Quarterly Financial Report for the quarter ended June 30, 2020 (unaudited)

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 in the Directive on Accounting Standards, GC 4400 Departmental Quarterly Financial Reports. This Quarterly Financial Report should be read in conjunction with the 2020–21 Main Estimates for the Financial Transactions and Reports Analysis Center of Canada (FINTRAC).

This Quarterly Financial Report has not been subject to an external audit or review.

1.1 Authority, Mandate and Program Activities

FINTRAC (the Centre) is Canada's financial intelligence unit and anti-money laundering and anti-terrorist financing regulator. The Centre assists in the detection, prevention and deterrence of money laundering and the financing of terrorist activities. FINTRAC's financial intelligence and compliance functions are a unique contribution to the safety of Canadians and the integrity of Canada's financial system.

FINTRAC acts at arm's length and is independent from the police services, 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 is headquartered in Ottawa, with regional offices located in Montréal, Toronto, and Vancouver.

FINTRAC was established by, and operates within the ambit of, the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) and its Regulations. The Centre is one of several domestic partners in Canada's Anti-Money Laundering and Anti-Terrorist Financing Regime, which is led by the Department of Finance.

FINTRAC fulfills its mandate by engaging in the following activities:

In addition, FINTRAC is part of the Egmont Group, an international network of financial intelligence units that collaborate and exchange information to combat money laundering and terrorist activity financing. FINTRAC also contributes to other multilateral fora such as the Financial Action Task Force (FATF), the Asia-Pacific Group on Money Laundering (APG) and the Caribbean Financial Action Task Force (CFATF), participating in international policy making and the provision of technical assistance to other FIUs.

The description of the program activities for the Centre can be found in Part II of the 2020–21 Main Estimates and in the 2020–21 Departmental Plan.

1.2 Basis of Presentation

This Quarterly Financial Report has been prepared by management using an expenditure basis of accounting, and a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities. The accompanying Statement of Authorities includes the Centre's spending authorities granted by Parliament and those used by the Department, consistent with the Main Estimates and Supplementary Estimates for both fiscal years as well as transfers from Treasury Board central votes that are approved by the end of the quarter.

The authority of Parliament is required before monies 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.

FINTRAC uses the 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

This departmental Quarterly Financial Report reflects the results of the current fiscal period. The following graph provides a comparison of budgetary and statutory authorities available for the first three months of 2020–21 compared to 2019–20.

Comparison of Authorities by Fiscal Year ($M). Budgetary Authorities 49.4 in 2019-20, 28.4 in 2020-21. Statutory Authorities 5.9 in 2019-20 and 5.6 in 2020-21.

2.1 Authorities Analysis

The following table provides a comparison of cumulative authorities by vote for the current and previous fiscal years.

Comparison of Cumulative Authorities Available for Use as at June 30
Authorities Available
(in thousands)
2020–21 2019–20 Variance ($) Variance (%)
Budgetary
Voted:
Vote 1 – Program Authorities 38,392 49,368 -10,967 -22%
Statutory
Employee Benefits Program 5,620 5,881 -261 -4%
Total Budgetary authorities 44,012 55,250 -11,237 -20%
Non-budgetary 0 0 0 0%
Total authoritiesFootnote 1 $44,012 $55,250 -$11,237 -20%

2.1.1 Voted Budgetary Authorities

The total Vote 1 program authorities available as at June 30, 2020 are $38.4 million compared to $49.4 million for the same period in 2019–20. The decrease of $11.0 million or -22% is attributable to the following factors:

2.1.2 Statutory Budgetary Authorities

The total statutory authorities available as at June 30, 2020 are $5.6 million compared to $5.9 million for the same period in 2019–20. The decrease of $0.3 million or -4% is related to adjustments to the employee benefits program (EBP) funding that align with the reduced initial supply provision for 2020–21 as described above.

2.2 Expenditure Analysis

The following table provides a comparison of year-to-date spending as at June 30 by vote for the current and previous fiscal years.

Comparison of Cumulative Expenditures as at June 30
Year-to-date expenditures
(in thousand $)
2020–21 2019–20 Variance
($)
Variance
(%)
Budgetary
Voted:
Vote 1 – Program Expenditures 9,909 9,823 86 1%
Statutory
Employee Benefits Program 1,405 1,357 48 4%
Total Budgetary expenditures 11,315 11,180 135 1%
Non-budgetary 0 0 0 0%
Total year-to-date expendituresFootnote 1 $11,315 $11,180 $135 1%

2.2.1 Voted Budgetary Expenditures

Voted expenditures remained stable. Total voted expenditures were $9.9 million in 2020–21 compared to $9.8 million in 2019–20, a small increase of $0.1 million or 1%. The net increase is the result of the following variances in expenditure categories:

2.2.2 Statutory Budgetary Expenditures

Statutory expenditures also remained stable. There was a small increase of $0.04 million or 4% compared to this period last year. 2020–21 expenditures were $1.40 million and 2019–20 expenditures were $1.36 million. The variance is in employee benefits program 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 identify risks and opportunities proactively, 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 manage its resources effectively. FINTRAC maintains a Corporate Risk Profile (CRP) to identify and manage its key corporate risks. Senior level committees review the CRP regularly and the business planning process identifies activities to mitigate the risks. In 2020–21, FINTRAC will update its CRP to provide a more robust risk context, which will help the Centre to better understand 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.

3.1 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 a sophisticated information technology infrastructure to receive, store and secure approximately 25 million new financial transaction reports every year. At the same time, this infrastructure allows 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 modern systems and processes 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 systems and processes 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 Programs

4.1 Key Personnel Changes

There were no personnel changes at the executive level during the first quarter of 2020–21.

4.2 Changes in Funding

Budget 2019 directed resources (up to $20.5M over 5 years) to FINTRAC to strengthen Canada's anti-money laundering and anti-terrorist financing regime. The funding supports the following five initiatives: the implementation of legislation and regulations package 2; Trade Based Money Laundering (TBML) analysis; disclosing to Revenue Quebec and the Competition Bureau; strengthening FINTRAC compliance outreach and examinations; and expanding FINTRAC public-private partnership projects. FINTRAC's 2020–21 funding for these initiatives is $4.3 million (excluding $0.5 million in EBP). This is an increase of $1.2 million from 2019–20 authorities of $3.1M (excluding $0.5M in EBP).

FINTRAC also received funding to contribute to the national strategy to combat human trafficking ($2.2 million over 5 years). 2020–21 funding for this initiative is $0.6 million (excluding $0.1 million in EBP).

5. Approval by Senior Officials

Approved by:

Donna Achimov, Acting Director and CEO

Date: August 28, 2020

Annette Ryan, Chief Financial Officer

Date: August 25, 2020


STATEMENT OF AUTHORITIES (unaudited) For the quarter ended June 30, 2020
(in thousands of dollars)
Fiscal Year 2020–21 Fiscal Year 2019–20
Total available for use for the year ending March 31, 2021 Footnote 2 Used during the quarter ended June 30, 2020 Year-to-date used at quarter-end Total available for use for the year ending March 31, 2020 Used during the quarter ended June 30, 2019 Year-to-date used at quarter-end
Budgetary authorities
Vote 1 – Program expenditures 38,392 9,909 9,909 49,368 9,823 9,823
Budgetary statutory authorities
Contributions to employee benefit plans 5,620 1,405 1,405 5,881 1,357 1,357
Total budgetary authorities 44,012 11,315 11,315 55,250 11,180 11,180
Non-budgetary authorities 0 0 0 0 0 0
Total authoritiesFootnote 1 $44,012 $11,315 $11,315 $55,250 $11,180 $11,180
DEPARTMENTAL BUDGETARY EXPENDITURES BY STANDARD OBJECT (unaudited)
For the quarter ended June 30, 2020

(in thousands of dollars)
Expenditures Fiscal Year 2020–21 Fiscal Year 2019–20
Planned expenditures for the year ending March 31, 2021Footnote 3 Expended during the quarter ended
June 30, 2020
Year-to-date used at quarter-end Planned expenditures for the year ending March 31, 2020 Expended during the quarter ended
June 30, 2019
Year-to-date used at quarter-end
Personnel 43,595 10,485 10,485 40,900 9,630 9,630
Transportation & communications 1,278 15 15 1,111 235 235
Information 403 19 19 349 55 55
Professional & special services 3,647 210 210 2,908 305 305
Rentals 6,211 161 161 5,270 805 805
Repair & maintenance 275 45 45 293 65 65
Utilities, materials & supplies 390 85 85 313 68 68
Acquisition of land, buildings & works 0 0 0 0 0 0
Acquisition of machinery & equipment 972 292 292 494 4 4
Transfer payments 0 0 0 0 0 0
Other subsidiaries & payments 39 3 3 3,612 12 12
Total budgetary expendituresFootnote 1 $56,809 $11,315 $11,315 $55,250 $11,180 $11,180
Date Modified: