Treasury Board of Canada Secretariat's Quarterly Financial Report for the Quarter Ended September 30, 2015

1.1 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the Secretariat’s spending authorities granted by Parliament and those used by the department, consistent with the Main Estimates and the Supplementary Estimates (A) for the 2015-16 fiscal year. The 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 monies 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.

The Department 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.

1.2 The Secretariat Financial Structure

The Secretariat manages both departmental and government-wide expenditures. Its departmental operating revenues and expenditures are managed under Vote 1, Program Expenditures.

Government-wide expenditures are managed via seven different votes:

• Vote 5, Government Contingencies which serves to supplement other appropriations to provide the Government with sufficient flexibility to meet miscellaneous, urgent or unforeseen departmental expenditures between Parliamentary supply periods;
• Vote 10, Government-Wide Initiatives which supplements other appropriations in support of the implementation of strategic management initiatives in the Public Service of Canada;
• Vote 15, Compensation Adjustments which supplements the appropriations of other government departments and agencies that may need to be partially or fully augmented as a result of adjustments made to terms and conditions of service or employment of the federal public service, including members of the Royal Canadian Mounted Police and the Canadian Forces, Governor in Council appointees and Crown corporations as defined in section 83 of the Financial Administration Act;
• Vote 20, Public Service Insurance, which covers revenues and expenses related to Treasury Board’s role as the employer of the core public administration. This includes revenues and expenses for the Public Service Health Care Plan (PSHCP), Public Service Dental Care Plan, Disability Insurance, Provincial Payroll Taxes (Manitoba, Newfoundland, Ontario and Quebec), Public Service Management Insurance Plan (PSMIP) and other programs;
• Vote 25, Operating Budget Carry Forward which supplements other appropriations for the carry forward of unused operating funds from the previous fiscal year;
• Vote 30, Paylist Requirements which covers paylist requirements for departments and agencies related to legal requirements for the government as employer for items such as parental benefits and severance payments; and
• Vote 33, Capital Budget Carry Forward which supplements other appropriations for the carry forward of unused capital funds from the previous fiscal year. This vote was created in 2011-12.

The funding within these votes is approved by Parliament. With the exception of Vote 20, the funding for Government-wide expenditures is eventually transferred from the Secretariat to other government departments once specified criteria are met. The Secretariat does not incur any revenue or expenses related to these votes and thus they are not reflected in the Statement of Authorities tables.

The Secretariat also incurs costs under Statutory Authorities, both for departmental and government-wide payments made under legislation approved previously by Parliament, which are not part of the Annual Appropriation Bills. These expenditures mainly reflect the employer’s share of Public Service Pension Plans, the Canada/Quebec Pension Plans, Employment Insurance premiums and Public Service Death Benefits. These expenditures are also initially charged to the accounts of the Secretariat but are eventually attributed to the statutory vote contributions to employee benefit plans of each department and agency, including the Secretariat.

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use decreased in 2015-16 from those in 2014-15 by $77.5M (2.5%). This net decrease is the result of a decrease in Vote 1 spending authority of $67.8M and a decrease in Vote 20 Public Service Insurance spending authority of $9.9M, offset by an increase of spending authority to make Statutory Payments of $0.2M.

The change in spending authority is summarized below:

The change in Vote 1 TBS Program authorities is primarily due to a decrease in funding set aside for the payout of an out-of-court settlement under the White class action lawsuit as the majority of claimants were paid in 2014-15. In addition, the sunset of funding set aside to implement phase 1 of the Workspace Renewal Initiative and Web Renewal Initiative contributed to this decrease as did the funding returned to the fiscal framework and transferred to the Canada School of Public Service to support the National Managers’ Community. These decreases were offset by an increase in authority to spend up to $16.1M in new funding received from other government departments and agencies to implement the TBS-led government-wide Back Office Transformation Initiative, an increase in the operating budget carry forward from 2014-15 to 2015-16, and new authority to implement phase 2 of the Workspace Renewal Initiative.

The decrease in Vote 20 Public Service Insurance spending authority is primarily due to funds returned to the fiscal framework related to the seventh and final year of savings achieved through implementation of the 2008 Vote 20 Public Service Insurance Strategic Review.

Statement of Departmental Budgetary Expenditures by Standard Object

At the end of Q2, “net budgetary expenditures” had decreased by $118.9M (9.9%) as compared to the same period last year. The change in expenditures by standard object is summarized below:

The standard objects with a significant change at the end of Q2, as compared to the same period last year, were:

• Personnel ($32.1M) – This is comprised of an increase in Vote 20 ($33.0M) offset by a decrease in Statutory expenditures ($63.4M) and Vote 1 ($1.7M).
  • Vote 20 ($33.0M) – The increase in expenditures is primarily due to higher costs per service for the PSHCP, the impact of plan design changes which came into effect on October 1, 2014 and to a lesser extent, the residual impact from the elimination of the annual deductible on PSHCP, which came into effect on January 1, 2015. These increases are offset by decreased expenditures for the PSMIP attributable to the premium holiday that came into effect on January 1, 2015, reducing the amount that the employer has to contribute.
  • Statutory Expenditures ($63.4M) – The Secretariat recovers from other government departments and agencies their share of the employer contributions to the pension plan and transfers them to Public Services and Procurement Canada to offset payment charges. The decrease in statutory expenditures is mainly due to the timing of flow-through payments primarily related to employer contributions made under the Public Service Superannuation Act (PSSA). The net effect on the financial statements of the Secretariat will be zero by year-end.
  • Vote 1 ($1.7M) – This is primarily due to a reduction in personnel expenditures including a decline in requirements for centrally funded items such as severance and maternity payments.
• Professional and Special Services ($7.3M) – This is comprised of the following increases:
  • Vote 1 ($5.7M) – This is primarily for services related to phase 1 of the Workspace Renewal Initiative including post move fit-up costs at the 90 Elgin Street location and for legal services.
  • Vote 20 ($1.5M) – This is primarily for services related to the PSHCP with the balance related to the Joint Learning Program.
• Rentals ($5.0M, Vote 1) - This is mainly due to the one-time purchase of licenses that was recorded in 2014-15 in support of the Financial Management Transformation Initiative of which the majority of costs were recovered from other governments departments by the end of 2014-15.
• Subsidies and Payments ($51.8M, Vote 1) – This is mainly due to the payout of an out-of-court settlement to eligible claimants under the White class action lawsuit and a one-time transition payment for implementing salary in arrears for TBS employees.

There was an increase in Revenue in Q2:

• Vote Net Revenue ($37.2M, Vote 20) – This is mainly due to an increase in revenue from pensioner members for the PSHCP following increases to contribution rates that came into effect on April 1, 2015 and an increase in recoveries as a result of higher salary forecasts for personnel related to the delivery of the CPP and EI programs.

For the quarter ended September 30, 2015