Quarterly Financial Report for period ending December 31, 2012

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

1. Introduction

Background to the Quarterly Report

As per the Treasury Board Accounting Standard (TBAS) 1.3, the Office of the Communications Security Establishment Commissioner (Office) is submitting its quarterly report.

This section of the quarterly financial report should be read in conjunction with the Main Estimates (and as applicable - Supplementary Estimates and previous interim reports for the current year).  The 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.  This quarterly financial report has not been subject to an external audit or review.

Authority, Mandate and Program

The Commissioner derives his authority and mandate from the National Defence Act:

• reviewing Communications Security Establishment Canada (CSEC) activities to ensure they comply with the law;
• conducting any investigations deemed necessary in response to complaints about CSEC; and
• informing the Minister of National Defence and the Attorney General of Canada of any CSEC activities that may not be in compliance with the law.

In addition, the Commissioner also has a mandate under the Security of Information Act to receive information from persons who are permanently bound to secrecy seeking to release special operational information on the grounds that it is in the public interest.

Further information on the mandate, roles, responsibilities and program of the Office can be found in the Commissioner's 2012-13 Report on Plans and Priorities and Main Estimates available on the following websites:

http://www.tbs-sct.gc.ca/rpp/2012-2013/index-eng.asp?acr=1987 and http://www.tbs-sct.gc.ca/est-pre/20122013/me-bpd/docs/me-bpd-eng.pdf

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting.  The accompanying Statement of Authorities includes the Office spending authorities granted by Parliament and those used by the department consistent with the Main Estimates and Supplementary Estimates (as applicable) for the 2012-2013 fiscal year. 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. 

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, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

The Office 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. 

2. Highlights of fiscal quarter and fiscal year to date (YTD) results

The authorities and the planned expenditures have been updated to reflect the allocation of the full value of the operating budget carry forward.

Third Quarter Results

Overall expenditures for this quarter were down $158K from the similar period of the previous year. The significant changes and the explanations for these changes are as follows:

• Personnel costs have decreased overall by $100K.  This decrease is almost entirely due to the one time payment of severance amounts in the 3^rd quarter of 2011-2012.
• Professional and special service costs have decreased by $56K. In the 3^rd quarter of the previous year, the Office made a one-time payment for system development support for its financial system of $25K. As well, shared service costs for human resource and financial systems decreased $8K from the previous quarter.  Professional service costs related to review, advisory and other professional services were down $36K from the previous quarter.  However, professional services costs related to the web and information management increased in the current quarter $13K.
• Rentals were down $12K from the previous year as a result of timing differences in the payment of invoices.
• Expenditures in the current quarter for office furniture for the additional office space increased $11K over the previous quarter.

Year to Date Results

Overall year to date expenditures were up $98K from the previous year.  The significant changes and the explanations for these changes are as follows:

• Personnel costs have decreased $80K. The decrease is a combination of one-time severance payments in 2011-2012 offset slightly by statutory increases paid to staff in 2012-2013;
• Professional services costs have decreased $14K. In the previous year, the Office made a one-time payment for system development support for its financial system of $25K. As well, shared service costs for human resource and financial systems decreased $15K from the previous year.  Professional service costs related to review, advisory and other professional services were down $39K from the previous year.  However, professional services costs related to the web and information management increased in the current year $15K.  In addition, there was a one time payment in the current year of $50K in support of the IIRAC Conference held in Ottawa.
• Construction costs related to accommodation were $194K in the current year.  There were no construction costs during the first nine months in 2011-2012.
• Equipment and furnishing costs have increased $11K over the previous year as a result of equiping the new office space.
• Other expenditures, machine rentals and supplies, are down due to lower requirements from the previous year by $13K.    

3. Risks and Uncertainties

Review Capability and Capacity

Risks and uncertainties remain the same.  As CSEC's operations grow and increase in complexity, the Commissioner's office must ensure that its review capabilities can meet this growth in size and complexity.  Review methodologies must be regularly assessed for effectiveness and efficiency and review officers must maintain a high level of professionalism and proficiency as well as training to keep up to date with technology and policy.  The Office, with the construction of its additional office space almost concluded, will soon start the process to engage the services of additional review professionals to further support the Commissioner in the discharge of his mandate.

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

There were no significant changes in operations, personnel and programs during the quarter.

Approval by Senior Officials

Original signed by:

Robert Décary, Q.C.
Commissioner                        

J. William Galbraith
Chief Financial Officer

Ottawa, Canada
February 26, 2013

STATEMENT OF AUTHORITIES (unaudited)

(in thousands of dollars)	Fiscal year 2012-13			Fiscal year 2011-2012
	Total available for use for the year ending March 31, 2013	Used during the quarter ended Dec 31, 2012	Year to date used at quarter-end	Total available for use for the year ended March 31, 2012	Used during the quarter ended Dec 31, 2011	Year to date used at quarter-end
Vote 20 - Program Expenses	2,069	368	1,246	1,971	525	1,157
Statutory authorities – Contributions to employee benefit plans	134	45	112	137	46	103
Total Budgetary authorities	2,203	413	1,358	2,108	571	1,260
Total authorities	2,203	413	1,358	2,108	571	1,260

Table 1: Departmental budgetary expenditures by Standard Object (unaudited)

* Planned expenditures for the year ending March 31, 2012 were revised to reflect construction costs.
Expenditures (In thousands of dollars):	Fiscal year 2012-2013			Fiscal year 2011-2012
	Planned expenditures for the year ending March 31, 2013	Expended during the quarter ended Dec 31, 2012	Year to date used at quarter-end	Planned expenditures for the year ending March 31, 2012 *	Expended during the quarter ended Dec 31, 2011	Year to date used at quarter-end
Personnel	896	261	761	899	361	841
Transportation and communications	14	5	12	177	3	8
Information	61	1	8	79	6	17
Professional and special services	364	95	244	459	151	258
Rentals	197	34	115	165	46	125
Repair and maintenance	2	0	1	5	0	0
Utilities, materials and supplies	15	4	8	15	2	7
Acquisition of land, buildings and works	639	0	194	250	0	0
Acquisition of machinery and equipment	15	13	15	59	2	4
Other subsidies and payments	0	0	0	0	0	0
Total gross budgetary expenditures	2,203	413	1,358	2,108	571	1,260
Total net budgetary expenditures	2,203	413	1,358	2,108	571	1,260