Quarterly Financial Report for the quarter ended December 31, 2017

Statement Outlining Results, Risks and Significant Changes in Operations, Personnel and Program

1. Introduction

1.1 Background to the Quarterly Financial Report

As per GC 4400, Departmental Quarterly Report, the Office of the Communications Security Establishment Commissioner (Office) is submitting its quarterly report for the period ending December 31, 2017.

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 external audit or review.

1.2 Authority, Mandate and Program

The position of Communications Security Establishment Commissioner was created to review the activities of Communications Security Establishment (CSE) to determine whether it performs its duties and functions in accordance with the laws of Canada.  This includes having due regard for the privacy of Canadians.

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

• reviewing CSE activities to ensure they comply with the law;
• conducting any investigations deemed necessary in response to complaints about the CSE;
• reviewing and reporting annually to the Minister on review activities carried out under an (ministerial) authorization;
• informing the Minister of National Defence and the Attorney General of Canada of any CSE activities that may not be in compliance with the law; and
• submitting to the Minister for tabling in Parliament, within 90 days after the end of each fiscal year, an annual report on the Commissioner's activities and findings.

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 programs of the Office can be found in the Office's 2017–18 Departmental Plan and in the Main Estimates.

1.3 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's spending authorities granted by Parliament and those used by the Office consistent with the Main Estimates and Supplementary Estimates (as applicable) for the 2017–18 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 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. 

The Office 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.

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

Third Quarter

It should be noted that the Authorities in the Statement of Authorities and the Planned Expenditures in Table 1: Departmental budgetary expenditures by Standard Object have been adjusted to account for the receipt of the operating budget carry-forward ($97 thousand) carried over from fiscal year 2016–17 and the compensation adjustments ($22 thousand) resulting from collective agreements settled. 

As reflected in the attached Statement of Authorities and in Table 1 Departmental budgetary expenditures by Standard Object (below) and illustrated in the chart (below), the Office's third quarter spending in 2017–18 is down $103 thousand from the same quarter of the previous year. 

This change can be attributed to the following factors:

• a decrease in personnel costs of $119 thousand due primarily to the recovery of the salary cost of an employee on interchange with another government department, employee turnover, and related employee benefit costs;
• an increase in the cost of office equipment of $16 thousand due to the replacement of obsolete, zero-value office equipment; and
• minor increases in professional and special services costs of $1 thousand, in information costs of $2 thousand and in rental costs of $4 thousand were offset by minor decreases in transportation and communication costs of $3 thousand and in materials and supplies of $4 thousand.

Fiscal Year to date

As reflected in the attached Statement of Authorities and in Table 1 Departmental budgetary expenditures by Standard Object (below) and illustrated in the chart (below), the Office's year to date spending in 2017–18 is down $117 thousand from the year to date expenditures in 2016–17.

This change can be attributed to the following factors:

• a decrease in personnel costs of $172 thousand due primarily to the recovery of the salary cost of an employee on interchange with another government department, employee turnover, and related employee benefit costs to employee departures;
• an overall decrease in other costs of $6 thousand (transportation costs decreased $1 thousand, materials, supplies and subscriptions decreased $5 thousand, the remaining costs not detailed below remained constant);
• the increase in rental costs in 2017–18 of $26 thousand was due to the late billing of 1 month's rent in 2016–17 by Public Services and Procurement Canada;
• the increase in information costs of $10 thousand was due primarily to the initiation of a research paper in 2017–18;
• on overall increase in the cost of professional services of $9 thousand from the previous year due to a variety of causes: late billings by Public Services and Procurement Canada in 2016–17 for shared services, one-time event costs in 2017­–18, and an increase in the cost of translation in 2017–18 offset by early billings in 2016–17 for website support services, and a reduction of 2017–18 costs for CDFS, the departmental financial management system; and
• an increase in the cost of office equipment of $16 thousand due to the replacement of obsolete, zero-value office equipment.

3. Risks and Uncertainties

Bill C-59

On June 20, 2017, Bill C-59, An Act respecting national security matters, was given first reading in the House of Commons.  Under the proposed legislation, when the legislation comes into force, the Commissioner of the Communications Security Establishment becomes the Intelligence Commissioner, the Office of the Communications Security Establishment Commissioner becomes the Office of the Intelligence Commissioner, the employees of the Office of the Communications Security Establishment Commissioner become employees of the Office of the Intelligence Commissioner and the money remaining from the appropriation to the Office of the Communications Security Establishment Commissioner is deemed to be an amount appropriated to the Office of the Intelligence Commissioner. 

With no certainty as to when the legislation will come into force, the Office continues to conduct reviews and support the Commissioner in the discharge of his mandate.

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

The Office is in the process of restructuring the organization to be able to continue to deliver on the Commissioner's review mandate while at the same time managing the risks related to, and preparing for, the potential changes that may result under Bill C-59.

5. Approval by Senior Officials

Original signed by:

The Honourable Jean-Pierre Plouffe, CD
Commissioner                                                           

J. William Galbraith
Chief Financial Officer

Ottawa, Canada
February 23, 2018

Statement of Authorities (unaudited)

Fiscal year 2017–18 (in thousands of dollars)

	Total available for use for the year ending March 31, 2018	Used during the quarter ended Dec 31, 2017	Year to date used at quarter-end
Vote 1 - Program Expenses	2,059	364	1,162
Statutory authorities – Contributions to employee benefit plans	169	43	127
Total Budgetary authorities	2,228	407	1,289
Total authorities	2,228	407	1,289

Fiscal year 2016–17 (in thousands of dollars)

	Total available for use for the year ended March 31, 2017	Used during the quarter ended Dec 31, 2016	Year to date used at quarter-end
Vote 1 - Program Expenses	2,026	464	1,267
Statutory authorities – Contributions to employee benefit plans	185	46	139
Total Budgetary authorities	2,211	510	1,406
Total authorities	2,211	510	1,406

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

Fiscal year 2017–18 (In thousands of dollars)

	Planned expenditures for the year ending March 31, 2018	Expended during the quarter ended Dec 31, 2017	Year to date used at quarter-end
Expenditures:
Personnel	1,268	229	810
Transportation and communications	32	6	18
Information	65	5	27
Professional and special services	484	66	170
Rentals	320	80	232
Repair and maintenance	3	0	1
Utilities, materials and supplies	31	5	15
Acquisition of land, buildings and works	0	0	0
Acquisition of machinery and equipment	25	16	16
Other subsidies and payments	0	0	0
Total gross budgetary expenditures	2,228	407	1,289
Total net budgetary expenditures	2,228	407	1,289

Fiscal year 2016–17 (In thousands of dollars)

	Planned expenditures for the year ending March 31, 2017	Expended during the quarter ended Dec 31, 2016	Year to date used at quarter-end
Expenditures:
Personnel	1,323	348	982
Transportation and communications	32	9	19
Information	24	3	17
Professional and special services	446	65	161
Rentals	317	76	206
Repair and maintenance	4	0	1
Utilities, materials and supplies	27	9	20
Acquisition of land, buildings and works	0	0	0
Acquisition of machinery and equipment	38	0	0
Other subsidies and payments	0	0	0
Total gross budgetary expenditures	2,211	510	1,406
Total net budgetary expenditures	2,211	510	1,406