Quarterly Financial Report—Quarter Ended June 30, 2018


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 2018–19.

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 which includes the 2018–19 Main and Supplementary Estimates as well as any adjustments, warrants and transfers.

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 Carry Forward: 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 in 2018–19, versus 2017–18, are largely related to funding increases in the department's Grants and Contributions and Operating votes, as described below. Variances in authorities used are largely due to timing differences related to cash flow requirements of transfer payment recipients.

2.1 Authorities available for use and planned expenditures

ISED's total authorities available for use of $2.9 billion at the end of the first quarter in 2018–19, amounts to a $293.4 million increase over the same period in 2017–18. This is illustrated in the Statement of Authorities and in Table 1: Departmental Budgetary Expenditures by Standard Object.

Graph 1: Comparison of Total Net Budgetary Authorities Available for Use as of June 30, 2018 and June 30, 2017

Description of Graph 1
Comparison of Total Net Budgetary Authorities Available for Use as of June 30, 2018 and June 30, 2017
2018–19
($ millions)
2017–18
($ millions)
G&CNote * 2,432 2,160
Operating 391 358
OtherNote ** 81 83
Capital 6 16
Total Budget 2,910 2,617

The overall increase includes:

  • Grants and Contributions (Vote 10 and Statutory): $272.4 million
  • Net Operating Expenditures (Vote 1): $32.5 million
  • Capital Expenditures (Vote 5): $10 million
  • Other: $1.6 million
    • CIPO Revolving Fund: $3.3 million
    • Employee Benefit Plan (EBP): $1.7 million

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

2.1.1 Highlights of Changes by Authority (2018–19 compared to 2017–18)

The following tables highlight the larger changes:

Grants and Contributions (Vote 10 and Statutory)
Grants and Contributions (Vote 10 and Statutory) Increase/ (Decrease)
in millions of dollars
Vote 10
Funding from Budget 2017:
Innovation Superclusters Initiative
$ 243.9
Strategic Innovation Fund
93.6
Sustainable Development Technology Fund
70.0
CanCode
29.0
Mitacs
26.5
Other
21.0
Funding from Budget 2018Footnote 1
Computers for Schools
4.7
Funding increases based on cash flow requirements of existing programs: 
Strategic Innovation Fund
199.9
Connect to Innovate
183.2
Canada Foundation for Innovation
79.8
Bombardier CSeries
15.5
Genome
13.0
Digital Skills for Youth
9.5
Other
0.7
Funding decreases based on cash flow requirements of existing programs:
Post-Secondary Institution Strategic Investment Fund
(485.4)
Sustainable Development Technology Fund
(83.9)
Connecting Canadians Program
(60.9)
Automotive Innovation Fund
(51.7)
Automotive Suppliers Innovation Program
(17.3)
Strategic Aerospace Defence Initiative
(9.3)
Technology Demonstration Program
(7.8)
Computers for Schools
(5.0)
Other
(3.2)
Programs for which funding has ended:
Canada 150 Infrastructure Program
(5.2)
Other minor items, net 0.1
Total Change in Vote 10 $ 260.7
Statutory
Funding from Budget 2017: 
Canadian Institute for Advanced Research (CIFAR) - Pan Canadian Artificial Intelligence $ 25.0
Programs for which funding has decreased:
Genome - Contributions (6.7)
Canada Small Business Financing Act (4.1)
Other minor items, net (2.5)
Total Change in Statutory $ 11.7
Total Change in Grants and Contributions (Vote 10 and Statutory) $ 272.4
Net Operating Expenditures (Vote 1)
Net Operating Expenditures (Vote 1) Increase/ (Decrease)
in millions of dollars
New Funding for operations from Budget 2017 $ 23.6
New Funding for operations from Budget 2018Footnote 1 (Computers for Schools) 0.6
Operating expenditure decreases for existing programs and programs that have ended (6.3)
Funds received from Treasury Board for compensation adjustments related to changes in the terms and conditions of employment 8.9
Funding reprofiled from previous years which was not required for retroactive collective agreement payments 5.9
Other minor items, net (0.2)
Total Change in Net Operating Expenditures (Vote 1) $ 32.5
Capital Expenditures (Vote 5)
Capital Expenditures (Vote 5) Increase/ (Decrease)
in millions of dollars
Ending of funding for the 2014 and 2016 Federal Infrastructure Program at the Communications Research Centre $ (10.0)
Total Change in Capital Expenditures (Vote 5) $ (10.0)
Other
Other Increase/ (Decrease)
in millions of dollars
Increase in planned Employee Benefit costs is due to an increase to the prescribed EBP rate used to estimate plan costs as well as funding received for various Budget 2017 initiatives. $ 1.7
Increase in forecasted revenues offset by an increase in planned expenditures for investments to modernize CIPO's IT infrastructure and to develop a suite of business services to meet client needs. (3.3)
Total Change in Other $ (1.6)

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
(2018–19 compared to 2017–18)
Increase/ (Decrease)
in millions of dollars
Standard Object
Personnel The increase is primarily related to new funding received for Compensation Adjustments, Collective Agreements, and new programs. $ 24.8
Professional Services The increase is primarily related to development costs for IT which is taking place within CIPO. 8.6
Transfer Payments Significant changes have been explained in Section 2.1.1. 272.4
Changes in Revenues netted against Program Expenditures
Sales of service and other revenues Higher planned revenues for internal services are related to developing IT projects for CIPO. (10.0)
Revolving fund revenues Higher forecasted revenues are primarily related to CIPO services. (5.3)
Other minor items, net 2.9
Total change in Planned Expenditures $ 293.4

2.2 Authorities used and actual expenditures

Expenditures for the first quarter of 2018–19 have decreased by $76.1 million when compared to the same period last year. The differences occurred primarily in Grants and Contributions (Vote 10 and Statutory) and is largely attributable to timing variances for payments to recipients. Overall spending for the year is expected to be higher than last, as described above in section 2.1 – Authorities available for use and planned expenditures. 

Graph 2: Comparison of Net First Quarter Expenditures as at June 30, 2018 and June 30, 2017

Description of Graph 2
Comparison of Net First Quarter Expenditures as at June 30, 2018 and June 30, 2017
First quarter
($ millions)
2018–19 2017–18
G&CNote * 382 464
Operating 93 89
OtherNote ** 21 18
Capital 1 2
Total 497 573

By category, the spending in the first quarter compared to the same time last year has changed as follows:

  • Grants and Contributions (Vote 10 and Statutory): $81.9 million
  • Net Operating Expenditures (Vote 1): $4.3 million
  • Capital Expenditures (Vote 5): $1.1 million
  • Other: $2.5 million
    • CIPO Revolving Fund: $2.0 million
    • EBP: $0.5 million

Section 2.2.1 provides a detailed breakdown of the changes from 2018–19 to 2017–18 for the First Quarter.

2.2.1 Highlights of Spending Changes for the First Quarter

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

Highlights of Spending Changes for the First Quarter
Grants and Contributions (Vote 10 and Statutory) Increase/ (Decrease)
in millions of dollars
Q1
New 2018–19 Program spending:
CanCode
$ 4.4
Higher approved spending requirements submitted by recipients:
Canadian Foundation for Innovation
52.7
Mitacs
6.4
Timing variances between periods (payments are made in different quarters between fiscal years):
Post-Secondary Institution Strategic Investment Fund
(56.7)
Genome Canada
(41.9)
Sustainable Development Technology Canada
(30.7)
Lower program spending requirements:
Strategic Aerospace Defence Initiative
(17.1)
Other minor items, net 1.0
Total change in Grants and Contributions (Vote 10 and Statutory) $ (81.9)
Net Operating Expenditures (Vote 1)
Net Operating Expenditures (Vote 1) Increase/ (Decrease)
in millions of dollars
Q1
The increase in operating expenditures is mainly related to personnel expenditures for new programs (Budget 2017). There were also moderate increases for legal services, equipment purchases and for software license fees. $ 6.8
There was an increase in respendable revenue recorded for the Competition Bureau related to a higher volume of merger review services. In May, the charge for this service also increased. (2.2)
Other minor items, net (0.3)
Total change in Net Operating Expenditures (Vote 1) $ 4.3
Capital Expenditures (Vote 5)
Capital Expenditures (Vote 5) Increase/ (Decrease)
in millions of dollars
Q1
Reduced spending for the completion of the Federal Infrastructure projects at the Communications Research Centre $ (1.3)
Other minor items, net 0.2
Total change in Capital Expenditures (Vote 5) $ (1.1)
Other
Other Increase/ (Decrease)
in millions of dollars
Q1

Increase in expenditures for investments to modernize CIPO's IT infrastructure and to develop a suite of business services to meet client needs.

$ 2.7
Other minor items, net (0.2)
Total change in Other $ 2.5

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
(2018–19 compared to 2017–18)
Increase/ (Decrease)
in millions of dollars
Q1
Standard Object
Personnel Primarily due to new program spending introduced through Budget 2017. $ 4.2
Professional services Primarily due to an increase in spending for CIPO's IT infrastructure modernization initiative as well as increased legal fees for the department. 3.3
Transfer Payments Significant changes have been explained in Section 2.2.1. (81.9)
Sales of Services Increase in merger service revenue for the Competition Bureau. (2.2)
Other minor items, net 0.5
Total change in Budgetary expenditures $ (76.1)

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

During the production of this report, on July 18, 2018, Prime Minister Justin Trudeau announced the following changes to the ISED portfolio:

  • Mélanie Joly became the Minister of Tourism, Official Languages and La Francophonie
  • Mary Ng became the Minister of Small Business and Export Promotion

4. Financial risks and uncertainties

In the first quarter of 2018–19, the Department continued to refine and strengthen its existing stewardship and oversight practices to monitor program funding and expenditures. This included the creation of the Resource Management Committee (RMC) in late Spring 2018. This committee was established to ensure the strategic management and sound stewardship of departmental resources at ISED. To achieve this objective, the RMC is mandated to provide strategic direction and oversight of ISED's financial and non-financial resources.

With the creation of the RMC, the Department will need to ensure that it is monitoring and mitigating the following uncertainties:

  • There is a risk that programs may be unable to spend their budget in a timely manner, due to a variety of internal and external factors.
  • There is a risk that the Department may lack the information to allocate and reallocate funds in a timely manner.

In order to best manage these risks, the Department will focus its efforts towards better overall integration. This will include ensuring the development of an integrated planning process, and the further integration of financial and performance information. This will facilitate the right information and data being available for decision-making at RMC. Furthermore, to ensure financial transparency, the Department will promote the importance of RMC to its members as well as its role in the reallocation and allocation of resources in the department. The Department will also develop tools that will further encourage transparency and accountability in financial decision-making.

The printed version was signed by:

Paul Thompson
Acting Deputy Minister

August 23, 2018
Date

Simon Brault
Acting Assistant Deputy Minister/Chief Financial Officer

August 22, 2018
Date

Innovation, Science and Economic Development Canada
For the quarter ended June 30, 2018

Statement of Authorities (unaudited)

Fiscal Year 2018–19
(in thousands of dollars) Total available for use for the year ending March 31, 2019Note 1 Used during the quarter ended June 30, 2018 Year to date used at quarter-end
Vote 1 – Operating expenditures 499,334 115,015 115,015
Vote 1 – Revenue Credited to the Vote (108,994) (21,397) (21,397)
Vote 1 – Net Operating Expenditures 390,340 93,618 93,618
Vote 5 – Capital expenditures 5,983 912 912
Vote 10 – Grants and contributions 2,318,002 367,379 367,379
Total voted authorities 2,714,325 461,909 461,909
Budgetary statutory authorities:
Revolving Fund Gross expenditures 188,797 42,484 42,484
Revolving Fund Revenues (164,033) (35,966) (35,966)
Revolving Fund Net expenditures 24,764 6,518 6,518
Grants and Contributions
Genome Canada 24,700 5,075 5,075
Liabilities under the Canada Small Business Financing Act and the Small Business Loans Act
64,946 9,486 9,486
Next Gen BioFuels Fund -   -   -  
CIFAR - Pan-Canadian Artificial Intelligence 25,000 -   -  
Other statutory grants and contributions -   -   -  
Total Statutory Grants and Contributions 114,646 14,561 14,561
Employee Benefit Plans 55,503 13,859 13,859
Refunds of Previous Years Revenue -   209 209
Proceeds for Crown Asset Disposals 183 -   -  
Ministers' Car Allowance 90 23 23
Total budgetary statutory authorities 195,186 35,170 35,170
Total Budgetary authorities 2,909,511 497,079 497,079
Non-budgetary authorities 800 -   -  
Total authorities 2,910,311 497,079 497,079
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 June 30, 2017 Year to date used at quarter-end
Vote 1 – Operating expenditures 456,795 107,958 107,958
Vote 1 – Revenue Credited to the Vote (98,994) (18,699) (18,699)
Vote 1 – Net Operating Expenditures 357,801 89,259 89,259
Vote 5 – Capital expenditures 16,030 1,978 1,978
Vote 10 – Grants and contributions 2,057,305 434,261 434,261
Total voted authorities 2,431,136 525,498 525,498
Budgetary statutory authorities:
Revolving Fund Gross expenditures 186,722 39,794 39,794
Revolving Fund Revenues (158,693) (35,306) (35,306)
Revolving Fund Net expenditures 28,029 4,488 4,488
Grants and Contributions
Genome Canada 33,100 23,700 23,700
Liabilities under the Canada Small Business Financing Act and the Small Business Loans Act
69,030 5,909 5,909
Next Gen BioFuels Fund 800 -   -  
CIFAR - Pan-Canadian Artificial Intelligence -   -   -  
Other statutory grants and contributions -   1 1
Total Statutory Grants and Contributions 102,930 29,610 29,610
Employee Benefit Plans 53,807 13,452 13,452
Refunds of Previous Years Revenue -   149 149
Proceeds for Crown Asset Disposals 130 -   -  
Ministers' Car Allowance 88 22 22
Total budgetary statutory authorities 184,984 47,721 47,721
Total Budgetary authorities 2,616,120 573,219 573,219
Non-budgetary authorities 800 -   -  
Total authorities 2,616,920 573,219 573,219

Innovation, Science and Economic Development Canada
For the quarter ended

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

Fiscal Year 2018–19
(in thousands of dollars) Planned expenditures for the year ending March 31, 2019Note 1 Expended during the quarter ended June 30, 2018 Year to date used at quarter-end
Expenditures:
Personnel 531,588 133,645 133,645
Transportation and communications
13,476 2,508 2,508
Information 10,153 1,452 1,452
Professional and special services 117,548 24,932 24,932
Rentals 17,657 3,728 3,728
Repair and maintenance 11,954 660 660
Utilities, materials and supplies 8,142 853 853
Acquisition of machinery and equipment
39,188 2,169 2,169
Transfer payments 2,432,649 381,940 381,940
Other subsidies and payments 183 2,555 2,555
Total gross budgetary expenditures 3,182,538 554,442 554,442
Less Revenues netted against expenditures:
Revolving Fund Revenues 164,033 35,966 35,966
Sales of Services and Other Revenue
108,994 21,397 21,397
Total Revenues netted against expenditures:
273,027 57,363 57,363
Total net budgetary expenditures 2,909,511 497,079 497,079
Fiscal Year 2017–18
(in thousands of dollars) Planned expenditures for the year ending March 31, 2018Note 1 Expended during the quarter ended June 30, 2017 Year to date used at quarter-end
Expenditures:
Personnel 506,798 129,425 129,425
Transportation and communications
12,288 2,442 2,442
Information 8,612 1,430 1,430
Professional and special services 108,944 21,362 21,362
Rentals 14,086 3,110 3,110
Repair and maintenance 14,496 1,821 1,821
Utilities, materials and supplies 8,313 911 911
Acquisition of machinery and equipment
39,906 774 774
Transfer payments 2,160,234 463,871 463,871
Other subsidies and payments 130 2,078 2,078
Total gross budgetary expenditures 2,873,807 627,224 627,224
Less Revenues netted against expenditures:
Revolving Fund Revenues 158,693 35,306 35,306
Sales of Services and Other Revenue
98,994 18,699 18,699
Total Revenues netted against expenditures:
257,687 54,005 54,005
Total net budgetary expenditures 2,616,120 573,219 573,219
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