Quarterly Financial Report—Quarter ended December 31, 2012
- 1. Introduction
- 2. Highlights of fiscal quarter and fiscal year-to-date (YTD) results
- 3. Risks and uncertainties
- 4. Significant changes in relation to operations, personnel and programs
- 5. Budget 2012 implementation
- Statement of Authorities (unaudited)
- Table 1: Departmental budgetary expenditures by Standard Object (unaudited)
Statement Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs
This quarterly report 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 quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates for fiscal year 2012–13 as well as Canada's Economic Action Plan 2012 (Budget 2012) and previous quarterly financial reports for fiscal year 2012–13.
A summary description of Industry Canada's program activities can be found in Part II of the Estimates.
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 in the form of statutory spending authority for specific purposes. This quarterly 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, Industry Canada 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. However, the spending authorities voted by Parliament remain on an expenditure basis. This quarterly report has therefore been prepared by management using an expenditure basis of accounting.
The accompanying Statement of Authorities includes Industry Canada's spending authorities granted by Parliament and those used by Industry Canada, consistent with the Main Estimates and Supplementary Estimates for the 2012–13 fiscal year.
As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result, the measures announced in Budget 2012 could not be reflected in the 2012–13 Main Estimates.
Instead, frozen allotments have been established in departmental votes to prohibit the spending of funds identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.
The quarterly financial report (QFR) has not been subject to an external audit. However, it has been reviewed by the Departmental Audit Committee.
2. Highlights of fiscal quarter and fiscal year-to-date (YTD) results
The variances in authorities available for use and actual expenditures in 2012–13 largely relate to five significant changes over the past year: the transfer of 123 employees to Shared Services Canada (SSC); the payment of a $29.0 million legal settlement; severance payouts made in 2011–12; the implementation of Budget 2012; and the sunsetting of the Knowledge Infrastructure Program (KIP).
2.1 Authorities available for use and planned expenditures
Industry Canada's total authorities available for use in 2012–13, $1.54 billion, decreased by approximately $150.1 million in comparison with the same quarter ended in 2011–12, as illustrated in the Statement of Authorities and in Table 1: Departmental Budgetary Expenditures by Standard Object. This decrease is primarily related to cash flow changes as well as the sunsetting of grants and contributions programs and a small net decrease in Vote 1–Net Operating Expenditures, as explained below.
2.1.1 Vote 10–Grants and Contributions ($44.6 million increase) and Statutory Grants and Contributions ($180.8 million decrease)
The authority for Vote 10–Grants and Contributions increased by a total of $44.6 million compared to the same quarter end of last fiscal year. This is primarily due to the following factors:
- The fluctuating funding profiles of programs such as the Canada Foundation for Innovation ($72.0 million increase), the Automotive Innovation Fund ($17.8 million increase), the Structured Financing Facility ($7.3 million increase), Bombardier CSeries ($5.4 million increase), and Technology Partnerships Canada / Strategic Aerospace and Defence Initiative ($6.2 million decrease), to match the expected requirements of recipients.
- New funding was approved for the Perimeter Institute for Theoretical Physics ($10 million) through Budget 2011 and for CANARIE ($12.6 million) through Budget 2012.
- The funding for Broadband Canada: Connecting Rural Canadians has decreased by $60.0 million as a result of the winding down of the program. The sunsetting of the Community Access Program has also resulted in a decrease of $14.1 million.
Statutory authorities for grants and contributions decreased by $180.8 million at the end of the third quarter from 2011–12 to 2012–13, primarily because of the sunsetting of the KIP which resulted in a decrease of $191.4 million. This particular funding difference appears in the third quarter since the KIP 2011–12 funding was received during that quarter. In addition to changes to its existing funding profile, Genome Canada also received additional funding in 2012–13 under Budget 2011, generating a net increase of $18.2 million. Finally, a $6.6 million decrease for Liabilities under the Canada Small Business Financing Act resulted from the lower anticipated payout of claims by the program.
These variances are also reflected in Table 1: Departmental Budgetary Expenditures by Standard Object in the "transfer payments" standard object.
2.1.2 Vote 1–Net Operating Expenditures ($6.8 million decrease)
Authorities available for use in Vote 1–Net Operating Expenditures decreased by a total of $6.8 million compared to the same quarter end of last year. The most significant elements at the third quarter contributing to this change include the permanent transfer of budgets and associated responsibilities to SSC as well as lower severance pay funding requirements to date, partially offset by one-time funding received for the payment for a legal settlement agreement.
2.1.3 Table 1: Departmental Budgetary Expenditures by Standard Object: Other Subsidies and Payments ($29.0 million increase)
Table 1: Departmental Budgetary Expenditures by Standard Object displays initial expenditure plans. These plans are subject to change during the fiscal year.
The previously explained variances for grants and contributions and net operating expenditures result in the current variances in standard objects. The increase in "other subsidies and payments" specifically pertains to the allocation of funding received for a legal settlement agreement.
In addition, this standard object contains deferred funding received, such as the "Reinvestment of receipts from repayable contributions to support operating requirements" and the annual "Operating Budget Carry-forward". Used primarily to pay for personnel expenditures, this funding cannot be assigned directly to the "personnel" standard object because Industry Canada receives it in non-salary dollars; it will later be converted to salary dollars.
2.2 Authorities used and actual expenditures
Expenditures in the third quarter of 2012–13 decreased by $60.9 million compared with the same quarter last year, primarily in Vote 10–Grants and Contributions and Statutory Grants and Contributions. In 2012–13, expenditures to date increased by $83.3 million compared to the same period of last fiscal year, primarily in Vote 10–Grants and Contributions and Statutory Grants and Contributions.
2.2.1 Vote 10–Grants and Contributions and Statutory Grants and Contributions (Third quarter: $54.5 million decrease; Year to date: $87.2 million increase)
In the third quarter of 2012–13, there was a $20.9 million net decrease in Vote 10–Grants and Contributions expenditures compared with the same quarter of 2011–12. Details of the significant variances, which occurred in four program activities, are as follows:
Science, Technology and Innovation Capacity
- $12.6 million increase in expenditures in the CANARIE program. This was the first payment made under a new contribution agreement starting in fiscal year 2012–13.
Spectrum Telecommunications and the Online Economy
- $6.5 million decrease in expenditures due to timing differences in the grant payment to the International Telecommunications Union (ITU), Geneva, Switzerland as the payment will be made in the fourth quarter this fiscal year.
Community Economic Development
- $10.9 million decrease in expenditures in the Broadband Canada: Connecting Rural Canadians program. The majority of the funding for this program ended as of March 31, 2012 and few payments have been made this fiscal year.
Industrial Research and Development Financing
- $9.9 million decrease in expenditures in the Bombardier CSeries program, due to the timing and number of claims submitted compared to 2011–12.
- $3.0 million decrease in expenditures in the Automotive Innovation Fund program, due to timing differences as fewer claims were submitted in the third quarter of fiscal year 2012–13 compared to 2011–12.
In 2012–13, the Vote 10–Grants and Contributions expenditures to date increased by $84.6 million compared to the same period of last fiscal year. $12.6 million of this increase is related to the payment made to CANARIE described above. Additionally, $72.0 million is related to the increase in expenditures for the Canada Foundation for Innovation as explained in the first quarter QFR, and a $10.0 million increase for the Perimeter Institute as explained in the second quarter QFR. Finally, there was a $12.1 million increase in year-to-date expenditures in the Bombardier CSeries program compared to last fiscal year. The company completed more of the research and development (R&D) work this year compared to last year. These increases are offset by the third quarter decrease in the grant payment to the ITU ($6.5 million) and the cumulative decrease in Broadband Canada: Connecting Rural Canadians program ($13.5 million).
In the third quarter of 2012–13, there was a $33.6 million net decrease in Statutory Grants and Contributions expenditures compared with the same quarter in 2011–12. Details of the significant variances, which fall under two program activities, are as follows:
Small Business Research, Advocacy and Services
- $10 million decrease in expenditures due to timing differences for the Canadian Youth Business Foundation (CYBF); the payment was made in the second quarter of 2012–13, but in the third quarter of 2011–12.
- $5.2 million decrease in expenditures resulting from a decrease in claims under the Canada Small Business Financing Act (CSBFA) and the Small Business Loans Act compared to third quarter of 2011–12
Science, Technology and Innovation Capacity
- $17.4 million decrease in expenditures for KIP due to timing differences. The majority of the payments made for KIP in 2011–12 occurred in the third quarter; however, no payments were made in the third quarter of this fiscal year.
In 2012–13, Statutory Grants and Contributions expenditures to date increased by $2.6 million compared to the same period last year. This variance is mostly attributable to timing differences for payments being made under KIP ($6.4 million increase), a decrease in claims being paid out under the CSBFA ($10.3 million decrease), and the $6.1 million increase in expenditures for Genome Canada as explained in the first quarter QFR.
The $54.5 million decrease in the third quarter as well as the $87.2 million year-to-date increase is also reflected in the "transfer payment" standard object in Table 1: Departmental Budgetary Expenditures by Standard Object.
2.2.2 Vote 1–Net Operating Expenditures
There are no significant variances to report for Vote 1 – Net Operating Expenditures.
2.2.3 Canadian Intellectual Property Office (CIPO) Revolving Fund (Year to date: $7.4 million decrease)
The $7.4 million decrease in CIPO's net year-to-date expenditures compared to fiscal year 2011–12 is mostly attributable to the $4.9 million decrease in severance payouts as explained in the second quarter QFR. Furthermore, revenues collected by CIPO have increased slightly ($1.7 million) compared to last fiscal year.
2.2.4 Vote 5–Capital Expenditures (Year to date: $2.3 million increase)
There was a $2.3 million increase in year-to-date Vote 5–Capital Expenditures compared to fiscal year 2011–12.This variance is primarily due to the following factors:
- $2.7 million increase in expenditures for the ongoing Spectrum Applications Modernization Project compared to fiscal year 2011–12.
- $1.5 million increase in expenditures for maintenance of the Communications Research Centre Canada (CRC) campus and equipment compared to fiscal year 2011–12.
- $1.2 million decrease in expenditures resulting from IT investments made in 2011–12. These costs are now handled by SSC.
- $600,000 decrease in expenditures resulting from two capital projects which were completed in fiscal year 2011–12.
2.2.5 Table 1: Departmental Budgetary Expenditures by Standard Object: Personnel (Year to date: $28.0 million decrease)
The "personnel" standard object in Table 1: Departmental Budgetary Expenditures by Standard Object includes personnel expenditures from all of the votes included in the Statement of Authorities, primarily from Vote 1–Net Operating Expenditures, Employee Benefit Plans and CIPO. In 2012–13, there was a $28.0 million year-to-date decrease in this standard object, largely the result of $18.4 million in severance payouts made in 2011–12 and a cumulative decrease of $11.2 million due to a reduction in headcount, including the transfer of 123 employees to SSC in November 2011.
2.2.6 Table 1: Departmental Budgetary Expenditures by Standard Object: Other subsidies and payments (Year to date: $28.6 million increase)
The $28.6 million increase in the "other subsidies and payments" standard object is primarily the result of the $29.0 million increase in expenditures due to the payment of a legal settlement, as explained in the first quarter QFR.
3. Risks and uncertainties
As described in the QFRs for the first two quarters of 2012–13, Industry Canada has been managing the impact of a number of government-wide budgetary restraint measures stemming from Budget 2010 and Budget 2011.
This included absorbing wage increases, as well implementing reductions from the Strategic Review exercise. As of the third quarter of 2012–13, the financial risks to the Department have been well mitigated and no additional measures will be undertaken.
4. Significant changes in relation to operations, personnel and programs
On November 12, 2012, Marta Morgan was appointed Associate Deputy Minister of Industry Canada.
Effective November 15, the control and supervision of certain portions of the Federal Public Administration known as the Email, Data Centre and Network Services Unit were transferred to Shared Services Canada in accordance with Order-in-Council P.S. 2011–1297. This transfer resulted in a decrease of $24.7 million in authorities available for use in 2012–13: $20.5 million for Vote 1, $2.3 million for Vote 5, and $1.9 million for Employee Benefit Plans.
5. Budget 2012 implementation
This section provides an overview of the savings measures announced in Budget 2012, which sets out the government's plan to reduce the federal deficit and return to fiscal balance by the end of this Parliament. Details regarding Budget 2012 reductions for 2012–13 are available online and are centred on three main areas, not in direct services to Canadians:
- reducing administrative expenditures by improving efficiencies;
- reducing expenditures by consolidating program and office functions; and
- efficiencies in research and analysis functions while maintaining adequate capacity for targeted policy development.
Industry Canada's prudent financial management, including the savings already realized in 2011–12, is central to Industry Canada's approach looking ahead to 2012–13 and beyond. Long-term financial affordability and a commitment to ensuring the Department's continued ability to deliver its mandate and its core activities have been a key focus of all financial decisions.
In addition, the Department took a proactive and targeted approach to managing the size of its workforce in advance of Budget 2012. As a result, as of the end of the third quarter of 2012–13, Industry Canada has achieved its headcount targets for both the current fiscal year and 2013–14. Additional information can be found in the second quarter Quarterly Financial Report.
As was reported in the second quarter Quarterly Financial Report, the Department will achieve savings of $49.2 million in the first year of implementation. Savings will increase to $65.2 million for 2013–14 and will result in ongoing savings of $79.5 million by 2014–15.
As of the end of the third quarter, a decrease of $2.5 million has been made to Industry Canada's grants and contributions authorities as a result of Budget 2012. The remaining decrease of $46.7 million for 2012–13 will come from reductions in repayable contributions that the Department is allowed to access through Supplementary Estimates.
The printed version is signed by:
February 28, 2013
Chief Financial Officer
February 28, 2013
For the quarter ended
Statement of Authorities (unaudited)
|(in thousands of dollars)||Total available for use for the year ending Footnote page 1||Used during the quarter ended||Year to date used at quarter-end|
|Vote 1 - Net Operating expenditures||424,542||81,827||284,677|
|Vote 5 - Capital expenditure||16,400||3,810||7,482|
|Vote 10 - Grants and contributions||794,947||96,784||468,553|
|Total voted authorities||1,235,889||182,421||760,712|
|Budgetary statutory authorities:|
|Revolving Fund Gross expenditures||156,964||34,606||102,370|
|Revolving Fund Revenues||(146,102)||(37,148)||(103,998)|
|Revolving Fund Net expenditures||10,862||(2,542)||(1,628)|
|Grants and Contributions|
|Perimeter Institute for Theoretical Physics||-||-||-|
|Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act||103,467||11,519||34,613|
|Knowledge Infrastructure Program||52,460||-||23,887|
|Canadian Youth Business Foundation||10,000||-||10,000|
|Other statutory grants and contributions||-||31||1,459|
|Total Statutory Grants and Contributions||240,527||11,550||128,059|
|Employee Benefit Plans||54,081||13,520||40,561|
|Total budgetary statutory authorities||305,967||22,663||167,413|
|Total Budgetary authorities||1,541,856||205,084||928,125|
|(in thousands of dollars)||Total available for use for the year ending Footnote page 2Footnote page 3||Used during the quarter ended Footnote page 4||Year to date used at quarter-end|
|Vote 1 - Net Operating expenditures||431,390||86,474||281,534|
|Vote 5 - Capital expenditure||15,260||3,348||5,205|
|Vote 10 - Grants and contributions||750,346||117,651||383,923|
|Total voted authorities||1,196,996||207,473||670,662|
|Budgetary statutory authorities:|
|Revolving Fund Gross expenditures||161,477||34,927||108,097|
|Revolving Fund Revenues||(144,958)||(35,821)||(102,306)|
|Revolving Fund Net expenditures||16,519||(894)||5,791|
|Grants and Contributions|
|Perimeter Institute for Theoretical Physics||1,010||1,010||1,010|
|Liabilities under the Canada Small Business Financing Act & the Small Business Loans Act||110,050||16,723||44,957|
|Knowledge Infrastructure Program||243,848||17,392||17,491|
|Canadian Youth Business Foundation||10,000||10,000||10,000|
|Other statutory grants and contributions||-||19||29|
|Total Statutory Grants and Contributions||421,308||45,144||125,487|
|Employee Benefit Plans||56,642||14,160||42,481|
|Total budgetary statutory authorities||494,989||58,472||174,118|
|Total Budgetary authorities||1,691,985||265,945||844,780|
For the quarter ended
Table 1: Departmental budgetary expenditures by Standard Object (unaudited)
|(in thousands of dollars)||Planned expenditures for the year ending||Expended during the quarter ended
||Year to date used at quarter-end|
|Transportation and communications||23,085||3,634||9,880|
|Professional and special services||101,010||23,316||57,171|
|Repair and maintenance||13,298||959||2,546|
|Utilities, materials and supplies||7,785||1,296||3,482|
|Acquisition of land, buildings and works||-||1,239||1,740|
|Acquisition of machinery and equipment||17,825||1,838||7,278|
|Other subsidies and payments||66,906||(320)||30,800|
|Total gross budgetary expenditures||1,766,056||269,052||1,093,795|
|Less Revenues netted against expenditures:|
|Revolving Fund Revenues||146,102||37,148||103,998|
|Sales of Services and Other Revenue||78,098||26,820||61,672|
|Total Revenues netted against expenditures:||224,200||63,968||165,670|
|Total net budgetary expenditures||1,541,856||205,084||928,125|
|(in thousands of dollars)||Planned expenditures for the year ending March 31, 2012 Footnote page 5||Expended during the quarter ended December 30, 2011Footnote page 6||Year to date used at quarter-end|
|Transportation and communications||23,905||5,299||13,600|
|Professional and special services||105,615||17,370||49,435|
|Repair and maintenance||14,197||2,838||7,240|
|Utilities, materials and supplies||10,338||1,462||3,871|
|Acquisition of land, buildings and works||-||13||17|
|Acquisition of machinery and equipment||28,098||3,015||6,125|
|Other subsidies and payments||37,889||(216)||2,199|
|Total gross budgetary expenditures||1,907,481||322,132||1,003,098|
|Less Revenues netted against expenditures:|
|Revolving Fund Revenues||144,958||35,821||102,306|
|Sales of Services and Other Revenue||70,538||20,366||56,012|
|Total Revenues netted against expenditures:||215,496||56,187||158,318|
|Total net budgetary expenditures||1,691,985||265,945||844,780|
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