Quarterly Financial Report – For the quarter ended June 30, 2015

 


1.0 Introduction

This Quarterly Financial Report should be read in conjunction with the 2015-16 Main Estimates. Shared Services Canada (SSC) had no items in the 2015-16 Supplementary Estimates (A) process. This 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. It has not been subject to an external audit or review.

1.1 Authority, Mandate and Programs

The Government of Canada created Shared Services Canada (SSC) in 2011 to modernize how the government manages its information technology (IT) infrastructure. SSC has brought together people, IT resources and assets to improve the efficiency, reliability and security of the government’s IT infrastructure, increase productivity across departments and agencies, and support the vision of a 21st century public service, as articulated in Blueprint 2020.

SSC reports to Parliament through the Minister of Public Works and Government Services and Minister responsible for SSC. The Department is mandated to deliver email, data centre and telecommunication services, including videoconferencing and Wi-Fi, to partner organizations. In addition, SSC provides services related to workplace technology devices (WTD), and cyber and IT security services. It also offers optional services on a cost-recovery basis to other federal organizations.

As part of its mandate, SSC is maintaining and improving IT infrastructure service delivery while renewing the government’s aging IT infrastructure. In doing so, the Department is:

  • working in partnership with key public and private sector stakeholders;
  • adopting enterprise wide approaches for managing IT infrastructure services; and
  • implementing efficient and effective business management processes in support of its mandate.

The main legislative authorities for the Department may be found in the Shared Services Canada Act

In 2014–15, revisions were made to SSC’s 2015–16 Program Alignment Architecture (PAA) and Performance Measurement Framework (PMF). SSC’s PAA, as approved by the Treasury Board of Canada, supports the achievement of the following strategic outcome: Modern, reliable, secure and cost-effective IT infrastructure services to support government priorities and program delivery. In addition to supporting the achievement of SSC’s commitments to Parliament and Canadians, the 2015–16 PAA is an evergreen document that will evolve as the Department’s programs mature.

As part of SSC’s participation in the 2016–17 Management, Resources and Results Structure (MRRS) amendment cycle and in preparation for its 2016–17 performance reporting obligations, the Department is currently reviewing the structure and descriptions of programs, in addition to the collection, management, and reporting of departmental financial and non-financial information on program performance.

Further details on SSC’s authority, mandate, responsibilities and programs may be found in the 2015–16 Main Estimates and 2015–16 Report on Plans and Priorities.

1.2 Basis of Presentation

This quarterly financial report has been prepared by management using an expenditure basis of accounting (modified cash accounting). The accompanying Statement of Authorities presents the Department's spending authorities granted by Parliament and those used by the Department consistent with the 2015–16 Main Estimates.

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.

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.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements, which are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

1.3 Shared Services Canada Financial Structure

SSC has a financial structure composed mainly of voted budgetary authorities that include Vote 1 - Operating Expenditures, Vote Netted Revenues and Vote 5 - Capital Expenditures, while the statutory authorities comprise the contributions to employee benefit plans (EBP).

At the end of the first quarter of 2015–16, 92% 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. The remaining 8% is devoted to Internal Services which support IT infrastructure services.

Total Vote Netted Revenue authority for 2015–16 is $411.1 million, which consists of respendable revenue for IT infrastructure services provided by SSC to partner organizations and other Government of Canada departments and agencies on a cost-recovery basis.

2.0 Highlights of Fiscal Quarter and Fiscal Year-to-Date Results

The numbers presented in the report are in accordance with the Government-Wide Chart of Accounts for Canada for 2015–16 and Treasury Board Accounting Standard (TBAS) 1.3.

The following graph provides a comparison of the net budgetary authorities available for spending, and year-to-date expenditures, for the quarters ended June 30, 2015 and June 30, 2014, for the Department’s combined Vote 1 - Operating Expenditures, Vote 5 - Capital Expenditures and Statutory Authorities.

Text version of graph

The graph shows total net budgetary authorities available for spending of $1,462.4 million as of June 30, 2015 and $1,490.9 million as of June 30, 2014. It also shows year-to-date expenditures totalling $324.7 million as of June 30, 2015 compared to $394.7 million as of June 30, 2014.

Spending Trend for Program Expenditures

2.1 Significant Changes to Authorities

For the period ended June 30, 2015, the authorities provided to the Department include only the Main Estimates. They also incorporate the savings measures identified in Budget 2014. Authorities available for spending in 2015–16 were $1,462.4 million at the end of the first quarter as compared with $1,490.9 million at the end of the first quarter of 2014–15, representing a decrease of $28.5 million, or 1.9%. This net decrease is a combination of a decrease of $9.5 million in Vote 1 - Operating Expenditures, a decrease of $12.7 million in Vote 5 - Capital Expenditures, a decrease in Budgetary Statutory Authorities of $8.9 million and a decrease of $2.6 million in Vote Netted Revenues which increased the total net authorities available.

Comparison of Net Budgetary Authorities for the Quarters Ended June 30, 2015 and June 30, 2014

 Net Authorities Available ($ millions)  2015–16 2014–15 Variance
Vote 1 - Operating Expenditures 1,580.3 1,589.8 (9.5)
Vote 5 - Capital Expenditures 203.9 216.6 (12.7)
Vote Netted Revenues (411.1) (413.7) 2.6
Statutory (EBP) 89.3 98.2 (8.9)
Total Net Authorities 1,462.4 1,490.9 (28.5)

Vote 1 - Operating Expenditures (includes Vote Netted Revenues)

The Department’s Vote 1 decreased by $9.5 million, compared to the first quarter of 2014–15, mainly due to:

  • A decrease of $55.6 million mostly attributed to the savings measures of $49.9 million related to the Email Transformation Initiative and to various other reductions in authorities totalizing $5.7 million such as the Northwest Territories Agreement and late fees and interest charges;

  • A net increase of $41.2 million in transfers received from partner organizations to adjust amounts as a result of the creation of SSC;

  • A net increase of $6.7 million related to funding for various projects such as 2016 Census of Population Program, Data Centre Closure, Mercury Global and the Supercomputer project;

  • A net decrease of $2.6 million in Vote Netted Revenues based on the 2015–16 revenue forecast; and

  • An increase of $0.8 million related to funds received from Treasury Board Central Votes for collective agreements.

Vote 5 - Capital Expenditures

The Department’s Vote 5 decreased by $12.7 million, compared to the first quarter of 2014–15, mainly due to:

  • Time-limited projects that do not have ongoing funding or that have variations in their funding profile such as Pay Modernization, Treasury Board Secretariat Workspace Renewal and Carling Campus.

Budgetary Statutory Authorities

The decrease of $8.9 million in 2015–16 is related to contributions to the Employee Benefit Plans (EBP) associated with the change in the Department’s budgetary requirements for the salary portion of the Vote Netted Revenue authority.

2.2 Explanations of Significant Variances from Previous Year Expenditures

Compared to the previous year, the total year-to-date expenditures, for the period ended June 30, 2015, have decreased by $70.0 million, from $394.7 million to $324.7 million as per the table below. This represents a decrease of 17.7% against expenditures recorded for the same period in 2014–15.

Comparison of Year-to-Date Expenditures for the Quarters Ended June 30, 2015 and June 30, 2014

 Net Year-to-Date Expenditures ($ millions)   2015–16   2014–15   Variance 
Vote 1 - Operating Expenditures 312.7 347.3 (34.6)
Vote 5 - Capital Expenditures 10.2 11.4 (1.2)
Vote Netted Revenues (16.0) 15.8 (31.8)
Statutory (EBP) 17.8 20.2 (2.4)
Total Net Year-to-Date Expenditures 324.7 394.7 (70.0)

Vote 1 - Decrease of $34.6 million

The net decrease in operating expenditures, compared to the first quarter of 2014–15, is mainly attributed to:

  • Transportation and telecommunications expenditures decreased by $18.1 million. This decrease is mainly due to timing differences between fiscal years in processing payments related to different contracts;

  • Other subsidies and payments expenditures decreased by $17.1 million. This decrease is mainly explained by the implementation of the salary payments in arrears in 2014–15 which generated a one-time transition payment in 2014–15 for all employees paid on a bi-weekly basis;

  • Professional and special services expenditures decreased by $13.9 million. The decrease is mostly due to timing differences between fiscal years in processing payments related to different contracts. It is also due to the completion of certain IT services contracts in 2014–15; and

  • Rentals and acquisitions of machinery and equipment increased by $20.8 million. This increase is partly attributable to a new contract for the consolidation of previous contracts related to the mainframe hardware, software maintenance and support services as well as to timing differences between fiscal years in processing payments related to different contracts.

Vote Netted Revenue - Variance of $31.8 million

  • The collected Vote Netted Revenues have increased by $31.8 million, compared to the first quarter of 2014–15. The revenues reported for the first quarter of 2014–15 were lower due to delays in billing for services provided by SSC to other departments as a result of changes in the 2014–15 Chart of Accounts which impacted the billing system. Also, an amount of $16.6 million in revenue from 2013–14 was disputed by a department and was reversed during the first quarter of 2014–15.

3.0 Risks and Uncertainty

As SSC moves forward with the operationalization of its transformation agenda, the management of internal and external risks continues to be vital in supporting strategic and business planning, as well as the successful delivery of SSC services to partner organizations.

SSC's risk management process is a structured methodology for managing risks across the strategic, operational, and project levels of the Department. One of the key components of the management rigour is the development and application of industry proven project management methodologies, processes and tools to deliver the partner and transformation projects that are at the core of SSC’s mandate. In 2013–14, SSC attained a Government of Canada Organizational Project Management Capacity Assessment (OPMCA) Class 3. SSC intends to maintain this level through sound project management discipline and practices.

Financial management, as it relates to the achievement of SSC’s self-funding requirement, is one of five key organizational risks identified in the 2015–16 Report on Plans and Priorities. With the active engagement of senior management in risk identification, assessment, monitoring and reporting functions, targeted mitigation strategies are being implemented across the Department to ensure effective financial processes, controls and accountabilities are in place.

Additional risks, risk drivers and response strategies that may impact the Department’s Investment Plan will be reflected in the 2016–17 Report on Plans and Priorities.

4.0 Significant Changes in Relation to Operations, Personnel and Programs

On January 19, 2015, SSC announced changes to its organizational structure. The new operational model took effect on April 1, 2015.

On June 26, 2015, the Prime Minister announced the appointment of Ron Parker as President of SSC, effective July 6, 2015.

 

 

 

Approval by Senior Officials

Approved by:

 

Original signed by
 

Ron Parker, President

Ottawa, Ontario
August 27, 2015

 

 

Original signed by Camille Therriault-Power for
 

Elizabeth Tromp, Acting Senior Assistant Deputy Minister and Chief Financial Officer


5.0 Statement of Authorities (unaudited)

Fiscal year 2015–16
(in thousands of dollars)

  Total available for use
for the year
ending
March 31, 2016 n1*
Used during the
quarter ended
June 30, 2015
Year-to-date
used at
quarter-end
Vote 1 - Operating expenditures
Gross Operating expenditures 1,580,259 312,680 312,680
Vote Netted Revenues (411,075) (15,968) (15,968)
Net Operating expenditures 1,169,184 296,712 296,712
Vote 5 - Capital expenditures 203,868 10,194 10,194
(S) Contributions to employee benefit plans 89,324 17,748 17,748
Total Budgetary authorities 1,462,376 324,654 324,654

Fiscal year 2014–15
(in thousands of dollars)

  Total available for use
for the year ending
March 31, 2015 n1*
Used during the
quarter ended
June 30, 2014
Year-to-date
used at
quarter-end
Vote 1 - Operating expenditures
Gross Operating expenditures 1,589,830 347,348 347,348
Vote Netted Revenues (413,731) 15,803 15,803
Net Operating expenditures 1,176,099 363,151 363,151
Vote 5 - Capital expenditures 216,593 11,382 11,382
(S) Contributions to employee benefit plans 98,211 20,158 20,158
Total Budgetary authorities 1,490,903 394,691 394,691

*Includes authorities available for use and granted by Parliament at quarter-end.

