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Quarterly Financial Report—Quarter Ended September 30, 2017


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 2017–18.

1.1 Our organization

Innovation, Science and Economic Development Canada (ISED) 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 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 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 2017–18 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.

In the event that Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

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 2017–18, versus 2016–17, are largely related to significant funding increases in the department's Grants and Contributions Vote, 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 September 30, 2017 and September 30, 2016

Bar chart illustrating the comparison of Total Net Budgetary Authorities Available for Use as of September 30, 2017 and September 30, 2016 (the long description is located below the image)
Description of Graph 1
Comparison of Total Net Budgetary Authorities Available for Use as of September 30, 2017 and September 30, 2016
2017–18
($ millions)
2016–17
($ millions)
G&CNote * 2,160 1,457
Operating 379 370
OtherNote ** 83 78
Capital 17 17
Total Budget 2,639 1,922

ISED's total authorities available for use of $2.6 billion, as of the second quarter of 2017–18, amount to a $717.5 million increase in comparison with the same quarter in 2016–17, as illustrated in the Statement of Authorities and in Table 1: Departmental Budgetary Expenditures by Standard Object. This increase includes:

  • Grants and Contributions (Vote 10 and Statutory) – $703.2 million
  • Net Operating Expenditures (Vote 1) – $9.7 million
  • Capital Expenditures (Vote 5) – $0.3 million
  • Other – $5 million
    • CIPO Revolving Fund: $9.1  million
    • Employee Benefit Plan (EBP): $4.1 million

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

2.1.1 Highlights of Changes by Authority (2017–18 compared to 2016–17)

The following tables highlight the significant changes:

Highlights of Changes by Authority (2017–18 compared to 2016–17) - Grants and Contributions (Vote 10 and Statutory)
Grants and Contributions (Vote 10 and Statutory) Increase/ (Decrease)
in millions of dollars
Funding from Budget 2016:
Post-Secondary Institutions Strategic Investment Fund
500.5
Connect to Innovate Program
65.9
Sustainable Development Technology Fund and the Next Generation Bio Fuels Fund (Statutory)
43.8
Center for Drug Research and Development
16.0
Genome Canada (Voted)
30.4
Funding increases based on cash flow requirements of recipients:
Canada Foundation for Innovation 52.4
Automotive Innovation Fund 33.9
Automotive Supplier Innovation Program 7.9
Mitacs 2.7
Technology Demonstration Program 2.1
Programs for which funding has decreased or ended:
Genome Canada (Statutory) ($41 million decrease in funding offset by a $6.1 million reprofile from 2016–17)
(34.9)
Strategic Aerospace and Defence Initiative under the Strategic Innovation Fund
(10.8)
Canada Small Business Financing Program (8.9)
Other minor items, net 2.2
Total Change in Grants and Contributions 703.2
Highlights of Changes by Authority (2017–18 compared to 2016–17) - Net Operating Expenditures (Vote 1)
Net Operating Expenditures (Vote 1) Increase/ (Decrease)
in millions of dollars
New Funding from Budget 2016:
Connect to Innovate Program 3.3
Funding received from the operating budget carry-forward 2.7
Improving Support for Entrepreneurs initiative 2.4
Automotive Innovation Fund & Automotive Innovation Office 1.5
Other minor items, net (0.2)
Total Change in Net Operating Expenditures 9.7
Highlights of Changes by Authority (2017–18 compared to 2016–17) - Capital Expenditures (Vote 5)
Capital Expenditures (Vote 5) Increase/ (Decrease)
in millions of dollars
Minor variances, net (0.3)
Total Change in Capital Expenditures (0.3)
Highlights of Changes by Authority (2017–18 compared to 2016–17) - Other
Other Increase/ (Decrease)
in millions of dollars
Increase for investments to modernize the CIPO's IT infrastructure and to develop a suite of business services to meet client needs. 9.1
Reduction in Employee Benefit costs is due to a decrease to the prescribed EBP rate used to estimate the employee benefit plan costs, from 17.2% in 2016–17 to 15.7% in 2017–18. (4.1)
Total Change in Other 5.0

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
(2017–18 compared to 2016–17)
Increase/ (Decrease)
in millions of dollars
Standard Object
Personnel The increase is primarily related to new funding received for the Connect to Innovate program ($2.2 million), the Defence Procurement Strategy ($2.1 million), and the Improving Support for Entrepreneurs Initiative ($0.5 million). 5.0
Professional Services The increase in related to planned/ongoing legal cases and high cost litigation. 4.4
Repair and maintenance The increase is related to new funding received for the maintenance and upgrade of federal infrastructure assets at the Communications Research Centre. 5.2
Acquisition of machinery and equipment The increase is mostly related to planned investments in IT infrastructure at CIPO and expenditures incurred for the National Accomodation Strategy and office relocations for the implementation of the innovation and skills plan. 7.1
Transfer Payments Significant changes have been explained in Section 2.1.1. 703.2
Changes in Revenues netted against Program Expenditures
Revolving fund revenues Higher planned revenues this fiscal year will be utilized to fund both planned investments of CIPO's IT infrastructure and higher FTE utilization and Phoenix-related issues. (5.0)
Other minor items, net (2.4)
Total change in Planned Expenditures 717.5

2.2 Authorities used and actual expenditures

Expenditures for the second quarter of 2017–18 have increased by $228.9 million for the quarter and $565.1  million for the year-to-date spending compared to the same time last year.  The differences occurred primarily in Grants and Contributions (Vote 10 and Statutory) expenditures.

Graph 2: Comparison of Net Expenditures in the First Quarter Expenditures as at September 30, 2017 and September 30, 2016

Bar chart of Comparison of Net Expenditures in the First Quarter Expenditures as at September 30, 2017 and September 30, 2016 (the long description is located below the image)
Description of Graph 2
Comparison of Net Expenditures in the First Quarter Expenditures as at September 30, 2017 and September 30, 2016
Second quarter
($ millions)
Year to date
($ millions)
2017–18 2016–17 2017–18 2016–17
G&CNote * 506 298 970 438
Operating 103 85 193 164
OtherNote ** 18 17 36 34
Capital 4 2 6 3
Total 631 402 1,205 639

By category, the spending in the second quarter and year-to-date has changed as follows:

  • Grants and Contributions (Vote 10 and Statutory):
    • Quarterly – $207.2 million
    • Year-to-date – $531.5 million
  • Net Operating Expenditures (Vote 1):
    • Quarterly – $18.7 million
    • Year-to-date – $28.3 million
  • Capital Expenditures (Vote 5):
    • Quarterly – $1.9 million
    • Year-to-date – $2.6 million
  • Other:
    • CIPO Revolving Fund:
      • Quarterly – $2.1 million
      • Year-to-date – $4.5 million
    • EBP:
      • Quarterly – $0.9 million
      • Year-to-date – $1.8 million

Section 2.2.1 provides a detailed breakdown of the changes from 2016–17 to 2017–18 for the Second Quarter.

2.2.1 Highlights of Spending Changes for the Second Quarter

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

Highlights of Spending Changes for the Second Quarter - Grants and Contributions (Vote 10 and Statutory)
Grants and Contributions (Vote 10 and Statutory) Increase/ (Decrease)
in millions of dollars
Q2 Q2 YTD
New 2017–18 Program spending:
Centre for Drug Research and Development 12.0 16.0
Higher approved spending requirements submitted by recipients:
Post-secondary Strategic Investment Fund 163.1 351.5
Sustainable Development Technology Fund and the Next Generation Bio Fuels Fund (Statutory and non-statutory)
44.6 75.3
Timing variances between periods (payments are made in different quarters between fiscal years):
Strategic Aerospace and Defence Initiative 29.3 45.3
Mitacs 13.7 20.6
Bombardier 12.0 13.1
Changes in program spending requirements:
Genome Canada (Non-statutory) - Higher YTD spending due to larger budget attributed to non-statutory funding
(3.8) 30.4
Canadian Foundation for Innovation
(20.0) 21.5
Genome Canada (Statutory)
(46.4) (38.2)
Other minor items, net 2.7 (4.0)
Total change in Grants and Contributions 207.2 531.5
Net Operating Expenditures (Vote 1)
Net Operating Expenditures (Vote 1) Increase/ (Decrease)
in millions of dollars
Q2 Q2 YTD
Increase in Q2 and Q2 YTD is primarily due to retroactive payments following the signature of various Collective Agreements ($13.6 million - Q2, $18.4 million Q2 YTD); higher regular pay expenditures due to the revised pay rates and salary spending related to the Connect to Innovate program and the Defence Procurement Strategy ($1.9 million - Q2, $4.2 million Q2 YTD); and higher part-time, casual, and student pay ($1.3 million - Q2, $2.8 million Q2 YTD). 16.8 25.6
Other minor items, net 1.9 2.7
Total change in Net Operating Expenditures 18.7 28.3
Highlights of Spending Changes for the Second Quarter - Capital Expenditures (Vote 5)
Capital Expenditures (Vote 5) Increase/ (Decrease)
in millions of dollars
Q2 Q2 YTD
Higher expenditures due to CRC Infrastructure projects. 1.9 2.6
Total change in Capital Expenditures 1.9 2.6
Highlights of Spending Changes for the Second Quarter - Other
Other Increase/ (Decrease)
in millions of dollars
Q2 Q2 YTD

CIPO Revolving Fund expenditures:

  • $1.8 million Q2 increase due to higher capital spending in professional services costs related to the modernization of the organization's IT infrastructure.
  • $3 million YTD increase due to higher capital spending in professional services related to the modernization of the organization's IT and to the increase in salaries due to higher FTE utilization and Phoenix-related issues.
1.8 3.0
CIPO Cash receipts (which offset expenditures) are lower due to smaller than expected cash receipts for the quarter and YTD. 0.3 1.5
Decrease in Employee Benefit Plan expenditures due to the lower prescribed rate as described in Section 2.1.1 (0.9) (1.8)
Total change in Other 1.2 2.7

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
(2017–18 compared to 2016–17)
Increase/ (Decrease)
in millions of dollars
Q2 Q2 YTD
Standard Object
Personnel Increase in Q2 spending is due to retroactive payments following the signature of various Collective Agreements ($12.1 million - Q2,$17.6 million Q2 YTD); higher regular pay expenditures due to the revised pay rates and salary spending related to the Connect to Innovate program and the Defence Procurement Strategy ($2.1 million - Q2, $5.0 million Q2 YTD); and higher part-time, casual, and student pay ($1.7 million - Q2, $3.7 million Q2 YTD) offset by a few smaller adjustments in other spending.Note 1 14.8 25.4
Professional and special services Increase in spending mainly due to research work for Improving support for Entrepreneurs, new activities related to Economic Strategy Tables and Skills (ESTS), Automotive Transportation and Digital Technology (ATDT), Spectrum Monitoring Evolution as well as higher contracting expenditures under PSIF and various initiatives. 2.8 1.8
Repair and Maintenance The increase in spending related to new funding received for the maintenance and upgrade of federal infrastructure assets at the Communications Research Centre. 1.4 2.2
Transfer Payments Significant changes have been explained in Section 2.2.1. 207.2 531.5
Other minor items, net 2.7 4.2
Total change in Budgetary expenditures 228.9 565.1

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

Effective September 25, 2017, Kelly Gillis left her position as the Associate Deputy Minister of Innovation, Science and Economic Development Canada to become the Deputy Minister of Infrastructure and Communities Canada.

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 second quarter of 2017–18, ISED continued implementation of Budget 2017 commitments. This has included launching wide-ranging organizational changes designed to better align the department's financial and human resources to deliver on significant initiatives and new funding under the new Innovation and Skills Plan. The Department will continue to utilize proven monitoring practices so that its financial objectives remain on track to be met.

Approved by:

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John Knubley
Deputy Minister

November 15, 2017
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Date

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Colette Downie
Assistant DM/Chief Financial Officer

November 10, 2017
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Date

Innovation, Science and Economic Development Canada
For the quarter ended

Statement of Authorities (unaudited)

Fiscal Year 2017–18
(in thousands of dollars) Total available for use for the year ending March 31, 2018Note 1 Used during the quarter ended September 30, 2017 Year to date used at quarter-end
Vote 1 – Operating expenditures 478,180 126,448 234,406
Vote 1 – Revenue Credited to the Vote (98,994) (22,912) (41,611)
Vote 1 – Net Operating Expenditures 379,186 103,536 192,795
Vote 5 – Capital expenditures 16,946 3,989 5,966
Vote 10 – Grants and contributions 2,057,305 490,870 925,132
Total voted authorities 2,453,437 598,395 1,123,893
Budgetary statutory authorities:
Revolving Fund Gross expenditures 186,722 41,545 81,339
Revolving Fund Revenues (158,693) (36,838) (72,144)
Revolving Fund Net expenditures 28,029 4,707 9,195
Grants and Contributions
Genome Canada 33,100 23,700
Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act
69,030 14,680 20,588
Next Gen BioFuels Fund 800
Other statutory grants and contributions 1
Total Statutory Grants and Contributions 102,930 14,680 44,289
Employee Benefit Plans 53,808 13,452 26,904
Refunds of Previous Years Revenue 56 206
Proceeds for Crown Asset Disposals 184 9 9
Ministers' Car Allowance 88 22 44
Total budgetary statutory authorities 185,039 32,926 80,647
Total Budgetary authorities 2,638,476 631,321 1,204,540
Non-budgetary authorities 800 - -
Total authorities 2,639,276 631,321 1,204,540
Fiscal Year 2016–17
(in thousands of dollars) Total available for use for the year ending March 31, 2017Note 1 Used during the quarter ended September 30, 2016 Year to date used at quarter-end
Vote 1 – Operating expenditures 468,478 108,221 207,890
Vote 1 – Revenue Credited to the Vote (98,994) (23,365) (43,383)
Vote 1 – Net Operating Expenditures 369,484 84,856 164,507
Vote 5 – Capital expenditures 17,264 2,116 3,329
Vote 10 – Grants and contributions 1,311,175 239,002 358,183
Total voted authorities 1,697,923 325,974 526,019
Budgetary statutory authorities:
Revolving Fund Gross expenditures 172,694 39,773 78,367
Revolving Fund Revenues (153,735) (37,135) (73,667)
Revolving Fund Net expenditures 18,959 2,638 4,700
Grants and Contributions
Genome Canada 68,000 46,425 61,900
Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act
77,908 12,546 17,552
Next Gen BioFuels Fund
Other statutory grants and contributions 334 334
Total Statutory Grants and Contributions 145,908 59,305 79,786
Employee Benefit Plans 57,885 14,358 28,717
Refunds of Previous Years Revenue 82 226
Proceeds for Crown Asset Disposals 213
Ministers' Car Allowance 87 15 22
Total budgetary statutory authorities 223,052 76,398 113,451
Total Budgetary authorities 1,920,975 402,372 639,470
Non-budgetary authorities 800 - -
Total authorities 1,921,775 402,372 639,470

Innovation, Science and Economic Development Canada
For the quarter ended

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

Fiscal Year 2017–18
(in thousands of dollars) Planned expenditures for the year ending March 31, 2018Note 1 Expended during the quarter ended September 30, 2017 Year to date used at quarter-end
Expenditures:
Personnel 506,798 137,720 267,146
Transportation and communications
15,853 2,386 4,827
Information 10,633 1,567 2,998
Professional and special services 116,086 29,426 50,789
Rentals 18,074 5,034 8,143
Repair and maintenance 15,024 3,563 5,385
Utilities, materials and supplies 8,796 1,373 2,284
Acquisition of machinery and equipment
44,267 2,036 2,809
Transfer payments 2,160,235 505,550 969,421
Other subsidies and payments 397 2,416 4,493
Total gross budgetary expenditures 2,896,163 691,071 1,318,295
Less Revenues netted against expenditures:
Revolving Fund Revenues 158,693 36,838 72,144
Sales of Services and Other Revenue
98,994 22,912 41,611
Total Revenues netted against expenditures:
257,687 59,750 113,755
Total net budgetary expenditures 2,638,476 631,321 1,204,540
Fiscal Year 2016–17
(in thousands of dollars) Planned expenditures for the year ending March 31, 2017Note 1 Expended during the quarter ended September 30, 2016 Year to date used at quarter-end
Expenditures:
Personnel 501,785 122,943 241,712
Transportation and communications
15,667 2,200 4,559
Information 10,557 1,838 2,975
Professional and special services 111,720 26,658 48,948
Rentals 17,285 3,649 8,180
Repair and maintenance 9,800 2,139 3,170
Utilities, materials and supplies 8,736 1,330 2,240
Acquisition of machinery and equipment
37,154 1,254 2,924
Transfer payments 1,457,083 298,307 437,969
Other subsidies and payments 3,916 2,554 3,843
Total gross budgetary expenditures 2,173,703 462,872 756,520
Less Revenues netted against expenditures:
Revolving Fund Revenues 153,734 37,135 73,667
Sales of Services and Other Revenue
98,994 23,365 43,383
Total Revenues netted against expenditures:
252,728 60,500 117,050
Total net budgetary expenditures 1,920,975 402,372 639,470
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