Quarterly Financial Report for the quarter ended June 30, 2017

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 assist in the detection and deterrence of money laundering and terrorism 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 2017–18 Main Estimates, available on the following website: https://www.canada.ca/en/treasury-board-secretariat/services/planned-government-spending/government-expenditure-plan-main-estimates/2017-18-estimates.html

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 actionable 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 for the 2017–18 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 2017–18 are $51.2M. This represents a decrease of $5.5M, or 10% when compared to the $56.7M in authorities available for use in the first quarter of 2016–17.

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)
  2017–18 2016–17
Budgetary Authorities 45.9 51.0
Statutory Authorities 5.3 5.7
ii. Budgetary Authorities

FINTRAC's budgetary authorities ($45.9M) have decreased by $5.1M, or 10%, when compared to the same period last year ($51.0M) due primarily to the following changes:

iii. Statutory Authorities

Authorities for contributions to employee benefit plans (EBP) decreased by $0.4M, or 7% when compared to the same period last year, primarily due to an adjustment of the contribution rate used.

B. Statement of Departmental Budgetary Expenditures by Standard Object

i. Planned Expenditures

Budget 2014 directed resources to FINTRAC in order to modernize the analytics system used to strengthen Canada's anti-money laundering and anti-terrorist financing regime. Following the profile of funding received, planned expenditures for acquisitions of machinery and equipment decreased by $3.1M in 2017–18.

FINTRAC has reduced its planned spending in the category of transportation and communication by $0.5M to reflect the decrease in funding to support the implementation of legislative amendments directed to FINTRAC in Budget 2014.

Planned spending in the category of professional and special services has decreased by $2.3M in order to align with expected reduced spending related to the analytics modernization project as well as recent historical spending trends.

ii. Year-to-date Expenditures

Total actual budgetary expenditures at the end of the first quarter have decreased by $1.4M or 12%, from $11.7M in 2016–17 to $10.3M in 2017–18.

Year-to-date expenditures for professional and special services have decreased by $0.5M. The decrease is primarily due to timing differences related to invoices for legal service fees from the Department of Justice, and information retrieval services. In 2016–17, invoices for these services were received and paid in Q1 but had not been received by the end of Q1 in 2017–18.

Year-to-date expenditures for rentals have decreased by $1.2M at the end of Q1 primarily due to timing differences in the billing for the rental of FINTRAC's office space.

Year-to-date personnel spending has increased by $0.2M in the first quarter of 2017–18 compared to 2016–17 due to an increase in salary expenditures.

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 operates in a dynamic, constantly changing environment. 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 objectives. 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.

Over the next few years, the Centre will face growing operating pressures due to increasing cost of operation and expenses of implementing government-wide technology centric investments and, as a fully reimbursing client of Public Services and Procurement Canada (PSPC), bearing the rising cost of office accommodations, building maintenance and leasehold improvements. 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 protecting 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. Key Personnel Changes

There were no personnel changes at the senior executive level during the first quarter.

B. 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 analytics system used to strengthen Canada's anti-money laundering and anti-terrorist financing regime. FINTRAC's funding for these initiatives is $2.2M (excluding EBP) in 2017–18 compared to funding of $7.9M in 2016–17.

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 provincial securities regulators. FINTRAC's funding for this initiative is $0.8M (excluding EBP) in 2017–18 compared to funding of $0.5M in 2016–17. Funding for 2017–18 has been included in FINTRAC's ARLU and is received through the Main Estimates.

5. Approval by Senior Officials

Approved by:

Gérald Cossette, Director
Ottawa, Canada

Stéphane Cousineau, Chief Financial Officer
Ottawa, Canada

Date: August 9, 2017


STATEMENT OF AUTHORITIES (unaudited)See the note below for Total available for use for the quarter ending March 31, 2018. Footnote 1
For the quarter ended June 30, 2017
(in thousands of dollars)
  Fiscal Year 2017–18 Fiscal Year 2016–17
  Total available for use for the year ending March 31, 2018See the note below for Total available for use for the quarter ending March 31, 2018. Footnote 1 Used during the quarter ended June 30, 2017 Year-to-date used at quarter-end Total available for use for the year ending March 31, 2017See the note below for Total available for use for the quarter ending March 31, 2018. Footnote 1 Used during the quarter ended June 30, 2016 Year-to-date used at quarter-end
Budgetary authorities            
Vote 1 – Program expenditures 45,943 8,969 8,969 51,042 10,289 10,289
Budgetary statutory authorities            
Contributions to employee benefit plans
5,283 1,321 1,321 5,655 1,413 1,413
Total budgetary authorities 51,226 10,289 10,289 56,697 11,702 11,702
Non-budgetary authorities 0 0 0 0 0 0
Total authorities 51,226 10,289 10,289 56,697 11,702 11,702

Note: Totals may not add due to rounding


DEPARTMENTAL BUDGETARY EXPENDITURES BY STANDARD OBJECT (unaudited)
For the quarter ended June 30, 2017

(in thousands of dollars)
  Fiscal Year 2017–18 Fiscal Year 2016–17
  Planned expenditures for the year ending March 31, 2018 Expended during the quarter ended June 30, 2017 Year-to-date used at quarter-end Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended June 30, 2016 Year-to-date used at quarter-end
Expenditures            
Personnel 38,931 9,228 9,228 38,530 9,073 9,073
Transportation and communications 955 323 323 1,418 359 359
Information 201 53 53 246 32 32
Professional and special services 3,639 303 303 5,951 765 765
Rentals 6,004 176 176 5,966 1,344 1,344
Repair and maintenance 594 20 20 541 41 41
Utilities, materials and supplies 301 50 50 348 67 67
Acquisition of land, buildings and works 0 0 0 0 0 0
Acquisition of machinery and equipment 600 45 45 3,697 24 24
Transfer payments 0 0 0 0 0 0
Other subsidiaries and payments 0 91 91 0 (3) (3)
Total budgetary expenditures 51,226 10,289 10,289  56,697 11,702 11,702

Note: Totals may not add due to rounding

Date Modified: