Quarterly Financial Report—Quarter ended June 30, 2014

  1. Introduction
  2. Highlights of fiscal quarter and fiscal year-to-date (YTD) results
  3. Significant changes in relation to operations, personnel and programs
  4. Risks and uncertainties
  5. Budget 2012 Implementation

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

1. Introduction

This Quarterly Financial Report (QFR) has been prepared by management as required by section 65.1 of the Financial Administration Act, in the form and manner prescribed by the Treasury Board. This QFR should be read in conjunction with the Main Estimates and Supplementary Estimates for fiscal year 2014–15.

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

Basis of presentation

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. This QFR has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

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. This QFR has therefore 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 Industry Canada, consistent with the Main Estimates and Supplementary Estimates for the 2014–15 fiscal year.

In fiscal year 2012–13, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013–14, the changes to departmental authorities were reflected in the 2013–14 Main Estimates tabled in Parliament.

This QFR has not been subject to an external audit. However, it has been reviewed by the Departmental Audit Committee.

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

The variances in authorities available for use and actual expenditures in 2014–15 largely relate to significant funding decreases in the department's Grants and Contributions Vote in addition to Operating reductions announced in Budget 2012 and budgets transferred to other government departments.

2.1 Authorities available for use and planned expenditures

Graph 1: Comparison of Total Net Budgetary Authorities Available for Use as of June 30, 2014 and June 30, 2013 (in millions $)

Graph 1: Comparison of Total Net Budgetary Authorities Available for Use as of June 30, 2014 and June 30, 2013 (in millions $) (the long description is located below the image)

* Includes Vote 10 and Statutory Grants and Contribution expenditures.

** Includes Canadian Intellectual Property Office (CIPO) Revolving Fund.

Description of Graph 1
Graph 1: Comparison of Total Net Budgetary Authorities Available for Use as of June 30, 2014 and June 30, 2013 (in millions $)
Budgetary Authorities 2014–15 2013–14
G&CFootnote * 703,975,000 794,577,000
Operating 297,683,000 304,053,000
OtherFootnote ** 60,360,000 72,412,000
Capital 16,841,000 19,403,000
Total Budget 1,078,859,000 1,190,445,000

Industry Canada's total authorities available for use in 2014–15 ($1.1 billion) reflects a $111.6 million decrease in comparison with the same quarter ended in 2013–14, as illustrated in the Statement of Authorities and in Table 1: Departmental Budgetary Expenditures by Standard Object. This decrease is primarily related to:

  • Grants and Contributions (Vote 10 and Statutory) — $90.6 million
  • Vote 1 — Operating Expenditures — $6.4 million
  • Vote 5 — Capital Expenditures — $2.6 million
  • CIPO Revolving Fund — $8.8 million

Variances for each appropriation are explained in greater detail throughout this document.

2.1.1 Grants and Contributions (Vote 10 and Statutory) — $90.6 million

The authority for Vote 10 — Grants and Contributions decreased by a total of $93.4 million compared to the same quarter end of last fiscal year, mainly due to the following factors:

  • The completion of the Bombardier CSeries program in 2013–14, resulting in a decrease of $55.4 million in 2014–15.
  • The reduction of contributions funding under the Strategic Aerospace and Defence Initiative ($41.6 million) and Technology Partnerships Canada ($4.5 million) is mainly due to the end of temporary resources approved as part of Budget 2009 for the aerospace industry.
  • A decrease resulting from a timing difference for the collection of Technology Partnerships Canada repayable contributions. An amount of $22.1 million was accessed via Supplementary Estimates A last year while this year's amount is planned to be accessed through Supplementary Estimates B.
  • Reductions in funding of approximately $8.6 million relate to programs that are winding down such as the Structured Financing Facility program and contributions to the Ivey Centre for Health Innovation and Leadership.
  • The Automotive Innovation Fund received an additional $48.6 million through Budget 2012, bringing its total funding for 2014–15 to $64.6 million. This represents an increase of $19.4 million over the previous year.
  • New funding has also been received ($18.2 million) for the Industrial Research and Development Program, the Technology Demonstration Program and the Economic Development Initiative.
  • The Canada Foundation for Innovation's budget increased by $1.2 million over the previous year to align with the funding profile approved following Budget 2012.

