Quarterly Financial Report for PCO - Quarter ended December 31, 2012

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Statement outlining results, risks and significant changes in operations, personnel and programs
For the quarter ended December 31, 2012


Introduction

This quarterly 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 and with the previous Quarterly Financial Reports as well as Canada's Economic Action Plan 2012 (Budget 2012).

This quarterly report has not been subject to an external audit or review, but has been reviewed by the Privy Council Office Audit Committee.

Authority, Mandate and Program Authorities

The mandate of the Privy Council Office (PCO) is to serve Canada and Canadians by providing professional, non-partisan advice and support to the Prime Minister, the ministers within the Prime Minister's portfolio and Cabinet. PCO supports the development of the Government of Canada's policy and legislative agenda; coordinates responses to issues facing the Government and the country; and, supports the effective operation of Cabinet.

As Head of the Public Service of Canada, the Clerk of the Privy Council sets strategic direction and oversees all major issues for the Public Service. Led by the Clerk of the Privy Council, PCO helps the Government to implement its vision and respond effectively and quickly to issues facing the Government and the country. PCO's three primary roles are:

  1. Advice to the Prime Minister: PCO provides impartial advice to the Prime Minister, portfolio ministers and Cabinet on matters of national and international importance;
  2. Secretariat to the Cabinet: PCO ensures the smooth functioning of the Cabinet decisionmaking process and facilitate the implementation of the Government's agenda; and,
  3. Public Service Leadership: PCO fosters a high-performing and accountable public service.

Further information on PCO's programs can be located in Part II of the Main Estimates on the Treasury Bord of Canada Secretariat's website. For more information on PCO's main roles, please visit PCO's website.

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 for the 2012-13 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework (using a cash basis) designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before moneys 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. Budget 2012 was tabled in Parliament on March 29, 2012 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. However, they were reflected in the 2012-13 Supplementary Estimates B.

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

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

Statement of Authorities

As of December 31, 2012, the total authorities available for the year have decreased by $20.7 million when compared to the same quarter of 2011-12.

As per the Statement of Authorities, the net decrease of $20.7 million, from $162 million for 2011-12 to $141.3 million for 2012-13 is mainly explained by the following items:

  • A reduction of $8.5 million in funding for the Commission of Inquiry into the Decline of Sockeye Salmon in the Fraser River (The Fraser Commission). The Fraser Commission submitted its final report on October 31, 2012 and operations were completed on December 31, 2012;
  • A net reduction of $5.4 million in funding from 2011-12 to 2012-13 due to reduced expenditures on severance pay. These expenditures were greater in 2011-12 following the ratification of new collective agreements which resulted in the cash-out of severance benefits;
  • A reduction of $3.9 million for the conclusion of the Afghanistan Task Force, which sunsetted in March 2012;
  • A reduction of $3.3 million for a transfer to the Shared Services Canada Agency which was created on August 4, 2011 with an effective transfer date of November 15, 2011. PCO transferred all of its resources associated with the delivery of email, data centre and network services. This reduction is explained by PCO transferring $4.1 million to the Shared Services Canada Agency in 2011-12 compared to $7.4 million in 2012-13;
  • A reduction of $1.3 million for Canada's Economic Action Plan 2012 (Budget 2012);
  • A further reduction of $1.1 million for Strategic Review (Budget 2011) in order to reflect the savings to be achieved in the second year of implementation of the Strategic Review Exercise;
  • A reduction of $1.1 million in the funding received to enhance the security of the Department. This reduction in 2012-13 is explained by the fact that for the previous two years, PCO incurred one-time fit-up and start-up costs for some initiatives; and,
  • A reduction of $0.5 million for adjustments to employee benefit plans in which the rate of the employee benefit plan changed from 18% to 17.6%. Yearly statutory authorities are directly affected by variations in the annual employee benefit rate.

Partially offset by the following:

  • An increase of $1.4 million to support the operational activities of the Business Transformation and Renewal Secretariat in pursuing government-wide opportunities for improved services and operational efficiencies;
  • An increase of $1.3 million to support the government-wide coordination of implementation of the Perimeter Security and Economic Competitiveness Action Plan which sets out a shared work plan for securing the North American perimeter while facilitating legitimate trade and travel; and,
  • An increase of $2.1 million to support the Regulatory Cooperation Council to eliminate unnecessary burdens on cross-border trade, reduce costs, foster cross-border investment, and promote certainty for businesses and the public, by coordinating, simplifying and ensuring the compatibility of regulations, where feasible.

The main variances in authorities by standard object of expenditure are mostly in professional and special services, personnel, transfer payments as well as transportation and communications standard objects. The majority of these variances can be attributed to the items listed above in the Statement of Authorities.

In accordance with section 29.2 of the Financial Administration Act, PCO identified $74,000 as Vote Net Revenue in its 2012-13 Main Estimates to provide internal support services to other departments.

Statement of Departmental Budgetary Expenditures by Standard Object

As of December 31, 2012, the expenditure for the quarter ended December 31, 2012, has decreased by $4.7 million compared to the same period for fiscal year 2011-12. Furthermore, the year-to-date used at quarter end as of December 31, 2012, has decreased by $17.9 million compared to the same quarter of 2011-12 which can mainly be explained by the following items:

Personnel:

  • A decrease of $4.9 million due to less payments made for the cash out of severance pay compared to last year. This decrease is partially offset by an increase of $0.4 million related to the Work Force Adjusment Lump Sum Payments;
  • A decrease of $0.9 million related to the transfer of a portion of PCO's responsibility for the information technology activities to Shared Services Canada Agency and the reduction of PCO's informatic technology activities;
  • A decrease of $1.2 million for the conclusion of the Afghanistan Task Force;
  • A decrease of $0.4 million is attributed to the adjustments to employee benefit plans in which the rate of the employee benefit plan changed from 18% to 17.6%; and,
  • A decrease of $0.3 million for The Fraser Commission. The Fraser Commission submitted its final report on October 31, 2012 and operations were completed on December 31, 2012.

Transportation and communications:

  • A decrease of $1.0 million related to the transfer of a portion of PCO's responsibility for the information technology activities to Shared Services Canada Agency and the reduction of PCO's informatic technology activities.

Professional and special services:

  • A decrease of $3.6 million for The Fraser Commission; and,
  • A decrease of $0.6 million related to the transfer of a portion of PCO's responsibility for the information technology activities to Shared Services Canada Agency and the reduction of PCO's informatic technology activities.

Acquisition of machinery and equipment:

  • A decrease of $0.9 million related to the transfer of a portion of PCO's responsibility for the information technology activities to Shared Services Canada Agency and the reduction of PCO's informatic technology activities.

Transfer payments:

  • A decrease of $1.5 million for The Fraser Commission.

Risks and Uncertainties

PCO faces a number of external and internal risks. The dominant financial risks lie in the area of funding initiatives to deal with issues that emerge unexpectedly. As part of its coordinating role, PCO is expected to launch these initiatives on short notice, and either manage the necessary expenditures within its own spending authorities, or cash manage until increased spending authorities are approved.

This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates for which full supply was released on June 29, 2012 and also includes the $6.1 million received in the 2012-13 Supplementary Estimates A and B.

Significant Changes in Relation to Operations, Personnel and Programs

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-11 levels for the fiscal years 2011-12 and 2012-13. Management has implemented various options to adjust to this constraint in funding.

PCO has taken several budget reduction-related activities in recent years. The combined effect of various savings exercises such as Strategic Review (Budget 2011), and measures to modernize and reduce the cost of government announced in Canada's Economic Action Plan 2012 (Budget 2012) have resulted in a reduction to PCO’s workforce.

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Canada's Economic Action Plan 2012 (Budget 2012) that will be implemented in order to refocus government and programs; make it easier for Canadians and businesses to deal with their government; and, modernize and reduce the back office.

PCO will achieve Canada's Economic Action Plan 2012 (Budget 2012) savings of $9.2M by fiscal year 2014-15 through efficiency measures that align resources to its core mandate; scaling back where the need is reduced; transforming how it works internally and by consolidating and streamlining.

In the first year of implementation, PCO will achieve savings of approximately $1.4M. Savings will increase to $2.6M in 2013-14 and will result in ongoing savings of $9.2M by 2014-15.

