Quarterly Financial Report—Quarter ended December 31, 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.

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, when compared to last fiscal year, relate to changes in cash flow requirements for recipients of Grants and Contributions; to operating reductions announced in Budget 2012; and to budget transfers 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 December 31, 2014 and December 31, 2013 (in millions $)

Bar chart 1: Comparison of Total Net Budgetary Authorities Available for Use as of December 31, 2014 and December 31, 2013 (in millions $) (the long description is located below the image)

* Includes planned 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 September 30, 2014 and September 30, 2013 (in millions $)
Budgetary Authorities 2014-15 2013-14
G&CFootnote * 738,564,000 858,929,000
Operating 352,466,000 353,640,000
OtherFootnote ** 60,853,000 72,563,000
Capital 24,255,000 27,486,000
Total Budget 1,176,138,000 1,312,618,000

When compared to last fiscal year, Industry Canada's total authorities available for use of $1.2 billion in 2014–15 decreased by $136.5 million, as shown in the Statement of Authorities and in Table 1: Departmental Budgetary Expenditures by Standard Object. This decrease is primarily reflected in the following:

  • Grants and Contributions (Vote 10 and Statutory) – $120.4 million 
  • Vote 5 – Capital Expenditures - $3.2 million 
  • Vote 1 – Operating Expenditures – $1.2 million 
  • CIPO Revolving Fund – $8.8 million 

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

2.1.1 Grants and Contributions (Vote 10 and Statutory) – $120.4 million 

The authority for Vote 10 – Grants and Contributions decreased by a total of $114.1 million in the third quarter of 2014–15, when compared to the same quarter of last fiscal year. The variance mainly resulted from the following factors:

  • The contribution funding for the Bombardier CSeries and the Technology Partnerships Canada programs decreased by $89.1 million when compared to the same quarter of last fiscal year. Compared with the Q2 report, this variance is now approximately $29.2 million higher as funding was received in the third quarter of 2013–14 for the completion of these programs.
  • The reduction of contribution funding under the Strategic Aerospace and Defence Initiative ($41.2 million) is mainly due to the end of temporary additional resources approved as part of Budget 2009 for the aerospace industry.
  • The contribution funding to the Structured Financing Facility program and to the Ivey Centre for Health Innovation and Leadership ended in 2013–14, which resulted in a reduction in funding of $2.9 million.
  • The Youth Internships at community access sites received funding of $9.5 million in Quarter 3 of 2013–14, whereas in 2014–15 the program was managed internally within Industry Canada reference levels. Conversely, the Computer for Schools program received funding of $4 million in Quarter 3 of 2014–15, but was funded internally within the department the year before.
  • The Automotive Innovation Fund received $64.6 million for 2014–15. This represents an increase of $8.7 million compared to the same quarter last year.
  • The funding for MITACS increase by $4 million (from $13 million to $17 million) this quarter, compared to the same quarter last year.
  • The new Technology Demonstration Program and the Economic Development Initiative received funding in 2014–15 for a total of $11.2 million.
  • The Canada Foundation for Innovation's budget increased by $1.2 million over the previous year to align with the funding profile approved in Budget 2012.

Statutory grants and contributions decreased by $6.2 million when compared to the same quarter of last year. As mentioned in last quarter's report, this variance is mainly attributed to the decrease of $12.8 million for forecasted claims under the Canada Small Business Financing Act, offset by an increase of $6.6 million for the Genome program.

2.1.2 Vote 1 – Net Operating Expenditures – $1.2 million 

Authorities available for use in Vote 1 – Net Operating Expenditures decreased by a total of $1.2 million when compared to the same period last year. As mentioned in the last quarter, the final implementation of the Budget 2012 Deficit Reduction Action Plan has resulted in a decrease of $8.4 million in 2014–15. The Operating Budget Carry Forward funding, now reflected in both fiscal years, further augmented the decrease by $0.7 million.

Other factors that contributed to the funding variance in Quarter 3 relate to the decrease in funding for government-wide transfers such as Web Renewal ($0.5 million); lower requirements in vote transfers for capital projects ($5.0 million) which increased the overall operating funding; the new funding for the Connecting Canadians program ($2.3 million); as well as the funding received from PWGSC as a reimbursement for releasing space no longer required ($0.9 million).

2.1.3 Vote 5 – Capital Expenditures - $3.2 million 

Authorities available for use in Vote 5 – Capital Expenditures decreased by a total of $3.2 million when compared to the third quarter of last year. This decrease can be explained by lower requirements in capital vote transfers for the National Accommodation Strategy initiative ($1.9 million) and the Spectrum Application Modernization project ($3.8 million), offset by the increase in the Capital Budget Carry Forward ($2.4 million).

2.1.4 CIPO Revolving Fund – $8.8 million 

As reported in the previous quarters, 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 the 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 reflects the department's expenditure plans.

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 in the Third Quarter and Net Year-to-Date Expenditures as of December 31, 2014 and December 31, 2013 (in millions $)

Bar chart 2: Comparison of Expenditures in the Third Quarter and Net Year-to-Date Expenditures as of December 31, 2014 and December 31, 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 in the Third Quarter and Net Year-to-Date Expenditures as of December 31, 2014 and December 31, 2013 (in millions $)
Budgetary Authorities Third quarter Year to date
2014-15 2013-14 2014-15 2013-14
G&C Footnote * 64,536,000 137,567,000 429,054,000 458,725,000
Operating 74,318,000 77,588,000 242,995,000 253,869,000
Other Footnote ** 12,972,000 13,161,000 48,323,000 47,737,000
Capital 6,690,000 6,601,000 14,836,000 13,901,000
Total Budget 158,516,000 234,917,000 735,208,000 774,232,000

Net expenditures in the third quarter of 2014–15 decreased by $76.4 million compared with the same quarter last year and also decreased by $39 million when comparing year-to-date figures. These differences occurred primarily in the Grants and Contributions category (Vote 10 and Statutory).

Third quarter and year-to-date change summary:

  • Grants and Contributions (Vote 10 and Statutory)
    • Quarterly – $73 million 
    • Year-to-date – $29.7 million 
  • Vote 1 – Net Operating Expenditures
    • Quarterly – $3.3 million 
    • Year-to-date – $10.9 million 
  • Vote 5 - Capital Expenditures
    • Quarterly – $89,000 
    • Year-to-date – 0.9 million 
  • CIPO Revolving Fund
    • Quarterly – $0.7 million 
    • Year-to-date – $3.1 million 
2.2.1 Grants and Contributions (Vote 10 and Statutory) (Third quarter: $73 million ; Year-to-date: $29.7 million )

In the third quarter of 2014–15, there was a $73 million net decrease in Grants and Contributions expenditures (Vote 10 and Statutory), compared with the same quarter in 2013–14. As well, year-to-date comparatives yield a $29.7 million decrease for the same category. Details of the significant variances that occurred are as follows:

  • $82.9 million year-to-date increase (no quarterly variance) in the Canada Foundation for Innovation program, which represents timing differences in program cash flow requirements;
  • $34.7 million quarter decrease and $81.1 million year-to-date decrease attributable to the Bombardier CSeries program having been completed in 2013–14;
  • Approximately $33.3 million quarter decrease and $61.6 million year-to-date decrease in spending for the Strategic Aerospace and Defence Initiative, in line with reductions to the programs funding levels for the fiscal-year;
  • $11.9 million year-to-date increase in spending (no quarterly variance) for Genome, stemming in part from funding increases and cash-flow timing differences;
  • $6.3 million quarter increase and $7.3 million year-to-date increase attributable to the Canada Small Business Financial Act and Small Business Loans Act as more claims are being paid out in 2014–15;
  • $6.8 million increase in year-to-date activity (minimal quarterly variance) 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;
  • Timing differences for payments to existing programs make up $12.4 million in decreased quarterly spending variances ($9 million less for the Canadian Youth Business Foundation and $3.4 million less for the International Telecommunications Union) as well as a $2 million increase in year-to-date activities.
2.2.2 Vote 1 – Net Operating Expenditures (Third quarter: $3.3 million ; Year-to-date: $10.9 million )

In the third quarter of 2014–15, there was a $3.3 million net decrease in authorities used for Vote 1 – Net Operating Expenditures. The variance is not material and analysis of spending objects in the vote show minor variances across several expenditure types, the most significant of which are described in section 2.2.5 below. Spending for this quarter was largely consistent with the same quarter of the previous fiscal year.

Overall year-to-date spending for Vote 1 – Net Operating Expenditures was $10.9 million less than the previous fiscal year; part of this variance is the result of normal variations in respendable revenue generation by the Superintendent of Bankruptcy ($2.6 million) and by the Competition Bureau ($1.6 million).

Actual spending was $6.4 million less than in previous years and are explained in part by activities previously reported in other quarterly reports:

  • A $16 million decrease in the first quarter for severance payouts, as most were made in 2013–14.
  • A $12 million increase in the first quarter 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 $1.1 million increase in the second quarter for increased professional service costs incurred for various planned IT projects.
  • A $3.3 million decrease in the third quarter attributable to several minor variances.
2.2.3 Vote 5 – Capital Expenditures (Third quarter: $89,000 ; Year-to-date: $0.9 million )

The increase in spending under the capital vote for the quarter is not material. Most activity within the vote for this fiscal year and last is related to the Spectrum Applications Modernization project and Communications Research Centre Canada capital projects for campus health and safety.

2.2.4 Canadian Intellectual Property Office (CIPO) Revolving Fund (Third quarter: $0.7 million ; Year-to-date: $3.1 million )

The decrease of $4.5 million in CIPO's gross expenditures for the third quarter is due partly to a disbursement of $2.3 million in the previous year to reduce the employee termination liability for those employees that elected for an early cash-out of their accumulated severance pay; a current year reduction in spending accounts for the remainder. The variance of $5.2 million in CIPO's revenues for the third quarter relates mainly to receipts being less than expected for the period.

Net expenditures were $3.1 million higher in the first three quarters of this year when compared to the previous year, attributable to the transition payment of $2.8 million made in the first quarter and a transfer of employees following a consolidation of IT services, to be recovered in future periods ($1.4 million). These increases in spending are offset by less than expected receipts, as described above.

2.2.5 Table 1: Departmental Budgetary Expenditures by Standard Object: Personnel (Third quarter: $6.3 million ; Year-to-date: $28.4 million )

The "personnel" standard object in Table 1: Departmental Budgetary Expenditures by Standard Object includes personnel expenditures from all of the votes included in the Statement of Authorities, primarily from Vote 1 – Net Operating Expenditures, Employee Benefit Plans and CIPO's Revolving Fund. The quarterly variance for this object ($6.3 million less) and the $28.4 million year-to-date decrease in this standard object is mainly due to one-time severance payouts made in 2013–14.

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.

Industry Canada continues to monitor the implementation of the operating budget freeze announced in the October 2013 Speech from the Throne, through a monthly financial forecasting exercise. The Department is addressing the requirements for reductions to internal spending largely through attrition. It is expected this approach will fully mitigate the related risks. Any changes 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

February 12, 2015
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Date

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David Enns
Chief Financial Officer
Ottawa, Canada

February 11, 2015
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Industry Canada
For the quarter ended December 31, 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 December 31, 2014 Year to date used at quarter-end
Vote 1 — Operating expenditures 431,620 98,545 307,075
Vote 1 — Revenue Credited to the Vote (79,154) (24,227) (64,080)
Vote 1 — Net Operating Expenditures 352,466 74,318 242,995
Vote 5 — Capital expenditures 24,255 6,690 14,836
Vote 10 — Grants and contributions 592,312 47,004 332,954
Total voted authorities 969,033 128,012 590,785
Budgetary statutory authorities:
Revolving Fund Gross expenditures 160,840 35,060 112,596
Revolving Fund Revenues (152,022) (34,768) (102,397)
Revolving Fund Net expenditures 8,818 292 10,199
Grants and Contributions
Genome Canada 63,700 - 47,300
Liabilities under the Canada Small Business Financing Act and the Small Business Loans Act 73,552 17,529 39,795
Canadian Youth Business Foundation 9,000 - 9,000
Other statutory grants and contributions -    3 5
Total Statutory Grants and Contributions 146,252 17,532 96,100
Employee Benefit Plans 50,786 12,586 37,757
Refunds of Previous Years Revenue - 73 304
Proceeds for Crown Asset Disposals 365 - -
Minister's Car Allowance 84 21 63
Total budgetary statutory authorities 206,305 30,504 144,423
Total Budgetary authorities 1,175,338 158,516 735,208
Non-budgetary authorities 800 - -
Total authorities 1,176,138 158,516 735,208
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 December 31, 2013 Year to date used at quarter-end
Vote 1 — Operating expenditures 432,274 101,636 313,425
Vote 1 — Revenue Credited to the Vote (78,634) (24,048) (59,556)
Vote 1 — Net Operating Expenditures 353,640 77,588 253,869
Vote 5 — Capital expenditures 27,486 6,601 13,901
Vote 10 — Grants and contributions 706,443 117,369 381,782
Total voted authorities 1,087,569 201,558 649,552
Budgetary statutory authorities:
Revolving Fund Gross expenditures 164,545 39,602 111,204
Revolving Fund Revenues (146,941) (39,988) (104,095)
Revolving Fund Net expenditures 17,604 (386) 7,109
Grants and Contributions
Genome Canada 57,100 - 35,400
Liabilities under the Canada Small Business Financing Act and the Small Business Loans Act 86,386 11,198 32,535
Canadian Youth Business Foundation 9,000 9,000 9,000
Other statutory grants and contributions - - 8
Total Statutory Grants and Contributions 152,486 20,198 76,943
Employee Benefit Plans 53,656 13,405 40,214
Refunds of Previous Years Revenue - 81 312
Proceeds for Crown Asset Disposals 420 40 40
Minister's Car Allowance 83 21 62
Total budgetary statutory authorities 224,249 33,359 124,680
Total Budgetary authorities 1,311,818 234,917 774,232
Non-budgetary authorities 800 - -
Total authorities 1,312,618 234,917 774,232

Industry Canada
For the quarter ended December 31, 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 December 31, 2014 Year to date used at quarter-end
Expenditures:
Personnel 455,368 115,750 355,935
Transportation and communications 13,013 2,722 6,988
Information 5,085 2,051 4,816
Professional and special services 108,523 18,374 56,290
Rentals 14,483 2,755 11,464
Repair and maintenance 10,064 1,614 3,834
Utilities, materials and supplies 6,677 1,118 3,144
Acquisition of land, buildings and works - 34 34
Acquisition of machinery and equipment 36,144 4,037 8,334
Transfer payments 738,563 64,536 429,055
Other subsidies and payments 18,594 4,520 21,791
Total gross budgetary expenditures 1,406,514 217,511 901,685
Less Revenues netted against expenditures:
Revolving Fund Revenues 152,022 34,768 102,397
Sales of Services and Other Revenue 79,154 24,227 64,080
Total Revenues netted against expenditures: 231,176 58,995 166,477
Total net budgetary expenditures 1,175,338 158,516 735,208
Fiscal Year 2013–2014
(in thousands of dollars) Planned expenditures for the year ending March 31, 2014Footnote 4 Expended during the quarter ended December 31, 2013 Year to date used at quarter-end
Expenditures:
Personnel 476,085 122,079 384,374
Transportation and communications 17,838 2,485 6,457
Information 3,808 3,713 5,183
Professional and special services 98,038 22,446 57,093
Rentals 10,701 4,809 11,024
Repair and maintenance 10,941 1,256 2,640
Utilities, materials and supplies 7,179 1,426 3,198
Acquisition of land, buildings and works -   1 4
Acquisition of machinery and equipment 33,781 2,391 7,085
Transfer payments 858,929 137,567 458,725
Other subsidies and payments 20,093 780 2,100
Total gross budgetary expenditures 1,537,393 298,953 937,883
Less Revenues netted against expenditures:
Revolving Fund Revenues 146,941 39,988 104,095
Sales of Services and Other Revenue 78,634 24,048 59,556
Total Revenues netted against expenditures: 225,575 64,036 163,651
Total net budgetary expenditures 1,311,818 234,917 774,232
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