Quarterly Financial Report—Quarter ended September 30, 2019

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 2019–20.

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.

ISED helps Canadian businesses grow, innovate and expand so they can create good-quality jobs and wealth for Canadians. It also supports science research and the integration of scientific considerations into investment and policy choices. The Department helps small businesses grow through trade and innovation and promotes increased tourism in Canada. The Department also works to position Canada as a global centre for innovation where investments support clean and inclusive growth, the middle class prospers through more job opportunities and companies become global leaders.

ISED's efforts focus on improving conditions for investment, supporting science, helping small and medium-sized businesses grow, building capacity for clean and sustainable technologies and processes, increasing Canada's share of global trade, promoting tourism, and building an efficient and competitive marketplace.

A summary description of Innovation, Science and Economic Development Canada's core responsibilities 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 2019–20 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:

2. Highlights of fiscal quarter and fiscal year-to-date (YTD) results

The variances in authorities available for use in 2019–20 versus 2018–19, result from a combination of increases in the department's Operating and Grants and Contribution votes to accommodate new programs, decreases in Grants and Contributions funding related to the winding down of the Post-Secondary Institutions Strategic Investment Fund (PSI-SIF), and higher planned net expenditures in the Canadian Intellectual Property Office's (CIPO) Revolving Fund as described in the sections below. Variances in authorities used are largely due to timing differences with payments between periods, increased cash flow requirements, and a temporary increase in spending for the quarter to complete PSI-SIF projects.

2.1 Authorities available for use and planned expenditures

ISED's total authorities available for use of $3.0 billion at the end of the second quarter in 2019–20, amounts to a $45.8 million increase over the same period in 2018–19. This is illustrated in Graph 1 below, 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 September 30, 2019 and September 30, 2018

Bar chart illustrating the Comparison of Total Net Budgetary Authorities Available for Use as of September 30, 2019 and September 30, 2018
* Includes 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 September 30, 2019 and September 30, 2018
2019–20
($ millions)
2018–19
($ millions)
G&CNote * 2,413 2,443
Operating 467 413
OtherNote ** 101 81
Capital 8 6
Total Budget 2,989 2,943

The overall increase includes:

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

2.1.1 Highlights of Changes in Authorities Available for Use (2019–20 compared to 2018–19)

The following tables highlight the larger changes in authorities available for use, as reported in the Statement of Authorities:

Highlights of Changes in Authorities Available for Use (2019–20 compared to 2018–19)
Grants and Contributions Authorities (Vote 10 and Statutory) Increase/ (Decrease)
in millions of dollars
Vote 10 Authority
New Funding from Budget 2019
CanCode 2.0 $ 28.9
Connect to Innovate 21.0
Funding increases based on cash flow requirements of existing programs
Strategic Innovation Fund 342.0
Canada Foundation for Innovation 58.6
Digital Research Infrastructure 48.7
Intellectual Property Strategy 30.3
Sustainable Technology Development Fund 17.3
Genome 12.0
Funding decreases based on cash flow requirements of existing programs
Post-Secondary Institutions Strategic Investment Fund (386.4)
Strategic Aerospace Defence Initiative (117.3)
Innovation Superclusters Initiative (60.4)
CanCode (29.0)
Other minor items, net 12.8
TOTAL CHANGE IN Vote 10 Authority $ (21.5)
Statutory Authorities
Programs for which funding has increased
Canadian Institute for Advanced Research (CIFAR) - Pan Canadian Artificial Intelligence $ 7.5
Programs for which funding has decreased
Genome - Contributions (13.3)
Canada Small Business Financing Act (2.8)
TOTAL CHANGE IN Statutory Authorities $ (8.6)
TOTAL CHANGE IN Grants & Contributions Authorities (Vote 10 and Statutory) $ (30.1)
Net Operating Expenditures Authority (Vote 1)
Net Operating Expenditures Authority (Vote 1) Increase/ (Decrease)
in millions of dollars
New Funding from Budget 2019
Various programs including Preparing for a New Generation of Wireless Tech (5G), CanCode 2.0, Connect to Innovate, etc. $ 8.4
New Funding from Budget 2018
Various programs including Cyber Certification, New Intellectual Property Strategy, Increasing Diversity in Science, etc. 16.8
Transfers from/to Other Government Departments (OGD)
PSPC - Build in Canada Innovation Program (BCIP) 39.4
Operating budget carry-forward authority (7.3)
Other minor items, net (3.6)
TOTAL CHANGE IN Net Operating Expenditures Authority (Vote 1) $ 53.7
Capital Expenditures Authority (Vote 5)
Capital Expenditures Authority (Vote 5) Increase/ (Decrease)
in millions of dollars
New Intellectual Property Strategy
$ 0.7
Preparing for a New Generation of Wireless Tech (5G)
0.7
Capital Budget Carry-Forward Authority
0.9
TOTAL CHANGE IN Capital Expenditures Authority (Vote 5) $ 2.3
Other authorities
Other Authorities Increase/ (Decrease)
in millions of dollars
Increase in planned Employee Benefit Costs is due to an increase to the prescribed EBP rate (starting from 2019–20, the comprehensive rate has changed from 20% to 27%) used to estimate the employee benefit plan costs as well as funding received for various Budget 2018 and Budget 2019 initiatives.
$ 3.9
Increase in planned expenditures due to investments to modernize CIPO's IT infrastructure and to develop a suite of business services to meet client needs.
15.8
Other minor items, net 0.2
TOTAL CHANGE IN Other Authorities $ 19.9

2.1.2 Highlights of Changes in Planned Expenditures (2019–20 compared to 2018–19)

Table 1: Departmental Budgetary Expenditures by Standard Object displays initial planned expenditures. These plans are subject to change during the fiscal year. The annual variances in planned expenditures are primarily due to the following:

Highlights of Changes in Planned Expenditures
Spending Category Explanation of significant changes
(2019–20 compared to 2018–19)
Planned Increase/ (Decrease)
in millions of dollars
Standard Object
Personnel The increase is primarily related to new funding received from Budget 2018 and Budget 2019 to support new programs; transfers from OGDs; and the operating budget carry forward that is now allocated to the individual standard objects including Personnel. $ 38.5
Professional Services The increase is primarily related to development costs for IT taking place within CIPO as well as OGD transfers-in for the Build in Canada Innovation Program (BCIP) from PSPC. 35.0
Transfer Payments Significant changes have been explained in Section 2.1.1. (30.1)
Changes in Revenues netted against Program Expenditures
Revenues netted against expenditures: Higher planned revenues align with the anticipated costs of delivering services by Revenue Generating Organizations (RGOs) of the department. (5.9)
Other minor items, net 8.3
TOTAL CHANGE IN Planned Expenditures $ 45.8

2.2 Authorities used and actual expenditures

Authorities used and actual expenditures for the second quarter of 2019–20 have increased by $240.3 million ($161.5 million in year-to-date spending) when compared to the same period last year (see Graph 2 below, the Statement of Authorities and Table 1: Departmental budgetary expenditures by Standard Object). The differences occurred primarily in Grants and Contributions (Vote 10 and Statutory) and is largely attributable to timing differences, increased cash flow requirements, and a temporary increase in spending for the quarter to complete PSI-SIF projects.

Graph 2: Comparison of Net Second Quarter and Year to date Authorities used and expended as at September 30, 2019 and September 30, 2018

Bar chart illustrating the comparison of net first quarter expenditures as at June 30, 2019 and June 30, 2018
* Includes Vote 10 and Statutory Grants and Contributions expenditures
** Includes CIPO Revolving Fund
Description of Graph 2
Comparison of Net First Quarter Expenditures as at September 30, 2019 and September 30, 2018
Second quarter
($ millions)
Year to date
($ millions)
2019–20 2018–19 2019–20 2018–19
G&CNote * 634.4 404.1 929.3 786.0
Operating 106.5 93.6 208.0 187.2
OtherNote ** 13.4 17.1 35.7 37.7
Capital 1.1 0.4 1.3 1.4
Total 755.4 515.2 1,174.3 1,012.3

By category, the authorities used and expended in the second quarter and year-to-date compared to the same periods last year have changed as follows:

Section 2.2.1 provides a detailed breakdown of the changes in authorities used for year-to-date and the second quarter.