The savings for 2012-13 have already started to be reflected in the expenditures during last quarter. The savings have been generated by adjusting internal service levels and by the employees affected by the Work Force Adjustment leaving earlier than planned.

PCO does not administer programs, and thus the major expenses are salaries and associated operational costs. Therefore, most of the savings will need to be generated by having fewer jobs at PCO.

The 2012-13 savings are being achieved by the following initiatives:

  • Streamlining of the Cabinet system to improve the efficiency and effectiveness of decision-making that will result in reduced workload;
  • Modernization and streamlining of the Government communications function which includes a new approach to media monitoring and analysis;
  • Reviewing the business processes of the Corporate Services Branch and adjusting service levels accordingly; and,
  • Modernization of business processes in other Branches within PCO and achievement of administrative efficiencies.

Approved by Senior Officials:

Wayne Wouters
Clerk of the Privy Council and
Secretary to the Cabinet

Michelle Doucet
Assistant Deputy Minister
Corporate Services

Ottawa, Canada
March 1, 2013

Statement of Authorities (unaudited)

(in thousands of dollars)
Fiscal year 2012-2013 Fiscal year 2011-2012
Total available for use for the year ending March 31, 20131 Used during the quarter ended December 31, 2012 Year to date used at quarter end Total available for use for the year ending March 31, 20121&2 Used during the quarter ended December 31, 20113 Year to date used at quarter end3

Note 1: Includes only Authorities available for use in the fiscal year and granted by Parliament at quarter-end.

Note 2: Pursuant to section 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011 (for PWGSC refer to Order-in-Council P.C. 2011-877 effective August 4, 2011), $4,113 thousand is deemed to have been appropriated to Shared Services Canada (Operating), which results in a reduction for the same amount in the Privy Council Office, Vote 1, Appropriation Act No.1, 2011-12.

Note 3: Excludes an amount of $570 thousand incurred on behalf of Shared Services Canada from the date of transfer of November 15, 2011 to December 31, 2011.

Note 4: Details may not add to totals due to rounding.

Vote 1 - Net operating expenditures 126,297 28,093 77,619 146,509 32,669 95,079
Budgetary statutory authorities 14,974 3,744 11,231 15,513 3,863 11,621
Total budgetary authorities 141,271 31,837 88,850 162,022 36,532 106,700
Total Authorities 141,271 31,837 88,850 162,022 36,532 106,700

Departmental budgetary expenditures by Standard Object (unaudited)

(in thousands of dollars)
Fiscal year 2012-2013 Fiscal year 2011-2012
Planned expenditures for the year ending March 31, 2013 Expended during the quarter ended December 31, 2012 Year to date used at quarter end Planned expenditures for the year ending March 31, 20121 Expended during the quarter ended December 31, 20112 Year to date used at quarter end2

Note 1: Pursuant to section 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011 (for PWGSC refer to Order-in-Council P.C. 2011-877 effective August 4, 2011), $4,113 thousand is deemed to have been appropriated to Shared Services Canada (Operating), which results in a reduction for the same amount in the Privy Council Office, Vote 1, Appropriation Act No.1, 2011-12.

Note 2: Excludes an amount of $570 thousand incurred on behalf of Shared Services Canada from the date of transfer of November 15, 2011 to December 31, 2011.

Note 3: Details may not add to totals due to rounding.

Personnel 106,434 27,296 76,698 111,062 28,983 85,027
Transportation and communications 6,059 793 2,153 7,912 1,379 3,630
Information 2,017 743 1,692 2,629 279 795
Professional and special services 15,722 2,351 5,407 26,034 4,493 11,331
Rentals 1,551 378 1,090 2,061 313 1,048
Repair and maintenance 2,120 98 207 2,356 188 744
Utilities, materials and supplies 1,193 213 454 1,836 309 566
Acquisition of machinery and equipment 4,846 76 892 4,455 231 1,829
Transfer payments 125 - 5 3,100 558 1,537
Other subsidies and payments 1,278 (37) 326 578 (201) 193
Total gross budgetary expenditures 141,345 31,911 88,924 162,022 36,532 106,700
Total revenues netted against expenditures (74) (74) (74) - - -
Total Budgetary Expenditures 141,271 31,837 88,850 162,022 36,532 106,700