Quarterly Financial Report for the quarter ended September 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

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) is Canada's financial intelligence unit. The Centre exists to assist in the detection, prevention and deterrence of money laundering and the financing of terrorist activities. FINTRAC's "value-added" financial intelligence products and compliance functions are a unique contribution to the public safety of Canadians and to the protection of the integrity of Canada's financial system.

FINTRAC is an independent agency that operates at arm's length from the law enforcement agencies and other entities to which it is authorized to disclose financial intelligence. It reports to the Minister of Finance, who is in turn accountable to Parliament for the activities of the Centre. FINTRAC was established by, and operates within, the ambit of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations.

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 second quarter of 2015–16 are $56.6M, an increase of $5.3M 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 51.1 45.9
Statutory Authorities 5.5 5.4
ii. Budgetary Authorities

FINTRAC's budgetary authorities have increased by $5.2M 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) 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 second quarter have decreased by $1.6M, or 6.6%, from $24.3M in 2014–15 to $22.7M 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 $0.6M due to the timing of billing for the rental of FINTRAC's office space ($0.3M) and decreased expenditures for software rentals ($0.3M).

A decrease of $1.2M for Other Subsidies and Payments is due to a one-time transition payment of $1.2M in 2014–15 for implementing salary payment in arrears by the Government of Canada.

Professional and Special Services year-to-date expenditures have decreased by $0.3M due to decreased expenditures of $0.1M for translation services and outside legal fees, both of which could be related to timing differences, and a one-time $0.2M expenditure in 2014–15 for a data gap analysis.

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.

Increases in year-to-date expenditures in the categories of Utilities, Materials and Supplies ($0.1M), Transportation, Communications and Information ($0.2M), and Acquisition of Machinery and Equipment ($0.1M) have occurred primarily due to 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:

Given the current state of the information technology infrastructure, namely the analytics system, it has been increasingly difficult for FINTRAC to efficiently manage the high volume of data it receives. To address the risk of system degradation that would impact the integrity of the Financial Intelligence Program, FINTRAC is implementing a multi-year project to modernize its analytics system and establish more efficient business processes and tools. Sustained effort is being made within the Centre to ensure the successful implementation of this significant project within its aggressive timelines. Such efforts include 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.

Finally, FINTRAC's IT infrastructure is now a Shared Services Canada (SSC) asset. This infrastructure is aging and has an increased risk of failure, which could potentially have an impact on FINTRAC operations and security requirements. With competing priorities from various partner departments, and a strategic focus toward end-state services, SSC has limited funding available for legacy infrastructure. This places an additional pressure on the Centre (which has provided supplemental funding for essential initiatives) to effectively plan, allocate its resources and deliver on its programs. To mitigate, FINTRAC will continue to implement a breadth of strategies, including: working closely with SSC and partners concerned with National Security to identify potential synergies; tracking existing and potential future issues with the Centre's legacy environments; conducting weekly status meetings and monthly partnership meetings with SSC; continuing to collaborate and partner with Chief Information Officers across the Government of Canada for potential solutions; and leveraging innovative technical solutions wherever possible.

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.

Budget 2015 directed resources (up to $3.5M over 5 years and $1M ongoing) to fight white-collar crime by authorizing FINTRAC to disclose financial intelligence to Canadian securities regulators. This change came into effect when Economic Action Plan 2015 Act, No. 1 received Royal Assent in June 2015. Funding has not yet been received for this initiative.

5. Approval by Senior Officials

Approved by:

Gérald Cossette, Director

Ottawa, Canada
November 24, 2015

Hélène Filion, Chief Financial Officer


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

(in thousands of dollars)
  Fiscal Year 2015–16 Fiscal Year 2014–15
  Total available for use for the year ending March 31, 2016Footnote * Used during the quarter ended September 30, 2015 Year to date used at quarter-end Total available for use for the year ending March 31, 2015Footnote * Used during the quarter ended September 30, 2014 Year to date used at quarter-end
Budgetary authorities            
Vote 30 – Program expenditures 51,135 9,813 19,930 45,912 8,580 21,597
Less: Revenues netted against expenditures -53 0 0 0 0 0
Net Vote 30 – Program expenditures 51,083 9,813 19,930 45,912 8,580 21,597
Budgetary statutory authorities
 Contributions to employee benefit plans
5,496 1,374 2,748 5,386 1,346 2,693
Total budgetary authorities $ 56,578 $ 11,187 $ 22,678 $ 51,298 $ 9,927 $ 24,290
Non-budgetary authorities 0 0 0 0 0 0
Total authorities $ 56,578 $ 11,187 $ 22,678 $ 51,298 $ 9,927 $ 24,290

Note: Totals may not add due to rounding.


DEPARTMENTAL BUDGETARY EXPENDITURES BY STANDARD OBJECT (unaudited)
For the quarter ended September 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 September 30, 2015 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2015Footnote * Expended during the quarter ended September 30, 2014 Year to date used at quarter-end
Expenditures:            
Personnel 38,207 7,939 18,267 38,026 7,663 18,192
Transportation and communications 1,177 294 511 1,191 182 368
Information 141 56 86 140 10 44
Professional and special services 7,500 714 997 2,382 722 1,294
Rentals 6,208 1,886 2,265 6,031 1,136 2,915
Repair and maintenance 1,124 102 228 1,565 70 119
Utilities, materials and supplies 389 90 185 305 66 83
Acquisition of land, buildings and works 0 0 0 0 0 0
Acquisition of machinery and equipment 1,881 106 144 1,652 57 82
Transfer payments 0 0 0 0 0 0
Other subsidies and payments See the note below for Other subsidies and payments (1) 5 -1 -5 6 19 1,193
Total gross budgetary expenditures $ 56,631 $ 11,187 $ 22,678 $ 51,298 $ 9,927 $ 24,290
Less: Revenues netted against expenditures -53 0 0 0 0 0
Total budgetary expenditures $ 56,578 $ 11,187 $ 22,678 $ 51,298 $ 9,927 $ 24,290

Note: Totals may not add due to rounding.

Date Modified: