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Quarterly Financial Report - For the quarter ended September 30, 2022

Table of contents

  1. 1. Introduction
    1. 1.1 Authority, mandate and programs
    2. 1.2 Basis of presentation
    3. 1.3 Shared Services Canada financial structure
  2. 2. Highlights of fiscal quarter and fiscal year-to-date results
    1. 2.1 Significant changes to authorities
    2. 2.2 Explanations of significant variances from previous year expenditures
  3. 3. Risks and uncertainty
  4. 4. Significant changes in relation to operations, personnel and programs
  5. 5. Statement of authorities (unaudited)
  6. 6. Departmental budgetary expenditures by standard object (unaudited)
  7. 7. Glossary

Quarterly Financial Report - For the quarter ended September 30, 2022 [PDF - 355 KB]

1. Introduction

This quarterly financial report should be read in conjunction with the 2022-23 Main Estimates and the 2022-23 Supplementary Estimates (A). This 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. It has not been subject to an external audit or review.

1.1 Authority, mandate and programs

Shared Services Canada (SSC) is responsible for digitally enabling government programs and services by providing information technology (IT) services in the domains of networks and network security, data centers and cloud offerings, digital communications and providing IT tools that the public service needs to do its job. As a service provider to over 40 government departments and agencies, SSC is focussed on moving toward an IT service delivery model that encourages sharing common solutions and platforms across departments in an effort to reduce the variety of IT solutions across the government. In taking this enterprise approach, SSC is working to solidify network capacity and security, equip and empower employees to collaborate, and support partners in the design and delivery of their digital service offering to Canadians. The Minister of Public Services and Procurement Canada is the Minister responsible for Shared Services Canada.

In carrying out its mandate, SSC is supporting the Digital Operations Strategic Plan: 2021-2024 and the Government of Canada Cloud Adoption Strategy, as well as working in partnership with public and private sector stakeholders, implementing enterprise-wide approaches for managing IT infrastructure services, and employing effective and efficient business management processes.

The Shared Services Canada Act and related Orders-in-Council set out the powers, duties and functions of the Minister responsible for SSC. Amendments to the Act in June 2017 allow the Minister to delegate to other Ministers the power to procure certain items, thereby making it easier for federal departments to buy some of the most frequently purchased IT goods and services. SSC remains responsible for setting up IT contracts, standing offers and supply arrangements, and will continue to ensure only trusted IT equipment and software are used. The Minister responsible for SSC may also, in exceptional circumstances, authorize another Minister to obtain services from within their own department or from a source other than SSC. However, this authorization cannot be used to exempt the entire department from using SSC’s services.

Further details on SSC’s authority, mandate, responsibilities and programs may be found in the 2022-23 Main Estimates and in SSC’s 2022-23 Departmental Plan.

1.2 Basis of presentation

This quarterly financial 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 2022-23 Main Estimates, the 2022-23 Supplementary Estimates (A), the 2021-22 Carry Forward and the 2022-23 Vote netted revenues increase. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before money 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.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis. The main difference between the quarterly financial report and the departmental financial statements is the timing of when revenues and expenses are recognized. The quarterly financial report presents revenues only when the money is received and expenses only when the money is paid out. The departmental financial statements report revenues when they are earned and expenses when they are incurred. In the latter case, revenues are recorded even if cash has not been received and expenses are incurred even if cash has not yet been paid out.

1.3 Shared Services Canada financial structure

SSC has a financial structure composed mainly of voted budgetary authorities, namely Vote 1 - Operating expenditures, including Vote netted revenues, and Vote 5 - Capital expenditures, including Vote netted revenues. The statutory authorities consist of contributions to the employee’s benefit plans (EBP).

At the end of the second quarter of 2022-23, 93% of the Department’s budget was devoted to support its IT consolidation and standardization goals. This ensured that current and future IT infrastructure services offered to the Government of Canada are maintained in an environment of operational excellence. The remaining 7% was devoted to internal services, which are services in support of SSC’s programs and/or required to meet SSC’s corporate obligations.

Total Vote netted revenue authority for 2022-23 is $861.2 million, which consists of respendable revenue for IT infrastructure services provided by SSC to organizations on a cost-recovery basis.

2. Highlights of fiscal quarter and fiscal year-to-date results

The following graph provides a comparison of the net budgetary authorities available for spending, the year-to-date expenditures, and the expenditures for the quarters ended September 30, 2022 and September 30, 2021, for the Department’s combined Vote 1 - Operating expenditures, Vote 5 - Capital expenditures, and statutory authorities.

