Treasury Board of Canada Secretariat's Quarterly Financial Report for the Quarter Ended June 30, 2012

We have archived this page and will not be updating it.

You can use it for research or reference.

We have archived this page and will not be updating it.

You can use it for research or reference.

Statement Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs

Table of Contents

• 1. Introduction
  • 1.1 Basis of Presentation
  • 1.2 TBS Financial Structure
• 2. Highlights of Fiscal Quarter and Fiscal Year-to-Date
  • Statement of Authorities - Vote 1, Program Expenditures
  • Statement of Authorities -Vote 20, Public Service Insurance
  • Statement of Authorities – Statutory Authorities
  • Statement of Departmental Budgetary Expenditures by Standard Object
• 3. Risks and Uncertainties
• 4. Significant Changes in Relation to Operations, Personnel and Programs
• 5. Cost Containment
• 6. Economic Action Plan 2012 (Budget 2012) Implementation
• 7. Approval by Senior Officials
• Appendix

1. Introduction

This quarterly report has been prepared by management as required by section 65.1 of the Financial Administration Act (FAA) and in the form and manner prescribed by the Treasury Board (TB). This quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates A as well as Canada’s Economic Action Plan 2012 (Budget 2012) for fiscal year 2012-13.

A summary description of the Treasury Board of Canada Secretariat (TBS) program activities can be found in Part II of the Main Estimates.

The quarterly report has not been subject to an independent audit or review.

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 TBS’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. 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 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.

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 identified as savings 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.

1.2 TBS Financial Structure

TBS manages both departmental and government-wide expenditures. Its departmental operating revenues and expenditures are managed under Vote 1, Program Expenditures.

Government-wide expenditures are managed via seven different votes:

• Vote 5, Government Contingencies which serves to supplement other appropriations to provide the Government with sufficient flexibility to meet miscellaneous, urgent or unforeseen departmental expenditures between Parliamentary supply periods;
• Vote 10, Government-Wide Initiatives which supplements other appropriations in support of the implementation of strategic management initiatives in the Public Service of Canada;
• Vote 15, Compensation Adjustments which supplements the appropriations of other government departments and agencies that may need to be partially or fully augmented as a result of adjustments made to terms and conditions of service or employment of the federal public service, including members of the Royal Canadian Mounted Police and the Canadian Forces, Governor in Council appointees and Crown corporations as defined in section 83 of the Financial Administration Act;
• Vote 20, Public Service Insurance which covers revenues and expenses related to Treasury Board’s role as the employer of the core public administration. This includes revenues and expenses for the Public Service Health Care Plan, Public Service Dental Care Plan, Disability Insurance, Provincial Payroll Taxes (Manitoba, Newfoundland, Ontario and Quebec) and other programs;
• Vote 25, Operating Budget Carry Forward which supplements other appropriations for the carry forward of unused operating funds from the previous fiscal year;
• Vote 30, Paylist Requirements which covers paylist requirements for departments and agencies related to legal requirements for the government as employer for items such as parental benefits and severance payments; and
• Vote 33, Capital Budget Carry Forward which supplements other appropriations for the carry forward of unused capital funds from the previous fiscal year. This vote was created in 2011-12.

With the exception of Vote 20, these votes are approved by Parliament for the eventual transfer of funding to other government departments once specified criteria are met. TBS does not incur any revenue or expenses related to these votes and thus they are not reflected in the Statement of Authorities or Planned Spending tables.

TBS also incurs costs under Statutory Authorities, both for departmental and government-wide payments made under legislation approved previously by Parliament, which are not part of the Annual Appropriation Bills. These expenditures mainly reflect the employer’s share of Public Service Pension Plans, the Canada/Quebec Pension Plans, Employment Insurance premiums and Public Service Death Benefits. These expenditures are also initially charged to the accounts of TBS but are eventually attributed to the statutory vote contributions to employee benefit plans of each department and agency, including TBS.

2. Highlights of Fiscal Quarter and Fiscal Year-to-Date

This section highlights the significant items that contributed to the net increase or decrease in resources available for the year and actual expenditures for the quarter ended June 30, 2012. The explanation of variances considers that changes under 5% have minimal impact on an interpretation of results.

