Quarterly Financial Report—Quarter Ended December 31, 2016—Revised

Erratum

Date:

Location: Table 1: Departmental budgetary expenditures by standard object (unaudited), Expended during the quarter ended December 31, 2016, Expenditures: Information

Revision: "Expenditures: Information $1,790 thousands" replaces "Expenditures: Information $1,760 thousands"

Location: Table 1: Departmental budgetary expenditures by standard object (unaudited), Planned expenditures for the year ending March 31, 2016, Expenditures: Repair and maintenance

Revision: "Expenditures: Repair and maintenance $9,681 thousands" replaces "Expenditures: Repair and maintenance $9,861 thousands"

Rationale for the revision: Transcription error occurred during the HTML conversion process.



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 document should be read in conjunction with the Main Estimates and Supplementary Estimates for fiscal year 2016–17.

1.1 Our organization

Innovation, Science and Economic Development Canada works with Canadians in all areas of the economy and in all parts of the country to improve conditions for investment, enhance Canada's innovation performance, increase Canada's share of global trade and build a fair, efficient and competitive marketplace.

This includes managing Canada's airwaves and overseeing its bankruptcy, incorporation, intellectual property and measurement systems; providing financing and industry research tools to help businesses develop, import and export; encouraging scientific research; and protecting and promoting the interests of Canadian consumers.

A summary description of Innovation, Science and Economic Development (ISED) Canada’s program activities can be found in Part II of the Estimates.

1.2 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 for specific purposes. This 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.

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. The spending authorities are voted by Parliament on an expenditure basis, therefore, management has prepared this report using an expenditure basis of accounting.

The accompanying Statement of Authorities includes ISED’s spending authorities granted by Parliament and found in the Main Estimates and Supplementary Estimates for the 2016–17 fiscal year.

This report has not been subject to an external audit or review. However, it has been reviewed by ISED’s Departmental Audit Committee (DAC) in accordance with Treasury Board guidance. No material misstatements or omissions have been identified.

1.3. General Descriptions

The following descriptions are referred to throughout the report:

  • Authority: Approvals from Parliament to spend up to a specific amount.
  • Operating (Vote 1): Amount approved for the fiscal year for the Department to spend on salary and operating expenditures.
  • Capital (Vote 5): Amount approved for the fiscal year for the Department to spend on capital purchases or for the construction of assets.
  • Grants and Contributions (Vote 10 and Statutory):
    • Vote 10: Amount approved for the fiscal year for the Department to provide Grants and Contribution (G&C) funding to prospective recipients.
    • Statutory: Amount approved through an existing Act of Parliament where additional annual approvals are not required by the Department to access G&C funding for recipients.
  • Operating and Capital Carryforward: Eligible funds lapsed in the previous fiscal year brought forward to the following year.
  • Employee Benefit Plan (EBP): The department’s contribution to public service employee benefit plans.
  • Vote Netted Revenue (VNR): Authority to apply revenues earned by the organization to cover costs incurred for specific activities by that organization.
  • Standard Object (SO): Classification or coding of transactions to permit the reporting of information about the nature of transactions in the Estimates and Public Accounts (i.e. personnel, professional and special services, and transfer payments).

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, versus 2015–16, are largely related to significant funding increases in the department's Grants and Contributions Vote, Operating Vote and Other expenditures, as described below.

2.1 Authorities available for use and planned expenditures

Graph 1: Comparison of Total Net Budgetary Authorities Available for Use as of December 31, 2016 and December 31, 2015

Bar chart of comparison of Total Net Budgetary Authorities Available for Use as of December 31, 2016 and December 31, 2015 (the long description is located below the image)

*Includes planned Vote 10 and Statutory Grants and Contributions expenditures
**Includes Canadian Intellectual Property Office (CIPO) Revolving Fund

Description of Graph 1
Comparison of Total Net Budgetary Authorities Available for Use as of December 31, 2016 and December 31, 2015
2016–17
($ millions)
2015–16
($ millions)
G&CFootnote * 1,713 876
Operating 370 353
OtherFootnote ** 78 62
Capital 21 21
Total Budget 2,181 1,313

ISED’s total authorities available for use of $2.18 billion, as of the third quarter of 2016–17, reflect an $868.6 million increase in comparison with the same quarter in 2015–16, as illustrated in the attached Statement of Authorities (and in Table 1: Departmental Budgetary Expenditures by Standard Object). This increase includes:

  • Grants and Contributions (Vote 10 and Statutory) – $836.5 million
  • Net Operating Expenditures (Vote 1) – $16.5 million
  • Other – $16.5 million
  • Capital Expenditures (Vote 5) – $0.9 million

The overall authorities available for use this quarter have increased by $259.5 million as compared to the second quarter this year. This quarter, the Department received funding in supplementary estimates B, of which the majority ($271.7 million) was for Grants and Contributions programs with an additional $3.3 million in capital and $2.8 million in operating funding. Other major changes in the authorities available for use this quarter included an increase of $27.5 million for the Sustainable Development Technology Fund, a decrease of $43.7 million resulting from a reprofile of funds from 2016–17 to 2017–18 for the Automotive Innovation Fund, and a $2.6 million reduction in travel, advertising and professional services as announced in Budget 2016.

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

2.1.1 Highlights of Changes by Authority (2016–17 compared to 2015–16)

The following tables highlight the significant changes:

Highlights of Changes by Authority (2016–17 compared to 2015–16) - Grants and Contributions (Vote 10 and Statutory)
Grants and Contributions (Vote 10 and Statutory) Increase/ (Decrease)
in millions of dollars
Funding from Budget 2015 and Budget 2016:
Post-Secondary Institutions Strategic Investment Fund 744.3
Sustainable Development Technology Fund, and the Next Generation
Bio Fuels Fund (statutory)
85.2
Mitacs – Globalink and Accelerate Programs 17.8
Let’s talk Science 2.7
Stem Cell Network 6.0
Canada 150 Infrastructure Program 5.2
Funding increases based on cash flow requirements of recipients: 
Canada Foundation for Innovation 21.5
Technology Demonstration Program 14.8
Automotive Supplier Innovation Program 12.5
Funding deferred to future fiscal years:
Connecting Canadian Program ($8.3M reprofiled from 2015–16 to 2016–17) 8.3
Automotive Innovation Fund ($43.7M reprofiled from 2016–17 to 2017–18) (43.7)
Programs for which funding has decreased or ended: 
Automotive Innovation Fund ($30M in funding in 2015–16 from the reprofiling
of funds from 2014–15 and 2016–17)
(30.0)
Broadband Connecting Rural Canadian Program (12.3)
Other minor items, net 4.2
Total Change in Grants and Contributions 836.5
Highlights of Changes by Authority (2016–17 compared to 2015–16) - Net Operating Expenditures (Vote 1)
Net Operating Expenditures (Vote 1) Increase/ (Decrease)
in millions of dollars
Vote transfers from Operating Expenditures to Capital Expenditure:
Operating funds previously transferred to Capital for 2 projects
(Spectrum Applications Modernization and National Accommodation Strategy)
8.7
New Funding/(Reduction) from Budget 2015 and in Budget 2016:
Defence Procurement Strategy 5.5
Post-Secondary Institutions Strategic Investment Fund 4.3
Automotive Innovation Fund 1.2
Federal Infrastructure Projects 1.1
Improving Support for Entrepreneurs 0.9
Reduction in Professional Services, Travel and Advertising announced
in Budget 2016
(2.6)
Employee Benefit Plans (2.9)
Other minor items, net 0.3
Total Change in Net Operating Expenditures 16.5
Highlights of Changes by Authority (2016–17 compared to 2015–16) - Other
Other Increase/ (Decrease)
in millions of dollars
Increase for investments to modernize the Canadian Intellectual Property Office's IT infrastructure and to develop a suite of business services to meet client needs 10.3

Increase in Employee Benefit Plans associated with:

  • the operating funding received with the change in the Department’s funding model
  • the Vote netted revenue authority for internal support services
  • additional program funding (including the Post-Secondary Institutions Strategic Investment Fund)
6.2
Total Change in Other 16.5
Highlights of Changes by Authority (2016–17 compared to 2015–16) - Capital Expenditures (Vote 5)
Capital Expenditures (Vote 5) Increase/ (Decrease)
in millions of dollars
Completion of the Spectrum Applications Modernization and the National Accommodation Strategy capital projects in previous year (refer to change in Net Operating Expenditures) (8.7)
Net Variance in Vote transfers (0.5)
Federal Infrastructure Projects 7.9
Net Variance in Capital Budget Carry Forward received in 2015–16 versus 2016–17 0.4
Total Change in Capital Expenditures (0.9)

2.1.2 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. The variances are primarily due to the following:

Table 1: Departmental Budgetary Expenditures by Standard Object
Spending Category Explanation of significant changes
(2016–17 compared to 2015–16)
Increase/ (Decrease)
in millions of dollars
Standard Object
Personnel The increase is primarily related to a change in the Department’s funding model and the increase to the Vote Netted Revenue Authority for Internal Services provided to the Canadian Intellectual Property Office (CIPO).Footnote 1 43.4
Professional Services The availability of funds accessed through the Main Estimates contributed to the year over year increases reflected by standard object. 7.8
Acquisition of machinery and equipment The variance observed in the planned expenditures for acquisition of machinery and equipment is primarily due to the following: a $8.5 million increase for the Communications Research Centre's federal infrastructure program and a $5.6 million increase for planned investments to modernize IT infrastructure for CIPO. 13.1
Other subsidies and payments The decrease in other subsidies and payments is a result of the change to the department’s funding model. Expenditures which were previously recorded in other subsidies and payments have now been reallocated to their respective standard objects. (14.4)
Transfer Payments Major changes have been explained in Section 2.1.1. Grants & Contributions 836.5
Changes in Revenues netted against Program Expenditures
Sales of Services and Other Revenue The increase of $19.2 million in the Vote Netted Revenue Authority in 2016–17 for Internal Services resulted in additional planned spending being recorded in 2016–17 against Sales of Services and Other Revenue. (19.2)
Other minor items, net 1.4
Total change in Planned Expenditures 868.6

2.2 Authorities used and actual expenditures

Expenditures in the third quarter of 2016–17 have increased by $431.6 million compared with the same quarter last year. Year-to-date expenditures compared to last year have increased by $491.1 million. The differences occurred primarily in Grants and Contributions (Vote 10 and Statutory) and are mainly due to new funding for the Strategic Investment Fund and the Sustainable Development Fund announced in Budget 2016, as well as higher payments requested by recipients for the Canada Foundation for Innovation.

Graph 2: Comparison of Net Expenditures in the Third Quarter and Net Year-to-Date Expenditures as of December 31, 2016 and December 31, 2015

Bar chart of comparison of Net Expenditures in the Third Quarter and Net Year-to-Date Expenditures as of December 31, 2016 and December 31, 2015 (the long description is located below the image)

* Includes Vote 10 and Statutory Grants and Contributions expenditures
** Includes CIPO Revolving Fund

Description of Graph 2
Comparison of Net Expenditures in the Third Quarter and Net Year-to-Date Expenditures as of December 31, 2016 and December 31, 2015
Third quarter Year to date
2016–17
($ millions)
2015–16
($ millions)
2016–17
($ millions)
2015–16
($ millions)
G&CFootnote * 518 100 956 486
Operating 85 69 249 226
OtherFootnote ** 19 18 53 46
Capital 3 6 6 14
Total 625 193 1,264 773

Spending in the third quarter and year-to-date has changed as follows:

  • Grants and Contributions (Vote 10 and Statutory)
    • Quarterly – $417.9 million
    • Year-to-date – $469.5 million
  • Net Operating Expenditures (Vote 1)
    • Quarterly – $15.2 million
    • Year-to-date – $22.6 million
  • Other
    • Quarterly – $1.5 million
    • Year-to-date – $6.6 million
  • Capital Expenditures (Vote 5)
    • Quarterly – $3.1 million
    • Year-to-date – $7.6 million

Section 2.2.1 provides a detailed breakdown of the changes from 2015–16 to 2016–17 for the Third Quarter and Year-to-date spending.

2.2.1 Highlights of Changes for the Third Quarter and Year-to-date

The following tables highlight, by authority, the significant changes in net expenditures:

Highlights of Changes for the Third Quarter and Year-to-date - Grants and Contributions (Vote 10 and Statutory)
Grants and Contributions (Vote 10 and Statutory) Increase/ (Decrease)
in millions of dollars
Q3 YTD
New Program spending:
Strategic Investment Fund 369.6 369.6
Sustainable Development Technology Fund (Statutory and
non-statutory)
59.0 85.3
Connecting Canadians 5.9 12.3
Stem Cell Network - 6.8
Higher approved spending requirements submitted by recipients:
Canada Foundation for Innovation - 21.5
Mitacs (A fourth project was added in 2016–17) 17.9 17.8
Canada Business Financing Act & the Small Business Loans Act 6.5 -
Timing variances between periods (payments are made in different quarters between fiscal years):
Institute for Quantum Computing 3.8 -
Northern Ontario Development Program - (6.5)
CANARIE Contribution (15.0) 5.0
Lower program spending requirements:
Automotive Innovation Fund (8.4) (9.8)
Strategic Aerospace and Defense Initiative (Variance is
due to the completion of the payment phase of
contribution agreements in 2015–16)
(25.4) (36.4)
Other minor items, net 4.0 3.9
Total change in Grants and Contributions 417.9 469.5
Highlights of Changes for the Third Quarter and Year-to-date - Net Operating Expenditures (Vote 1)
Net Operating Expenditures (Vote 1) Increase/ (Decrease)
in millions of dollars
Q3 YTD
Personnel: Increases in Q3 and YTD spending are primarily due to timing variance for issuing performance pay as a result of Phoenix delays. Salaries also increased for new initiatives/programs announced in Budget 2016. 6.4 7.4
Professional Services:
Professional service costs related to additional
requirements in CIPO (Application and Information
Technology Management and Infrastructure
projects), Business Intelligence and IT projects
9.8 15.7
Invoices for legal expenses were received and paid earlier
this year compared to last yearFootnote 1
(2.2) 1.5
Other minor items, net 1.2 (2.0)
Total change in Net Operating Expenditures 15.2 22.6
Highlights of Changes for the Third Quarter and Year-to-date - Other
Other Increase/ (Decrease)
in millions of dollars
Q3 YTD
CIPO Revolving Fund (Increases are due to higher salary and professional services costs related to the modernization of IT infrastructure and salary expenses) 2.1 6.1
CIPO Cash receipts (which offset expenditures) are higher due to higher than expected cash receipts. (2.0) (3.0)
Increase in Employee Benefit Plans (related to new funding and the change to Vote netted revenue authority) 1.4 4.2
Other minor items, net -    (0.7)
Total change in Other 1.5 6.6
Highlights of Changes for the Third Quarter and Year-to-date - Capital Expenditures (Vote 5)
Capital Expenditures (Vote 5) Increase/ (Decrease)
in millions of dollars
Q3 YTD
Measurement Canada – Higher technical equipment and fleet acquisition and replacement expenditures 0.5 0.4
Completion of the Spectrum Applications Modernization project in the previous fiscal year (3.7) (8.2)
Other minor items, net 0.1 0.2
Total change in Capital Expenditures (3.1) (7.6)

2.2.2 Table 1: Departmental Budgetary Expenditures by Standard Object

Variances in spending by standard object are primarily due to the following:

Table 1: Departmental Budgetary Expenditures by Standard Object
Spending Category Explanation of significant changes
(2016–17 compared to 2015–16)
Increase/ (Decrease)
in millions of dollars
Q3 YTD
Standard Object
Personnel Increases in Q3 and YTD spending are primarily due to timing variances for issuing Performance pay as a result of Phoenix delays. Salaries also increased for new initiatives/programs announced in Budget 2016. 6.4 7.4
Professional Services Professional service costs related to additional requirements in CIPO (Application and Information Technology Management and Infrastructure projects), Business Intelligence and IT projects 9.8 15.7
Invoices for legal expenses were received and paid earlier this year compared to last yearFootnote 1 (2.2) 1.5
Transfer Payments Significant changes have been explained in Section 2.2.1. 417.9 469.5
Other minor items, net (0.3) (3.0)
Total change in Budgetary expenditures 431.6 491.1

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

While the department received significant funding to carry out new programs, there have been no significant changes in relation to operations, personnel and programs over the last quarter.

4. Financial risks and uncertainties

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

In the third quarter of 2016–17, implementation of significant Budget 2016 commitments is underway, including delivery of the $2 billion Post-Secondary Institutions Strategic Investment Fund and work to enhance broadband services for rural Canadians. In addition, the Department is making significant investments, such as upgrading the Communications Research Centre campus at Shirley’s Bay. The Department will continue to utilize proven monitoring practices so that its financial 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 and reallocation. 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:

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John Knubley
Deputy Minister


February 17, 2017
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Date

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Colette Downie
Assistant DM/Chief Financial Officer


February 16, 2017
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Date

Innovation, Science and Economic Development Canada
For the quarter ended

Statement of Authorities (unaudited)

 Fiscal Year 2016–17
(in thousands of dollars) Total available for use for the year ending March 31, 2017Footnote 1 Used during the quarter ended December 31, 2016 Year to date used at quarter-end
Vote 1 – Operating expenditures 468,792 107,146 314,923
Vote 1 – Revenue Credited to the Vote (98,994) (22,617) (65,886)
Vote 1 – Net Operating Expenditures 369,798 84,529 249,037
Vote 5 – Capital expenditures 20,611 2,885 6,213
Vote 10 – Grants and contributions 1,539,225 470,269 828,452
Total voted authorities 1,929,634 557,683 1,083,702
Budgetary statutory authorities:
Revolving Fund Gross expenditures 172,694 42,779 121,146
Revolving Fund Revenues (153,735) (37,860) (111,526)
Revolving Fund Net expenditures 18,959 4,919 9,620
Grants and Contributions
Genome Canada 68,000 -    61,900
Liabilities under the
Canada Small Business Financing Act & the Small Business Loans Act
77,908 20,171 37,723
Sustainable Development Technology Fund 27,476 27,476 27,476
Technology Partnerships Canada -    -    334
Total Statutory Grants and Contributions 173,384 47,647 127,433
Employee Benefit Plans 58,174 14,359 43,076
Refunds of Previous Years Revenue -    81 306
Proceeds for Crown Asset Disposals 238 8 8
Ministers' Car Allowance 88 36 58
Total budgetary statutory authorities 250,843 67,050 180,501
Total Budgetary authorities 2,180,477 624,733 1,264,203
Non-budgetary authorities 800 -   -  
Total authorities 2,181,277 624,733 1,264,203
 Fiscal Year 2015–16
(in thousands of dollars) Total available for use for the year ending March 31, 2016Footnote 1 Used during the quarter ended December 31, 2015 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
Sustainable Development Technology Fund -    -    -   
Technology Partnerships Canada -    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
Ministers' 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

Innovation, Science and Economic Development Canada
For the quarter ended

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

 Fiscal Year 2016–17
(in thousands of dollars) Planned expenditures for the year ending March 31, 2017Footnote 1 Expended during the quarter ended December 31, 2016 Year to date used at quarter-end
Expenditures:
Personnel 505,663 123,396 365,108
Transportation and
communications
15,674 3,368 7,928
Information 10,619 1,790 4,765
Professional and special services 110,626 28,890 77,838
Rentals 17,292 3,463 11,643
Repair and maintenance 9,800 1,789 4,960
Utilities, materials and supplies 8,744 1,372 3,611
Acquisition of machinery and
equipment
38,237 2,418 5,342
Transfer payments 1,712,610 517,916 955,885
Other subsidies and payments 3,941 706 4,547
Total gross budgetary expenditures 2,433,206 685,108 1,441,627
Less Revenues netted against expenditures:
Revolving Fund Revenues 153,735 37,860 111,526
Sales of Services and Other
Revenue
98,994 22,515 65,898
Total Revenues netted against
expenditures:
252,729 60,375 177,424
Total net budgetary expenditures 2,180,477 624,733 1,264,203
 Fiscal Year 2015–16
(in thousands of dollars) Planned expenditures for the year ending March 31, 2016Footnote 1 Expended during the quarter ended December 31, 2015 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
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
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