Comparison of net budgetary authorities and expenditures as of September 30, 2022 and September 30, 2021 ($ millions)
Long description - Comparison of net budgetary authorities and expenditures as of September 30, 2022 and September 30, 2021

The graph shows total net budgetary authorities available for spending of $2,881.1 million as of September 30, 2022 and $2,247.1 million as of September 30, 2021. It also shows year-to-date expenditures totalling $1,102.5 million as of September 30, 2022 compared to $1,025.6 million as of September 30, 2021. Finally, it shows total expenditures of $571.4 million for the second quarter ended September 30, 2022 compared to $408.3 million for the second quarter ended September 30, 2021.

2.1 Significant changes to authorities

For the period ended September 30, 2022, the authorities available to the Department include the Main Estimates, the Supplementary Estimates (A), the 2021-22 Carry Forward, and the 2022-23 Vote netted revenues increase. Authorities available for spending in 2022-23 are $2,881.1 million at the end of the second quarter, compared to $2,247.1 million at the end of the second quarter of 2021-22, representing an increase of $634.0 million, or 28.2%. This total increase is a combination of an increase of $730.3 million in Vote 1 – Gross operating expenditures, an increase of $78.0 million in Vote 5 – Gross capital expenditures, an increase in Vote netted revenues of $196.2 million and an increase in Budgetary statutory authorities (EBP) of $21.9 million.

Comparison of net budgetary authorities for the quarters ended September 30, 2022 and September 30, 2021
Net authorities available ($ millions) 2022-23 2021-22 Variance
Vote 1 - Operating expenditures 3,125.2 2,394.9 730.3
Vote 5 - Capital expenditures 499.4 421.4 78.0
Statutory (EBP) 117.7 95.8 21.9
Total gross authorities 3,742.3 2,912.1 830.2
Vote netted revenues (861.2) (665.0) (196.2)
Total net authorities 2,881.1 2,247.1 634.0

Vote 1 – Gross operating expenditures

The Department’s Vote 1 increased by $730.3 million, compared to the second quarter of 2021-22, mainly due to:

Vote 5 – Gross capital expenditures

The Department’s Vote 5 increased by $78.0 million, compared to the second quarter of 2021-22, mainly due to:

Vote netted revenues

The Department’s Vote netted revenues (VNR) authority increased by $196.2 million compared to the second quarter of 2021-22. This increase is due to increased customer demand for IT and transformation services aligned with Canada’s Digital Government Strategy. At the end of 2021-22, SSC’s VNR authority was $950.0 million, compared to the total authority of $861.2 million at the end of the second quarter of 2022-23. SSC’s VNR authority at the end of the second quarter of 2022-23 is lower than the 2021-22 year-end VNR authority due to the implementation of the IT Enterprise Service Model.

Statutory (EBP)

The Department’s Employee Benefits Plan (EBP) authority increased by $21.9 million, compared to the second quarter of 2021-22, mainly due to:

2.2 Explanations of significant variances from previous year expenditures

Compared to the previous year, the total year-to-date expenditures, for the period ended September 30, 2022, have increased by $76.9 million, from $1,025.6 million to $1,102.5 million as per the table below. This represents an increase of 7.5% against expenditures recorded for the same period in 2021-22.

Comparison of year-to-date expenditures for the quarters ended September 30, 2022 and September 30, 2021
Net year-to-date expenditures ($ millions) 2022-23 2021-22 Variance
Vote 1 - Operating expenditures 1,200.0 1,079.9 120.1
Vote 5 - Capital expenditures 91.5 53.3 38.2
Statutory (EBP) 58.9 47.3 11.6
Total gross year-to-date expenditures 1,350.4 1,180.5 169.9
Vote netted revenues (247.9) (154.9) (93.0)
Total net year-to-date expenditures 1,102.5 1,025.6 76.9

Vote 1 - Increase of $120.1 million

The net increase in operating expenditures, compared to the second quarter of 2021-22, is mainly attributed to:

Vote 5 - Increase of $38.2 million

The net increase in capital expenditures, compared to the second quarter of 2021-22, is mainly attributed to:

Vote netted revenues - Increase of $93.0 million

The increase in the collected Vote netted revenues, compared to the second quarter of 2021-22, is mainly due to the fact that the Department was in the process of transitioning to a new platform to process invoices last year, which delayed billing in fiscal year 2021-22.

