Quarterly Financial Report for PCO - Quarter ended December 31, 2015

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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 previous Quarterly Financial Reports.

A summary description of the Privy Council Office (PCO) programs 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 2015-16 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 appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

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

This section highlights the significant items that contributed to the net increase or decrease in authorities available for the year and actual expenditures for the quarter ended December 31, 2015.

Statement of Authorities

Authorities available for use:
The net decrease of $0.2 million, from $124.4 million for 2014-15 to $124.2 million for 2015-16 is mainly related to the following:

  • An increase of $2.1 million in funding for the operations of the Canadian Secretariat to the Canada-U.S. Regulatory Cooperation Council (RCC). The goal of the Canada-U.S. RCC is to better align both regulatory systems to benefit industry, regulators and the public, and boost North American trade and competitiveness. Budget 2014 reiterated Canada's commitment to the RCC for an additional three fiscal years (2014-15, 2015-16 and 2016-17). The additional funding will allow the Canadian RCC Secretariat to continue its efforts to work with US and Canadian partners to advance regulatory cooperation;

  • An increase of $1.2 million in funding for the creation and operation of the Central Innovation Hub at PCO. The Hub provides departments with expertise and advice on applying new approaches to complex policy and program challenges. The Hub also helps test, document, accelerate, replicate and scale up successful innovation across the Public Service. Locating the Hub at the Privy Council Office amplifies and aligns successful initiatives across departmental lines. Funding for this initiative has been approved until 2018-19;

  • An increase of $0.1 million for the salary and motor car allowance for the Minister of Democratic Institutions. This position in the current Cabinet is a full ministerial position which replaces the former Minister of State (Democratic Reform) position listed in the 2014-15 fiscal year.

  • A decrease of $3.4 million related to three sunsetter initiatives, namely:

    • The coordination of a government-wide communications approach;

    • The Office of the Special Advisor on Human Smuggling and Illegal Migration headed by Mr. Ward Elcock, the Special Advisor to the Prime Minister on this matter; and

    • The Beyond the Border Action Plan which gives effect to the 2011 Declaration signed by Canada and the U.S. establishing a new long-term partnership accelerating the legitimate flow of people and goods between both countries, while strengthening security and economic competitiveness.
  • A decrease of $0.3 million in funding for the implementation of various government-wide initiatives, including the continued consolidation of pay services at the Public Service Pay Centre in Miramichi, the implementation of the Canada School of Public Service's new business model, the elimination of spending on late fees and interest charges to suppliers and the Web Renewal Initiative;

  • A $0.2 million reduction in PCO's Operating Budget Carry Forward (OBCF) amount in 2015-16 compared to 2014-15;

  • A $1.3 million decrease to PCO's planned "Voted Expenditures" and a corresponding $1.3 million increase in "Statutory Expenditures". This is due to an internal budget transfer from the operating fund which falls under the "Voted Expenditures" to the Employee Benefit Plans (EBP) which falls under the "Statutory Expenditures" to better align PCO's reference levels with its actual spending profile. The transfer has no impact on PCO's total authorities.

The $75,000 for Revenues netted against expenditures identified by PCO for internal services provided to the Security Intelligence Review Committee as per section 29.1(2)(a) of the Financial Administration Act remains unchanged between the two fiscal years.

It should be noted that subsequent to the tabling of PCO's 2015-16 Main Estimates, Budget 2015 confirmed the availability of funds for all three of the sunsetter initiatives mentioned above and PCO received approval from Treasury Board in June 2015 to access these funds in Supplementary Estimates C. Until funding is received, PCO is cash managing the activities associated with these three sunsetter initiatives.

Authorities used during the quarter:
Overall, PCO's 2015-16 expenditures for the quarter ended December 31, 2015 have increased by $0.3 million when compared to the expenditures for the same quarter in 2014-15 (from $29.4 million in 2014-15 to $29.7 million in 2015-16). Further information related to this increase is provided in the section below addressing the Statement of Departmental Budgetary Expenditures by Standard Object.

Year-to-Date Authorities used:
PCO's 2015-16 year-to-date expenditures as of December 31, 2015 have decreased by $3.8 million when compared to year-to-date expenditures at the same time last year (from $85.2 million in 2014-15 to $81.4 million in 2015-16). In reality, PCO's overall spending has decreased by $1.2 million and the remaining decrease of $2.6 million is due to the one-time payment made during the first quarter of 2014-15 to implement the Government of Canada salary payment in arrears. Further information related to this overall decrease 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 decrease of $0.2 million in authorities by Standard Object, from $124.4 million in 2014-15 to $124.2 million in 2015-16, is mainly explained as follows:

  • Personnel
    The increase of $5.8 million is mostly due to an internal budget transfer from operating to personnel to better align PCO's reference levels with its actual spending profile along with an increase in funding for the operations of the Canadian Secretariat to the Canada-U.S. Regulatory Cooperation Council and the Central Innovation Hub. These increases are partially offset by a reduction in the amount being allocated to personnel from the Carry Forward in 2015-16 compared to 2014-15.
  • Purchased Repair and maintenance
    The increase of $2.0 million goes towards PCO's investment in the Workplace 2.0 initiative, a government-wide strategy to renew the federal workplace by modernizing the physical space and the usage of new technologies. This increase includes funding allocated from the Carry Forward in 2015-16.
  • Other standard objects
    The overall decrease of $8.0 million in the other standard objects is primarily the result of the internal budget transfer from other operating to personnel in 2015-16 to better align PCO's reference levels to its actual spending profile.

