Vol. 146, No. 9 — April 25, 2012
SOR/2012-76 April 5, 2012
FINANCIAL ADMINISTRATION ACT
Regulations Amending the Regulations Exempting a Department and Parent Crown Corporations from the Requirements of Subsections 65.1(1) and 131.1(1) of the Financial Administration Act
The Treasury Board, pursuant to subsection 65.1(4) (see footnote a) of the Financial Administration Act (see footnote b), hereby makes the annexed Regulations Amending the Regulations Exempting a Department and Parent Crown Corporations from the Requirements of Subsections 65.1(1) and 131.1(1) of the Financial Administration Act.
REGULATIONS AMENDING THE REGULATIONS EXEMPTING A DEPARTMENT
AND PARENT CROWN CORPORATIONS FROM THE REQUIREMENTS
OF SUBSECTIONS 65.1(1) AND 131.1(1) OF THE
FINANCIAL ADMINISTRATION ACT
1. The title of the Regulations Exempting a Department and Parent Crown Corporations from the Requirements of Subsections 65.1(1) and 131.1(1) of the Financial Administration Act (see footnote 1) is replaced by the following:
REGULATIONS EXEMPTING DEPARTMENTS AND PARENT CROWN CORPORATIONS FROM THE REQUIREMENTS OF SUBSECTIONS 65.1(1) AND 131.1(1) OF THE FINANCIAL ADMINISTRATION ACT.
2. Section 1 of the Regulations is replaced by the following:
1. The Canadian Security Intelligence Service and the Communications Security Establishment are exempted from the requirement of subsection 65.1(1) of the Financial Administration Act.
COMING INTO FORCE
3. These Regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
Issue and objectives
Pursuant to section 65.1 of the Financial Administration Act (FAA), departments must prepare quarterly financial reports for each of the first three fiscal quarters ended after April 1, 2011. The legislation allows Treasury Board of Canada to exempt an entity from the requirement to produce a quarterly financial report or allow an entity to exclude for its report any content required by the legislation.
As a result of an Order in Council (OIC) [P.C. 2011-1301] dated November 15, 2011, the FAA was amended to add to Schedule 1.1 the Communications Security Establishment (CSE). It is proposed that the Communications Security Establishment be indefinitely exempted from the requirements of section 65.1 of the FAA.
There are concerns from a national security perspective with regard to publishing information pertaining to the operational capacity and capabilities of CSE through publication of quarterly financial reports.
Description and rationale
Prior to the creation of CSE as a separate department, its financial information was reported through the Department of National Defence. Because of the relatively small size of CSE’s expenditures in comparison with the total amount of expenditures at the whole department level, information about CSE’s detailed financial and operational resources have not been identifiable by outsiders. As a stand alone department, CSE is now required to publish detailed quarterly financial reports (QFRs). Exemption from this requirement would eliminate the risk of unintentional disclosure of information to outsiders on the operational capacity and capabilities of CSE through the publication of QFRs, thus preserving national security.
The exemption will result in less information about CSE’s finances being publicly reported. This reduction is justified, however, as it serves a legitimate security objective. CSE will continue to ensure accountability through various mechanisms which will involve third party oversight. CSE will continue to be subject to audits by the Office of the Auditor General. Preventing sensitive information related to CSE’s operational capability from becoming available to outsiders minimizes national security risks.
When section 65.1 of the FAA was introduced, it was anticipated that certain entities might be exempted from the requirement to publish quarterly financial reports for national security reasons. Relieving the entity from the requirements of section 65.1 of the FAA will eliminate the risk that sensitive or potentially sensitive information will be released to the public. A clear precedent has been set with the granting of a similar exemption to the Canadian Security Intelligence Service.
These Regulations were drafted in consultation with the Treasury Board of Canada Secretariat and the Department of Justice. CSE has been consulted, and supports the Regulations.
Implementation, enforcement and service standards
These Regulations come into force on the day on which they are registered. All other departments and parent Crown corporations are responsible for the preparation and publication of quarterly financial reports in compliance with the Financial Administration Act.
Departmental Accounting and Reporting
Office of the Comptroller General
Treasury Board of Canada Secretariat
S.C. 2009, c. 31, s. 58
R.S., c. F-11