Treasury Board of Canada Secretariat’s Quarterly Financial Report for the Quarter Ended December 31, 2016

1.1 Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting.  The accompanying Statement of Authorities includes the Treasury Board Secretariat’s (the Secretariat’s) spending authorities granted by Parliament and those used by the department, consistent with the Main Estimates and the Supplementary Estimates (A) and (B) for the 2016-17 fiscal year.  The 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 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.

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

1.2 Raison d'être

The Secretariat is the administrative arm of the TB, a committee of ministers. The Secretariat supports TB in undertaking the following principal roles:

Spending oversight

Review spending proposals and authorities; review existing and proposed government programs for efficiency, effectiveness and relevance; provide information to Parliament and Canadians on government spending.

Regulatory oversight

Develop and oversee policies to promote good regulatory practices; review proposed regulations to ensure that they adhere to the requirements of government policy; and advance regulatory cooperation across jurisdictions.

Administrative leadership

Lead government-wide initiatives; develop policies and set the strategic direction for government administration related to service delivery and access to government information, as well as the management of assets, finances, information and technology.

Employer

Develop policies and set the strategic direction for people management in the public service; manage total compensation (including pensions and benefits) and labour relations; undertake initiatives to improve performance in support of recruitment and retention objectives.

1.3 The Secretariat's financial structure

The Secretariat manages both departmental and Treasury Board Central votes. Its departmental operating expenditures and revenues are managed under Vote 1, Program Expenditures.

The Secretariat manages seven different Central votes:

• Vote 5, Government Contingencies which serves to supplement other appropriations to provide government departments and agencies temporary advances for urgent or unforeseen departmental expenditures between Parliamentary supply periods;
• Vote 10, Government-Wide Initiatives which serves to supplement other appropriations to support the implementation of strategic management initiatives across the federal public service;
• Vote 15, Compensation Adjustments which serves to supplement other appropriations to provide funding for adjustments made to terms and conditions of service or employment of the federal public administration as a result of collective bargaining;
• Vote 20, Public Service Insurance which provides the employer’s share of group benefit plan coverage costs as part of Treasury Board’s role as the employer of the core public administration.  This includes the Public Service Health Care Plan (PSHCP), Public Service Dental Care Plan (PSDCP), Pensioners’ Dental Services Plan (PDSP), Disability Insurance, Provincial Payroll Taxes (Manitoba, Newfoundland, Ontario and Québec), Public Service Management Insurance Plan (PSMIP) and other programs;
• Vote 25, Operating Budget Carry Forward which serves to supplement other appropriations for the carry forward of unused operating funds from the previous fiscal year, up to 5% of the gross operating budget contained in an organization’s Main Estimates;
• Vote 30, Paylist Requirements which serves to supplement other appropriations to meet legal requirements for the government as employer for items such as parental benefits and severance payments; and
• Vote 33, Capital Budget Carry Forwardwhich serves to supplement other appropriations for the carry forward of unused capital funds from the previous fiscal year, up to 20% of an organization’s Capital vote.

The funding within these votes is approved by Parliament. With the exception of Vote 20, funding within Central votes is transferred from the Secretariat to individual departments and agencies, once specified criteria are met. Like any other department, the Secretariat also receives its own share of appropriations from these votes.  Any unused balance from these votes is returned to the fiscal framework at the end of the year and is reported as the Secretariat lapse.

Expenditures incurred against Statutory Authorities mainly reflect the government’s obligation to pay the employer’s share of Public Service Pension Plans, Canada/Quebec Pension Plans, Employment Insurance premiums and Public Service Death Benefits. The Secretariat recovers from other government departments and agencies their share of the employer contributions under the Public Service Superannuation Act (PSSA), and is subsequently charged by Public Services and Procurement Canada (PSPC) for actual expenditures in the same Statutory Vote. Adjustments are made at year-end to individual departments’ Statutory Votes (including that of the Secretariat) for the difference between periodic recoveries and actual expenditures.

This quarterly report will highlight the financial results of Vote 1 – Program Expenditures related to the delivery of the Secretariat’s mandate, Vote 20 – Public Service Insurance related to TB’s employer role, and Statutory Authorities related to the government’s obligation to pay the employer’s share of employee benefit plans (EBP).

Statement of voted and Statutory Authorities

Total budgetary authorities available for use increased in 2016-17 by $129.3M (4.3%) from those in 2015-16. Below are explanations for the changes in program funding that caused an increase in Vote 1 authorities of $97.3M, an increase in Vote 20 authorities of $133.6M, and a decrease in authority to make statutory payments of $101.6M.

Statement of departmental budgetary expenditures by standard object

At the end of Q3, budgetary expenditures had decreased by $101.9M (6.5%) as compared to the same period last year. The change in expenditures by standard object is summarized below:

Slow pace of implementation

Due to the number and complexity of priority initiatives, the Secretariat may not have the necessary capacity to deliver sustainable results in the expected timeframes.

To address this risk, from the outset the Secretariat adopted a results and delivery approach by articulating clear goals and performance indicators for each initiative that will be reported on a regular basis. This approach is being led by a Chief Results and Delivery Officer and supported by a small Results and Delivery Unit. In the third quarter, the Secretariat established additional monitoring mechanisms and standardized monitoring strategies in order to improve oversight. It also enhanced capacity to provide strategic policy and advice to priority areas.

Moving forward, the Secretariat will continue to implement its data strategy to better measure performance on priority initiatives and take stock of progress regularly. Efforts will be placed on better managing interdependencies and cross-cutting issues through early detection and resolution of bottlenecks.  It will also explore new ways to prioritize and to sequence priority initiatives on areas that have the greatest impact on the lives of Canadians.

Limited IT capacity

Many priority initiatives are IT dependent and there is always a risk that the current IT infrastructure and expertise may not evolve at the desired pace and subsequently not adequately support the Secretariat’s objectives.

To date, to address this risk, the Secretariat has acquired new technology, taken steps to better use the current IT infrastructure and developed the internal expertise needed to support new platforms. To ensure that highly available, secure and fully managed network and systems are in place, the Secretariat is developing disaster recovery plans for “business critical” systems. Moving forward, the Secretariat will continue to strengthen its collaboration with Shared Services Canada, and improve recruitment, training, retention and succession planning for key positions and skillsets. It will also increase IT capacity through the use of alternate sources such as subscription services, software-as-a-service and infrastructure-as-a-service.

Insufficient capacity for delivery of government-wide projects

The Secretariat is playing an increasingly prominent role in government-wide initiatives and is leading a number of initiatives such as back office transformation, open government, development of a new service strategy and revitalization of access to information.  Leading these initiatives is a challenge, particularly in an organization as large and complex as the federal government. As such there is a risk that the Secretariat may not have sufficient capacity to support government-wide projects.

In rising to this challenge, the Secretariat has so far focused on strengthening governance and on attracting, developing and retaining additional skills and talent. It has made some progress but targeted action is needed as part of an overall approach that places more emphasis on results and benefits and on phased development and implementation. Efforts now will therefore focus increasingly on course-correction and project gating, engaging with user communities, improving training strategies, and improving departmental readiness. The Secretariat will continue to support better coordination of government-wide initiatives and to strengthen the capacity for managing them.

Increasing costs of PSHCP

The cost of delivering the PSHCP is driven by many variables. As a result there could be significant shifts in spending in a given year due to: changes in plan membership; the cost of drugs and medical treatments; use of plan entitlements; and provincial tax regulations.

The Secretariat continues to closely monitor spending activity and trends in the rising cost to deliver Public Service Insurance Benefit Plans.

For the quarter ended December 31 , 2016