Quarterly Financial report for period ending December 31, 2018

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, 2018.

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 of National Defence 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 2018–19 Departmental Plan (https://www.ocsec-bccst.gc.ca/s47/s49/eng/departmental-plans) and in the Main Estimates (https://www.canada.ca/en/treasury-board-secretariat/services/planned-government-spending/government-expenditure-plan-main-estimates/2018-19-estimates/main-estimates.html).

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 2018–19 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 compensation allocations from Treasury Board.

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 2018–19 is up $274 thousand from the same quarter of the previous year. 

This change can be attributed to the following factors:

• an increase in personnel costs of $130 thousand for the most part due to payments related to collective agreements, staff engaged in anticipation of the enactment of Bill C-59, An Act respecting national security matters, including the engagement of a Special Legal Advisor;
• an increase in rental costs of $144 thousand as a result of late billing by Public Services and Procurement Canada – all nine months' rent for 2018–19 were billed in the 3^rd quarter;
• there was a reduction of $15 thousand in equipment and furniture costs in the third quarter as obsolete equipment with a zero book value was replaced in the 3^rd quarter of 2017–18; and
• the spending on all other objects of expenditure combined increased $15 thousand during the third quarter of 2018–19.

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 2018–19 is up $139 thousand from the year to date expenditures in 2017–18.

This change can be attributed to the following factors:

• an increase in personnel costs of $115 thousand for the most part due to payments related to collective agreements, staff engaged in anticipation of the enactment of Bill C-59, An Act respecting national security matters, including the engagement of a Special Legal Advisor;
• there was an increase in travel of $54 thousand primarily as a result of the costs of travel to London to meet with U.K. counterparts to discuss legislative experiences in relation to Bill C-59 and travel to Australia for the annual Five Eyes Intelligence Oversight and Review Council meeting;
• there was a reduction of $15 thousand in equipment and furniture costs for the year to date as obsolete equipment with a zero book value was replaced in the 3^rd quarter of 2017–18; and
• the spending year to date on all other objects of expenditure combined decreased $15 thousand during 2018–19.

3. Risks and Uncertainties

The risks and uncertainties remain unchanged from the previous quarter.

Bill C-59

Bill C-59, An Act respecting national security matters, which received second reading in the Senate and was referred to the Standing Senate Committee on National Security and Defence on December 11, 2018, proposes significant changes in the national security framework and intelligence accountability regime. Should the legislation be enacted, 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 if legislation will pass and when it 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 process of restructuring the office 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, continues.

5. Approval by Senior Officials

Original signed by:

The Honourable Jean-Pierre Plouffe, CD
Commissioner

Guylaine A. Dansereau
Chief Financial Officer

Ottawa, Canada

February 15, 2019

Statement of Authorities (unaudited)

Fiscal year 2018–19 (in thousands of dollars)

	Total available for use for the year ending March 31, 2019	Used during the quarter ended Dec 31, 2018	Year to date used at quarter-end
Vote 1 - Program Expenses	2,104	641	1,304
Statutory authorities – Contributions to employee benefit plans	166	40	124
Total Budgetary authorities	2,270	681	1,428
Total authorities	2,270	681	1,428

Fiscal year 2017–18 (in thousands of dollars)

	Total available for use for the year ended 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

Departmental Budgetary Expenditures by Standard Object (unaudited)

Fiscal year 2018–19 (In thousands of dollars)

Expenditures:	Planned expenditures for the year ending March 31, 2019	Expended during the quarter ended Dec 31, 2018	Year to date used at quarter-end
Personnel	1,378	359	925
Transportation and communications	89	12	72
Information	45	11	26
Professional and special services	388	70	165
Rentals	320	224	225
Repair and maintenance	2	0	1
Utilities, materials and supplies	28	4	13
Acquisition of land, buildings and works	0	0	0
Acquisition of machinery and equipment	20	1	1
Other subsidies and payments	0	0	0
Total gross budgetary expenditures	2,270	681	1,428
Total net budgetary expenditures	2,270	681	1,428

Fiscal year 2017–18 (In thousands of dollars)

Expenditures:	Planned expenditures for the year ending March 31, 2018	Expended during the quarter ended Dec 31, 2017	Year to date used at quarter-end
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