Statement of Authorities - Vote 1, Program Expenditures

The Program Expenditure Authorities increased by $1.2 million from 2011-12 to 2012-13, or by 0.5%. Although this change is less than the standard 5% materiality threshold, it is nonetheless explained below. The change is mainly due to the net effect of the following factors:

• Increases of:
  • $9.4 million to establish and maintain a Litigation Management Unit to manage employment and labour relations litigation and to fund litigation costs in responding to challenges to federal public sector labour and employment legislation. Funding is provided via a frozen allotment and resources that are not required will be returned to the Fiscal Framework;
  • $7.8 million to modernize human resources data and systems in departments and agencies;
  • $4.6 million to implement Canada’s Cyber Security Strategy to protect federal digital infrastructure;
  • $3.3 million for the US – Canada Regulatory Cooperation Council in support of its work to eliminate unnecessary burdens on cross-border trade, reduce costs, foster cross-border investment and promote certainty for businesses and the public;
  • Other miscellaneous increases of $1.6 million;
• These increases in funding were offset by decreases of:
  • $9.9 million for the transfer of resources to Shared Services Canada (SSC);
  • $8.5 million for budget reductions relating to the 2010 TBS Strategic Review as reported in Budget 2011,
  • $2.5 million due to sun-setting of resources for the Cabinet Directive on Streamlining Regulations; and
  • the wind down of the Internal Audit Human Resources Management Framework (IAHRMF) ($3.0 million), and the Financial Interoperability and Stewardship Initiative (FISI) ($1.6 million) as part of the Economic Action Plan 2012.

The year-to-date Program Expenditures to June 30, 2012 decreased by approximately $3.9 million or 7% when compared to year-to-date at quarter end of 2011-12. This is mainly explained by the following factors:

• Decreases of:
  • $1.9 million due to the transfer of responsibilities and resources to SSC;
  • Expenditure restraint measures including:
    • $1.2 million reduction as part of the 2010 TBS Strategic Review;
    • $0.5 million reduction as a result cost cutting measures outlined in the 2008 Horizontal Review of Human Resources, and
    • A decrease in expenditures due to the wind down of IAHRMF ($0.2 million) and FISI ($0.5 million), as well as reductions in expenditures of $0.2 million in personnel and $0.8 million in expenditures for term and casual employees as part of the measures announced in Economic Action Plan 2012.
  • Other miscellaneous decreases totalling $1.0 million;
• These decreases were partially offset by a $2.4 million increase in expenditures caused by two main factors:
  • A timing difference related to the processing of recoveries for shared services provided to other government departments; and
  • An increase in expenditures for the transition of the TBS information technology services and infrastructure to a business service delivery model that enhances security and service reliability.

Graph 1 outlines the net budgetary authorities for Vote 1, Program Expenditures, which represent the resources available for use for the year (blue bar) as well as the year-to-date expenditures (red bar).

Graph 1: Comparison of Net Budgetary Authorities and Expenditures for Vote 1 as of June 30, 2011-12 and 2012-13

Table 1: Comparison of Net Budgetary Authorities and Expenditures for Vote 1 as of June 30, 2011-12 and 2012-13

Vote 1

(in millions $)	2011-2012	2012-2013
Net Budgetary Authorities	235.5	236.7
Year-to-date expenditures ending June 30	53.5	49.6

Statement of Authorities -Vote 20, Public Service Insurance

Public Service Insurance Payments include the employer share of the Public Service Health Care Plan (PSHCP), the largest such plan in Canada, as well as other benefit plans and provincial payroll taxes.

The Vote 20 authorities decreased by $175 million or 7% from 2011-12 to 2012-13 as a result of:

• The transfer of the management of pension, insurance and social security programs for Locally Engaged Staff to Department of Foreign Affairs and Trade, Department of National Defence and Canadian Tourism Commission for $71 million; and
• The cost containment measures from the successful introduction of the pay direct card for Public Service Health Care Plan offset by less revenue than expected and lower growth in plan membership which also impacts payroll taxes and some premium holidays resulting in a decrease of $104 million.

TBS Vote 20 net expenditures have decreased by $21 million, or 4%, when compared to the same period of 2011-12. The key elements are:

• A non-recurring $29.1 million expense reduction due to the transfer of the management of the pension and insurance programs related to Locally Engaged Staff (LES) to other government departments and therefore related expenses are no longer charged to Vote 20;
• A $7.2 million increase in expenditures in recorded Pensioner’s Dental Services Plan (PDSP) expenses.  Details of PDSP expenses which are recorded on a “cheques cashed” basis include:
  • A $4.2 million variance attributable to a postal strike in June 2011 as members were unable to file their claims, and cheques issued by the service provider were not delivered, therefore cheques remained un-cashed and unrecorded in the reporting quarter; and
  • The remaining $3 million is attributable to increases in claims occurrences and amounts experienced during the first two months of the quarter;
• A $0.8 million increase attributed to a series of components affected by changes in payment and accounting methodology (the Public Service Dental Care Plan, Quebec Taxes on Insurance Premiums), timing differences and accounting issues (Public Service Management Insurance Plan, Vote 20 Goods and Services, Provincial Health Plans, Revolving Funds).

Graph 2 outlines the net budgetary authorities as well as actual expenditures for Vote 20, Public Service Insurance. This represents revenues and expenses related to TB’s role as the employer of the core public administration.

Graph 2: Comparison of Net Budgetary Authorities and Expenditures for Vote 20 as of June 30, 2011-12 and 2012-13

Table 2: Comparison of Net Budgetary Authorities and Expenditures for Vote 20 as of June 30, 2011-12 and 2012-13

Vote 20

(in millions $)	2011-2012	2012-2013
Net Budgetary Authorities	2,452.2	2,277.2
Year-to-date expenditures ending June 30	520.2	499.1

Statement of Authorities – Statutory Authorities

Statutory Authorities of $30.6 million have decreased slightly from last year and reflect the TBS departmental share of pensions and related benefits. The decrease is the result of a reduction in the Salary envelope from $172.9 million in 2011-12 to $165.6 million in 2012-13 and a reduction in the EBP (employee benefit plan) rate from 18% in 2011-12 to 17.6% in 2012-13.

TBS Statutory Authorities expenditures have a large credit balance at the end of the first quarter in both fiscal years. This is due to the timing of flow-through payments to Public Works and Government Services Canada (PWGSC) primarily related to employer contributions made under the Public Service Superannuation Act (PSSA), and is not reflective of any forecasted annual decrease. TBS receives the employee contribution of the pension payments from Government departments and agencies and then transfers them to PWGSC to fund the PSSA. The net effect on the financial statements of TBS will be zero at year-end.

Graph 3 outlines the net budgetary authorities as well as net actual expenditures for TBS’ Statutory Authorities.

Graph 3: Comparison of Net Budgetary Authorities and Net Expenditures for Statutory Authorities as of June 30, 2011-12 and 2012-13

Table 3: Comparison of Net Budgetary Authorities and Net Expenditures for Statutory Authorities as of June 30, 2011-12 and 2012-13

Statutory Authorities

(in millions $)	2011-2012	2012-2013
Net Budgetary Authorities	31.9	30.6
Year-to-date expenditures - Revenues ending June 30	-218.7	-219.3

Statement of Departmental Budgetary Expenditures by Standard Object

This section elaborates on variances in expenditures for both Vote 1 and Vote 20 by standard object in order to explain changes in spending trends. The explanation of variances considers that changes under 5% or $100,000 have a minimal impact on an interpretation of the results.

Year-to-date personnel expenditures have decreased by $28.1 million resulting from a reduction of $26.5 million in Vote 20 and $1.6 million in Vote 1. The majority of the $26.5 million decrease in Vote 20 personnel expenditures is related to the transfer of the management of the pension, insurance and social security programs for Locally Engaged Staff to other government departments.

$1.6 million reductions in personnel in Vote 1 are mainly due to:

• $1.6 million increase resulting from a transition of certain internal services to a business service delivery model that enhances security and service reliability and decreases in recoveries due to the timing of processing;
• $0.8 million decrease related to the transfer to SSC;
• Restraint measures resulting in decreased spending of: $0.5 million from the 2008 Horizontal Review of Human Resources, $0.9 million from the 2010 TBS Strategic Review, as well as $0.2 million for IAHRMF and $0.8 million for term and casual employment from Economic Action Plan 2012.

Transportation and communications expenditures decreased by $0.6 million as resources were transferred to Shared Services Canada.

Professional Services increased by $1.9 million as a result of:

• $2.9 million increase due to the timing of payments of administrative fees for both Public Service Health Care and Dental Plans;
• $0.5 million decrease due to the transfer of resources to Shared Services Canada; and,
• $0.5 million decrease due to wind down Financial Interoperability and Stewardship Initiative as part of expenditures restraint measures outlined in Economic Action Plan 2012.

Repair and maintenance increased by $0.1 million as expenditures for the payment of services for security guards occurred earlier in 2012-13 than they did in 2011-12.

Machinery and equipment decreased by $0.6 million primarily due to timing differences of payments for software and maintenance renewals.

Other subsidies and payments increase of $1 million is related to the timing of quarterly payments for the Joint Learning Program.

The Directive on Internal Support Services, which came into effect on April 1, 2012, requires departments to report recoveries as revenue and rather than offsetting expenditures as was the case in prior periods. As a result of this directive, Program Expenditures and Votre Netted Revenues have both increased; however, the net effect is zero.

3. Risks and Uncertainties

TBS maintains a corporate risk profile which identifies and assesses high-level risks that could affect the achievement of the TBS objectives and priorities. Similar to most organizations, certain risks could have financial impacts, should they materialize, for example risks related to the security of data and information and to the transformation of administrative and business processes. Response strategies have been developed and measures are in place to minimize their likelihood. For example, the Secretariat is strengthening its network security and information management practices, and ensuring effective planning and priority-setting around key transformation initiatives.

TBS is addressing reduced flexibility to its operating budget as a result of the expenditure restraint measures reported in Economic Action Plan 2012 ($7.6 million in 2012-13), the 2010 Strategic Review reported in Budget 2011 ($9.7 million in 2012-13) and the cost containment measures due to the freeze on operating budgets set out in Budget 2010. TBS is managing the implementation of these measures through proportional reduced budget allocations to sectors, supported by rigorous monitoring of staffing and expenditures in line with business, financial and human resources planning.

As the PSHCP is driven by many variables, there could be significant shifts from the forecast in a given year caused by changes in: plan membership, the cost of drugs and medical treatments, use of plan entitlements and provincial tax regulations. TBS continues to closely monitor payment activity and trends.

4. Significant Changes in Relation to Operations, Personnel and Programs

This section highlights any significant changes which impact the expenditures or approved resources available for the year or have impacted actual expenditures for the quarter ended June 30, 2012.

A new directive on Internal Support Services came into effect April 1, 2012. This change applies to departments that are providing internal services to other departments on a cost-recovery basis. In the past, recoveries from other departments were used to offset expenditures. The new directive requires that recoveries made by departments be reported as Vote Netted Revenues. Following the implementation of the directive, recoveries are reported as Vote Netted Revenues resulting in an increase to both expenditures and to revenues with a net effect of zero.

5. Cost Containment

As a result of the TBS 2010 Strategic Review reported in Budget 2011, TBS found savings totalling $11.5 million, leading to the elimination of 84 positions over three years (see page 230 of Budget 2011), starting in fiscal year 2011-12. Through this review, opportunities were identified to better align activities with core roles and to achieve internal efficiencies. Strategic Communications and Ministerial Affairs have implemented the 2010 Strategic Review decision to eliminate the Regional Communications Network. 2012-13 fiscal year savings are on target and approximately 88% of the overall savings have been implemented. The remaining Strategic Review reduction initiatives are all underway.

6. Economic Action Plan 2012 (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.

TBS will achieve Budget 2012 savings of $23.6 million by fiscal year 2014-15 through efficiency measures and program reductions that align resources to its core mandate, scaling back where the need is reduced; transforming how it works internally; and by consolidating, streamlining and focusing internal business processes.

In the first year of implementation, the Secretariat reference levels will be reduced by approximately $7.6 million. Savings will increase to $15.1 million in 2013-14 and will result in ongoing savings of $23.6 million by 2014-15.

There is a variance of $4.8 million (including EBP) in the Secretariat’s authorities between fiscal year 2011-12 and 2012-13 related to two Budget 2012 initiatives. In its role as management board, TBS provides funding to support departments and agencies in meeting government-wide management priorities. When new approaches have been well entrenched, central funding can be reduced or eliminated. Specifically savings are achieved in 2012-13 by winding down the Internal Audit Human Resource Management Framework ($3.2 million including EBP) and the Financial Interoperability and Stewardship Initiative ($1.6 million).

The balance of the 2012-13 Budget 2012 savings will be reflected in subsequent quarterly financial reports.

There are no financial risks or uncertainties related to these savings.

Other measures referenced in Budget 2012 include:

• The development of an action plan by the President of the Treasury Board to address the Red Tape Reduction Commission’s Recommendations Report in the coming months, and the adoption of measures to implement the Canada-U.S. Border and Regulatory Action Plan commitments over the next two years;
• The pursuit of additional standardization and consolidation opportunities as part of the ongoing implementation of the Administrative Services Review.

No incremental funding was required for TBS to complete the above work which is well under way.

7. Approval by Senior Officials

Approved by,

Ottawa, Canada

Date:

Appendix

For the quarter ended June 30, 2012

Table 1 - Departmental budgetary expenditures by Standard Object ( unaudited)
( in dollars)

Description	Fiscal year 2011-2012			Fiscal year 2012-2013
	Planned expenditures for the year ending March 31, 2012**	Expended during the quarter ended June 30, 2011	Year to date used at quarter-end	Planned expenditures for the year ending March 31, 2013**	Expended during the quarter ended June 30, 2012	Year to date used at quarter-end
Note 1
Government-Wide Expenses included above*
1 Personnel	2,919,098,000	365,360,666	365,360,666	2,719,958,397	338,883,786	338,883,786
2 Transportation and communications	0	1,527	1,527	0	5,368	5,368
4 Professional and special services	0	2,862,534	2,862,534	0	5,790,720	5,790,720
10 Transfer payments	520,000	1,531	1,531	520,000	361	361
12 Other subsidies and payments	1,859,200	0	0	1,958,171	979,084	979,084
Total	2,921,477,200	368,226,257	368,226,257	2,722,436,568	345,659,319	345,659,319
* Government-Wide Expenses include Vote 20 and $20,000 statutory for Public Service Pension Adjustment Act ** Planned expenditures do not reflect measures announced in Budget 2012
Expenditures:
1 Personnel	3,127,652,225	417,721,468	417,721,468	2,926,587,092	389,610,864	389,610,864
2 Transportation and communications	5,876,650	1,078,009	1,078,009	5,268,865	518,011	518,011
3 Information	1,047,555	76,152	76,152	685,015	49,482	49,482
4 Professional and special services	48,346,730	8,297,355	8,297,355	53,288,209	10,181,010	10,181,010
5 Rentals	1,330,486	134,486	134,486	1,062,197	182,302	182,302
6 Repair and maintenance	1,373,078	106,278	106,278	2,098,678	209,288	209,288
7 Utilities, materials and supplies	1,948,066	154,443	154,443	1,861,985	97,285	97,285
9 Acquisition of machinery and equipment	4,764,194	891,738	891,738	5,886,633	297,263	297,263
10 Transfer payments	520,000	1,531	1,531	520,000	361	361
12 Other subsidies and payment	2,242,526	1,192,435	1,192,435	5,448,696	2,207,460	2,207,460
Total gross budgetary expenditures	3,195,101,510	429,653,895	429,653,895	3,002,707,370	403,353,326	403,353,326
Less Revenues netted against expenditures:
Vote Netted Revenues (VNR) - Centrally managed items	-469,252,000	-74,738,187	-74,738,187	-445,197,000	-73,428,572	-73,428,572
Vote Netted Revenues (VNR) - Program expenditures	-6,243,112	0	0	-13,044,094	-483,475	-483,475
Total Revenues netted against expenditures	-475,495,112	-74,738,187	-74,738,187	-458,241,094	-73,912,046	-73,912,046
Total net budgetary expenditures (Note 1)	2,719,606,398	354,915,708	354,915,708	2,544,466,276	329,441,280	329,441,280

For the quarter ended June 30, 2012

Table 2 - Statement of Authorities ( unaudited)
( in dollars)

Description	Fiscal year 2011-2012			Fiscal year 2012-2013
	Total available for use for the year ending March 31, 2012* **	Used during the quarter ended June 30, 2011	Year to date used at quarter-end	Total available for use for the year ending March 31, 2013* **	Used during the quarter ended June 30, 2012	Year to date used at quarter-end
More information is available in the attached table. * Includes only Authorities available for use and granted by Parliament at quarter-end ** Total available for use does not reflect measures announced in Budget 2012.
Vote 1 - Program Expenditures	235,502,149	53,460,777	53,460,777	236,667,672	49,570,773	49,570,773
Vote 20 - Public Service Insurance	2,452,205,200	520,189,821	520,189,821	2,277,219,568	499,135,434	499,135,434
Statutory Authorities
A111 - President of the Treasury Board - Salary and motor car allowance	77,516	16,477	16,477	77,516	19,379	19,379
A140 - Contributions to employee benefit plans	31,801,533	7,950,383	7,950,383	30,481,520	7,620,380	7,620,380
A145 - Unallocated employer contributions made under the PSSA and other retirement acts and the Employment Act (EI)	0	-226,700,391	-226,700,391	0	-226,905,120	-226,905,120
A681 - Payments under the Public Service Pension Adjustment Act	20,000	416	416	20,000	361	361
A683 - Payments for the pay equity settlement pursuant to section 30 of the Crown Liability and Proceedings Act	0	-1,775	-1,775	0	73	73
Total Statutory Authorities	31,899,049	-218,734,890	-218,734,890	30,579,036	-219,264,928	-219,264,928
Total authorities	2,719,606,398	354,915,708	354,915,708	2,544,466,276	329,441,280	329,441,280