Authorities used during the quarter:
The increase of $0.3 million in authorities used during the quarter by Standard Object (from $29.4 million in 2014-15 to $29.7 million in 2015-16) is attributable to:

  • Personnel
    The increase of $0.4 million for personnel is mainly explained by the increase for contributions to the employee benefit plans rate and an increase in payments related to vacation leave for departing ministerial staff which are partially offset by a decrease in salary during the election period.
  • Professional and Special Services
    The increase of $0.3 million is mostly related to services for the Corps of Commissionaires contracts. This continues the implementation of security changes from 2014-15 and includes increased security requirements to support the change in government during transition.
  • Transportation and communications
    The decrease of $0.4 million is mostly explained by less spending on travel and transportation in the delivery of PCO's core mandate during the election period.

Year-to-Date authorities used:
Overall, PCO's 2015-16 year-to-date expenditures as of December 31, 2015 have decreased by $3.8 million when compared to the year-to-date expenditures at the same time last year (from $85.2 million in 2014-15 to $81.4 million in 2015-16). This decrease is mainly explained as follows:

  • Other subsidies and payments
    The decrease of $2.7 million is primarily due to the one-time transition payment of $2.6 million that took place in the first quarter of 2014-15 to implement the Government of Canada salary payment in arrears.
  • Acquisition of machinery and equipment
    The decrease of $0.7 million is mainly explained by a one-time investment in the first quarter of 2014-15 to modernize and strengthen PCO's classified networks.
  • Professional and Special Services
    The decrease of $0.5 million in professional services is explained by less spending in 2015-16 compared to 2014-15 for government-wide initiatives such as desktop modernization, record keeping, digitization and email transformation. These decreases are partially offset by an increase in expenses related to services for the Corps of Commissionaires contracts.
  • Transportation and communications
    The decrease of $0.3 million is mostly explained by less spending on travel and transportation in the delivery of PCO's core mandate during the election period.

These decreases are partially offset by:

  • Personnel
    The increase of $0.4 million for personnel is mainly explained by the increase for contributions to the employee benefit plans rate and an increase in payments related to vacation leave for departing ministerial staff which are partially offset by a decrease in salary during the election period.

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 2015-16 Main Estimates (full supply was released on June 19, 2015). PCO did not request any funding through the 2015-16 Supplementary Estimates (A) or (B). Additional funding has been requested in Supplementary Estimates (C).

Significant Changes in Relation to Operations, Personnel and Programs

Due to the election of a new government in October 2015, PCO's current operating environment is changing as it adapts to the emerging priorities of this government's mandate. Changes include the appointment of Michael Wernick as Clerk of the Privy Council and Secretary to the Cabinet in January 2016 and the creation of a new secretariat to focus on results and delivery to be led by a new Deputy Secretary to the Cabinet, Matthew Mendelsohn. The Secretariat will support the Cabinet Committee on agenda and results.

PCO is subject to the operating Budget Freeze announced in the 2013 Speech from the Throne and the 2013 Fall Update. The department will need to absorb wage and salary increases that take effect in 2014-15 and 2015-16. The impact on PCO's expenditures will only be reflected after collective agreements are ratified for unionized staff.

Approved by Senior Officials: (original signed by)

Original signed by
_________________
Michael Wernick
Clerk of the Privy Council and
Secretary to the Cabinet

Original signed by
_________________
Michelle Doucet
Assistant Deputy Minister and
Chief Financial Officer
Corporate Services Branch

Ottawa, Canada
February 23, 2016

Statement of Authorities (unaudited) (note 2)

(in thousands of dollars)
Fiscal year 2015-2016 Fiscal year 2014-2015
Total available for use for the year ending March 31, 2016 (note 1) Used during the quarter ended December 31, 2015 Year-to-date used at quarter- end Total available for use for the year ending March 31, 2015 (note 1) Used during the quarter ended December 31, 2014 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 109,746 26,125 70,611 111,454 26,199 75,489
Budgetary statutory authorities  
Contributions to employee benefit plans 14,123 3,531 10,593 12,722 3,182 9,542
Prime Minister - Salary and motor car allowance 170 28 113 166 40 124
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 - - - - - -
Leader of the Government in the House of Commons - Salary and motor car allowance 82 14 55 80 20 60
Minister of State (Democratic Reform) - Motor car allowance - - - 2 1 2
Minister of Democratic Institutions - Salary and motor car allowance 82 7 7 - - -
Minister of State and Chief Government Whip - Motor car allowance 2 0 1 2 1 2
Spending of proceeds from the disposal of surplus Crown assets 27 - - 24 - -
Total budgetary authorities 124,232 29,705 81,380 124,450 29,442 85,218
Total Authorities 124,232 29,705 81,380 124,450 29,442 85,218

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

(in thousands of dollars)
Fiscal year 2015-2016 Fiscal year 2014-2015
Planned expenditures for the year ending March 31, 2016 (note 1) Expended during the quarter ended December 31, 2015 Year-to-date used at quarter-end Planned expenditures for the year ending March 31, 2015 (note 1) Expended during the quarter ended December 31, 2014 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 100,090 24,885 70,255 94,313 24,492 69,779
Transportation and communications 3,236 714 2,176 3,314 1,080 2,518
Information 2,191 402 1,261 4,069 607 1,406
Professional and special services 11,887 2,761 5,440 14,028 2,475 5,915
Rentals 1,291 340 863 1,817 188 753
Purchased repair and maintenance 2,934 143 177 971 173 213
Utilities, materials and supplies 678 181 407 1,417 156 455
Acquisition of machinery and equipment 1,974 227 639 4,309 235 1,315
Other subsidies and payments 26 52 162 288 36 2,864
Total gross budgetary expenditures 124,308 29,705 81,380 124,525 29,442 85,218
Less Revenues netted against expenditures:
  Revenues
(75) - - (75) - -
Total revenues netted against expenditures (75) - - (75) - -
Total Budgetary Expenditures 124,232 29,705 81,380 124,450 29,442 85,218