Foreign Affairs, Trade and Development Canada Quarterly Financial Report

For the quarter ended June 30, 2013

Statement outlining results, risks and significant changes in operations, personnel and program

1. Introduction

This report has been prepared by management as required by section 65.1 of the Financial Administration Act in the form and manner prescribed by Treasury Board. The report has not been subject to an external audit or review, and should be read in conjunction with the Main Estimates, Supplementary Estimates A, Supplementary Estimates B, the Quarterly Financial Reports from fiscal year 2012-13 as well as Canada’s Economic Action Plan 2012 (Budget 2012).

A summary description of the department's programs can be found within the 2013-14 Estimates, Part II - The Main Estimates.

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 and Supplementary Estimates for the 2013-14 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.

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 Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-2013, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013-2014, the changes to departmental authorities were reflected in the 2013-2014 Main Estimates tabled in Parliament.

The department uses the full accrual method of accounting to prepare and present its annual consolidated departmental financial statements that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

B. Financial Structure

The department has one revolving fund, Passport Canada, which is included in the statutory authorities in the accompanying Statement of Authorities. Passport Canada (PPT) is expected to be financially viable, meaning that the full cost of its operations should be equal to its revenue. To support any deficit, PPT has a drawdown authority by which the aggregate of expenditures incurred within the fund may exceed the revenues.

2. Highlights of fiscal quarter and fiscal year to date (YTD) results

The department spent slightly less of its budgetary and non-budgetary authorities at June 30, 2013 ($333 million) as compared to the same period last year ($355 million). More significantly, DFATD’s authorities have almost doubled due to the amalgamation with CIDA.

A. Significant changes to Authorities

As at June 30, 2013, total authorities available for use by the Department have increased by $ 2.2 billion as compared to the same period last year. This increase is the result of the amalgamation with CIDA ($2.6billion) offset by a reduction to DFAIT’s authorities ($311 million):

Table 1: Authorities
(In thousands of dollars)DFAIT 2013-14CIDA 2013-14DFATD 2013-14DFAIT 2012-13DFATD VariancesDFATD %
Vote 1 - Net Operating expenditures1,232,955135,5191,368,4741,363,5844,8900.4%
Vote 5 - Capital expenditures165,510-165,510201,519(36,009)(18%)
Vote 10 - Grants and contributions695,6542,315,2223,010,876858,9772,151,899251%
Vote 15 - Locally engaged staff pensions, insurance and social security65,380-65,38050,77914,60129%
Budgetary statutory authorities152,92347,965200,888151,81349,07532%
Non-budgetary authorities28,98252,30481,28626,03655,250212%
Total Authorities2,341,4042,551,0104,892,4142,652,7082,239,70584%
i. Budgetary Authorities

Vote 1 – Net Operating expenditures authorities have increased by $5 million. There was a $135 million increase due to deemed appropriations from CIDA plus $33 million of appropriations transferred from Vote 5. These were offset by reductions to DFAIT’s authorities due to Budget 2012 cost containment measures and decreased funding to the Global Peace and Security Fund.

Vote 5 - Capitalexpenditure authorities have decreased by $36 million mainly due to a transfer from Vote 5 to Vote 1 as part of the implementation of a common definition of capital expenditures and as well as a funding transfer to Shared Services Canada (SSC).

Vote 10 – Grants and Contributions authorities have increased by $2.2 billion due to the deemed appropriations from CIDA.

Vote 15 – Locally engaged staff pension, insurance and social security programs authorities increased by $14 million due to an increase in funding requirements.

ii. Budgetary statutory authorities

The total Statutory Authorities available for use as of June 30, 2013 increased by $49 million, mainly due to the transfer of authorities from CIDA

iii. Non-budgetary authorities

The department’s non-budgetary authorities increased by $55 million as at June 30, 2013, compared to the same quarter the previous year. This increase is attributable to the transfer of authorities from CIDA.

B. Significant changes to budgetary expenditures by standard object

i. Expenditures
Table 2: Expenditures
(In thousands of dollars)Year to date used at quarter end 2013-14Year to date used at quarter end 2012-13Difference%
* Professional and special services include items such as protection, business and information technology services and management consulting.
** Rental expenses are almost entirely related to the cost of renting buildings outside Canada (Chanceries, Official Residences and Staff Quarters).
Expenditures
Salaries and employee benefits267,125266,5315940.2%
Transportation and communications26,30030,330(4,030)(13%)
Information2,4971,1981,299108%
Professional and special services*42,37236,6055,76716%
Rentals**51,95657,208(5,252)(9%)
Repair and maintenance3,8964,711(815)(17%)
Utilities, materials and supplies15,72115,634871%
Other5731,439(866)(60%)
Total Operating410,440413,655(3,215)(1%)
Acquisition of land, buildings and works6,55413,534(6,980)(52%)
Acquisition of machinery and equipment4,0434,632(589)(13%)
Total Acquisition10,59718,166(7,569)(42%)
Transfer payments5,76115,874(10,113)(64%)
Total gross budgetary expenditures426,798447,695(20,897)(5%)
Less Revenues netted against expenditures
PPT Respendable Revenue70,93580,337(9,401)(12%)
Revenue Credited to the Vote26,58518,5048,08244%
Total net budgetary expenditures329,278348,855(19,577)(6%)

Transportation and communications - The $4 million decrease is mainly due to departmental travel restrictions and the transfer of communication services to SSC.

Information - The $1 million increase is mainly attributable to printing services for passport application forms.

Professional and special services- The increase of $6 million is mainly due to the introduction of a monthly accrual for services provided to Passport by SSC, and an increase in language training fees.

Rentals - The decrease of $5 million is mainly due to the timing of rent payments, mainly for the International Civil Aviation Organization.

Repair and maintenance - The decrease of $815 thousand is mainly due to a reduction in the installation and relocation of computers.

Acquisition of land, building and works - The decrease of $7 million is mainly due to the acquisition and construction of the official residence in Oslo and staff quarters in Beirut and Berlin during the same quarter last year.

Transfer payments - The decrease of $10 million is mainly due to the sunsetting of different programs within the Global Peace and Security Fund.

ii. Revenues

The decrease of $9 million in Passport revenues is mainly due to a decrease in Passport sales and the increase of $8 million for DFATD is due to the increase in co-locator revenues.

3. Risks and uncertainties

This quarterly report reflects the results of the current fiscal period in relation to the Main Estimates for which full supply was released.

Like other federal government organizations, DFATD faces budget constraints. The majority of its salary, operating and capital expenditures are funded through voted authorities. Over the last few years, the federal government has announced a series of initiatives and realignment strategies to renew and modernize its expenditure management system to ensure value for money of federal expenditures while operating more efficiently

DFATD has been examining how it can improve its alignment with government policy and management priorities, and has been looking at more efficient ways of doing business and delivering services. The department has also taken steps to address the cumulative impact of successive rounds of government-wide reduction exercises. In managing these reductions, DFATD has rigorously examined its programs for efficiency, effectiveness and continued relevance to government priorities.

DFATD currently faces the likelihood of pressures against its authorities for the foreseeable future as the department continues to implement the efficiency measures approved in Budget 2012 Canada’s Economic Action Plan. The implementation of these efficiency measures could have an impact on the department's workforce. The ongoing impact of these measures coupled with an ongoing requirement to reallocate funds to meet emerging priorities will likely continue to put pressure on the department's envelope.

In recognition of this tightening fiscal environment, DFATD will continue to examine its departmental program spending, making reallocations against identified priorities. The department will continue to implement strategies to mitigate and manage the impact of these efficiency measures to achieve the best results for Canadians.

4. Significant changes in relation to operations, personnel, and programs

i. Amalgamation with the Canadian International Development Agency (CIDA)

In order to promote greater international policy coherence and achieve improved outcomes for Canadians, the Government tabled legislation as part of the Budget Implementation Act to move forward with the commitment made in Economic Action Plan 2013 to amalgamate CIDA and the Department of Foreign Affairs and International Trade (DFAIT).

On June 26, 2013, the Governor General gave Royal Assent to Bill C-60, creating the new Department of Foreign Affairs, Trade and Development (DFATD). Canada now has a single integrated foreign affairs, trade and development department. The new department has foreign policy responsibilities that range from advancing Canadian values and interests, providing international development and humanitarian assistance, providing consular services to Canadians, promoting Canadian trade and investment and pursuing Canada’s economic prosperity agenda through international trade. Canada's Economic Action Plan 2013 outlines the government's plans to better align Canada's foreign policy, trade, and development interests.

Under the Foreign Affairs, Trade and Development Act, the department has three ministers, the Minister of Foreign Affairs, the Minister of International Trade and the Minister of International Development.

ii. Key senior personnel change

On June 26, 2013, Greta Bossenmaier became the Senior Associate Deputy Minister of International Development. On July 8, 2013, Paul Rochon became the Deputy Minister of International Development.

5. Budget 2012 implementation

This section provides an overview of the savings announced in Budget 2012 that are being implemented under the former Department of Foreign Affairs and International Trade (DFAIT).

DFAIT had Budget 2012 savings of $87.3 million during 2012-2013 and will achieve savings of $144.5 million in 2013-2014 and $197.1 million in 2014-2015 and ongoing. These savings include those resulting from the horizontal review of the International Assistance Envelope (IAE). This review was driven by three criteria: alignment to the Government of Canada’s priorities, foreign policy and international assistance commitments; demonstration of effectiveness and tangible results; and, efficiency and value for money. Since April 1, 2012, the Department has achieved substantial savings through modernizing its operations, restructuring its Canadian offices, foreign properties and missions, reducing the back office and transforming how it works internally to achieve efficiencies and adjusting programming. Key initiatives undertaken to date;

  • Continuing the Global Partnership Program, a significant foreign policy initiative under the IAE, at a reduced level;
  • Introducing a regional network model for missions in Europe and the United States that centralizes resources and capabilities in larger missions and allows for reductions in other missions.
  • Reducing the number of Canada-based staff (CBS) positions at missions, in some cases by converting them to locally engaged staff (LES) positions to reduce costs related to deployment of staff abroad; and
  • Closing of some missions abroad: the Consulate General in Buffalo; Anchorage, Philadelphia, Phoenix and Raleigh-Durham missions; and Princeton (satellite office). Despite having closed the Consulate General in Buffalo and the Consulate in Philadelphia, the Department is keeping a cost-effective trade-focused presence in these cities.

There were no significant financial impacts in the first quarter of 2013-14 on the department’s authorities due to Budget 2012 decisions. The balance of the Budget 2012 savings will be reflected in subsequent quarterly financial reports. The department has put in place rigorous planning, monitoring and financial risk management measures to achieve the budgetary savings as expected.

6. Approval by Senior Officials

Approved, as required by the Policy on Financial Resource Management, Information and Reporting:

Morris Rosenberg
Deputy Minister of Foreign Affairs

Simon Kennedy
Deputy Minister of International Trade

Nadir Patel
hief Financial Officer and Assistant Deputy Minister, Corporate Planning, Finance and Human Resources