Statutory grants and contributions increased by $2.8 million over the first quarter of 2013–14, mainly due to:

  • The Canadian Youth Business Foundation, approved in the 2013 Budget Implementation Act, received $9 million in both 2013–14 and 2014–15. However, in 2013–14, the funding was not approved in time for the first quarter.
  • The Genome program increased by $6.6 million in line with its approved funding profile.
  • A $12.8 million reduction under the Canada Small Business Financing Act based on a decreased forecasted use of the program by lenders.
2.1.2 Vote 1 — Net Operating Expenditures — $6.4 million

Authorities available for use in Vote 1 — Net Operating Expenditures decreased by a total of $6.4 million compared to the same quarter end of last year, mostly due to the implementation of the last cost containment measures from Budget 2012 ($9.3 million). In addition, $1.5 million was transferred to Shared Services Canada for the management of end user devices for the department while another $1.8 million was transferred to FedDev Ontario for the Canada Business Network (Ontario). These reductions are partially offset by $3.8 million received for collective agreement increases and by lower vote transfers for capital requirements ($2.6 million).

2.1.3 Vote 5 — Capital Expenditures — $2.6 million

Authorities available for use in Vote 5 — Capital Expenditures decreased by a total of $2.6 million compared to the first quarter of last year. The decrease relates mainly to the reduced requirement for the National Accommodation Strategy initiative ($1.9 million) and the Spectrum Application Modernization project ($0.9 million).

2.1.4 CIPO Revolving Fund — $8.8 million

CIPO is planning to draw down $8.8 million less on its 2014–15 authority than in the previous year due primarily to an increase of $5.1 million in its revenue forecasts as well as a decrease of $3.7 million in employee termination liability for those employees who elected for an early cash-out of their accumulated severance pay.

2.1.5 Table 1: Departmental Budgetary Expenditures by Standard Object

Table 1: Departmental Budgetary Expenditures by Standard Object displays initial expenditure plans. These plans are subject to change during the fiscal year, particularly when deferred funding is to be accessed and included later in the fall.

Major variances in standard objects between the two years are mainly attributable to the changes in Grants and Contributions programs as described in section 2.1.1.

2.2 Authorities used and actual expenditures

Graph 2: Comparison of expenditures as of June 30, 2014 and June 30, 2013 (in millions $)

Graph 2: Comparison of expenditures as of June 30, 2014 and June 30, 2013 (in millions $) (the long description is located below the image)

* Includes Vote 10 and Statutory Grants and Contribution expenditures.

** Includes Canadian Intellectual Property Office (CIPO) Revolving Fund.

Description of Graph 2
Graph 2: Comparison of expenditures as of June 30, 2014 and June 30, 2013 (in millions $)
Budgetary Authorities 2014–15 2013–14
G&CFootnote * 121,365,000 126,355,000
Operating 86,944,000 92,606,000
OtherFootnote ** 37,362,000 18,667,000
Capital 4,292,000 4,945,000
Total Budget 249,963,000 242,573,000

Expenditures in the first quarter of 2014–15 increased by $7.4 million, compared with the same quarter last year primarily in the CIPO revolving fund.

First quarter significant change summary:

  • Grants and Contributions (Vote 10 and Statutory) — $5.0 million
  • Vote 1 — Net Operating Expenditures — $5.7 million
  • Vote 5 — Capital Expenditures — $0.7 million
  • CIPO Revolving Fund — $19.5 million
2.2.1 Grants and Contributions (Vote 10 and Statutory) $5.0 million

In the first quarter of 2014–15, there was a $5 million net decrease in Grants and Contributions expenditures, compared with the same quarter in 2013–14. Details of the significant variances that occurred are as follows:

  • $32.1 million decrease attributable to the Bombardier CSeries program having been completed in 2013–14.
  • $18.5 million increase in various programs, including payments to Genome Canada and the Canada Foundation for Innovation. These represent timing differences for programs year-over-year. To reduce the risk of overpayment, the department introduced payments to several programs in two installments rather than one time payments per fiscal year. In several cases, single payments normally made later in the fiscal year have now had a portion paid in the first quarter of this fiscal year.
  • Minor timing differences and cash flow requirements of existing contribution agreements amount to another $5.6 million in increased spending.
  • $2.6 million increase in activity for the transfer payment programs under FedNor, a return to normal average levels after reduced activity in the 2013–14 fiscal year. This was due to some delays in the anticipated launch of two FedNor initiatives: the Targeted Manufacturing Initiative for Northern Ontario and Fednor's deployment of broadband support.
2.2.2 Vote 1 — Net Operating Expenditures — $5.7 million

In the first quarter of 2014–15, there was a $5.7 million net decrease in authorities used for Vote 1 — Net Operating Expenditures. As shown in Table 1: Departmental Budgetary Expenditures by Standard Object, this variance is primarily due to the following factors:

  • A $16 million decrease in severance payouts, as most were made in 2013–14.
  • A $12 million increase in expenditures in the "other subsidies and payments" standard object due to a one-time charge against the department's operating vote for a transition payment to existing employees which will allow the Government to change its pay system to a "pay in arrears" industry standard.
  • A $1.7 million decrease in net expenditures related to increased reported respendable revenues generated primarily by the Competition Bureau.
2.2.3 Vote 5 — Capital Expenditures — $0.7 million

The reduction in spending under the capital vote is consistent with the reduced requirements explained in section 2.1.3.

2.2.4 Canadian Intellectual Property Office (CIPO) Revolving Fund — $19.5 million

A system issue in the first quarter of this fiscal year has understated the cash receipts against CIPO's spending authority. The issue has understated CIPO's recorded revenue for this quarter by approximately $11.7 million and has resulted in an overstatement in net revolving fund expenditures for the first quarter of 2014–15. Increases in spending for the quarter are attributable to a transition payment to existing employees for pay in arrears ($2.8 million) and a transfer of employees to be recovered in future periods ($2.2 million).

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

There have been no significant changes in relation to operations, personnel and programs over the last quarter.

4. Risks and uncertainties

The Department continues to refine and strengthen its existing stewardship and oversight practices to monitor program funding and expenditures.

Ongoing controls and accurate monitoring are particularly important to Industry Canada because of the Department's funding model, whereby a portion of the operating budget comes from royalty repayments from legacy contribution programs. Because these royalties fluctuate with the sales of aging product lines of individual companies and the overall health of the economy, the Department must be prepared to mitigate the impact of unpredictable changes to its funding level.

The Department has completed an assessment of the impact of the operating budget freeze announced in the October 2013 Speech from the Throne, and will address the requirements largely through attrition. It is expected this approach will fully mitigate the related risks. Any change in this regard will be addressed in future editions of the Department's Quarterly Financial Report.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that have been implemented by Industry Canada in order to refocus government and programs, make it easier for Canadians and business to deal with their government, and modernize and reduce the back office.

Industry Canada has implemented all reduction measures stemming from Budget 2012, and no further measures will be undertaken in 2014–15. Details regarding Industry Canada's Budget 2012 reductions are available online.

Industry Canada's prudent financial management, focus on long-term financial affordability, and commitment to ensuring the continued delivery of the Department's mandate and core activities have been key to meeting the required targets.

There are no financial risks or uncertainties related to these savings.

The printed version is signed by:

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John Knubley
Deputy Minister
Ottawa, Canada

August 19, 2014
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Date

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David Enns
Chief Financial Officer
Ottawa, Canada

August 19, 2014
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Date

Industry Canada
For the quarter ended June 30, 2014

Statement of Authorities (unaudited)

Fiscal Year 2014–2015
(in thousands of dollars) Total available for use for the year ending March 31, 2015Footnote 1 Used during the quarter ended June 30, 2014 Year to date used at quarter-end
Vote 1 — Operating expenditures 376,837 106,141 106,141
Vote 1 — Revenue Credited to the Vote (79,154) (19,197) (19,197)
Vote 1 — Net Operating Expenditures 297,683 86,944 86,944
Vote 5 — Capital expenditures 16,841 4,292 4,292
Vote 10 — Grants and contributions 557,723 89,685 89,685
Total voted authorities 872,247 180,921 180,921
Budgetary statutory authorities:
Revolving Fund Gross expenditures 160,840 40,740 40,740
Revolving Fund Revenues (152,022) (16,119) (16,119)
Revolving Fund Net expenditures 8,818 24,621 24,621
Grants and Contributions
Genome Canada 63,700 23,650 23,650
Liabilities under the Canada Small Business Financing Act& the Small Business Loans Act 73,552 8,030 8,030
Canadian Youth Business Foundation 9,000 -    -   
Total Statutory Grants and Contributions 146,252 31,680 31,680
Employee Benefit Plans 50,342 12,586 12,586
Refunds of Previous Years Revenue -    134 134
Proceeds for Crown Asset Disposals 316 -    -   
Minister's Car Allowance 84 21 21
Total budgetary statutory authorities 205,812 69,042 69,042
Total Budgetary authorities 1,078,059 249,963 249,963
Non-budgetary authorities 800 -   -  
Total authorities 1,078,859 249,963 249,963
Fiscal Year 2013–2014
(in thousands of dollars) Total available for use for the year ending March 31, 2014Footnote 2 Used during the quarter ended June 30, 2013 Year to date used at quarter-end
Vote 1 — Operating expenditures 382,687 110,005 110,005
Vote 1 — Revenue Credited to the Vote (78,634) (17,399) (17,399)
Vote 1 — Net Operating Expenditures 304,053 92,606 92,606
Vote 5 — Capital expenditures 19,403 4,945 4,945
Vote 10 — Grants and contributions 651,091 82,333 82,333
Total voted authorities 974,547 179,884 179,884
Budgetary statutory authorities:
Revolving Fund Gross expenditures 164,545 35,750 35,750
Revolving Fund Revenues (146,941) (30,659) (30,659)
Revolving Fund Net expenditures 17,604 5,091 5,091
Grants and Contributions
Genome Canada 57,100 35,400 35,400
Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act 86,386 8,622 8,622
Canadian Youth Business Foundation -    -    -   
Total Statutory Grants and Contributions 143,486 44,022 44,022
Employee Benefit Plans 53,619 13,405 13,405
Refunds of Previous Years Revenue -   150 150
Proceeds for Crown Asset Disposals 306 -    -   
Minister's Car Allowance 83 21 21
Total budgetary statutory authorities 215,098 62,689 62,689
Total Budgetary authorities 1,189,645 242,573 242,573
Non-budgetary authorities 800 -    -   
Total authorities 1,190,445 242,573 242,573

Industry Canada
For the quarter ended June 30, 2014

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

Fiscal Year 2014–2015
(in thousands of dollars) Planned expenditures for the year ending March 31, 2015Footnote 3 Expended during the quarter ended June 30, 2014 Year to date used at quarter-end
Expenditures:
Personnel 451,466 120,183 120,183
Transportation and communications 9,331 1,471 1,471
Information 3,019 1,359 1,359
Professional and special services 97,846 16,616 16,616
Rentals 11,771 6,310 6,310
Repair and maintenance 5,694 791 791
Utilities, materials and supplies 4,585 662 662
Acquisition of land, buildings and works -    -    -   
Acquisition of machinery and equipment 21,232 1,217 1,217
Transfer payments 703,975 121,365 121,365
Other subsidies and payments 316 15,305 15,305
Total gross budgetary expenditures 1,309,235 285,279 285,279
Less Revenues netted against expenditures:
Revolving Fund Revenues 152,022 16,119 16,119
Sales of Services and Other Revenue 79,154 19,197 19,197
Total Revenues netted against expenditures: 231,176 35,316 35,316
Total net budgetary expenditures 1,078,059 249,963 249,963

Fiscal Year 2013–2014
(in thousands of dollars) Planned expenditures for the year ending March 31, 2014Footnote 4 Expended during the quarter ended June 30, 2013 Year to date used at quarter-end
Expenditures:
Personnel 473,499 137,117 137,117
Transportation and communications 14,715 1,893 1,893
Information 3,270 567 567
Professional and special services 79,325 15,703 15,703
Rentals 10,712 3,752 3,752
Repair and maintenance 8,465 447 447
Utilities, materials and supplies 6,383 744 744
Acquisition of land, buildings and works -    4 4
Acquisition of machinery and equipment 23,968 3,804 3,804
Transfer payments 794,577 126,356 126,356
Other subsidies and payments 306 244 244
Total gross budgetary expenditures 1,415,220 290,631 290,631
Less Revenues netted against expenditures:
Revolving Fund Revenues 146,941 30,659 30,659
Sales of Services and Other Revenue 78,634 17,399 17,399
Total Revenues netted against expenditures: 225,575 48,058 48,058
Total net budgetary expenditures 1,189,645 242,573 242,573
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