3. Risks and uncertainty

As the collective public service and Shared Services Canada look to a post-pandemic world – one in which employees across the Government of Canada will need to be supported with the enterprise tools and network infrastructure critical for the delivery of government programs and services, there are certain risk exposures and emerging trends which could potentially impact departmental outcomes. Namely, the unprecedented transition to a mix of in-office and work-from-home arrangements in the near future will likely come with it unique risks related to the organizational management and engagement of employees; effective management of complex enterprise IT projects to continue digital transformation, and increasing and sophisticated cybersecurity incidents exacerbated by increasing reliance on digital services. Looking to external factors, Shared Services Canada is operating within a continually evolving landscape including the global supply chain disruptions, shifting global socio-economic, political, and/or environmental conditions, and the ever-changing industry standards and best-practices related to IT service delivery.

Considering the host of internal and external risks, the Department strives to employ best-practice Enterprise Risk Management (ERM) and Operational Risk Management (ORM) methodology throughout all of its project and program operations, internal services, and financial governance activities. Shared Services Canada promotes a risk-informed culture through the Corporate Risk Management division, whereby the function continuously seeks to strengthen the Department’s risk management processes and procedures, systems, governance structures, service delivery model, tools, analytics capacity and controls to ensure high-standards of practice. Within this context, Shared Services Canada has also revised its Enterprise Risk Profile (ERP) to capture the foremost risk exposures faced by the organization and to ensure strategic alignment with its enterprise approach and the Digital Operations Strategic Plan 2021-2024.

Further, an Integrated Business Planning framework has been developed to effectively drive a consolidated vision to mature strategic planning and reporting to ensure the fulfillment of key priorities and interweave risk management methodology through all facets of the organization. The Department has also undertaken several initiatives related to proactive workforce resourcing strategies to retain, recruit, and train personnel and provide progressive mental-health resources to support employees throughout the COVID-19 pandemic. Lastly, Shared Services Canada promotes effective financial management practices and financial sustainability to ensure that it has the financial resources, systems, and funding mechanisms in place to maintain and enhance mission-critical systems while funding modernization initiatives.

The Key Enterprise Risks can be found in the SSC’s 2022-23 Departmental Plan.

4. Significant changes in relation to operations, personnel and programs

On August 31, 2022, Minister Helena Jaczek was named as the new Minister of Public Services and Procurement Canada and the Minister responsible for Shared Services Canada.

Approval by senior officials

Sony Perron
President
Scott Davis, CPA
Assistant Deputy Minister and Chief Financial Officer  

Ottawa, Canada
November 18, 2022

5. Statement of authorities (unaudited) (in thousands of dollars)

  Fiscal year 2022-23 Fiscal year 2021-22
Total available for use for the year ending March 31, 2023Footnote 1 Used during the quarter ended September 30, 2022 Year-to-date used at quarter-end Total available for use for the year ending March 31, 2022Footnote 1 Used during the quarter ended September 30, 2021 Year-to-date used at quarter-end
Vote 1 - Operating expenditures
Gross operating expenditures 3,125,188 624,615 1,199,970 2,394,867 493,542 1,079,845
Vote netted revenues (791,215) (138,225) (247,882) (595,000) (141,318) (154,891)
Net operating expenditures 2,333,973 486,390 952,088 1,799,867 352,224 924,954
Vote 5 - Capital expenditures
Gross capital expenditures 499,371 55,621 91,545 421,394 32,373 53,337
Vote netted revenues (70,000) - - (70,000) - -
Net capital expenditures 429,371 55,621 91,545 351,394 32,373 53,337
(S) Contributions to employee benefit plans 117,709 29,428 58,855 95,791 23,668 47,336
Total budgetary authorities 2,881,053 571,439 1,102,488 2,247,052 408,265 1,025,627

6. Departmental budgetary expenditures by standard object (unaudited) (in thousands of dollars)

  Fiscal year 2022-23 Fiscal year 2021-22
Planned expenditures for the year ending March 31, 2023Footnote 2 Expended during the quarter ended September 30, 2022 Year-to-date used at quarter-end Planned expenditures for the year ending March 31, 2022Footnote 2 Expended during the quarter ended September 30, 2021 Year-to-date used at quarter-end
Expenditures:
Personnel (includes EBP) 914,088 230,441 454,870 769,290 191,155 435,695
Transportation and communications 832,991 150,762 228,027 735,302 118,504 188,571
Information 3,991 199 390 1,900 181 400
Professional and special services 477,393 99,446 154,629 316,042 97,388 150,880
Rentals 622,877 101,489 295,037 470,951 47,754 247,168
Repair and maintenance 266,923 62,177 107,832 186,670 48,307 78,022
Utilities, materials and supplies 9,842 1,393 2,003 10,274 1,347 1,710
Acquisition of land, buildings and works 11,705 14,277 14,886 13,424 903 1,798
Acquisition of machinery and equipment 594,185 41,632 84,874 401,165 40,828 69,712
Transfer payments - - - - - -
Public debt charges 8,177 2,447 4,251 5,654 2,578 3,960
Other subsidies and payments 96 5,401 3,571 1,380 638 2,602
Total gross budgetary expenditures 3,742,268 709,664 1,350,370 2,912,052 549,583 1,180,518
Less revenues netted against expenditures:
Vote netted revenues 861,215 138,225 247,882 665,000 141,318 154,891
Total revenues netted against expenditures 861,215 138,225 247,882 665,000 141,318 154,891
Total net budgetary expenditures 2,881,053 571,439 1,102,488 2,247,052 408,265 1,025,627

7. Glossary

Appropriations / Authorities

Expenditure authorities are approvals from Parliament for individual government organizations to spend up to specific amounts. Expenditure authority is provided in two ways: annual appropriation acts that specify the amounts and broad purposes for which funds can be spent; and other specific statutes that authorize payments and set out the amounts and time periods for those payments. The amounts approved in appropriation acts are referred to as voted amounts, and the expenditure authorities provided through other statutes are called statutory authorities.

Vote 1 - Operating expenditures
A vote that covers most day-to-day expenses, such as salaries, utilities and minor capital expenditures.
Vote 5 - Capital expenditures
Capital expenditures are those made for the acquisition or development of items that are classified as tangible capital assets as defined by Government accounting policies. This vote is generally used for capital expenditures that exceed $10,000.
Capital Budget Carry Forward
Treasury Board centrally managed vote that permits departments to bring forward eligible lapsing funds from one fiscal year to the next in an amount up to 20% of their year-end allotments in the capital expenditures Vote as reflected in Public Accounts.
Cash method of accounting
The cash method recognizes revenues when they are received and expenses when they are paid for.
Collective agreement
Collective agreement means an agreement in writing entered into under the Public Service Staff Relations Act between the employer and a bargaining agent and containing provisions covering terms and conditions of employment and related matters.
Departmental Plan
The Departmental Plan is an expenditure plan for each department and agency (excluding Crown corporations). It describes departmental priorities, expected results and associated resource requirements covering a three-year period, beginning with the year indicated in the title of the report.
Employee Benefit Plans (EBP)
A statutory item that includes employer contributions for the Public Service Superannuation Plan, the Canada and the Quebec Pension Plans, Death Benefits, and the Employment Insurance accounts. Expressed as a percentage of salary, the EBP rate is changed every year as directed by the Treasury Board Secretariat.
Expenditure basis of accounting
An accounting method that combines elements of the two major accounting methods, the cash method and the accrual method. The expenditure basis of accounting method recognizes revenues when cash is received and expenses when liabilities are incurred or cash is paid out.
Frozen allotments

Frozen allotments are used to prohibit the spending of funds previously appropriated by Parliament. There are two types of frozen allotments:

  • permanent: where the Treasury Board has directed that funds lapse at the end of the fiscal year
  • temporary: where an appropriation is frozen until such time as conditions have been met
Full accrual method of accounting
An accounting method that measures the performance and position of an organization by recognizing economic events regardless of when cash transactions occur. Therefore, the full accrual method of accounting recognizes revenues when they are earned (for example, when the terms of a contract are fulfilled) and expenses when they are incurred.
Main Estimates
Each year, the government prepares estimates in support of its request to Parliament for authority to spend public funds. This request is formalized through the introduction of appropriation bills in Parliament. In support of the Appropriation Act, the Main Estimates identify the spending authorities (Votes) and amounts to be included in subsequent appropriation bills. Parliament is asked to approve these Votes to enable the government to proceed with its spending plans.
Operating Budget Carry Forward
Treasury Board centrally managed vote that permits departments to bring forward eligible lapsing funds from one fiscal year to the next in an amount up to 5% of their Main Estimates gross operating budget allotment.
Standard objects
A system in accounting that classifies and summarizes the expenditures by categories, such as type of goods or services acquired, for monitoring and reporting.
Supplementary Estimates
The President of the Treasury Board tables up to three Supplementary Estimates usually in May, in late October or early November and in February to obtain the authority of Parliament to adjust the government's expenditure plan set out in the estimates for that fiscal year. Supplementary Estimates serve two purposes. First, they seek authority for revised spending levels that Parliament will be asked to approve in an Appropriation Act. Second, they provide Parliament with information on changes in the estimated expenditures to be made under the authority of statutes previously passed by Parliament. Each Supplementary Estimates document is identified alphabetically (A, B and C).
Vote netted revenues authority
The authority by which Shared Services Canada has permission to collect and spend revenue earned and collected from the provision of IT services within the government.

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