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

Introduction

The Quarterly Financial Report (QFR) for the Financial Consumer Agency of Canada (FCAC) 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 Act (the 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

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the agency’s spending authorities as set out in section 13 of the Act. 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 Agency uses the full accrual method of accounting to prepare and present its annual agency financial statements that are part of the departmental results reporting process. However, spending authorities included in this report remain on an expenditure basis. 

Highlights: quarter results

FCAC’s total expenses for the three months ended September 30, 2017 totalled 4,957,461, or 87.69% of its budgeted expenses for the period, compared to 98.30% for the same period last year. The variance to budget as at September 30, 2017 of $696,199 is primarily due to lower than expected usage of external consultants to undertake the sales practices industry review.

When compared to the previous year, FCAC’s total expenses for the three months ended September 30, 2017 of $4,957,461, were $832,683 or 20.19% higher than the same period last year. This increase is primarily due to increases in Personnel costs, Machinery and equipment, and Professional services.

For the quarter ended September 30, 2017, Personnel costs increased by $425,367 when compared to the same period last year due to the staffing of new positions, overtime costs, and for planned growth in employees’ compensation, including economic increases.

Increases of $169,573 in Machinery and equipment were incurred to expand the Agency’s offices to accommodate its growing workforce, including rental costs, office furnishings, and computer software and equipment. Professional services expenditures increased by $109,897 due to investments in educational tools to enhance the experience of users.

Highlights: year-to-date results

FCAC’s total expenses for the six months ended September 30, 2017, totalled $9,089,804 or 86.01% of its budgeted expenses for the period, compare to 94.08% for the same period last year. The variance to budget of $1,478,018 as of September 30, 2017 is primarily due to a lower than expected usage of external consultants for the sales practices industry review and as a result of vacant positions.

FCAC’s total expenses for the six months ended September 30, 2017 of $9,089,804 were $1,149,974 or 14.48% higher than the same period last year. This increase is primarily due to a rise of $535,586 in Personnel costs, of $355,365 in Professional Services, and of $138,303 in Machinery and equipment. 

Personnel costs increased by $535,586 as a result of staffing of new positions, overtime costs, and for planned growth in employees’ compensation, including economic increases, as described in the quarter results section. 

Professional Services expenses were $355,365 more than in the first six months of 2016-17, which was mostly incurred in the first quarter of the year for the cost of FCAC’s transition to Public Sector Accounting Standard and for legal expenses to complete its consultation with provincial and territorial regulators to identify best practices to protect financial consumers. The increase is also due to investments in educational tools as described in the quarterly results section.

The increase in Machinery and equipment of $138,303 is due to the Agency’s office expansion to accommodate its growing workforce, as described in the quarter results section.  

Risks and uncertainties

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.

Governance

Further to the new Policy on Internal Audit issued by the Treasury Board of Canada Secretariat on April 1, 2017, the requirements for maintaining and holding a departmental audit committee have changed. As a result, FCAC’s Audit Committee no longer meets the requirement of the new Policy.   

As FCAC is not required to maintain and hold an Audit Committee, it moved to dissolve its Audit Committee on July 19, 2017. All issues of a financial nature will now be addressed under a new Financial Management Committee in lieu.

There were no other significant changes in Operations, Personnel and Programs during the quarter ended September 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   

November 24, 2017

Statement of Authorities (Unaudited) (in dollars)

Departmental Budgetary Expenditures by Standard Object (Unaudited) (in dollars)