Quarterly Financial Report—Quarter Ended June 30, 2016


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 2016–17.

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 2016–17 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 2016–17 are largely related to significant funding increases in the department's Grants and Contributions and Operating Votes.

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 June 30, 2016 and June 30, 2015 (the long description is located below the image)
Description of Graph 1
Comparison of Total Net Budgetary Authorities Available for Use as of and
2016–17 2015–16
Capital 16 21
OtherFootnote ** 78 62
Operating 351 311
G&CFootnote * 1,457 875
Total Budgetary authorities 1,902 1,269

ISED's total authorities available for use of $1.9 billion in 2016–17 reflects a $633.3 million increase in comparison with the same quarter ended in 2015–16, as illustrated in the Statement of Authorities and in Table 1: Departmental Budgetary Expenditures by Standard Object. This increase is primarily related to:

  • Grants and Contributions (Vote 10 and Statutory) – $582 million
  • Vote 1 – Net Operating Expenditures – $39.6 million
  • Other - $16.3 million
    • CIPO Revolving Fund - $10.3 million
    • Employee Benefit Plan (EBP) - $6 million
  • Vote 5 – Capital Expenditures – $4.6 million

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

2.1.1 Grants and Contributions (Vote 10 and Statutory) – $582 million

Authorities available for use in Grants and Contributions (Vote 10 and Statutory) increased by a total of $582 million compared to the same quarter of last fiscal year and are primarily explained by the following:

Vote 10 Grants and Contributions:

New Budget 2016 funding in the amount of $566 million for:

  • the new Post-Secondary Institutions - Strategic Investment Fund ($494.9 million)
  • the transfer of the Sustainable Development Technology Canada Fund from Environment and Climate Change Canada and Natural Resources Canada ($57.8 million)
  • the renewal of MITACS - Globalink program ($7 million)
  • the new Stem Cell Network ($6 million)

Additional Budget 2015 funding of $23 million:

  • the Canada 150 Community Infrastructure Program ($5.2 million)
  • MITACS – Accelerate program ($17.9 million)

Increased funding of $45 million as a result of approved cash flow requirements of existing programs:

  • Canada Foundation for Innovation ($21.5 million)
  • Technology Demonstration Program ($14.8 million)
  • Automotive Supplier Innovation Program ($8.9 million)

The additional funding was offset by $52 million worth of reductions in the following programs:

  • Automotive Innovation Fund - $30 million which was accessed for one year in 2015–16 to support large scale research and development projects in the automotive sector 
  • Youth Internships program - $9.5 million of funding received in 2015–16 for a one-year extension of the program
  • Broadband Connecting Rural Canadian Program - remaining funding of $12.3 million ended in 2015–16
Statutory Grants and Contributions:

Statutory grants and contributions remained stable with the same quarter of last year with very little change in spending.

2.1.2 Vote 1 – Net Operating Expenditures – $39.6 million 

Authorities available for use in Vote 1 – Net Operating Expenditures increased by a total of $39.6 million.  The main reason for the increase is the resolution of the department's previous funding model, which relied on funding from the repayment of contributions.  This year, the department was able to access, on a permanent basis, the full $33 million (including $2.9 million in EBP) as part of the Main Estimates in order to stabilize its operating budget. In the first quarter last year, only $11.9 million was accessed via Supplementary Estimates (A).

In addition, major capital projects such as Spectrum Application Modernization and the National Accommodation Strategy ended in 2015-16, resulting in an increase to the operating vote of $13.9 million, as funding for these projects was previously transferred to Capital from the Operating Vote.

Finally, as per Budget 2016, $7.9 million in new funding was received for administering:

  • the Post-Secondary Investment Fund ($4.3M)
  • the Defence Procurement Strategy ($2.5M)
  • Federal Infrastructure Projects ($1.1M)

In previous years, ISED recovered expenditures charged to CIPO as a credit against the Department's expenditures in the other subsidies and payments standard object.  Starting this year, a change was made to the Vote 1 authority wording to increase the Department's VNR authority for recoveries from CIPO. The associated budget and operating expenditures forecast have been updated to the pertinent standard objects.  This change has helped to improve the Departmental cash management position.

2.1.3 Vote 5 – Capital Expenditures – $4.6 million 

Authorities available for use in Vote 5 – Capital Expenditures decreased by $4.6 million compared to the first quarter last year primarily due to the end of major capital projects, as mentioned in Section 2.1.2, for which $13.9 million is no longer required in transfers from the operating to the capital vote. This decrease is partially offset by a net increase of $9.4 million in capital funding for Federal Infrastructure Projects.

2.1.4 Other - $16.3 million

CIPO Revolving Fund - $10.3 million

An increase of $10.3 million in the CIPO's requirements is primarily due to planned investments to modernize its IT infrastructure as well as to develop a suite of business services to meet clients' needs. 

Employee Benefit Plan - $6 million

The $6 million increase in EBP is primarily due to the following: the increase related to the resolution of the funding model ($2.9 million), the increase in Vote Netted Revenue Authority for internal support services ($2.6 million) and the funding received for the Post-Secondary Investment fund ($0.5 million).

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.

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.

The other variances by standard objects are primarily due to the resolution of the previous funding model with a permanent increase of $33 million in 2016–17 and the increase in Vote Netted Revenue Authority for Internal Services of $19.2 million. These increases better reflect overall planned spending by standard object.

2.2 Authorities used and actual expenditures

Graph 2: Comparison of Expenditures in the first quarter and Net Year-to-Date Expenditures as of June 30, 2016 and June 30, 2015

Bar chart of Comparison of Expenditures in the first quarter and Net Year-to-Date Expenditures as of June 30, 2016 and June 30, 2015 (en millions de dollars) (the long description is located below the image)
Description of Graph 2
Comparison of Expenditures in the first quarter and Net Year-to-Date Expenditures as of June 30, 2016 and June 30, 2015 (in millions of dollars)
2016–17 2015–16
Capital 1.2 3.7
OtherFootnote ** 16.3 16.4
Operations 79.7 75.7
G&CFootnote * 139.7 149.1
Total Budgetary authorities 236.9 244.9

Expenditures in the first quarter of 2016–2017 decreased by $8.2 million compared with the same quarter last year due to changes in spending of Grants and Contributions (Vote 10 and Statutory), Operating, Capital, and the CIPO revolving fund expenditures, as follows:

  • Grants and Contributions (Vote 10 and Statutory) – $8.9 million
  • Vote 1 –Net Operating Expenditures – $4 million
  • Vote 5 - Capital Expenditures – $2.5 million
  • CIPO Revolving Fund – $2.1 million
  • Other – Employee Benefit Plans - $1.4 million

2.2.1 Grants and Contributions (Vote 10 and Statutory) - $8.9 million

Overall, spending on Grants and Contributions decreased by $8.9 million compared to the same quarter last year.  The primary drivers of the change are outlined below:

  • Vote 10 Grants and Contributions declined by $5.7 million primarily due to variances in cash flow requirements and timing of payments.  The largest variances included a $11.6 million decrease in spending for the Canada Foundation for Innovation, partially offset by a $5.9 million increase for the new CANARIE program
  • Statutory Grant and Contribution expenditures decreased by $3.2 million this quarter as a result of lower payments made to the Canada Small Business Financing Program

2.2.2 Vote 1 – Net Operating Expenditures - $4 million

First quarter expenditures are $4 million higher compared to the same time last year primarily due to the following:

  • $2 million increase in legal services expenditures related to an accelerated Justice service payment schedule
  • $1.2 million increase of expenditures for information technology and telecommunications consultants for ISED's IT Consolidation initiative
  • $1 million increase in licence/maintenance fees for application software

2.2.3 Vote 5 – Capital Expenditures - $2.5 million

Compared to the first quarter last year, capital expenditures were $2.5 million lower primarily due to the completion of the Spectrum Application Modernization project which amounted to $2.1 million of expenditures last year.

2.2.4 Canadian Intellectual Property Office (CIPO) Revolving Fund - $2.1 million

CIPO's Net Revolving fund expenditures were $2.1 million lower due to a positive year-over-year variance of $4.3 million in revenues, resulting from higher than expected cash receipts, partially offset by a $2.1 million increase in professional services costs related to the modernization of the organization's IT infrastructure.

2.2.5 Other – Employee Benefit Plans - $1.4 million

Spending on employee benefit plans was $1.4 million higher than the same quarter last year due to the resolution of both ISED's previous funding model and the change for CIPO recoveries to be reflected in ISED's Vote Net Recovery authority.  This has allowed the department to more accurately reflect its true EBP costs.

2.2.6 Table 1: Departmental Budgetary Expenditures by Standard Object: Professional and special services - $5.8 million

Net authorities used for professional and special services, in the first quarter of this year, increased by $5.8 million compared to the same period last year due to the variances explained in Sections 2.2.2 and 2.2.4.

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

In lieu of relying on the repayment of contributions, $33 million has been reflected on a permanent basis to stabilize the department's operating budget this year. 

No other significant changes in relation to operations, personnel and programs have occurred.

4. Risks and uncertainties

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

For 2016–17, ISED Canada will be monitoring implementation of significant Budget 2016 commitments, including delivery of the $2 billion Post-Secondary Institutions Strategic Investment Fund, enhancing broadband services for rural Canadians, and providing additional funding through the granting councils. The Department will also be managing significant investments, such as updating aging buildings and related infrastructure at the Communications Research Centre campus at Shirleys Bay. While ISED has positioned key resources and implemented controls to ensure the effective management of these initiatives, including the establishment of a departmental Grants and Contributions Centre of Excellence, significant monitoring will ensure that the department's objectives are on track to be met.

In addition, ISED 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. Strategies have been put in place to allow the Department to manage increases in operational costs as the collective bargaining agreements currently being negotiated are finalized. Any changes in this regard will be addressed in future editions of the Department's Quarterly Financial Report.

Approved by:

signature
John Knubley
Deputy Minister
Ottawa, Canada


Space to insert date
August 24, 2016

Space to insert signature
David Enns
Chief Financial Officer
Ottawa, Canada


Space to insert date
August 17, 2016

Innovation, Science and Economic Development Canada
For the quarter ended

Statement of Authorities (unaudited)

Statement of Authorities (unaudited) Fiscal Year 2016–17
(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 449,796 99,670 99,670
Vote 1 - Revenue Credited to the Vote (98,994) (20,019) (20,019)
Vote 1 - Net Operating Expenditures 350,802 79,651 79,651
 
Vote 5 - Capital expenditures 16,352 1,213 1,213
Vote 10 - Grants and contributions 1,311,175 119,181 119,181
Total voted authorities 1,678,329 200,045 200,045
 
Budgetary statutory authorities:
Revolving Fund Gross expenditures
172,694 38,594 38,594
Revolving Fund Revenues
(153,735) (36,531) (36,531)
Revolving Fund Net expenditures
18,959 2,063 2,063
 
Grants and Contributions
Genome Canada
68,000 15,475 15,475
Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act
77,908 5,006 5,006
Total Statutory Grants and Contributions 145,908 20,481 20,481
 
Employee Benefit Plans 57,885 14,358 14,358
Refunds of Previous Years Revenue 144 144
Proceeds for Crown Asset Disposals 199
Minister's Car Allowance 88 7 7
Total budgetary statutory authorities 223,039 37,053 37,053
Total Budgetary authorities 1,901,368 237,098 237,098
Non-budgetary authorities 800
Total authorities 1,902,168 237,098 237,098
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 390,965 94,828 94,828
Vote 1 - Revenue Credited to the Vote (79,794) (19,156) (19,156)
Vote 1 - Net Operating Expenditures 311,171 75,672 75,672
 
Vote 5 - Capital expenditures 20,951 3,700 3,700
Vote 10 - Grants and contributions 730,888 124,860 124,860
Total voted authorities 1,063,010 204,232 204,232
 
Budgetary statutory authorities:
Revolving Fund Gross expenditures
159,948 36,453 36,453
Revolving Fund Revenues
(151,317) (32,273) (32,273)
Revolving Fund Net expenditures
8,631 4,180 4,180
 
Grants and Contributions
Genome Canada
70,800 14,975 14,975
Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act
73,454 8,760 8,760
Total Statutory Grants and Contributions 144,254 23,735 23,735
 
Employee Benefit Plans 51,929 12,970 12,970
Refunds of Previous Years Revenue - 152 152
Proceeds for Crown Asset Disposals 170 - -
Minister's Car Allowance 86 21 21
Total budgetary statutory authorities 205,070 41,058 41,058
Total Budgetary authorities 1,268,080 245,290 245,290
Non-budgetary authorities 800 - -
Total authorities 1,268,880 245,290 245,290

Innovation, Science and Economic Development Canada
For the quarter ended

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

Departmental budgetary expenditures by Standard Object (unaudited) Fiscal Year 2016–17
(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
501,785 118,769 118,769
Transportation and communications
11,756 2,360 2,360
Information
8,452 1,137 1,137
Professional and special services
109,031 22,289 22,289
Rentals
12,863 4,531 4,531
Repair and maintenance
9,272 1,032 1,032
Utilities, materials and supplies
7,125 910 910
Acquisition of land, buildings and works
Acquisition of machinery and equipment
36,531 1,669 1,669
Transfer payments
1,457,083 139,662 139,662
Other subsidies and payments
199 1,289 1,289
Total gross budgetary expenditures 2,154,097 293,648 293,648
 
Less Revenues netted against expenditures:
Revolving Fund Revenues
153,735 36,531 36,531
Sales of Services and Other Revenue
98,994 20,019 20,019
Total Revenues netted against expenditures:
252,729 56,550 56,550
Total net budgetary expenditures 1,901,368 237,098 237,098
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
462,062 119,439 119,439
Transportation and communications
10,579 2,040 2,040
Information
5,649 1,255 1,255
Professional and special services
94,074 16,456 16,456
Rentals
11,062 4,931 4,931
Repair and maintenance
4,681 896 896
Utilities, materials and supplies
5,572 676 676
Acquisition of land, buildings and works
- - -
Acquisition of machinery and equipment
23,890 1,738 1,738
Transfer payments
875,142 148,595 148,595
Other subsidies and payments
6,480 693 693
Total gross budgetary expenditures 1,499,191 296,719 296,719
 
Less Revenues netted against expenditures:
Revolving Fund Revenues
151,317 32,273 32,273
Sales of Services and Other Revenue
79,794 19,156 19,156
Total Revenues netted against expenditures:
231,111 51,429 51,429
Total net budgetary expenditures 1,268,080 245,290 245,290
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