Quarterly Financial Report for FCAC for the quarter ended June 30, 2017

Introduction

This Quarterly Financial Report (QFR) 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.

The Financial Consumer Agency of Canada (FCAC) Act outlines FCAC’s functions and administration and enforcement powers, and lists the sections of federal laws and regulations under its supervision. A description of its program activities can be found in FCAC’s Business Plan 2017-18.

The QFR has not been subjected to an external audit or review.

Basis of Presentation

The Financial Consumer Agency of Canada is a federal government agency that recovers its costs mainly through asset-based, premium-based or transaction-based assessments on the financial entities it supervises.

In addition to its revenues from assessments, FCAC receives an annual statutory expenditure of a maximum of $5 million to support, collaborate and coordinate its activities and efforts with stakeholders to improve the financial literacy of Canadians.

The Agency 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.

Highlights of the fiscal quarter and the fiscal year-to-date (YTD) results

FCAC’s total expenses for the three months ended June 30, 2017 totalled $4,138,860 or 85.50% of its budgeted expenses for the period, compared to 88.94% for the same period last year. The variance to budget as at June 30, 2017 of $702,084 is primarily due to delays in staffing vacant positions and in the implementation of projects for which professional services expenses are incurred.

When compared to the previous year, FCAC’s total expenses for the three months ended June 30, 2017 were $4,138,860, a $361,954 increase or 9.58% from the same period last year. This increase is primarily due to increases in Professional Services, Personnel costs and Transportation and Communication expenses. 

Professional services expenses increased by $226,113 or 48.55% compared to the previous year due to a number of factors. Professional services expenses were incurred as a result of FCAC’s adoption and transition to Public Sector Accounting Standards effective April 1, 2017. Additional legal expenses were incurred to assist with the industry review of bank sales practices initiative, an FCAC priority for fiscal year 2017-18.
 
Personnel costs increased by $96,448 or 3.36% when compared to the same period last year due to planned growth in employees’ compensation in accordance with terms and conditions of employment, including economic increases.
 
The increase in Transportation and Communication expenses of $14,767 or 13.65% is largely due to travel expenses for increased participation at financial literacy events and conferences attended by FCAC’s supervision and promotion employees.

Government Funding

For the three months ended June 30, 2017, expenses in the amount of $842,528 were funded through the annual statutory expenditure (2017 - $752,783), and the balance was funded through assessments from the financial entities FCAC supervises.

Risks and uncertainties

Business risks and financial statement implications

Business risks result from conditions, events, circumstances, actions or inactions that could adversely affect FCAC’s ability to achieve its objectives and execute its strategies. A business risk is broader than the risk of material misstatement of financial reports and statements. Business risks may have potential financial consequences and, as a result, affect financial reports and statements.

Enterprise risk management

The environment in which FCAC operates carries an array of risks to the achievement of its mandate and objectives. While many of these challenges are always present, the extent to which they pose a risk to FCAC’s objectives varies, depending on economic and financial conditions, and the financial industry environment and its impact on financial consumers. FCAC’s ability to achieve its mandate depends on the timeliness and effectiveness with which it identifies, evaluates, prioritizes and develops initiatives to address areas where it is most at risk.

External risks

Economic, industry and supervisory environment

FCAC operates in a rapidly evolving financial marketplace, including increasingly complex financial products and new technology developed to suit the needs and demands of today’s consumers. This may impede FCAC’s ability to keep pace with this rapid rate of change.

FCAC must continue to assess the impact of these changes and be prepared to act quickly while remaining flexible. FCAC must also stay abreast of new developments and discussions, both domestically and internationally, and leverage resulting opportunities, while managing risks to ensure the continued achievement of its mandate.

Changes to consumer protection framework

The Government of Canada is working towards improving the federal financial consumer protection framework. FCAC will contribute to this discussion and assess potential impacts on its supervisory approach and its structure, resources, systems and processes to effectively and efficiently supervise federally regulated financial entities under this potential new framework.

Ability to deliver and diversity of external influencers

In advancing key components of its financial literacy program and the national strategy for financial literacy, FCAC relies heavily on a diverse network of partners and stakeholders from the public, private and not-for-profit sectors, and seeks to develop sound, strategic and credible alliances. Each partner and stakeholder may have its own organizational interests and goals, which may differ from those of FCAC. The Agency will continue to cultivate program development partnerships and maintain optimal approaches to ensure common goals are achieved.

Financial risks

Financial risks, primarily liquidity and credit risks, are closely managed and continue to be rated low.

Significant changes in operations, personnel and programs

Changes in Accounting Standards - Transition to Public Sector Accounting Standards (PSAS)

In December 2014, the Public Sector Accounting Board (PSAB) issued amendments to Public Sector Accounting Standards (PSAS). These amendments introduced the concept of a new public sector entity – referred to as a government component – and provided the basis of accounting to be used by such entities. FCAC is considered a government component and as such has adopted PSAS effective April 1, 2017.

First Time adoption by Government Organizations requires that the accounting policies in effect as at March 31, 2018 be applied to the opening PSAS statement of financial position as at April 1, 2016. FCAC monitors PSAS developments to ensure that the impacts of any potential or actual changes to PSAS are appropriately considered in its changeover plan. The impact to the opening statement of financial position will be disclosed in the annual financial statements for the year ended March 31, 2018.

 

There were no other significant changes in Operations, Personnel and Programs during the quarter ended June 30, 2017.

 

Approved by:
  
Lucie M.A. Tedesco    
Commissioner     
Financial Consumer Agency of Canada   

Brigitte Goulard
Deputy Commissioner and Chief Financial Officer 
Financial Consumer Agency of Canada  

 

August 17, 2017

Departmental Budgetary Expenditures by Standard Object (Unaudited)

 

Fiscal year 2017-2018
Expenditures Planned expenditures for the year ending March 31, 2018 Expended during the quarter ended June 30, 2017 Year-to-date used at quarter end
Personnel 13,936,041 2,970,600 2,970,600
Transportation and communications 634,926 122,925 122,925
Information 688,411 46,280 46,280
Professional and special services 5,802,830 691,817 691,817
Rentals 1,135,241 199,829 199,829
Repair and maintenance 11,300 0 0
Utilities, materials and supplies 32,500 (10,098) (10,098)
Acquisition of machinery and equipment 121,797 19,437 19,437
Other subsidies and payments 615,595 98,070 98,070
Total gross budgetary expenditures 22,978,641 4,138,860 4,138,860
Fiscal year 2016-2017Footnote 1
Expenditures Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended June 30, 2016 Year-to-date used at quarter end
Personnel 11,517,434 2,874,152 2,874,152
Transportation and communications 519,632 108,158 108,158
Information 931,719 9,496 9,496
Professional and special services 3,625,391 465,704 465,704
Rentals 989,417 208,793 208,793
Repair and maintenance 14,480 1,301 1,301
Utilities, materials and supplies 32,500 10,171 10,171
Acquisition of machinery and equipment 113,670 8,859 8,859
Other subsidies and payments 516,865 90,272 90,272
Total gross budgetary expenditures 18,261,108 3,776,906 3,776,906

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