6.0 Departmental Budgetary Expenditures by Standard Object (unaudited)

Fiscal year 2015–16
(in thousands of dollars)

  Planned expenditures
for the year ending
March 31, 2016 n11*
Expended during the
quarter ended
June 30, 2015
Year-to-date
used at
quarter-end
Expenditures:
Personnel (includes EBP) 603,554 134,803 134,803
Transportation and telecommunications 479,153 38,727 38,727
Information 1,321 67 67
Professional and special services 190,036 13,303 13,303
Rentals 217,727 110,322 110,322
Repair and maintenance 80,236 9,030 9,030
Utilities, materials and supplies 7,784 396 396
Acquisition of land, buildings and works
Acquisition of machinery and equipment 290,939 32,925 32,925
Transfer payments
Public debt charges
Other subsidies and payments 2,701 1,049 1,049
Total gross budgetary expenditures 1,873,451 340,622 340,622
Less Revenues netted against expenditures:
Vote Netted Revenues 411,075 15,968 15,968
Total Revenues netted against expenditures 411,075 15,968 15,968
Total net budgetary expenditures 1,462,376 324,654 324,654

Fiscal year 2014–15
(in thousands of dollars)

  Planned expenditures
for the year ending
March 31, 2015n11*
Expended during the
quarter ended
June 30, 2014
Year-to-date
used at
quarter-end
Expenditures:
Personnel (includes EBP) 586,889 139,966 139,966
Transportation and telecommunications 488,340 56,310 56,310
Information 1,699 43 43
Professional and special services 195,600 26,370 26,370
Rentals 261,849 26,334 26,334
Repair and maintenance 73,853 12,378 12,378
Utilities, materials and supplies 12,016 764 764
Acquisition of land, buildings and works
Acquisition of machinery and equipment 277,428 98,657 98,657
Transfer payments
Public debt charges
Other subsidies and payments 6,960 18,066 18,066
Total gross budgetary expenditures 1,904,634 378,888 378,888
Less Revenues netted against expenditures:
Vote Netted Revenues 413,731 (15,803) (15,803)
Total Revenues netted against expenditures 413,731 (15,803) (15,803)
Total net budgetary expenditures 1,490,903 394,691 394,691

*Includes authorities available for use and granted by Parliament at quarter-end.

7.0 Glossary

La gestion financière constitue une discipline importante à SPC, puisqu’elle influence toutes les activités au sein de l’organisation. La fonction de planification est une dimension intrinsèque de la gestion financière et le fondement pour appuyer des données financières exactes, et fournir des conseils financiers sains et solides pour soutenir les principales décisions financières au sein de SPC. Cette nouvelle stratégie financière mise en œuvre par SPC comporte une stratégie, claire et transparente, d’établissement des prix et des coûts, tient compte de la demande de services actuelle et nouvelle et expose le programme officiel de remplacement des immobilisations pour résoudre la question du matériel de TI ministériel qui arrive en fin de vie et va être mis hors service. Ce plan définira également une approche claire de la mesure du progrès réalisé et des avantages obtenus, avec présentation de rapports à ses clients gouvernementaux, aux parlementaires et aux Canadiens dans leur ensemble. Ce plan répondra directement aux pressions financières que subit SPC depuis un moment, tout en garantissant la pérennité des activités et en renforçant la responsabilisation des clients quant à la gestion de leurs demandes.

  • Cadre de gestion des coûts d’entreprise
  • Stratégie d’établissement des prix
  • Mécanismes de financement évolutifs
  • Appropriations / Authorities
    • Expenditure authorities are approvals from Parliament for individual government organizations to spend up to specific amounts. Expenditure authority is provided in two ways: annual appropriation acts that specify the amounts and broad purposes for which funds can be spent; and other specific statutes that authorize payments and set out the amounts and time periods for those payments. The amounts approved in appropriation acts are referred to as voted amounts, and the expenditure authorities provided through other statutes are called statutory authorities.

      • Vote 1 - Operating Expenditures
        A vote that covers most day-to-day expenses, such as salaries, utilities and minor capital expenditures.

      • Vote 5 - Capital Expenditures
        Capital expenditures are those made for the acquisition or development of items that are classified as tangible capital assets as defined by Government accounting policies. This vote is generally used for capital expenditures that exceed $10,000.

    • Capital Budget Carry Forward
      • Treasury Board centrally managed vote that permits departments to bring forward eligible lapsing funds from one fiscal year to the next in an amount up to twenty percent of their year-end allotments in the Capital Expenditures Vote as reflected in Public Accounts.

    • Cash method of accounting
      • The cash method recognizes revenues when they are received and expenses when they are paid for.

    • Collective agreement
      • Collective agreement means an agreement in writing entered into under the Public Service Staff Relations Act between the employer and a bargaining agent and containing provisions covering terms and conditions of employment and related matters.

