Quarterly Financial Report for the quarter ended September 30, 2019

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.

Further information on the mandate, roles, responsibilities and program of FINTRAC can be found in the FINTRAC 2019–20 Main Estimates, available on the following website: https://www.canada.ca/en/treasury-board-secretariat/services/planned-government-spending/government-expenditure-plan-main-estimates/2019-20-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 2019–20 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 results 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 2019–20 are $57.5M. This represents an increase of $3.5M, or 6.5% when compared to the $54.0M in authorities available for use in the second quarter of 2018–19.

Comparison of Authorities by Fiscal Year ($M)
Comparison of Authorities by Fiscal Year ($M)
View the text equivalent for Comparison of Authorities by Fiscal Year
FINTRAC's total authorities available (in millions)
2019–20 2018–19
Budgetary Authorities 51.6 48.8
Statutory Authorities 5.9 5.3
ii. Budgetary Authorities

FINTRAC’s budgetary authorities ($51.6M) have increased by $2.8M, or 5.8%, when compared to the same period last year ($48.8M) primarily due to the following changes:

iii. Statutory Authorities

Authorities for contributions to employee benefit plans (EBP) ($5.9M) have increased by $0.6M or 11.4%, due primarily to the following changes:

B. Statement of Departmental Budgetary Expenditures by Standard Object

i. Planned Expenditures

Compared to the second quarter of fiscal year 2018–19, planned expenditures as at 2019–20 Q2 increased by $3.4M or 6.3%.

Personnel spending is expected to increase by $1.6M predominately due to the receipt of compensation funding as well as the receipt of salary funding as part of the operating budget carry forward. Planned spending on professional and special services and rentals are expected to decrease by $1.0M and $0.8M respectively following the end of the Budget 2014 funding to modernize the analytical system used to detect money laundering and terrorist financing. Planned spending for other subsidies is expected to increase by $3.6M in relation to the Budget 2019 funding received.

ii. Year-to-date Expenditures

Total actual budgetary expenditures at the end of the second quarter are higher compared to the same quarter end last year. Fiscal year 2019–20 Q2 expenditures of $13.4M are 17.2% or $2.0M higher compared to expenditures of $11.4M in 2018–19 Q2.

Year-to-date expenditures for Rentals and Utilities increased by $1.1M and $0.1M respectively at the end of Q2 primarily due to timing differences in the billing related to FINTRAC’s office space. Expenditures for Repairs and Maintenance have increased by $0.5M related to the transition to CTSN. Acquisition of Machinery and Equipment have increased by $0.1M IM/IT related project costs. Personnel costs have increased by $0.2M in relation to the hiring of new Budget 2019 related staff.

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 proactively identify risks and opportunities, FINTRAC must anticipate and assess internal and external risk factors that can affect the design and delivery of its programs 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 maintains 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. In 2019–20, FINTRAC will undertake a full review of its CRP to provide a comprehensive risk context which will help the Centre to better understand, among other things, how risks are mapped to strategic outcomes, the relationship between corporate risks and importantly, how risks should be mitigated and managed by the Centre on an ongoing basis.

A. Risk Factors and Mitigation

An important area of risk identified in FINTRAC’s current 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. Employee engagement at all levels, along with appropriate talent and tools, is required to ensure effective resource management. As well, effective management of resources through periods of transformation is critical to ensure effective alignment of resources and to seize investment opportunities as they materialize.

FINTRAC continues to face growing operating pressures due to the increasing cost of operation and expenses related to the implementation of 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:

FINTRAC depends on information technology infrastructure to receive, store and secure approximately 25 million new financial transaction reports every year. At the same time, this infrastructure needs to allow intelligence analysts to filter the information, analyze it, and generate actionable financial intelligence for Canada's police, law enforcement and national security agencies. This is only possible with a modern system that can manage the high volume of information, make the connections and produce the needed results, all in real-time or close to it. FINTRAC continues to ensure that its business processes and systems support its ability to deliver on its mandate and to adapt to future innovations and enhancements in business requirements. In 2018–19, the Centre initiated a review of its analytics modernization to ensure the best path forward in upgrading its analytics capabilities to allow for the full and timely use of its data and knowledge. This review will support FINTRAC’s continued efforts to ensure that its business processes and systems support its ability to deliver on its mandate and to adapt to future innovations and enhancements in business requirements.

Finally, FINTRAC’s IT infrastructure is 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:

B. Funding Authorities

Budget 2019 directed resources (up to $20.5M over 5 years) to FINTRAC in order to support the following five initiatives:

FINTRAC’s funding for these initiatives is $3.1M (excluding $0.5M EBP) in 2019–20.

5. Approval by Senior Officials

Approved by:

Nada Semaan, Director & CEO

Date: November 21, 2019

Annette Ryan, Chief Financial Officer

Date: November 22, 2019


STATEMENT OF AUTHORITIES (unaudited) Footnote 1
For the quarter ended September 30, 2019
(in thousands of dollars)
Fiscal Year 2019–20 Fiscal Year 2018–19
Total available for use for the year ending March 31, 2020* Used during the quarter ended September 30, 2019 Year-to-date used at quarter-end Total available for use for the year ending March 31, 2019* Used during the quarter ended September 30, 2018 Year-to-date used at quarter-end
Budgetary authorities
Vote 1 – Program expenditures 51,569 12,030 21,853 48,763 10,107 19,866
Budgetary statutory authorities

Contributions to employee benefit plans

5,881 1,357 2,714 5,277 1,319 2,639
Total budgetary authorities 57,540 13,386 24,566 54,040 11,426 22,504
Non-budgetary authorities 0 0 0 0 0 0
Total authorities 57,540 13,386 24,566 54,040 11,426 22,504

Note: Totals may not add due to rounding.

DEPARTMENTAL BUDGETARY EXPENDITURES BY STANDARD OBJECT (unaudited)
For the quarter ended September 30, 2019

(in thousands of dollars)
Expenditures Fiscal Year 2019–20 Fiscal Year 2018–19
Planned expenditures for the year ending March 31, 2020 Expended during the quarter ended September 30, 2019 Year-to-date used at quarter-end Planned expenditures for the year ending March 31, 2019 Expended during the quarter ended September 30, 2018 Year-to-date used at quarter-end
Personnel 41,551 9,695 19,326 39,995 9,560 19,185
Transportation and communications 1,271 438 674 1,273 464 681
Information 399 57 112 357 56 130
Professional and special services 3,327 619 924 4,350 574 869
Rentals 6,031 1,766 2,570 6,805 658 1,223
Repair and maintenance 336 500 565 412 28 164
Utilities, materials and supplies 359 145 213 429 72 166
Acquisition of land, buildings and works 0 0 0 0 0 0
Acquisition of machinery and equipment 565 168 172 419 23 59
Transfer payments 0 0 0 0 0 0
Other subsidies and payments 3,612 -2 9 0 -8 28
Total budgetary expenditures 57,450 13,386 24,566 54,040 11,426 22,504

Note: Totals may not add due to rounding.

Date Modified: