Quarterly Financial Report—Quarter Ended December 31, 2017

• 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. Financial risks and uncertainties
• Statement of Authorities (unaudited)
• Table 1: Departmental budgetary expenditures by Standard Object (unaudited)

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 and Operating votes, 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, 2017 and December 31, 2016

ISED's total authorities available for use of $2.5 billion, as of the third quarter of 2017–18, amount to a $313.3 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): $265.8 million
• Net Operating Expenditures (Vote 1): $45.0 million
• Capital Expenditures (Vote 5): $3.7 million
• Other: $6.2 million
  • CIPO Revolving Fund: $9.1  million
  • Employee Benefit Plan (EBP): $2.9 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:

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:

2.2 Authorities used and actual expenditures

Expenditures for the third quarter of 2017–18 have decreased by $221.0 million for the quarter and increased by $344.1 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) and Operating expenditures. 

Graph 2: Comparison of Net Third Quarter Expenditures and Net Year to Date Expenditures as at December 31, 2017 and December 31, 2016

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

• Grants and Contributions (Vote 10 and Statutory):
  • Quarterly – $232.7  million
  • Year-to-date – $298.8 million
• Net Operating Expenditures (Vote 1):
  • Quarterly – $10.8 million
  • Year-to-date – $39.1 million
• Capital Expenditures (Vote 5):
  • Quarterly – $1.8 million
  • Year-to-date – $4.4 million
• Other:
  • CIPO Revolving Fund:
    • Quarterly – Nil
    • Year-to-date – $4.5 million
  • EBP:
    • Quarterly – $0.9 million
    • Year-to-date – $2.7 million

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

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

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

2.2.2 Table 1: Departmental Budgetary Expenditures by Standard Object

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

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

Effective November 20, 2017, Paul Thompson became the new Associate Deputy Minister at Innovation, Science and Economic Development Canada.

In December 2017, the Deputy Ministers announced that, as of January 2, 2018, Philippe Thompson would assume the role of Chief Financial Officer and Assistant Deputy Minister of the Corporate Management Sector.

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 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 target to be met.

Since the introduction of the new pay system in February 2016, there have been issues with both Phoenix and the Pay Centre's capacity to deliver pay services on time, with a resulting backlog of transactions. A dedicated group of employees in the Human Resources Branch has been created in an attempt to support employees and managers, and to minimize the impacts of any pay issues faced by employees. In addition, a salary team was formally established in the Financial Operations Directorate. This team has also been designated as the Departmental claims Authorities Office to assist employees that have incurred financial expenses as a result of Phoenix. To better understand the impact of overpayments and underpayments, the Department is performing routine analysis. On a quarterly basis, this departmental analysis is reported to TBS.

Approved by:

John Knubley
Deputy Minister

February 23, 2018

Date

Philippe Thompson
Assistant DM/Chief Financial Officer

February 21, 2018

Date

Innovation, Science and Economic Development Canada
For the quarter ended December 31, 2017

Statement of Authorities (unaudited)

Innovation, Science and Economic Development Canada
For the quarter ended December 31, 2017

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