plans
5,496 1,374 1,374 5,386 1,346 1,346
Total budgetary authorities $ 54,243 $ 11,491 $ 11,491 $ 49,189 $ 14,363 $ 14,363
Non-budgetary authorities 0 0 0 0 0 0
Total authorities $ 54,243 $ 11,491 $ 11,491 $ 49,189 $ 14,363 $ 14,363

Note: Totals may not add due to rounding.



DEPARTMENTAL BUDGETARY EXPENDITURES BY STANDARD OBJECT (unaudited)
For the quarter ended June 30, 2015

(in thousands of dollars)
  Fiscal Year 2015–16 Fiscal Year 2014–15
  Planned expenditures for the year ending March 31, 2016 Expended during the quarter ended June 30, 2015 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2015 Expended during the quarter ended June 30, 2014 Year to date used at quarter-end
Expenditures:            
Personnel 38,207 10,328 10,328 38,026 10,529 10,529
Transportation and communications 1,036 216 216 1,002 186 186
Information 124 30 30 118 34 34
Professional and special services 6,474 283 283 2,004 573 573
Rentals 5,464 379 379 5,073 1,779 1,779
Repair and maintenance 989 125 125 1,317 49 49
Utilities, materials and supplies 343 95 95 257 17 17
Acquisition of land, buildings and works 0 0 0 0 0 0
Acquisition of machinery and equipment 1,655 38 38 1,389 25 25
Transfer payments 0 0 0 0 0 0
Other subsidies and payments See the note below for Other subsidies and payments* 4 -4 -4 5 1,173 1,173
Total gross budgetary expenditures $ 54,296 $ 11,491 $ 11,491 $ 49,189 $ 14,363 $ 14,363
Less: Revenues netted against expenditures -53 0 0 0 0 0
Total budgetary expenditures $ 54,243 $ 11,491 $ 11,491 $ 49,189 $ 14,363 $ 14,363

Note: Totals may not add due to rounding.


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