Quarterly Financial Report for PCO - Quarter ended December 31, 2013

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Statement outlining results, risks and significant changes in operations, personnel and programs


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 shared with the Privy Council Office Departmental Audit Committee and it reflects the committee members' comments.

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. The Prime Minister is responsible for this organization.

PCO supports the development of the Government of Canada's policy and legislative agendas, coordinates responses to issues facing the Government and the country, and supports the effective operation of Cabinet. PCO is led by the Clerk of the Privy Council. In addition to serving as the Deputy Head for PCO, the Clerk also acts as Secretary to the Cabinet and the Head of the Public Service.

PCO's three primary roles are:

  1. Provide non-partisan advice and support to the Prime Minister, portfolio ministers, Cabinet and Cabinet committees on matters of national and international importance;
  2. Support the smooth functioning of the Cabinet decision-making process and facilitate the implementation of the Government's agenda; and
  3. Foster a high-performing and accountable public service.

Further information on PCO's program activities can be found in Part II of the Main Estimates . 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 2013-14 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework (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 appropriations 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 Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-13, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013-14, the changes to departmental authorities were reflected in the 2013-14 Main Estimates tabled in Parliament.

PCO 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.

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

Statement of Authorities

PCO’s 2013-14 Quarterly Financial Reports for the first and second quarter presented the authorities included in its Main Estimates and Supplementary Estimates (A). In addition to the authorities included in the previous reports, this report includes Supplementary Estimates (B). Due to the timing of the approval for sunsetting and new initiatives, the variance analysis for this quarter has considerably changed when compared to the last two quarters, since the funding for the Office of the Special Advisor on Human Smuggling and Illegal Migration, the coordination of a government-wide communications strategy for Canada’s Economic Action Plan and the government-wide coordination of implementation of the Perimeter Security and Economic Competitiveness Action Plan (Beyond the Border Action Plan) is now included in both fiscal years.

As per the Statement of Authorities, the net decrease of $11.2 million, from $141.3 million for 2012-13 to $130.1 million for 2013-14 is mainly related to the following:

  • A decrease of $5.8 million in PCO’s authorities for 2013-14 to implement the savings resulting from PCO’s Strategic Review identified in Budget 2011 and the Department’s deficit reduction measures identified in Budget 2012;
  • A decrease in funding of $2.8 million related to the completion of the Commission of Inquiry into the Decline of Sockeye Salmon in the Fraser River (Cohen Commission);
  • A decrease of $2.4 million related to funding received from Treasury Board (TB) Central Vote for specific salary items such as severance pay and parental leave;
  • A decrease in funding of $2.1 million to support the Canadian Secretariat for the Regulatory Cooperation Council, since at the time of the preparation of PCO’s 2013-14 Supplementary Estimates (B), funding for this work had not yet been secured for the current year. Funding is now being sought through PCO’s Supplementary Estimates (C) and if approved, the increase in authority will be reflected in the year-end reporting; and
  • A decrease of $0.2 million as a result of government-wide efficiency exercises such as the consolidation of pay services, and measures announced in Canada’s Economic Action Plan 2013 for the consolidation of the procurement of Workplace Technology Device Software as well as a reduction of travel costs.

These reductions are partially offset by the following:

  • An increase of $1.0 million to fund the operational activities of the Business Transformation and Renewal Secretariat in pursuing government-wide opportunities for improved services and operational efficiencies; and
  • An increase of $0.9 million for the ratification of specific collective agreements.

The decrease in authorities for standard objects Personnel and Professional and Special Services is mainly explained by savings resulting from PCO’s Strategic Review announced in Budget 2011, the Department’s deficit reduction measures identified in Budget 2012, the completion of the Cohen Commission and a decrease in funding received from TB Central Votes for specific salary-items (standard object Personnel only). These decreases are partially offset by an increase related to the operational activities of the Business Transformation and Renewal Secretariat and the ratification of specific collective agreements (standard object Personnel only).

The decrease in authorities for Acquisition of Machinery and Equipment can be explained by the fact that the 2012-13 authorities were based on historical spending trends which included activities that were transferred to Shared Services Canada (SSC).

The decrease in authorities for Other subsidies and payments is explained by temporary funding that was allocated under this category for 2012-13 and is reported under the Professional and Special Services category in 2013-14.

In previous quarterly financial reports for 2013-14, a variance explanation was included for the Vote Net Revenue (authority to provide internal support services to other departments, in accordance with section 29.1(2)(a) of the Financial Administration Act ). Since the last quarter, PCO has increased its amount identified for Vote Net Revenue in order to better reflect the service level provided by PCO to other departments though eliminating the variance between 2013-14 and 2012-13.

Statement of Departmental Budgetary Expenditures by Standard Object

The expenditures for the quarter ended December 31, 2013 have decreased by $2.0 million (from $31.8 million in 2012-13 to $29.8 million in 2013-14).

As per the Statement of Departmental Budgetary Expenditures by Standard Object, the decrease in the year-to-date used as of December 31, 2013 is $3.8 million from $88.9 million in 2012-13 to $85.1 million in 2013-14. This decrease can mainly be attributed to a decrease in expenditures for Personnel and Professional and Special Services. This decrease is partially offset by an increase in expenditures for Acquisition of Machinery and Equipment. Details are provided below.

Personnel

The decrease of $3.6 million in Personnel is mainly explained by savings resulting from PCO’s Strategic Review announced in Budget 2011, the Department’s deficit reduction measures identified in Budget 2012 ($2.1 million for both reviews), the completion of the Cohen Commission ($0.6 million) and less salary-related items payments ($1.0 million), such as, severance pay and employee benefits plans.

This decrease is partially offset by:

  • An increase related to the operational activities of the Business Transformation and Renewal Secretariat ($0.2 million).

Professional and Special Services

The decrease of $0.1 million in Professional and Special Services is mainly explained by the completion of the Cohen Commission ($1.3 million).

This decrease is partially offset by:

  • An increase in spending related to one-time strategic investment projects to help advance government priorities, mitigate outstanding operational risks and address workplace requirements ($0.5 million), Translation services ($0.3 million), management consulting services ($0.2 million) and Training services ($0.2 million).

Acquisition of Machinery and Equipment

The increase in spending of $0.7 million in acquisition of machinery and equipment is mainly due to one-time strategic investment projects to help advance government priorities, mitigate outstanding operational risks and address workplace requirements ($1.0 million). This increase is partially offset by a reduction in expenditures related to servers and software which included activities that were transferred to Shared Services Canada ($0.3 million).

Risks and Uncertainties

PCO faces a number of external and internal risks. The dominant financial risks lie in 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 2013-14 Main Estimates (full supply was released on June 20, 2013) and the 2013-14 Supplementary Estimates (B) (supply was released on December 16, 2013). PCO did not request any funding through the 2013-14 Supplementary Estimates (A).

Significant Changes in Relation to Operations, Personnel and Programs

PCO has managed several budget reduction-related activities in recent years. The combined effect of various savings exercises such as Budget 2010, 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.

The transfer of activities to Shared Services Canada (SSC) had a significant impact on PCO's spending. PCO transferred all its resources associated with the delivery of email, data centre and network services to SSC for $7.4 million ongoing in 2012-13. An additional transfer approved in Canada's Economic Action Plan 2013 (Budget 2013) related to the consolidation of the procurement of Workplace Technology Device Software occurred in 2013-14.

The Cohen Commission submitted its final report on October 31, 2012 and operations were completed on December 31, 2012. Although no commissions of inquiry are planned for the 2013–14 fiscal year, PCO will provide any commission that may be established throughout the year with the financial and administrative support necessary to fulfil its mandate.

Budget 2012 Implementation

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

As announced in Canada’s Economic Action Plan 2012, part of the Government’s agenda is to refocus government and its programs, make it easier for Canadians and businesses to deal with their government, as well as right-size and modernize back office operations. To support these objectives, PCO has undertaken several deficit reduction measures, including: transforming business processes across the department to achieve administrative efficiencies and redefining internal service levels accordingly; further integrating the intergovernmental affairs function within the department; modernizing and streamlining the government communications function; and streamlining the Cabinet system to improve the efficiency and effectiveness of decision-making.

