Quarterly Financial Report—Quarter Ended June 30, 2018

• 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)

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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.

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:

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 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. 

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:

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

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:

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

Statement of Authorities (unaudited)

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

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