    • Employee Benefit Plan (EBP)
      • A statutory item that includes employer contributions for the Public Service Superannuation Plan, the Canada and the Quebec Pension Plans, Death Benefits, and the Employment Insurance accounts. Expressed as a percentage of salary, the EBP rate is changed every year as directed by the Treasury Board Secretariat.

    • Expenditure basis (modified cash accounting)
      • An accounting method that combines elements of the two major accounting methods, the cash method and the accrual method. The modified cash accounting method recognizes revenues when cash is received and expenses when liabilities are incurred or cash is paid out.

    • Frozen allotments
      • Frozen allotments are used to prohibit the spending of funds previously appropriated by Parliament. There are two types of frozen allotments:
        • Permanent: where the Treasury Board has directed that funds lapse at the end of the fiscal year; and
        • Temporary: where an appropriation is frozen until such time as conditions have been met.

    • Full accrual method of accounting
      • An accounting method that measures the performance and position of an organization by recognizing economic events regardless of when cash transactions occur. Therefore, the full accrual method of accounting recognizes revenues when they are earned (for example, when the terms of a contract are fulfilled) and expenses when they are incurred.

    • Government-wide Chart of Accounts
      • The Government-wide Chart of Accounts (COA) provides the framework for identifying, collecting and reporting financial transactions to satisfy the government’s corporate information requirements. The COA contains accounts and codes for all the fields that comprise the government-wide coding block.

    • Main Estimates
      • Each year, the government prepares estimates in support of its request to Parliament for authority to spend public funds. This request is formalized through the introduction of appropriation bills in Parliament. In support of the Appropriation Act, the Main Estimates identify the spending authorities (Votes) and amounts to be included in subsequent appropriation bills. Parliament is asked to approve these Votes to enable the government to proceed with its spending plans.

    • Management, Resources and Results Structures (MRRS)
      • A common approach and structure to the collection, management and reporting of financial and non-financial performance information.

      • An MRRS provides detailed information on all departmental programs (e.g. program costs, program expected results and their associated targets, how they align to the government’s priorities and intended outcomes, etc.) and establishes the same structure for both internal decision making and external accountability.

    • Operating Budget Carry Forward
      • Treasury Board centrally managed vote that permits departments to bring forward eligible lapsing funds from one fiscal year to the next in an amount up to five percent of their Main Estimates gross Operating Budget allotment.

    • Payment in arrears
      • The adoption of the payment in arrears means that employees are paid on Wednesday for the ten days worked (from a Thursday to a Wednesday) that concluded two weeks prior to the pay day.

    • Performance Measurement Framework (PMF)
      • A requirement of the Policy on Management, Resources and Results Structure, a PMF sets out an objective basis for collecting information related to a department’s programs. A PMF includes the department’s strategic outcomes, expected results of programs, performance indicators and associated targets, data sources and data collection frequency and actual data collected for each indicator.

    • Program Alignment Architecture (PAA)
      • A structured inventory of a department’s programs, where programs are arranged in a hierarchical manner to depict the logical relationship between each program and the strategic outcomes to which they contribute.

    • Reports on Plans and Priorities (RPP)
      • Reports on Plans and Priorities are expenditure plans for each department and agency (excluding Crown corporations). They describe departmental priorities, expected results and associated resource requirements covering a three-year period, beginning with the year indicated in the title of the report.

    • Standard objects
      • A system in accounting that classifies and summarizes the expenditures by categories, such as type of goods or services acquired, for monitoring and reporting.

    • Strategic Outcome
      • A long-term and enduring benefit to Canadians that is linked to the department's mandate, vision, and core functions.

    • Sunsetting
      • Refers to a time-limited program or initiative that does not have on-going funding or policy authority.

    • Supplementary Estimates
      • The President of the Treasury Board tables three Supplementary Estimates usually in late spring, late fall and early spring to obtain the authority of Parliament to adjust the government's expenditure plan set out in the estimates for that fiscal year. Supplementary Estimates serve two purposes. First, they seek authority for revised spending levels that Parliament will be asked to approve in an Appropriation Act. Second, they provide Parliament with information on changes in the estimated expenditures to be made under the authority of statutes previously passed by Parliament. Each Supplementary Estimates document is identified alphabetically (A, B and C).

    • Vote Netted Revenues Authority
      • The authority by which Shared Services Canada has permission to collect and spend revenue earned and collected from the provision of IT services within the government.


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