Quarterly Financial Report for FCAC for the quarter ended December 31, 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 December 31, 2017 totalled $5,611,083, or 88.65% of its budgeted expenses for the period, compared to 75.88% for the same period last year. The variance to budget as at December 31, 2017 of $718,347 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 December 31, 2017 of $5,611,083, were $1,716,291 or 44.06% higher than the same period last year. This increase is primarily due to increases in Personnel costs of $727,343, Information costs of $376,872, Professional services of $303,267, Travel costs of $112,288, and Machinery and Equipment of $92,592.

For the quarter ended December 31, 2017, Personnel costs increased by $727,343 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 $376,872 in Information costs related to advertising expenses incurred for the campaign “Take charge of your finances”.  The objective of the campaign is to help raise awareness of the importance of managing and reducing debt through a series of ads that focus on Home Equity Lines of Credit (HELOC) and long-term car loans. The campaign launched in November 2017 during Financial Literacy Month and will continue until the end of March 2018.

Professional services expenses increased by $303,267 due to costs related to the Organization for Economic Co-operation and Development (OECD) Youth Survey for the Program of International Student Assessment (PISA). The increase is also the result of legal costs for an additional general counsel to support the Agency.

Travel costs increased by $112,288 mainly due to travel related to the sales practices industry review and for attendance to FCAC’s Financial Literacy conference.

Increases of $92,592 in Machinery and Equipment were incurred to expand the Agency’s offices to accommodate its growing workforce, including office furnishings, computer software and equipment.

Highlights: year-to-date results

FCAC’s total expenses for the nine months ended December 31, 2017, totalled $14,700,887 or 87.00% of its budgeted expenses for the period, in line with 87.02% for the same period last year. The variance to budget of $2,196,365 as of December 31, 2017 is primarily due to a lower than expected usage of external consultants for the sales practices industry review and vacant positions.

FCAC’s total expenses for the nine months ended December 31, 2017 of $14,700,887 were $2,866,265 or 24.22% higher than the same period last year. This increase is primarily due to a rise of $1,262,929 in Personnel costs, of $658,631 in Professional Services, of $394,604 in Information costs, of $230,895 in Machinery and Equipment, and of $163,982 in Travel costs.

Personnel costs increased by $1,262,929 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 increased by $658,631 in the first nine months of 2017-18, mainly due to costs related to the OECD Youth Survey for PISA, legal expenses related to the provincial and territorial best practices report on financial consumer protection, and for investments in educational tools to enhance the experience of users.

The increase in Information costs of $394,604 is due to the advertising campaign described in the quarter results section.

The increase in Machinery and Equipment costs of $230,895 is related to the expansion of the Agency’s office to accommodate its growing workforce. The increase in Travel costs of $163,982 is due to travel related to the sales practices industry review and to the Financial Literacy conference.

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.

There were no significant changes in Operations, Personnel and Programs during the quarter ended December 31, 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

February 20, 2018

Statement of Authorities (Unaudited) (in dollars)

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