2.2.1 Highlights of Changes in Authorities used for the Year-to-date and Second Quarter

The following tables highlight, by authority, the larger changes in authorities used, as reported in the Statement of Authorities:

Highlights of Changes in Authorities used for the Year-to-date and Second Quarter
Grants and Contributions Authorities Used (Vote 10 and Statutory) Increase/ (Decrease)
in millions of dollars
Q2 YTD
Timing variances between periods (payments are made in different quarters between fiscal years) / Cash flow requirements
Sustainable Development Technology Fund $ 59.8 $ 93.8
Canadian Institute for Advanced Research (CIFAR) - Pan Canadian Artificial Intelligence 24.6 24.6
Canada Foundation for Innovation 19.8 28.6
Innovation Superclusters Initiative 7.2 12.1
Timing variance to accommodate program delays; program is winding down, overall
Post-Secondary Institutions Strategic Investment Fund 93.9 (37.9)
Higher approved spending requirements submitted by recipients
Strategic Innovation Fund 17.8 18.0
CANARIE 14.2 15.6
Digital Research Infrastructure 14.1 14.1
Mitacs 7.3 9.5
Connect to Innovate 5.1 5.3
Lower spending due to decreased funding; programs winding down
Strategic Aerospace and Defence Initiative (36.1) (36.4)
Other minor items, net 2.7 (4.1)
Total Change in Grants and Contributions Authorities Used (Vote 10 and  Statutory) $230.4 $143.2
Net Operating Expenditures Authorities Used (Vote 1) Increase/ (Decrease)
in millions of dollars
Q2 YTD
Operating expenditures:
The increase is primarily due to higher professional services related to the Build in Canada Innovation Program (BCIP) and an increase in IT consultant fees. The increase is also attributed to higher personnel expenditures for new programs as well as an increase in head count to address pay administration issues.
$18.7 $31.5
Revenue credited to vote:
The increase is mainly due to revenues for internal services related to developing IT projects for CIPO.
(5.8) (10.7)
Total Change in Net Operating Expenditures Authorities Used (Vote 1) $12.9 $20.8
Capital Expenditures Authorities Used
Capital Expenditures Authorities Used (Vote 5) Increase/ (Decrease)
in millions of dollars
Q2 YTD
Minor items, net $ 0.7 $ (0.1)
Total Change in Capital Expenditures Authorities Used (Vote 5) $ 0.7 $ (0.1)
Other Authorities Used Increase/ (Decrease)
in millions of dollars
Q2 YTD
Increase in Employee Benefit costs is due to an increase to the prescribed EBP rate used to estimate the employee benefit plan costs and the funding received for various Budget 2018 and Budget 2019 initiatives. $ 0.6 $ 1.2
A net increase in CIPO revenues is attributable to new international trademark treaties. These are offset by increases to salary costs and IT infrastructure costs. (4.4) (3.8)
Other minor items, net 0.0 0.1
Total Change in Other Authorities Used $ (3.8) $ (2.5)

2.2.2 Highlights of Changes in Actual Expenditures (2019–20 compared to 2018–19)

Variances in actual expenditures by standard object (Table 1: Departmental Budgetary Expenditures by Standard Object) are primarily due to the following:

Highlights of Changes in Actual Expenditures (2019–20 compared to 2018–19)
Spending Category Explanation of significant changes in actual expenditures Increase/ (Decrease)
in millions of dollars
(2019–20 compared to 2018–19) Q2 YTD
Standard Object
Personnel Significant changes have been explained in Section 2.2.1 – Net Operating Expenditures. $11.4 $18.0
Professional Services Significant changes have been explained in Section 2.2.1 – Net Operating Expenditures. 12.9 21.4
Transfer payments Significant changes have been explained in Section 2.2.1 – Grants and Contributions. 230.4 143.2
Revolving Fund Revenues Increase due to new international trademark treaties. (9.2) (11.6)
Sales of Services Significant changes have been explained in Section 2.2.1 – Net Operating Expenditures. (5.8) (10.7)
Other minor items, net 0.6 1.2
Total Change in Net Budgetary actual expenditures $ 240.3 $ 161.5

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

On September 3, 2019, Simon Kennedy was appointed Deputy Minister of ISED. Shortly after the QFR reporting period, on October 7, 2019, Douglas McConnachie was appointed Assistant Deputy Minister of the Corporate Management Sector and Chief Financial Officer of ISED.

4. Financial risks and uncertainties

ISED recognizes that its success in fulfilling its expansive mandate includes effective and integrated risk management (IRM). IRM enables the Department to identify and respond to uncertainty by using risk-based information to support decision-making and resource allocation, which support the achievement of departmental results.

The identification of risks is key to effective IRM. ISED's 2019-20 Corporate Risk Profile identified two finance-related risks: 

To respond to these risks, ISED is implementing strong control frameworks, including clear governance channels, which support establishing expectations, monitoring progress, and timely signal-checking. ISED is also developing the data, processes and tools to support decision-making and resource allocation. These initiatives are positioning the organization to adapt and align to shifting priorities and risks in an agile manner.  ISED continues to monitor its enterprise risks to ensure that they do not impede the achievement of its outcomes.

The printed version was signed by:

Space to insert signature
Simon Kennedy
Deputy Minister

November 25, 2019
Date

Space to insert signature
Douglas McConnachie
Assistant Deputy Minister/Chief Financial Officer

November 18, 2019
Date


STATEMENT OF AUTHORITIES (unaudited)
(in thousands of dollars) Fiscal Year 2019–20 Fiscal Year 2018–19
Total available for use for the year ending
March 31, 2020Footnote 1
Used during the quarter ended September 30, 2019 Year to date used at quarter-end Total available for use for the year ending
March 31, 2019Footnote 1
Used during the quarter ended September 30, 2018 Year to date used at quarter-end
Vote 1 — Operating expenditures 583,815 137,369 265,203 521,730 118,700 233,715
Vote 1 — Revenue Credited to the Vote (117,364) (30,862) (57,209) (108,994) (25,114) (46,510)
Vote 1 — Net Operating Expenditures 466,451 106,507 207,994 412,736 93,586 187,205
Vote 5 — Capital expenditures 8,240 1,127 1,265 5,983 448 1,360
Vote 10 — Grants and contributions 2,306,427 596,200 881,671 2,328,002 378,920 746,298
Total voted authorities 2,781,118 703,834 1,090,930 2,746,721 472,954 934,863
Revolving Fund Gross expenditures 202,186 46,376 91,889 188,797 41,589 84,074
Revolving Fund Revenues (161,566) (47,715) (86,119) (164,033) (38,519) (74,486)
Revolving Fund Net expenditures 40,620 (1,339) 5,770 24,764 3,070 9,588
Grants and Contributions
Genome Canada 11,400 8,550 11,400 24,700 15,225 20,300
Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act 62,173 12,139 18,567 64,946 9,923 19,410
CIFAR — Pan-Canadian Artificial Intelligence 32,500 17,619 17,619 25,000 - -
Other statutory grants and contributions - - - - 8 8
Total Statutory Grants and Contributions 106,073 38,308 47,586 114,646 25,156 39,718
Employee Benefit Plans 59,434 14,482 28,964 55,503 13,859 27,718
Refunds of Previous Years Revenue - 162 331 - 122 331
Proceeds for Crown Asset Disposals 226 - - 275 - -
Ministers' Car Allowance 351 87 175 90 44 66
Total budgetary statutory authorities 206,704 51,700 82,826 195,278 42,251 77,421
Total Budgetary authorities 2,987,822 755,534 1,173,756 2,941,999 515,205 1,012,284
Non-budgetary authorities 800 - - 800 - -
Total authorities 2,988,622 755,534 1,173,756 2,942,799 515,205 1,012,284
Table 1: Departmental Budgetary Expenditures by Standard Object (unaudited)
(in thousands of dollars) Fiscal Year 2019–20 Fiscal Year 2018–19
Planned expenditures for the year ending
March 31, 2020Footnote 1
Expended during the quarter ended
September 30, 2019
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2019Footnote 1
Expended during the quarter ended
September 30, 2018
Year to date used at
quarter-end
Expenditures:
Personnel 570,109 142,747 282,126 531,588 131,330 264,129
Transportation and communications 16,726 3,184 6,081 15,327 2,695 5,203
Information 12,556 1,942 4,438 12,452 2,150 3,602
Professional and special services 159,717 38,735 72,174 124,709 25,860 50,792
Rentals 20,231 5,373 9,986 20,129 3,455 7,183
Repair and maintenance 16,751 1,025 1,621 13,597 1,034 1,694
Utilities, materials and supplies 9,400 1,083 1,874 8,958 1,134 1,987
Acquisition of machinery and equipment 48,199 1,764 3,308 45,342 2,411 4,580
Transfer payments 2,412,500 634,507 929,257 2,442,649 404,076 786,016
Other subsidies and payments 562 3,750 6,219 275 4,693 8,094
Total gross budgetary expenditures 3,266,751 834,110 1,317,084 3,215,026 578,838 1,133,280
Less revenues netted against expenditures:
Revolving Fund Revenues 161,565 47,714 86,119 164,033 38,519 74,486
Sales of Services and Other Revenue 117,364 30,862 57,209 108,994 25,114 46,510
Total Revenues netted against expenditures: 278,929 78,576 143,328 273,027 63,633 120,996
Total net budgetary expenditures 2,987,822 755,534 1,173,756 2,941,999 515,205 1,012,284
Date modified: