Quarterly Financial Report for PCO - Quarter ended September 30, 2014

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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, previous Quarterly Financial Reports as well as Canada's Economic Action Plan 2012 (Budget 2012).

A summary description of the Privy Council Office (PCO) programs based on PCO's Program Alignment Architecture can be found in Part II of the Main Estimates. For more information on PCO's main roles, please visit PCO's website.

This quarterly report has not been subject to an external audit or review but has been shared with the PCO Departmental Audit Committee and it reflects the committee members' comments.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes PCO's spending authorities granted by Parliament and those used by the department, consistent with the Main Estimates for the 2014-15 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.

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 Results

Statement of Authorities

Authorities available for use

The net increase of $0.8 million, from $123.4 million for 2013-14 to $124.2 million for 2014-15 is mainly related to the following:

  • An increase of $5.5 million for the Operating Budget Carry Forward (OBCF), which was received during the second quarter of 2014-15. In 2013-14, the OBCF was only received in the third quarter;
  • An increase of $1.1 million in funding for the Office of the Special Advisor on Human Smuggling and Illegal Migration; and
  • An increase of $0.4 million for the wage and salary increases resulting from collective agreements that took effect in 2013-14.

These increases are partially offset by the following:

  • A decrease of $4.4 million in savings identified as part of the Budget 2012 Spending Review;
  • A decrease of $1.4 million related to statutory authorities mostly for contributions to employee benefit plans;
  • A decrease of $0.3 million related to efficiencies 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. The budget reduction is also related to two Government-wide initiatives: the Web Renewal Initiative and the initiative to eliminate late fees and interest charges.

Authorities used during the quarter

PCO's 2014-15 expenditures for the quarter ended September 30, 2014 have decreased by $1.5 million when compared to the 2013-14 expenditures for the same quarter (from $29.2 million in 2013-14 to $27.7 million in 2014-15). Further information related to this decrease is provided in the section below addressing the Statement of Departmental Budgetary Expenditures by Standard Object.

Year-to-Date Authorities used

Overall, PCO's 2014-15 year-to-date expenditures as of September 30, 2014 have increased by $0.5 million when compared to the year-to-date expenditures at the same time last year (from $55.3 million in 2013-14 to $55.8 million in 2014-15). In reality, PCO's overall spending has decreased by $2.1 million but this decrease is offset by the one-time payment of $2.6 million made during the first quarter to implement the Government of Canada salary payment in arrears. Further information related to this overall increase is provided in the section below addressing the Statement of Departmental Budgetary Expenditures by Standard Object.

Statement of Departmental Budgetary Expenditures by Standard Object

Authorities available for use

The increase of $0.8 million in authorities by Standard Object from 2013-14 to 2014-15 is mainly explained as follows:

  • Personnel
    The decrease of $0.8 million in personnel is mostly due to savings resulting from the Department's deficit reduction measures identified in Budget 2012, a decrease in contributions to employee benefit plans and other efficiencies exercises such as the consolidation of pay services. These decreases are partially offset by an increase in funding for the Office of the Special Advisor on Human Smuggling and Illegal Migration, for funding received for the ongoing effect of the ratification of specific collective agreements which took effect in 2013-14 and for a portion of the funding received for the OBCF.
  • All other standard objects
    PCO has realigned some of the planned expenditures by standard object for 2014-15 when compared to 2013-14 to better reflect upcoming spending trends. As a result, the planned expenditures for Transportation and Communications and for Purchased Repair and Maintenance have decreased mostly to reflect the transfer of functions to Shared Services Canada. The increase in planned expenditures for Information and for Acquisition of Machinery and Equipment is mostly explained by a realignment of expenses by the Receiver General for Canada for electronic subscriptions and by anticipated spending in key multi-dependency IT/IM initiatives which are Government-wide driven. Some of these initatives are: Desktop and InfoXpress Modernization and the Email Transformation Initiative. A portion of the funding received in the second quarter for OBCF was allocated to the Professional and special services which explains the increase in this category.
  • Revenues
    PCO has increased its amount identified for Vote Net Revenue in order to better reflect the service level provided by PCO to the Security Intelligence Review Committee, in accordance with section 29.1(2)(a) of the Financial Administration Act. PCO adjusted its Vote Net Revenue during the third quarter of 2013-14, through the Estimates process.

Authorities used during the quarter

PCO's 2014-15 expenditures for the quarter ended September 30, 2014 have decreased by $1.5 million when compared to the 2013-14 expenditures for the same quarter. This decrease is mainly explained as follows:

  • Personnel
    An overall decrease in personnel spending of $1.7 million. $1.1 million can be attributed to less spending for contributions to employee benefit plans, payments in lieu of leave, severance and separation pay and by $0.6 million as an overall decrease in related staffing costs.
  • Acquisition of Machinery and Equipment
    A decrease of $0.8 million. During the second quarter of 2013-14, PCO invested in onetime strategic investment projects to help advance government priorities and mitigate outstanding operational risks. For example, PCO invested resources to modernize and strengthen its classified networks. Key investments in this category were made earlier this year, specifically during the first quarter of 2014-15.

These decreases are partially offset by the following:

  • Professional and Special Services
    An increase of $0.6 million in professional services to implement Government-wide initiatives such as the Desktop Modernization and the Email Transformation Initiatives.
  • Transportation and Communications
    An overall increase of $0.3 million in travel to deliver PCO's core mandate.

Year-to-Date Authorities used

Overall, PCO's 2014-15 year-to-date expenditures as of September 30, 2014 have increased by $0.5 million when compared to the year-to-date expenditures at the same time last year. This increase is mainly explained as follows:

  • Other subsidies and payments
    An increase of $2.6 million due to the one-time transition payment made in the first quarter for implementing the Government of Canada salary payment in arrears.
  • Professional and Special Services
    An increase of $0.7 million in professional services to implement Government-wide initiatives such as the Desktop Modernization and the Email Transformation Initiatives.

These increases are partially offset by the following:

  • Personnel
    An overall decrease in personnel spending of $2.7 million. $1.8 million can be attributed to less spending for contributions to employee benefit plans, payments in lieu of leave, severance and separation pay. A decrease of $0.4 million is related to Ministers' Offices, mainly for the Office of the Leader of the Government in the Senate (LGS). Since July 2013, the LGS's position is not held by a Minister; therefore, PCO no longer provides funding or services to that Office. Finally, $0.5 million is due to an overall decrease in related staffing costs.

Risks and Uncertainties

PCO's complex, fast-paced and ever-evolving operating environment unavoidably creates a broad spectrum of management and operational risks. Accordingly, PCO has adopted an Integrated Risk Management Strategy that is supported by a comprehensive governance and oversight regime. The risk management structure ensures that PCO has the information, analysis and management direction required to detect, prevent and, if necessary, actively mitigate emerging and evolving risks.

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 reflects the results of the current fiscal period in relation to the 2014-15 Main Estimates (full supply was released on June 19, 2014). PCO did not request any funding through the 2014-15 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 Budget 2012 have resulted in a reduction to PCO's workforce.

PCO is subject to the operating Budget Freeze announced in the 2013 Speech from the Throne and Fall Update. The department will need to absorb wage and salary increases that take effect in 2014-15 and 2015-16, and the ongoing impact of those adjustments.

Janice Charette was appointed Clerk of the Privy Council and Secretary to the Cabinet by the Prime Minister on October 6, 2014. Michael Wernick, who was Senior Advisor to the Privy Council Office, became Deputy Clerk of the Privy Council and Associate Secretary to the Cabinet, also effective October 6, 2014.

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's budget was reduced by $1.4 million. Additional budget reductions of $2.6 million were achieved in 2013-14. Further budget reductions of $5.2 million were made in 2014-15 to achieve ongoing savings target of $9.2 million set for PCO in Budget 2012.

There are no major variance between PCO's authorities used during the quarter compared to the same quarter last year, related to the Budget 2012 implementation as PCO fully implemented its savings ahead of schedule.

Approved by Senior Officials: (original signed by)

Janice Charette
Clerk of the Privy Council and
Secretary to the Cabinet

Michelle Doucet
Assistant Deputy Minister
Corporate Services
Chief Financial Officer





Ottawa, Canada
November 28, 2014

Statement of Authorities (unaudited) (note 2)

(in thousands of dollars)
Fiscal year 2014-2015 Fiscal year 2013-2014
Total available for use for the year ending March 31, 2015 (note 1) Used during the quarter ended September 30, 2014 Year-to-date used at quarter- end Total available for use for the year ending March 31, 2014 (note 1) Used during the quarter ended September 30, 2013 Year-to-date used at quarter- end

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

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

Vote 1 - Net operating expenditures 111,184 24,497 49,290 109,008 25,688 48,133
Budgetary statutory authorities
Contributions to employee benefits plans 12,722 3,181 6,361 13,997 3,499 6,998
Prime Minister - Salary and motor car allowance 166 41 83 163 41 82
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 80 - - 79 1 1
Leader of the Government in the Senate - Salary and motor car allowance - - - 79 3 22
Leader of the Government in the House of Commons - Salary and motor car allowance 80 20 40 79 20 39
Minister of State (Democratic Reform) - Motor car allowance 2 1 1 2 - 1
Minister of State and Chief Government Whip - Motor car allowance 2 1 1 2 - 1
Spending of proceeds from the disposal of surplus Crown assets 21 - - 22 - -
Total budgetary authorities 124,258 27,740 55,776 123,432 29,252 55,277
Total Authorities 124,258 27,740 55,776 123,432 29,252 55,277

Departmental budgetary expenditures by Standard Object (unaudited) (note 2)

(in thousands of dollars)
Fiscal year 2014-2015 Fiscal year 2013-2014
Planned expenditures for the year ending March 31, 2015 (note 1) Expended during the quarter ended September 30, 2014 Year-to-date used at quarter-end Planned expenditures for the year ending March 31, 2014 (note 1) Expended during the quarter ended September 30, 2013 Year-to-date used at quarter-end

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

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

Expenditures
Personnel 94,086 23,047 45,287 94,847 24,755 48,000
Transportation and communications 3,314 989 1,438 5,394 663 1,160
Information 4,069 350 799 1,998 412 909
Professional and special services 14,065 2,318 3,440 12,530 1,677 2,704
Rentals 1,817 253 565 1,600 288 591
Repair and maintenance 971 26 40 2,287 37 60
Utilities, materials and supplies 1,417 206 299 1,451 175 243
Acquisition of machinery and equipment 4,306 388 1,080 3,292 1,204 1,336
Other subsidies and payments 288 163 2,828 82 41 274
Total gross budgetary expenditures 124,333 27,740 55,776 123,481 29,252 55,277
Less Revenues netted against expenditures: Revenues (75) - - (49) - -
Total revenues netted against expenditures (75) - - (49) - -
Total Budgetary Expenditures 124,258 27,740 55,776 123,432 29,252 55,277