Quarterly Financial Report for the quarter ended December 31, 2017
Statement outlining results, risks and significant changes in operations, personnel and program
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
FINTRAC's total authorities available for use at the end of the third quarter of 2017–18 are $55.2M. This represents a decrease of $4.1M, or 6.9% when compared to the $59.3M in authorities available for use in the third quarter of 2016–17.
View the text equivalent for Comparison of Authorities by Fiscal Year
ii. Budgetary Authorities
FINTRAC's budgetary authorities ($49.9M) have decreased by $3.6M, or 7%, when compared to the same period last year ($53.5M) due primarily to the following changes:
- a decrease of $4.2M for funding to modernize the analytical system used to detect money laundering and terrorist financing;
- a decrease of $1.0M in funding to support the implementation of legislative amendments;
- an increase of $0.3M for funding to provide disclosures to provincial securities regulators;
- an increase of $1.0 following the collective bargaining reprofile;
- an increase of $0.4M in the operating budget carry forward; and,
- a decrease of $0.1M due to contributions to the enabling functions and executive leadership program initiatives and Budget 2016 reductions.
iii. Statutory Authorities
Authorities for contributions to employee benefit plans (EBP) decreased by $0.5M, or 8% 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 $3.4M in 2017–18.
FINTRAC reduced its planned spending in the category of transportation and communication by $0.4M 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 decreased by $1.8M in order to align with expected reduced spending related to the analytics modernization project as well as recent historical spending trends.
In 2017–18, FINTRAC's Compensation Review Committee announced its decision to pay an economic increase to its employees. Although FINTRAC employees work in an unrepresented environment and do not participate in collective bargaining, FINTRAC's practice has been to determine its employees' pay increases based on a review of terms negotiated with bargaining agents in the core public service. A reprofile of previous years' funding was received in 2017–18 for the purpose of funding additional personnel expenditures, resulting in an increase of $0.9M in planned expenditures for personnel.
As FINTRAC is a fully reimbursing client of Public Services and Procurement Canada (PSPC), planned spending in the category of rentals increased by $0.5M given the rising cost of office accommodations.
ii. Year-to-date Expenditures
Total actual budgetary expenditures at the end of the third quarter decreased by $0.8M or 2%, from $38.9M in 2016–17 to $38.1M in 2017–18.
Year-to-date expenditures for professional and special services decreased by $4.6M. The decrease is primarily due to a decrease in IT consulting service costs related to the Analytical Modernization project.
Personnel spending increased by $2.7M in the third quarter of 2017–18 compared to 2016–17. This is mainly due to economic increases paid to employees in 2017–18. Increases had not been paid to employees since 2014 as collective agreements were still being negotiated in the core public service.
Other items offsetting the decrease in professional and special services are year-to-date increases of $0.7M in rental expenses, $0.2M in other subsidies and payments, $0.1M in utilities, materials and supplies and $0.1M in acquisition of machinery and equipment.
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:
- Managers have been asked to identify and implement opportunities for efficiencies to offset a higher cost of operations; and,
- FINTRAC management has developed rigorous control and reporting mechanisms to monitor spending including, for example, additional oversight to ensure that spending for travel, conferences and hospitality remain within sustainable levels.
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
The following key personnel changes occurred at the executive level in the third quarter:
- Barry MacKillop was appointed as Interim Director of FINTRAC effective October 18, 2017.
- Karyne Merrick Moore was appointed as Acting General Counsel effective November 30, 2017.
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 $2.7M (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.
5. Approval by Senior Officials
Chief Financial Officer
Date: February 26, 2018
|Fiscal Year 2017–18||Fiscal Year 2016–17|
|Total available for use for the year ending March 31, 2018Footnote1||Used during the quarter ended December 31, 2017||Year-to-date used at quarter-end||Total available for use for the year ending March 31, 2017Footnote1||Used during the quarter ended December 31, 2016||Year-to-date used at quarter-end|
|Vote 1 – Program expenditures||49,881||13,901||34,159||53,533||10,794||34,717|
|Budgetary statutory authorities|
Contributions to employee benefit plans
|Total budgetary authorities||55,164||15,222||38,121||59,274||12,207||38,958|
Note: Totals may not add due to rounding.
|Fiscal Year 2017–18||Fiscal Year 2016–17|
|Planned expenditures for the year ending March 31, 2018||Expended during the quarter ended December 31, 2017||Year-to-date used at quarter end||Planned expenditures for the year ending March 31, 2017||Expended during the quarter ended December 31, 2016||Year-to-date used at quarter end|
|Transportation and communications||1,149||214||750||1,574||343||900|
|Professional and special services||4,777||1,059||1,976||6,555||2,384||6,555|
|Repair and maintenance||715||98||170||605||43||146|
|Utilities, materials and supplies||362||250||372||390||132||241|
|Acquisition of land, buildings and works||0||0||0||0||0||0|
|Acquisition of machinery and equipment||721||108||209||4,150||20||70|
|Other subsidies and payments||0||76||177||0||(2)||(8)|
|Total budgetary expenditures||55,164||15,222||38,121||59,274||12,207||38,958|
Note: Totals may not add due to rounding.
- Date Modified: