Quarterly Financial Report – For the quarter ended June 30, 2012

Table of contents

Introduction
Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results
- Significant Changes to Authorities
Risks and Uncertainty
Significant changes in relation to Operations, Personnel and Programs
Budget 2012 Implementation
Statement of Authorities (unaudited)
Departmental Budgetary Expenditures by Standard Object (unaudited)

Introduction

This Quarterly Financial 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 Accounting Standard 1.3. This Quarterly Financial Report should be read in conjunction with the Main Estimates and Supplementary Estimates (A) of 2012-13, as well as Canada’s Economic Action Plan 2012 (Budget 2012). This Quarterly Financial Report has not been subject to an external audit or review.

Authority, Mandate and Programs

Shared Services Canada (SSC) is a federal department created on August 4, 2011, to fundamentally transform how the Government of Canada manages its information technology (IT) infrastructure. SSC reports to Parliament through the Minister of Public Works and Government Services and will deliver email, data centre and network services to its 43 partner organizations in a consolidated and standardized manner to support the delivery of Government of Canada programs and services. SSC may also provide these services to other federal government organizations and with the approval of the Governor in Council, to provincial and non-governmental organizations.

The Shared Services Canada Act received Royal Assent on June 29, 2012. This legislation establishes SSC as a department. With its passage, the Government of Canada is re-affirming its commitment to our mandate, which is to streamline, consolidate and standardize information technology (IT) infrastructure services in order to reduce costs and improve email, data centre and networks across government. With a whole-of-government approach to IT, SSC will create economies of scale to deliver more efficient, reliable and secure IT infrastructure services to Government of Canada departments.

SSC's Program Alignment Architecture (PAA), as approved by the Treasury Board of Canada, supports the achievement of the following strategic outcome: Mandated services are delivered in a consolidated and standardized manner to support the delivery of Government of Canada programs and services for Canadians.

The current PAA is an interim structure that will be reviewed and refined in future fiscal years. Further information on the mandate, roles, responsibilities and programs of SSC can be found in the 2012-13 Main Estimates and Report on Plans and Priorities.

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 and Supplementary Estimates (A) for the 2012-13 fiscal year.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

The authority of Parliament is required before monies can be spent by the Government. Approvals are given in the form of annual limits provided through Appropriation Acts or through legislation in the form of statutory spending authority for specific purposes.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements as presented through the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis, as do the expenditures presented in this report.

Shared Services Canada Financial Structure

SSC has a financial structure composed mainly of voted budgetary authorities that include Vote 20 - Operating Expenditures, Vote 25 – Capital and a Vote Netted Revenue authority, while the statutory authorities comprise the Contributions to employee benefit plans.

Over 88 percent of the Department's budget is devoted to support its IT consolidation and standardization goals while ensuring that current and future IT infrastructure services offered to the Government of Canada are maintained in an environment of operational excellence.

Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results

The numbers presented in the report are in accordance with the Government-Wide Chart of Accounts for Canada for 2012-13 and the Treasury Board Accounting Standard (TBAS) 1.3. SSC is a new department and received its first financial authorities on April 1, 2012. Its financial processes will be refined as the fiscal year progresses.

Significant Changes to Authorities

Please note that for the period ending June 30, 2012, the authorities provided to the Department include the Main Estimates and Supplementary Estimates (A). The attached Statement of Authorities reflects $1.5 billion in SSC's total authorities at June 30, 2012 and do not incorporate the impact of the Budget 2012 approved saving measures.

The authorities available for use are a combination of Vote 20 - Operating Expenditures ($1,326.8 M), Vote 25 – Capital ($78.2 M), as well as Budgetary Statutory Authorities ($101.5 M).

Vote 20 - Operating Expenditures

The Department’s Vote 20 authorities are comprised of $1,673.3 M in operating authorities reduced by $368.2 M of revenues credited to the vote in the Main Estimates along with an additional $21.7 M authorized in the Supplementary Estimates A giving a total authority of $1,326.8 M.

Vote 25 – Capital

The Department’s Vote 25 authorities are comprised of $67.5 M authorized in the 2012-13 Main Estimates along with an additional $10.7 M authorized in the Supplementary Estimates A giving a total authority of $78.2 M.

Budgetary Statutory Authorities

The Department’s Budgetary Statutory Authorities are comprised of $101.5 M of contributions to employee benefit plans as identified on the 2012-13 Main Estimates.

Risks and Uncertainty

SSC is putting in place rigorous management processes that will help to mitigate risks with its infrastructure consolidation and renewal initiatives and which will provide the ability to adjust quickly. Through its ongoing, proactive engagement with partners and stakeholders, SSC will appropriately size, structure and judiciously manage its transformation initiatives. SSC will closely monitor all projects with a focus on management excellence and will proactively manage all risks.

Given that SSC is in its first year of operation, and is still completing its business intake process, there are some risks associated with the migration and capture of information in relation to contracts, projects, liabilities, assets and inventory. Dedicated efforts are being invested to support the gathering of this information from partnering departments and agencies.

As with any government transformational initiative, SSC is engaging extensively with partner departments to mitigate risk of transforming the IT infrastructure. These transformation initiatives will drive significant change across existing operations both from a process and technology perspective. SSC has embedded disciplined change and process management throughout its initiatives, with proven principles and leading project management disciplines to sustain engagement of numerous partners, both departments and industry, and design services that will integrate with existing departmental systems. Transformation also requires timely procurement in order to permit the delivery of forecasted savings.

Further assessment of key risks, their likelihood and the impact on the organization will be developed within a Corporate Risk Profile under an Integrated Risk Management Framework that has been identified as a priority during the first year of operation.

Significant changes in relation to Operations, Personnel and Programs

As this is the first year of operation of SSC, there are no changes to report in relation to Operation, Personnel and Programs. SSC has established its organizational and governance structure to support the delivery of its mandate.

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

Like other departments and agencies, Shared Services Canada (SSC) has an important part to play in supporting the Government in its efforts to return to a balanced budget. SSC was created to find efficiencies and deliver ‘value for money’ through its operate and transform mandate. In particular, by taking an enterprise approach, we will move the Government of Canada to a single e-mail system, we will reduce the number of data centres that we use from over 300 to fewer than 20, and we will build an integrated and efficient telecommunications network to support the delivery of programs and services to Canadians. The end result will be a modern, reliable and secure IT platform for the Government of Canada, at a lower cost.

As set out in Economic Action Plan 2012, SSC’s contribution to the Government’s deficit reduction efforts will amount to $74.7 million in 2012-13, $104.5 million in 2013-14 and $150 million on an ongoing basis beginning in 2014-15. In the short-term, we will capitalize on the savings that are achievable through increased efficiency, better pricing, and reductions in duplication that become possible when you consolidate operations across 43 partner organizations. Specific initiatives that we will undertake to achieve our budget commitments are, first and foremost, our major consolidation initiatives.

SSC’s immediate contribution to reduce the deficit takes place within the context of a longer term transformation agenda and will be guided through three key priorities: to maintain operational stability across our 43 partner departments; to generate savings that can be used to contribute to the Government’s deficit reduction efforts and to fund our investments; and to plan, design and build a new IT infrastructure platform over an eight year period. Given the importance of IT infrastructure to the Government and its operations, SSC will move forward in a gradual and prudent way.

Approval by Senior Officials:

___________________________________________
Liseanne Forand, President
Ottawa, Ontario
Date:

___________________________________________
Gina Rallis, Senior Assistant Deputy Minister and Chief Financial Officer
Ottawa, Ontario
Date:

6.0 Statement of Authorities (unaudited)

Fiscal year 2012-2013
(displayed in thousands of dollars)
	Total available for use for the year ending March 31, 2013^{Footnote 1} ^{Footnote 2}	Used during the quarter ended June 30, 2012	Year to date used at quarter-end
Vote 20 Gross Operating expenditures	1,694,998	142,509	142,509
Vote-Netted Revenues	(368,200)	N/A	N/A
Net Operating Expenditures	1,326,798	142,509	142,509
Vote 25 – Capital expenditures	78,204	342	342
Budgetary statutory authorities	101,502	25,380	25,380
Total Budgetary authorities	1,506,522	168,231	168,231

Note: Totals may not add and may not agree with details provided elsewhere due to rounding.

Note: SSC is a new Department and received its first financial authorities on April 1, 2012. The Department is still working through transitional issues with its 43 partner departments, including the standardization of financial processes and the transfer of salary expenditures. Adjustments will be made throughout this fiscal year as these issues are resolved.

Departmental Budgetary Expenditures by Standard Object (unaudited)

Fiscal year 2012-2013
(displayed in thousands of dollars)
	Planned expenditures for the year ending March 31, 2013^{Footnote 3}	Expended during the quarter ended June 30, 2012	Year to date used at quarter-end
Expenditures: Personnel	682,214	101,748	101,748
Transportation and communications	498,066	17,924	17,924
Information	465	10	10
Professional and special services	483,284	16,062	16,062
Rentals	28,994	24,267	24,267
Repair and maintenance	104,414	4,042	4,042
Utilities, materials and supplies	3,417	2	2
Acquisition of land, buildings and works	N/A	N/A	N/A
Acquisiton of machinery and equipment	66,535	3,836	3,836
Transfer payments	N/A	N/A	N/A
Public debt charges	N/A	N/A	N/A
Other subsidies and payments	7,333	340	340
Total gross budgetary expenditures	1,874,722	168,231	168,231
Less Revenues netted against expenditures: Vote-Netted Revenues	368,200	N/A	N/A
Total Revenues netted against expenditures	368,200	N/A	N/A
Total net budgetary expenditures	1,506,522	168,231	168,231