Quarterly Financial Report—Quarter Ended December 31, 2015


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 2015–16.

A summary description of Innovation, Science and Economic Development (ISED) 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, ISED 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 ISED Canada's spending authorities granted by Parliament and those used by ISED Canada, consistent with the Main Estimates and Supplementary Estimates for the 2015–16 fiscal year.

This QFR has not been subject to an external audit or review. However, it has been reviewed by the Departmental Audit Committee (DAC) in accordance with Treasury Board guidance concerning the roles and responsibilities for DAC Members. No material misstatements or omissions have been identified.

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

The variances in authorities available for use and actual expenditures in 2015–16 are largely related to significant funding increases in the department's Grants and Contributions Vote.

2.1 Authorities available for use and planned expenditures

Graph 1: Comparison of Total Net Budgetary Authorities Available for Use as of and

Bar chart of Comparison of Total Net Budgetary Authorities Available for Use as of December 30, 2015 and December 30, 2014 (in millions $) (the long description is located below the image)
Description of Graph 1
Comparison of Total Net Budgetary Authorities Available for Use as of December 31, 2015 and December 31, 2014 (in millions of dollars)
2015–16 2014–15
Capital 21 24
OtherFootnote ** 62 61
Operating 353 352
G&CFootnote * 876 739
Total Budget 1,312 1,176

Innovation, Science and Economic Development Canada's total authorities available for use of $1.3 billion in 2015–16 reflect a $136 million increase in comparison with the same quarter ended in 2014–15, as illustrated in the Statement of Authorities and in the Table 1: Departmental Budgetary Expenditures by Standard Object. This increase is primarily related to:

  • Grants and Contributions (Vote 10 and Statutory) – $137.5 million 
  • Vote 1 – Operating Expenditures – $0.8 million 
  • Vote 5 – Capital Expenditures – $2.8 million 
Variances for each appropriation are explained in greater detail throughout this document.

2.1.1 Grants and Contributions (Vote 10 and Statutory) – $137.5 million 

Authorities available for use in Vote 10 – Grants and Contributions increased by a total of $139.5 million compared to the same quarter of last fiscal year. The primary causes of the increase are explained below:

  • $151.6 million of new funding for 2015–16, as per Budgets 2014 and 2015:
    • $76 million for the new Connecting Canadians program to extend high-speed Internet service to households in rural and remote regions of the country;
    • $30 million for the Automotive Innovation Fund to support research and development projects in the automotive sector;
    • $21.9 million for the Technology Demonstration Program (TDP), of which $10 million was funded internally from the Strategic Aerospace and Defence Initiative (SADI);
    • $9.5 million for Youth Internships at Community Access Sites;
    • $7.6 million for the new Automotive Supplier Innovation Program;
    • $4.6 million of net additional funding following the renewal of three programs (Futurpreneur Canada, Council of Canadian Academies and canarie Inc.); and,
    • $2 million increase for Mitacs Elevate.
  • $8.7 million net decrease for SADI primarily due to the following:
    • $10 million transfer to the TDP;
    • $0.7 million decrease in 2015–16 repayable contribution funding accessed in 2015–16 compared to 2014-15; and,
    • $2 million increase due to the reprofile of funds from the previous year.
  • $4.6 million net decrease in cash flow requirements for the following programs:
    • $15 million decrease for Genome Canada;
    • $8.9 million increase for the Canada Foundation for Innovation; and,
    • $1.5 million increase for the Broadband program.

In addition, statutory grants and contributions decreased by $2 million when compared to the same quarter last year following the $9 million statutory reduction of Canadian Youth Business Foundation (now known as Futurpreneur in Vote 10 funding) offset by an increase of $7.1 million for the statutory Genome program.

2.1.2 Vote 1 – Net Operating Expenditures – $0.8 million 

Authorities available for use in Vote 1 – Net Operating Expenditures increased by a total of $0.8 million compared to the same quarter of last fiscal year primarily due to:

  • New funding of $1.4 million was received for projects related to Internal Trade, the Automotive Supplier Innovation Program, and Youth Internships at Community Access Sites.
  • A $0.7 million funding reduction pertaining to the TBS back office transformation agenda, ISED's contribution to the 2016 Census of Population, and Canada School of Public Service's enterprise-wide learning approach.

2.1.3 Vote 5 – Capital Expenditures – $2.8 million 

Authorities available for use in Vote 5 – Capital Expenditures decreased by $2.8 million compared to the third quarter last year. This is mainly due to the decrease in funding received from the 2015–16 Capital Budget Carry Forward.

2.1.4 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 the deferred funding is accessed.

Major variances in standard objects between the two years are mainly explained by the changes in Grants and Contributions programs as mentioned in section 2.1.1.

In addition, there is a decrease of $11 million in Acquisition of Machinery and Equipment due to revised capital project plans and the receipt of reduced Capital Budget Carry forward funding.

Personnel expenditures have increased by $6.9 million compared to 2014–15 due to additional funding for Connecting Canadians and spending by the Canadian Intellectual Property Office (CIPO) in order to strengthen its operational capacity and implement its information technology and intellectual property modernization agenda.

A $4.2 million increase in Information costs was offset by a similar reduction in Professional and Special Services following a decision to reclassify subscription and data services expenditures in 2015–16. The total departmental expenditures for Subscription and data services were approximately $3.3 million in 2014–15.

The $4.2 million increase in Rentals is related to increased rental expenditures for the Spectrum Applications Modernization (SAM) project.

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, 2015 and December 31, 2014

Bar charts representing comparison of Expenditures in the Third quarter and Net Year-to-Date Expenditures as of December 31, 2015 and December 31, 2014 (in millions $) (the long description is located below the image)
Description of Graph 2
Comparison of Expenditures in the Third quarter and Net Year-to-Date Expenditures as of December 31, 2015 and December 31, 2014 (in millions of dollars)
Third quarter Year-to-Date
2015–16 2014–15 2015–16 2014–15
Capital 6 7 14 15
OtherFootnote ** 18 13 46 48
Operating 69 74 226 243
G&CFootnote * 100 65 486 429
Total 193 159 773 735

Expenditures in the third quarter of 2015–16 increased by $34.6 million compared with the same quarter last year.  Year-to-date expenditures have increased by $37.9 million. The differences occurred primarily in Grants and Contributions (Vote 10 and Statutory) but also in Operating expenditures and the CIPO revolving fund.

Second quarter and year-to-date change summary:

  • Grants and Contributions (Vote 10 and Statutory)
    • Quarterly – $35.5 million 
    • Year-to-date – $57.3 million 
  • Vote 1 – Net Operating Expenditures
    • Quarterly – $5.0 million 
    • Year-to-date – $16.6 million 
  • Vote 5 – Capital Expenditures
    • Quarterly – $0.7 million 
    • Year-to-date – $1.0 million 
  • CIPO Revolving Fund
    • Quarterly – $4.5 million 
    • Year-to-date – $3.7 million 

2.2.1 Grants and Contributions (Vote 10 and Statutory) (Third quarter: $35.5 million ; Year-to-date: $57.3 million )

In the third quarter of 2015–16, there was a $35.5 million net increase in Grants and Contributions expenditures compared with the same quarter last year. Year-to-date expenditures increased by $57.3 million compared to last year.

Third quarter increase of $35.5 million is primarily due to the following:

  • A $20.5 million increase related to timing differences of payments to the following programs this quarter:
    • $15 million increase for CANARIE;
    • $8 million increase related to AIF payments;
    • $1.3 million decrease for Communities Future North; and,
    • $1.2 million decrease for Youth Internship (YI).
  • An $18.7 million increase related to changes in program demand:
    • $21.3 million increase for SADI disbursements;
    • $1.6 million increase for Broadband; and,
    • $4.2 million decrease related to the Northern Ontario Development Program (NODP).
  • A $3.8 million decrease in expenditures related to liabilities under the Canada Small Business Financing Act and the Small Business Loans Act.

Year-to-date increase of $57.3 million is primarily due to the following:

  • A $60.1 million year-to-date increase in G&C disbursements due to timing differences in the following programs:
    • $35.7 million increase for SADI;
    • $9.4 million for AIF with payments having been requested and paid in the fourth quarter last year;
    • $6 million in TDP, which was paid in the fourth quarter last year;
    • $5 million for Quantum, which was paid in the fourth quarter last year; and,
    • $4 million for Mitacs, which was signed and paid in the fourth quarter last year.
  • A $6.5 million net increase in variances to recipient cash flow requirements related to the following programs:
    • $12.6 million increase for Genome Canada (Statutory);
    • $8.9 million increase for CFI; and,
    • $15 million decrease for Genome Canada.
  • A $4 million increase in expenditures for new G&C programs (Let's Talk Science and the Council of Canadian Academies).
  • An $11.4 million decrease in the previous CANARIE program which was completed in 2014–15. Only $15 million has been paid to the new CANARIE project, renewed as part of Budget 2015.
  • A $2 million net decrease in spending as the Canadian Youth Business Foundation (previously $9 million in statutory disbursements) was renewed as Futurpreneur ($7 million).

2.2.2 Vote 1 – Net Operating Expenditures (Third quarter: $5.0 million ; Year-to-date: $16.6 million )

Third quarter expenditures were $5 million lower than the same period last year primarily due to higher recoveries from CIPO for IT services provided by ISED.

Year-to-date net operating expenditures have decreased by $16.6 million compared to the same period as last year. As shown in the Table 1: Departmental budgetary expenditures by Standard Object, the variance is primarily due to the following:

  • A $12 million decrease in expenditures in the "other subsidies and payments" standard object due to a one-time charge against the department's operating vote in 2014–15 for a transition payment to existing employees as a result of the Government's change to a "pay in arrears" pay system.
  • A $3.7 million increase in recoveries compared to last year.

2.2.3 Vote 5 – Capital Expenditures (Third quarter: $0.7 million ; Year-to-date: $1.0 million )

The change in spending under the capital vote is not material. The variance in spending is primarily due to lower expenditures for the National Accommodation Strategy and CIO's investment in the Business Intelligence project.

2.2.4 Canadian Intellectual Property Office (CIPO) Revolving Fund (Third quarter: $4.5 million ; Year-to-date: $3.7 million )

In the third quarter of 2015–16, there was a $4.5 million increase in CIPO's net expenditures of which $5.6 million relates to material and supplies purchased for office moves as well as salary increases and other professional services supported by CIPO's MOUs.  This increase was partially offset by a $1 million increase in revenues.

Year-to-date net expenditures were $3.7 million lower than the same time last year as a result of $6.2 million in additional revenues partially offset by $2.4 million of increased expenditures.

2.2.5 Table 1: Departmental Budgetary Expenditures by Standard Object: Other subsidies and payments (Third quarter: $4.0 million ; Year-to-date: $19 million )

Third quarter expenditures were $4 million lower in the "other subsidies and payments" standard object due to an increase of $3.7 million in recoveries from CIPO.

On a year-to-date basis, the "other subsidies and payments" standard object expenditures were $19 million lower due to the Government's change to "pay in arrears" system last fiscal year and the $3.7 million increase in recoveries. 

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

Following the 2016 Federal election, the name of the Department was changed from Industry Canada to Innovation, Science and Economic Development Canada.  In addition, the following 3 new Ministers were appointed:

  • Navdeep Bains – Minister of Innovation, Science and Economic Development
  • Kirsty Duncan – Minister of Science
  • Bardish Chagger – Minister of Tourism and Small Business

Starting in 2016-17, an increase of $33 million has been approved on a permanent basis to stabilize the department's operating budget, in lieu of relying on the repayment of contributions.

4. Risks and uncertainties

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

The risks and uncertainties related to the Department's old funding model, which relied on funding from the repayment of contributions, has been mitigated by the $33 million of annual funding starting in the 2016–17 Main estimates.

Innovation, Science and Economic Development Canada continues to monitor the operating budget freeze announced in the October 2013 Speech from the Throne, and has been managing the required reductions to internal spending largely through attrition. It is expected this approach will continue to mitigate the related risks. Any changes in this regard will be addressed in future editions of the Department's Quarterly Financial Report.

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John Knubley
Deputy Minister
Ottawa, Canada


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February 15, 2016

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David Enns
Chief Financial Officer
Ottawa, Canada


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February 15, 2016

Industry Canada
For the quarter ended

Statement of Authorities (unaudited)

Statement of Authorities (unaudited), Fiscal Year 2015–16
(in thousands of dollars) Total available for use for the year ending Footnote 1 Used during the quarter ended
Year to date used at quarter-end
Vote 1 - Operating expenditures 433,090 94,691 292,145
Vote 1 - Revenue Credited to the Vote (79,794) (25,405) (65,700)
Vote 1 - Net Operating Expenditures 353,296 69,286 226,445
Vote 5 - Capital expenditures 21,480 5,944 13,798
Vote 10 - Grants and contributions 731,805 86,281 388,407
Total voted authorities 1,106,581 161,511 628,650
Budgetary statutory authorities:
Revolving Fund Gross expenditures
159,948 40,630 115,040
Revolving Fund Revenues
(151,317) (35,830) (108,568)
Revolving Fund Net expenditures
8,631 4,800 6,472
Grants and Contributions
Genome Canada
70,800   59,900
Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act
73,454 13,693 38,041
Canadian Youth Business FoundationFootnote 2
     
Other statutory grants and contributions
  8 31
Total Statutory Grants and Contributions 144,254 13,701 97,972
Employee Benefit Plans 51,929 12,970 38,909
Refunds of Previous Years Revenue   78 956
Proceeds for Crown Asset Disposals 308 71 71
Minister's Car Allowance 86 15 59
Total budgetary statutory authorities 205,208 31,635 144,439
Total Budgetary authorities 1,311,789 193,146 773,089
Non-budgetary authorities 800 - -
Total authorities 1,312,589 193,146 773,089
Statement of Authorities (unaudited), Fiscal Year 2014–15
(in thousands of dollars) Total available for use for the year ending Footnote 1 Used during the quarter ended 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 & the Small Business Loans Act
73,552 17,529 39,795
Canadian Youth Business FoundationFootnote 2
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

Industry Canada
For the quarter ended

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

Departmental budgetary expenditures by Standard Object (unaudited), Fiscal Year 2015–16
(in thousands of dollars) Planned expenditures for the year ending Footnote 1 Expended during the quarter ended Year to date used at quarter-end
Expenditures:
Personnel
462,226 116,984 357,685
Transportation and communications
13,279 3,505 8,133
Information
9,213 1,726 4,600
Professional and special services
102,805 19,570 58,623
Rentals
18,689 5,594 14,502
Repair and maintenance
9,681 2,121 4,388
Utilities, materials and supplies
7,372 1,045 3,570
Acquistion of land, buildings and works
- - -
Acquisition of machinery and equipment
25,158 3,292 6,715
Transfer payments
876,059 99,982 486,379
Other subsidies and payments
18,418 562 2,762
Total gross budgetary expenditures
1,542,900 254,381 947,357
Less Revenues netted against expenditures:
Revolving Fund Revenues
151,317 35,830 108,568
Sales of Services and Other Revenue
79,794 25,405 65,700
Total Revenues netted against expenditures:
231,111 61,235 174,268
Total net budgetary expenditures 1,311,789 193,146 773,089
Departmental budgetary expenditures by Standard Object (unaudited), Fiscal Year 2014–15
(in thousands of dollars) Planned expenditures for the year ending Footnote 1 Expended during the quarter ended 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
Acquistion 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
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