Reporting Requirements for 2014-15 Departmental and Agency Quarterly Financial Reports

Date:

Message from: Michel Vaillant, A/Executive Director, Government Accounting Policy & Reporting, and Sally Thornton, Deputy Assistant Secretary, Expenditure Management Sector

To: Chief Financial Officers

Copy to: Deputy Chief Financial Officers

This communication is to advise departments and agencies of the reporting requirements for departmental and agency quarterly financial reports for fiscal year 2014-15. It includes additional guidance and information as follows:

Also, please note the new requirement to provide financial information by program to Expenditure Management Sector (EMS) for the second and third quarter of fiscal year 2014-15. This financial information will not be made public by EMS nor should be included in the 2014-15 quarterly financial reports.

Reporting Requirements for 2014-15 Quarterly Financial Reports

Budget 2012

As in the prior two fiscal years, departments and agencies should continue to include a separate section called Budget 2012 Implementation in their 2014-15 quarterly financial reports that addresses the expected impact of initiatives and savings measures announced in Canada’s Economic Action Plan 2012. This section will continue to include a description of the new or renewed initiatives and savings measures that will have a significant influence on departmental authorities and expenditures in 2014-15. In preparing this description, departments and agencies should maximize the use of internal and external communications products approved for Budget 2012. In addition, the Budget 2012 Implementation section of the quarterly financial reports should be reviewed according to departmental communications and protocols for public release.

As Budget 2012 initiatives and savings measures are being implemented, departments and agencies should highlight any significant variances in expenditures. Information should also be provided regarding the expected impact of these initiatives and saving measures on the departmental financial plan for the reporting period and the remainder of the year.

The effect of initiatives and savings measures from the other previous budgets and Budget 2014 should be reflected in the appropriate section of the quarterly financial reports (i.e. Highlights of Fiscal Quarter and Fiscal Year-to-Date Results, Risks and Uncertainties and Significant Changes in Relation to Operations, Personnel and Programs).

Materiality should be considered in determining the level of detail provided in all of these sections.

The quarterly financial report package attached as Appendix A provides additional guidance as well as an illustrative example of reporting on the implementation of Budget 2012. This example does not consider all unique circumstances and particularities. Departments and agencies should follow existing communications protocols and use approved internal and external materials as well as professional judgement in preparing their financial reports.

Please note that the additional text proposed in prior years in the Introduction and Basis of Presentation sections explaining that the measures announced in Budget 2012 were not reflected in the 2012-13 Main Estimates is no longer required.

Guidance for correcting quarterly financial reports and types of misstatements

After a report is made public by departments and agencies on departmental web sites, parliamentarians and the public can immediately access the report. Thereafter, if a misstatement or omission is found in the financial tables, narrative sections or presentation of the report, an erratum section should be added by the department or agency to inform the readers of the correction after the publication of the report. Appendix B provides guidance for correcting quarterly financial reports. It also provides the types of frequently misstatements found last year in the financial tables and reiterates the basic processes to mitigate the risk of having these types of misstatements or anomalies.

Departments and Agencies hyperlink to quarterly financial reports

Departments and agencies are reminded that the hyperlink of the quarterly financial reports on their departmental website are maintained on the Information for Parliamentarians section on TBS website home page and should be current at all times. Departments and agencies should ensure every effort is made to preserve the hyperlink to their quarterly financial reports and should inform the Office of the Comptroller General of any changes to the quarterly financial reports through the Quarterly Financial Reporting e-mail box.

New requirements to provide financial information by program

The government is looking at options for providing more information to parliamentarians at the program level for authorities granted by Parliament. The options currently considered will call for more insight into programs in Estimates and other documents. Quarterly financial reports are a natural candidate for providing this same information for in-year authorities and spending.

Given the results of the interim review of Treasury Board Accounting Standard (TBAS) 1.3, the proposed requirement to provide financial information by program in the quarterly financial reports will be included to ensure a consistent government direction. In addition, once TBAS 1.3 is approved and effective, the inclusion of this information in the TBS InfoBase will provide a whole-of-government picture of in-year spending by program for Parliamentarians and the public.

As a temporary measure, until TBAS 1.3 is revised, departments and agencies are asked to provide financial information by program using the template in Appendix C for the second and third quarter of fiscal year 2014-15. Completed Appendix C should be returned to Expenditures e-mail box 60 days after the end of the reporting periods. This information will form the basis for the comparative financial information for the 2015-16 quarterly financial reports and it will not be made public until TBAS 1.3 is approved and effective and the respective quarterly financial report is published. To support departments and agencies with this new requirement, please refer to Appendix C for guidance.

If you have any questions on the quarterly financial reports and Appendix A, B and C please do not hesitate to contact either Andrée Pelchat by e-mail or at 613-957-9853, or Anik Chantigny by e-mail or at 613-952-0896.

If you have any questions on this new requirement and Appendix C, please do not hesitate to contact either Derek Armstrong by e-mail or at 613-957-8290, or Mike Muirhead by e-mail or at 613-952-3059.

Michel Vaillant
A/Executive Director, Government Accounting Policy & Reporting | Directeur exécutif par intérim, Comptabilité gouvernementale, Politique & Rapport
Financial Management Sector | Secteur de la gestion financière
Office of the Comptroller General | Bureau du contrôleur général
Treasury Board of Canada Secretariat | Secrétariat du Conseil du Trésor du Canada
Ottawa, Canada K1A 0R5
Michel.Vaillant@tbs-sct.gc.ca

Sally Thornton
Deputy Assistant Secretary, Expenditure Management | Sécretaire adjoint délégué, gestion des dépenses
EMS - Assistant Secretary's Office | SGD - Bureau du secrétaire adjoint principal
Expenditure Management Sector | Secteur de la gestion des dépenses
Treasury Board of Canada Secretariat | Secrétariat du Conseil du Trésor du Canada
Ottawa, Canada K1A 0R5
Sally.Thornton@tbs-sct.gc.ca

Appendix A - Additional Guidance for disclosure of the section Budget 2012 Implementation

Highlights of fiscal quarter and fiscal year to date (YTD) results

Any significant variance in authorities available for use or expenditures due to the implementation of incremental and savings measures announced in Budget 2012 should be identified and explained in the Budget 2012 Implementation section, whereas any significant variance in authorities available for use or expenditures due to the implementation of measures announced in other previous budgets or in Budget 2014 should be identified and explained in this section.

Risks and Uncertainties

Any financial risks or uncertainties resulting from the implementation of Budget 2012 measures should be discussed in the Budget 2012 Implementation section, whereas any financial risks or uncertainties resulting from the implementation of measures from other previous budgets or Budget 2014 should be discussed in this section.

Significant changes in relation to operations, personnel and programs

Any significant changes that have occurred in the department during the current quarter resulting from the implementation of Budget 2012 measures should be discussed in the Budget 2012 Implementation section, whereas any significant changes that have occurred in the department during the current quarter resulting from the implementation of measures from other previous budgets or Budget 2014 should be discussed in this section.

Budget 2012 Implementation

This section of the report should identify and explain the impacts related to the implementation of new or renewed initiatives and savings measures as announced in Budget 2012 as implementation has an effect on departmental authorities (i.e. Main and Supplementary Estimates) and expenditures. Departments and agencies should use existing communications protocols and approved materials as well as professional judgment in preparing this section.

The following should be included:

  • The overall impact of the new or renewed initiatives and savings measures as announced in Budget 2012 on the departmental financial plan. Departments and agencies may wish to use the text in the Illustrative Example of Budget 2012 Implementation in preparing this section. The following paragraph should be added as an introduction.

    This section provides an overview of the savings measures announced in Budget 2012 that are being 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.

  • Information regarding the new or renewed initiatives and savings measures as announced in Budget 2012 that affect fiscal year 2014-2015. An explanation of any significant variance in current fiscal year authorities available for use due to the implementation of new or renewed initiatives and savings measures announced in Budget 2012. This would include details regarding the changes that have occurred in order to realize the expected spending reduction results.
  • An explanation of any significant variance in current fiscal year expenditures due to the implementation of new or renewed initiatives and savings measures announced in Budget 2012. Such variances would include decreases in actual expenditures and in relation to planned expenditures, compared to the same periods of the preceding fiscal year (quarter and YTD). Significant variances that are not readily apparent from the quantitative analysis should also be explained, for example when the impact of the savings measures may be offset by the impact of new initiatives.
  • Information on significant financial risks and uncertainties related to the implementation of new or renewed initiatives and savings measures from Budget 2012 including the expected impact on the department's financial plan for the current quarter. It should also briefly outline the strategies adopted to manage these risks and uncertainties. Possible mitigating strategies to mention could include rigorous planning and monitoring activities and the application of sound project management techniques.
  • Information regarding significant changes that have occurred in the department during the current quarter, as a result of the implementation of new or renewed initiatives and savings measures announced in Budget 2012. This should include information regarding the impact on expenditures to date.

Illustrative Example: Budget 2012 Implementation Section for the Quarter Ended Month DD, YYYY

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that are being 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.

Treasury Board Secretariat (Secretariat) will achieve Budget 2012 savings of $ [ Amount] 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 and streamlining. With these changes the Secretariat will focus on supporting management excellence and accountability across government.

In the first year of implementation, the Secretariat achieved savings of $ [ Amount] million. Savings have increased to $ [ Amount] million in 2013-14 and will result in ongoing saving of $ [ Amount] million in 2014-15.

There is a variance of $ [ Amount] million in the Secretariat's authorities between fiscal year 2013-2014 and 2014-2015 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 2014-2015 by eliminating funding to the following initiatives as the objectives of these projects have been met:

  • The Financial Interoperability and Stewardship Initiative (FISI) assisted departments and agencies in expediting and completing projects to improve interoperability and integration of financial data and systems. The proposal would eliminate $ [ Amount] million in funding for FISI but would allow departments to capitalize on the guidance and tools already developed.
  • The Internal Audit Human Resource Management Framework provided HR guidance and tools for recruitment, training and retention of internal auditors to support increased capacity of the federal internal audit function. Given this work is significantly completed; $ [ Amount] million in savings will be achieved.

Expenditures in the current quarter of 2014-2015 are only slightly less than the same period from last fiscal year. The YTD expenditures are $ [ Amount] million less than the previous fiscal year which is mainly due to the elimination of the Financial Interoperability and Stewardship initiative.

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.

There was no incremental funding provided to TBS to complete the above work which is well under way.

Appendix B - Guidance for correcting quarterly financial reports and types of misstatements

The following document provides guidance for correcting quarterly financial reports. Once a report is made public by departments and agencies on the website, parliamentarians and the public can immediately access the report. Thereafter, if a misstatement or omission is found in the financial tables, the narrative sections or the presentation of the report, an erratum section should be added by departments to inform readers of the correction after the publication of the report.

When a misstatement or omission is found after the publication of the report for current year as well as comparative information, the department must determine whether the misstatement or omission is considered material or non-material. The only difference in the procedures in the erratum section below, in the event that the misstatement or omission is considered material is that the quarterly financial report should be signed by the deputy head and chief financial officer with a new reporting date. There is no general rule of application for materiality. This is a question of judgment.

When a material misstatement or omission is found in the report of a previous fiscal year, departments and agencies should not modify previously published reports. This recommendation is based on the argument that a discovery of a misstatement or omission in comparative information from the previous fiscal year will be made after more than three months have elapsed since the last report was published in the previous fiscal year. Updated information will be provided in the most current report and the correction of the previous misstatement or omission will be referenced with a footnote that is to be added to the bottom of the table. The current report will be signed by both the deputy head and chief financial officer.

Departments and agencies must notify the Office of the Comptroller General (OCG) via e-mail at Quarterly Financial Reporting e-mail box informing them of any corrections to the published quarterly financial reports. The OCG can also provide support to departments prior to correcting the quarterly financial report.

Erratum Section

The procedures for correcting a misstatement or omission are as follows:

  • Step 1: Only if the misstatement or omission is material, have the updated report re-signed and dated by the deputy head and chief financial officer.

  • Step 2: Amend the link reference for the quarterly financial report found on the departmental Web page by adding the word “Revised”. e.g. Quarterly Financial Report for the quarter ended [insert Month day, Year] Revised

  • Step 3: Amend the title of the quarterly financial by adding the word “Revised” e.g. Quarterly Financial Report for the quarter ended [insert Month day, Year] Revised

  • Step 4: At the beginning of the report, before the Introduction, add an Erratum section that includes the following:

    • the date of the revision;
    • the information on the location where the revision can be found;
    • the description of the revision before and after; and
    • the rationale for the revision
  • Step 5: Inform OCG that the revised quarterly financial report has been made public.

To support departments and agencies in correcting a quarterly financial report, please find below an example of an Erratum section:

Erratum

Date:
Location: Statement of Authorities (unaudited), Used during the quarter ended , Vote 1 - Operating expenditures.
Revision: “Vote 1 - Operating expenditures $2,567,463 thousands” replaces “Vote 1 – Operating expenditures $2,867,463 thousands”.
Rationale for the revision: Original amount reported was not correct.

Footnote to Financial Tables

To support departments and agencies in correcting comparative financial information in both the Statements of Authorities and Departmental Budgetary Expenditures by Standard Object, please find below an example of a footnote:

(x) The Total available for the year ending [insert Month Day, Year] has been updated to reflect a dollar amount of $ [Amount] thousands. $ [Amount] thousands has been added to the Statutory item Spending of proceeds from the disposal of Crown assets.

Types of Misstatements Frequently Found

The misstatements frequently found last year by the Expenditure Management Sector in using financial data from quarterly financial reports tables to populate the Expenditure Database are listed below as well as the processes to implement to mitigate the risks of having these types of misstatements or anomalies. There are two types of misstatements: the main type of misstatement seems to result from the transposition of the signed version of the report to the website version and the second type of misstatements results from the non-compliance to TBAS 1.3.

  1. Mathematical inaccuracy in both financial tables

    Ensure that all financial tables are mathematically accurate in both the signed and the web version.

  2. Comparative information in both financial tables does not match the prior year report

    Ensure that all comparative financial information matches the prior year report.

  3. Difference between the signed version of the report and the web version

    Ensure there is an approval process in place for the web version of the report by comparing the signed version of the report before the report is being made public on the website.

  4. Difference between the totals in financial tables

    Ensure the total budgetary authorities in the Statement of Authorities should match the total net budgetary expenditures in the Departmental Budgetary Expenditures by Standard Object table.
    For any additional guidance, please refer to Frequently Asked Question dated which can be found in GCPedia more specifically question 12.

  5. Frozen allotments are excluded from the tables

    Ensure the budgetary information should reflect all authorities granted either through the Estimate process or through the TB allotment transfers. Consistent with the presentation of Volume II of Public Accounts of Canada, frozen allotments should be shown as lapsing authorities in financial tables.
    For any additional guidance, please refer to Frequently Asked Question dated which can be found in GCPedia more specifically questions 12 and 18.

Appendix C – Template: Statement of programs

DEPARTMENT’S NAME
Quarterly Financial Report
For the Quarter ended [Insert Month Day, Year]

Statement of programs (unaudited)
(In dollars )

  Fiscal year 2014 - 2015
  Total available for use for the year ending Used during the quarter ended [insert Month Day, Year] Year to date used at quarter end
Budgetary  
Program 1 [$amount] [$amount] [$amount]
Program 2 [$amount] [$amount] [$amount]
Program 3 [$amount] [$amount] [$amount]
Program 4 [$amount] [$amount] [$amount]
Internal services [$amount] [$amount] [$amount]
(Insert programs as needed) [$amount] [$amount] [$amount]
Total budgetary [$amount] [$amount] [$amount]
Non-budgetary (if any)  
Program 2 [$amount] [$amount] [$amount]
Program 4 [$amount] [$amount] [$amount]
Total non-budgetary [$amount] [$amount] [$amount]
Total department [$amount] [$amount] [$amount]

Ensure that budgetary and non-budgetary totals match the budgetary and non-budgetary authorities totals in the Statement of Authorities for the three columns.

Ensure that the source of the program name used is the same as what will be reported in Volume II of Public Accounts of Canada.

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