Quarterly Financial Report—Quarter ended June 30, 2011

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

1. Introduction

This quarterly 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 report should be read in conjunction with the Main Estimates and Supplementary Estimates.

A summary description of the Industry Canada program activities can be found in Part II of the Main Estimates.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes Industry Canada's spending authorities granted by Parliament and those used by the department, consistent with the Main Estimates and Supplementary Estimates for the 2011–12 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.

As part of the departmental performance reporting process, Industry Canada prepares its annual departmental financial statements on a full accrual basis in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector. However, the spending authorities voted by Parliament remain on an expenditure basis.

The quarterly report has not been subject to an external audit or review.

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

2.1 Authorities available for use and planned expenditures

In 2011–12, Industry Canada's authorities available for use decreased by approximately $1.16 billion when compared to the same quarter of 2010–11, as illustrated in the Statement of Authorities. The primary reasons for the decrease are related to the winding down of Economic Action Plan (EAP) initiatives in Vote 10 — Grants and contributions and Statutory Grants and contributions. In Budget 2009, the federal government allocated $2.9 billion to Industry Canada to deliver EAP initiatives, the majority of which concluded on March 31, 2011. The authority for Vote 10 — Grants and contributions decreased by $623.9 million, marking the end of such initiatives as the Marquee Tourism and Events Program (MTEP) and the Community Adjustment Fund. In addition, one of Industry Canada's EAP programs, the Knowledge Infrastructure Program (KIP), was extended into 2011–12. However, funding requirements to complete the program are significantly less when compared to last fiscal year. Finally, there were changes in funding requirements for several programs, including the Broadband Canada: Connecting Rural Canadians program, the Canada Foundation for Innovation, the Institute for Quantum Computing, and the Automotive Innovation Fund. Similarly, statutory authorities available for use for Grants and contributions decreased by $508.4 million, primarily as a result of the winding down of KIP.

Reductions in authorities available for use in Vote 1 – Net Operating expenditures are also apparent. Of the $19.8 million reduction, $16.3 million relates to programs which are sunsetting including the Structured Financing Facility, MTEP, and the Security and Prosperity Partnership of North America – Canadian Secretariat. The remaining $3.6 million decrease is to remove funding received for collective agreements in accordance with cost containment measures from Budget 2010.

These variances are also illustrated in Table 1: Departmental budgetary expenditures by Standard Object but are combined with the Canadian Intellectual Property Office (CIPO) expenditures reported as "Other Statutory authorities" in the Statement of Authorities. During the preparation of the 2011–12 Main Estimates, a new methodology was used to improve the reporting of planned expenditures by standard object. Information by standard object is now compared and adjusted against actual spending trend data to improve the overall accuracy of spending estimates. This change of methodology resulted in variances in the majority of standard object categories, most notably in planned expenditures for:

  • Transportation and communications ($9.2 million decrease)
  • Professional and special services ($9.1 million increase)
  • Repair and maintenance ($4.8 million increase)
  • Utilities, material and supplies ($1.3 million decrease)

This analysis, along with the reduced requirements of sunsetting programs, results in variances in operating expenditures, most notably in:

  • Transportation and communications ($5.6 million decrease)
  • Utilities, materials and supplies ($2.6 million decrease).

These decreases were offset by a $9.1 million increase in planned revenues which net against funded authorities for the department.

The Vote 5 – Capital expenditures variance of $9.2 million is largely the result of termination of funding for the Modernizing of Federal Laboratories initiative provided under EAP. The Capital budget will be replenished to some extent later in the fiscal year, through transfers from Vote 1 – Net Operating expenditures, when capital projects receive full approval. The Vote 5 variance is also reflected in the planned expenditures for the Acquisition of machinery and equipment in Table 1: Departmental budgetary expenditures by Standard Object.

Authorities used and actual expenditures

Authorities used during the first quarter of 2011–12 increased by $162 million compared to the same quarter last year, primarily in Vote 10 — Grants and contributions and Statutory Grants and contributions.

The $175 million increase in transfer payment spending is a result of timing differences for transfer payment expenditures, specifically, a payment to the Canada Foundation for Innovation of $177 million which was made in the first quarter of 2011–12. A similar payment was made last fiscal year, but in the second quarter.

The increase in authorities used for Grants and contributions is offset by decreases in Vote 1 – Net operating expenditures and Other Statutory expenditures totalling $13.8 million; primarily by a $4.5 million decrease in expenditures in Professional and special services due to timing differences of payments and a $5.4 million increase in the collection of CIPO's respendable revenue, also due to timing differences.

The Statement of Authorities illustrates that authorities available for use in Vote 1 – Net Operating expenditures decreased and there was a proportionate decrease in associated authorities used compared to the same quarter of the last fiscal year. Similarly, Table 1: Departmental budgetary expenditures by Standard Object illustrates that aside from transfer payments, there was an overall decrease in expenditures in all standard objects compared to the same quarter of last fiscal year. Finally, operating expenditures trends in the first quarter of fiscal year 2011–12 are comparable to those of the same quarter of fiscal year 2010–11, with approximately 25 percent of authorities available for use expended during the quarter.

3. Risks and Uncertainties

To restore fiscal balance, the government has implemented a number of measures to improve efficiency while lowering the rate of growth in the size and operations of the public service. Budget 2010 announced that the operating budgets of departments would be frozen at their 2010–11 levels for the fiscal years 2011–12 and 2012–13. Departmental budgets will not be increased to fund the standard 1.5 percent increase in annual wages for the federal public service, or to fund increases set out in collective agreements. Budget 2010 also mandated a series of strategic reviews of various federal departments and agencies to identify cost reductions of 5 percent.

For Industry Canada, the impact of these measures in 2011–12 includes:

  • wage reduction measures, requiring the reallocation of an estimated $8.4 million to cover the cumulative increase related to new collective bargaining agreements
  • reductions totalling $6.1 million stemming from the strategic review exercise conducted in 2010.

In addition, Industry Canada has a funding model, under which a portion of the budget for core operations is generated by royalty payments from firms that had received funds under former contribution programs. This amount can fluctuate significantly according to the financial success of individual companies and the overall health of the economy.

Consequently, the department is working to identify the most appropriate measures to deliver on its mandate within its current funding situation. To do so, Industry Canada is building on its existing stewardship and oversight practices to monitor program funding and expenditures. This includes conducting comprehensive monthly analysis of trends and forecasting in employee headcount, salary expenditures and non-salary expenditures at both the departmental and sector level to ensure affordability and sustainability. These analyses are key elements in the decision-making process to ensure the department works within its allocated resource levels. The department also conducts rigorous oversight of major IT projects to ensure benefits to the department and sound project management.

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

Industry Canada is in the final year of delivering KIP which was one of the EAP initiatives announced in Budget 2009. KIP will be completed by the end of fiscal year 2011–12 while most other programs under the EAP initiative ended March 31, 2011. The impact of the completion of KIP is a decrease in authorities of approximately $1 billion compared to last fiscal year.

The printed version is signed by:

_____________________________
Richard Dicerni
Deputy Minister
Ottawa, Canada

_____________________________
Kelly Gillis
Chief Financial Officer

_____________________________
Date
August 29, 2011

_____________________________
Date
August 29, 2011


Industry Canada
Quarterly Financial Report
For the quarter ended June 30, 2011

Statement of Authorities (unaudited)

Fiscal Year 2011–2012
(in thousands of dollars) Total available for use for the year ending March 31, 2012* Used during the quarter ended June 30, 2011 Year to date used at quarter-end
* Includes approved estimates documents as at quarter end. (Return to reference 1)
Vote 1 – Net
Operating expenditures
373,238 90,675 90,675
Vote 5 – Capital expenditures   5,949 295 295
Vote 10 — Grants and contributions 710,615 186,344 186,344
Budgetary statutory authorities
Employee benefit plans 56,642 14,160 14,160
Grants and contributions 170,960 64,857 64,857
Other 16,601 (1,458) (1,458)
Total Budgetary authorities 1,334,005 354,873 354,873
Non-budgetary authorities 800
Total authorities 1,334,805 354,873 354,873
Fiscal Year 2010–2011(continued)
(in thousands of dollars) Total available for use for the year ending March 31, 2011* Used during the quarter ended June 30, 2010 Year to date used at quarter-end
* Includes approved estimates documents as at quarter end. (Return to reference 2)
Vote 1 – Net
Operating expenditures
393,046 97,392 97,392
Vote 5 – Capital expenditures 15,192 462 462
Vote 10 — Grants and contributions 1,334,519 14,973 14,973
Budgetary statutory authorities
Employee benefit plans 53,998 13,499 13,499
Grants and contributions 679,325 60,760 60,760
Other 13,742 5,655 5,655
Total Budgetary authorities 2,489,822 192,741 192,741
Non-budgetary authorities 800
Total authorities 2,490,622 192,741 192,741

Industry Canada 
Quarterly Financial Report
For the quarter ended June 30, 2011

Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal Year 2011–12
(in thousands of dollars) Planned expenditures for the year ending March 31, 2012* Expended during the quarter ended June 30, 2011 Year to date used at quarter-end
* Includes approved estimates documents as at quarter end. (Return to reference 3)
Expenditures:
Personnel
473,663 129,056 129,056
Transportation and communications
29,084 3,704 3,704
Information
4,209 241 241
Professional and special services
108,178 12,035 12,035
Rentals
11,751 2,539 2,539
Repair and maintenance
12,517 2,850 2,850
Utilities, materials and supplies
7,522 979 979
Acquisition of land, buildings and works
3 3
Acquisition of machinery and equipment
18,276 948 948
Transfer payments
881,576 251,201 251,201
Other subsidies and payments
872 872
Total gross budgetary expenditures 1,546,776 404,428 404,428
Less Revenues netted against expenditures:
Sales of Services
212,771 49,544 49,544
Other Revenue
11 11
Total Revenues netted against expenditures: 212,771 49,555 49,555
Total net budgetary expenditures  1,334,005 354,873 354,873
Fiscal Year 2010–11
(in thousands of dollars) Planned expenditures for the year ending March 31, 2011* Expended during the quarter ended June 30, 2010 Year to date used at quarter-end
* Includes approved estimates documents as at quarter end. (Return to reference 4)
Expenditures:
Personnel
471,418 129,538 129,538
Transportation and communications
43,873 4,422 4,422
Information
5,330 487 487
Professional and special services
99,018 16,541 16,541
Rentals
11,653 2,735 2,735
Repair and maintenance
7,728 3,091 3,091
Utilities, materials and supplies
11,441 1,233 1,233
Acquisition of land, buildings and works
11 11
Acquisition of machinery and equipment
29,236 1,711 1,711
Transfer payments
2,013,844 75,733 75,733
Other subsidies and payments
1,374 1,374
Total gross budgetary expenditures 2,693,541 236,876 236,876
Less Revenues netted against expenditures:
Sales of Services
203,719 44,125 44,125
Other Revenue
10 10
Total Revenues netted against expenditures:   203,719 44,135 44,135
Total net budgetary expenditures 2,489,822 192,741 192,741
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