The vast majority of PCO's expenses consist of salaries and associated operational costs. As a result, most of the savings needed to be generated by having fewer full time equivalent positions within the department. These reductions were achieved through a fair and transparent Workforce Adjustment process with all affected employees treated with respect and every possible effort made to identify the best possible solution for each individual.

In the first year of implementation which was 2012-13, PCO has achieved savings of approximately $1.4 million. Incremental savings of $2.6 million will be achieved in 2013-14 and will result in ongoing annual savings of $9.2 million by 2014-15.

Approved by Senior Officials:

Wayne G. Wouters
Clerk of the Privy Council and
Secretary to the Cabinet
Michelle Doucet
Assistant Deputy Minister
Corporate Services Branch
Chief Financial Officer

Ottawa, Canada
February 28, 2014

Statement of Authorities (unaudited)

(in thousands of dollars)
Fiscal year 2013-2014 Fiscal year 2012-2013
Total available for use for the year ending March 31, 2014** Used during the quarter ended December 31, 2013 Year-to-date used at quarter- end Total available for use for the year ending March 31, 2013** Used during the quarter ended December 31, 2012 Year-to-date used at quarter- end

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

Note 1: Fiscal year 2013-14 presents authorities available for Planned Spending of proceeds from the disposal of surplus Crown assets. This information was not presented in PCO's 2012-13 Quarterly Financial Statements.

Note 2: Details may not add to totals due to rounding.

Vote 1 - Net operating expenditures 115,563 26,242 74,375 126,297 28,093 77,619
Budgetary statutory authorities
Contributions to employee benefits plans 14,085 3,500 10,498 14,578 3,645 10,934
Prime Minister - Salary and motor car allowance 163 39 121 160 40 120
Minister of Infrastructure, Communities and Intergovernmental Affairs and Minister of the Economic Development Agency of Canada for the Regions of Quebec - Salary and motor car allowance 79 - 1 78 20 58
Leader of the Government in the Senate - Salary and motor car allowance 79 - 22 78 20 58
Leader of the Government in the House of Commons - Salary and motor car allowance 79 20 59 78 19 57
Minister of State (Democratic Reform) - Motor car allowance 2 1 2 2 - 2
Minister of State and Chief Government Whip - Motor car allowance 2 1 2 2 - 2
Spending of proceeds from the disposal of surplus Crown assets (Note 1) 23 - - - - -
Total budgetary authorities 130,075 29,803 85,080 141,271 31,837 88,850
Total Authorities 130,075 29,803 85,080 141,271 31,837 88,850

Departmental budgetary expenditures by Standard Object (unaudited)

(in thousands of dollars)
Fiscal year 2013-2014 Fiscal year 2012-2013
Planned expenditures for the year ending March 31, 2014** Expended during the quarter ended December 31, 2013 Year-to-date used at quarter-end Planned expenditures for the year ending March 31, 2013** Expended during the quarter ended December 31, 2012 Year-to-date used at quarter-end

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

Note 1: Details may not add to totals due to rounding.

Expenditures
Personnel 99,290 25,080 73,080 106,434 27,296 76,698
Transportation and communications 5,848 718 1,878 6,059 793 2,153
Information 2,000 630 1,539 2,017 743 1,692
Professional and special services 14,326 2,559 5,263 15,722 2,351 5,407
Rentals 1,556 192 783 1,551 378 1,090
Repair and maintenance 2,287 157 217 2,120 98 207
Utilities, materials and supplies 1,454 148 391 1,193 213 454
Acquisition of machinery and equipment 3,293 290 1,626 4,846 76 892
Transfer payments - - - 125 - 5
Other subsidies and payments 96 29 303 1,278 (37) 326
Total gross budgetary expenditures 130,150 29,803 85,080 141,345 31,911 88,924
Revenues (75) - - (74) (74) (74)
Total revenues netted against expenditures (75) - - (74) (74) (74)
Total Budgetary Expenditures 130,075 29,803 85,080 141,271 31,837 88,850