Ottawa, Canada
Date: August 29, 2013

Table 3a: Statement of Authorities (Unaudited)
(In thousands of dollars)Fiscal year 2013-2014
Total available for use for the year ending March 31, 2014* ***Used during the quarter ended June 30, 2013****Year to date used at quarter end
* Includes only Authorities available for use and granted by Parliament at quarter-end.
*** Pursuant to s. 18 of An act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures effective June 26, 2013, $135,519,300 is deemed to have been appropriated to the Department of Foreign Affairs, Trade and Development as Vote 1 Operating Expenditures and $2,315,222,400 is deemed to have been appropriated to the Department of Foreign Affairs, Trade and Development as Vote 10 Grants and contributions, which results in a reduction for the same amounts in the Canadian International Development Agency’s Vote 25 Operating expenditures and Vote 30 Grants and contributions, Appropriation Act No. 1, 2013-14.
**** CIDA expenditures incurred between June 26 and June 30, 2013 were immaterial and are not reflected in this report.
Vote 1 - Net Operating expenditures1,368,474276,303276,303
Vote 5 - Capital Expenditures165,51015,11715,117
Vote 10 - Grants and contributions3,010,8765,7355,735
Vote 15 - Locally engaged staff pensions, insurance and social security65,38010,05110,051
Budgetary statutory authorities:
Contributions to employee benefit plans98,52813,90513,905
DFATD Ministers' salary and motor car allowance2204040
Payments under the Diplomatic Service (Special) Superannuation Act2502626
Spending of proceeds form the disposal of surplus Crown assets761--
Refunds of amounts credited to revenues in previous years121212
Payments to International Financial Institutions30,744--
Passport Office Revolving Fund70,3738,0898,089
Total Budgetary authorities4,811,128329,278329,278
Non-budgetary authorities81,2864,1934,193
Total authorities4 892 414333 471333 471
Table 3b: Statement of Authorities (Unaudited)
(In thousands of dollars)Fiscal year 2012-2013
Total available for use for the year ending March 31, 2013* **Used during the quarter ended June 30, 2012Year to date used at quarter end
* Includes only Authorities available for use and granted by Parliament at quarter-end
** Pursuant to s. 18 of An act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures effective June 26, 2013, $135,519,300 is deemed to have been appropriated to the Department of Foreign Affairs, Trade and Development as Vote 1 Operating Expenditures and $2,315,222,400 is deemed to have been appropriated to the Department of Foreign Affairs, Trade and Development as Vote 10 Grants and contributions, which results in a reduction for the same amounts in the Canadian International Development Agency’s Vote 25 Operating expenditures and Vote 30 Grants and contributions, Appropriation Act No. 1, 2013-14.
Vote 1 - Net Operating expenditures1,363,584285,795285,795
Vote 5 - Capital Expenditures201,51923,53823,538
Vote 10 - Grants and contributions858,97715,85615,856
Vote 15 - Locally engaged staff pensions, insurance and social security50,77911,15611,156
Budgetary statutory authorities:
Contributions to employee benefit plans83,75221,31521,315
DFATD Ministers' salary and motor car allowance1573939
Payments under the Diplomatic Service (Special) Superannuation Act2501818
Spending of proceeds form the disposal of surplus Crown assets---
Refunds of amounts credited to revenues in previous years---
Payments to International Financial Institutions---
Passport Office Revolving Fund67,654(8,862)(8,862)
Total Budgetary authorities2,626,672348,855348,855
Non-budgetary authorities26,0365,9075,907
Total authorities 2,652,708354,762354,762
Table 4a: Departmental budgetary expenditures by Standard Object (unaudited)
(In thousands of dollars)Fiscal year 2013-2014
Planned expenditures for the year ending March 31, 2014**Expended during the quarter ended June 30, 2013***Year to date used at quarter-end
** Pursuant to s. 18 of An act to implement certain provisions of the budget tabled in Parliament on March 21, 2013 and other measures effective June 26, 2013, $135,519,300 is deemed to have been appropriated to the Department of Foreign Affairs, Trade and Development as Vote 1 Operating Expenditures and $2,315,222,400 is deemed to have been appropriated to the Department of Foreign Affairs, Trade and Development as Vote 10 Grants and contributions, which results in a reduction for the same amounts in the Canadian International Development Agency’s Vote 25 Operating expenditures and Vote 30 Grants and contributions, Appropriation Act No. 1, 2013-14.
*** CIDA expenditures incurred between June 26 and June 30, 2013 were immaterial and are not reflected in this report.
Expenditures
Salaries and employee benefits1,110,647267,125267,125
Transportation and communications133,60326,30026,300
Information18,7922,4972,497
Professional and special services279,19742,37242,372
Rentals283,12551,95651,956
Repair and maintenance43,2243,8963,896
Utilities, materials and supplies74,99615,72115,721
Acquisition of land, buildings and works76,5826,5546,554
Acquisition of machinery and equipment89,3174,0434,043
Transfer payments3,041,8715,7615,761
Other4,458573573
Total gross budgetary expenditures5,155,812426,798426,798
Less revenues netted against expenditures
PPT Respendable Revenue285,35970,93570,935
Revenue Credited to the Vote59,32526,58526,585
Total revenues netted against expenditures344,68497,52097,520
Total net budgetary expenditures4,811,128329,278329,278
Table 4b: Departmental budgetary expenditures by Standard Object (unaudited)
(In thousands of dollars)Fiscal year 2012-2013
Planned expenditures for the year ending March 31, 2013*Expended during the quarter ended June 30, 2012Year to date used at quarter-end
* Planned expenditures do not reflect measures announced in Budget 2012.
Expenditures
Salaries and employee benefits1,043,971266,531266,531
Transportation and communications179,63330,33030,330
Information27,6661,1981,198
Professional and special services292,45136,60536,605
Rentals220,34257,20857,208
Repair and maintenance43,5404,7114,711
Utilities, materials and supplies84,71115,63415,634
Acquisition of land, buildings and works144,65813,53413,534
Acquisition of machinery and equipment72,7854,6324,632
Transfer payments859,22715,87415,874
Other14,5381,4391,439
Total gross budgetary expenditures2,983,520447,695447,695
Less revenues netted against expenditures
PPT Respendable Revenue301,94980,33780,337
Revenue Credited to the Vote54,90018,50418,504
Total revenues netted against expenditures356,84998,84098,840
Total net budgetary expenditures2,626,672348,855348,855