Quarterly Financial Report—Quarter Ended December 31, 2016—Revised

Erratum

Date: April 7, 2017

Location: Table 1: Departmental budgetary expenditures by standard object (unaudited), Expended during the quarter ended December 31, 2016, Expenditures: Information

Revision: "Expenditures: Information $1,790 thousands" replaces "Expenditures: Information $1,760 thousands"

Location: Table 1: Departmental budgetary expenditures by standard object (unaudited), Planned expenditures for the year ending March 31, 2016, Expenditures: Repair and maintenance

Revision: "Expenditures: Repair and maintenance $9,681 thousands" replaces "Expenditures: Repair and maintenance $9,861 thousands"

Rationale for the revision: Transcription error occurred during the HTML conversion process.

• 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 2016–17.

1.1 Our organization

Innovation, Science and Economic Development Canada 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 (ISED) 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 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. 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 2016–17 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.

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 2016–17, versus 2015–16, are largely related to significant funding increases in the department's Grants and Contributions Vote, Operating Vote and Other expenditures, 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, 2016 and December 31, 2015

*Includes planned Vote 10 and Statutory Grants and Contributions expenditures
**Includes Canadian Intellectual Property Office (CIPO) Revolving Fund

ISED’s total authorities available for use of $2.18 billion, as of the third quarter of 2016–17, reflect an $868.6 million increase in comparison with the same quarter in 2015–16, as illustrated in the attached Statement of Authorities (and in Table 1: Departmental Budgetary Expenditures by Standard Object). This increase includes:

• Grants and Contributions (Vote 10 and Statutory) – $836.5 million
• Net Operating Expenditures (Vote 1) – $16.5 million
• Other – $16.5 million
• Capital Expenditures (Vote 5) – $0.9 million

The overall authorities available for use this quarter have increased by $259.5 million as compared to the second quarter this year. This quarter, the Department received funding in supplementary estimates B, of which the majority ($271.7 million) was for Grants and Contributions programs with an additional $3.3 million in capital and $2.8 million in operating funding. Other major changes in the authorities available for use this quarter included an increase of $27.5 million for the Sustainable Development Technology Fund, a decrease of $43.7 million resulting from a reprofile of funds from 2016–17 to 2017–18 for the Automotive Innovation Fund, and a $2.6 million reduction in travel, advertising and professional services as announced in Budget 2016.

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

2.1.1 Highlights of Changes by Authority (2016–17 compared to 2015–16)

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 in the third quarter of 2016–17 have increased by $431.6 million compared with the same quarter last year. Year-to-date expenditures compared to last year have increased by $491.1 million. The differences occurred primarily in Grants and Contributions (Vote 10 and Statutory) and are mainly due to new funding for the Strategic Investment Fund and the Sustainable Development Fund announced in Budget 2016, as well as higher payments requested by recipients for the Canada Foundation for Innovation.

Graph 2: Comparison of Net Expenditures in the Third Quarter and Net Year-to-Date Expenditures as of December 31, 2016 and December 31, 2015

* Includes Vote 10 and Statutory Grants and Contributions expenditures
** Includes CIPO Revolving Fund

Spending in the third quarter and year-to-date has changed as follows:

• Grants and Contributions (Vote 10 and Statutory)
  • Quarterly – $417.9 million
  • Year-to-date – $469.5 million
• Net Operating Expenditures (Vote 1)
  • Quarterly – $15.2 million
  • Year-to-date – $22.6 million
• Other
  • Quarterly – $1.5 million
  • Year-to-date – $6.6 million
• Capital Expenditures (Vote 5)
  • Quarterly – $3.1 million
  • Year-to-date – $7.6 million

Section 2.2.1 provides a detailed breakdown of the changes from 2015–16 to 2016–17 for the Third Quarter and Year-to-date spending.

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

The following tables highlight, by authority, the significant 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

While the department received significant funding to carry out new programs, there have been no significant changes in relation to operations, personnel and programs over the last quarter.

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 2016–17, implementation of significant Budget 2016 commitments is underway, including delivery of the $2 billion Post-Secondary Institutions Strategic Investment Fund and work to enhance broadband services for rural Canadians. In addition, the Department is making significant investments, such as upgrading the Communications Research Centre campus at Shirley’s Bay. The Department will continue to utilize proven monitoring practices so that its financial objectives are on track to be met.

In addition, ISED continues to monitor the operating budget freeze announced in the October 2013 Speech from the Throne, and has been managing the required reductions to internal spending largely through attrition and reallocation. Strategies have been put in place to allow the Department to manage increases in operational costs as the collective bargaining agreements currently being negotiated are finalized. Any changes in this regard will be addressed in future editions of the Department's Quarterly Financial Report.

Approved by:

Innovation, Science and Economic Development Canada
For the quarter ended December 31, 2016

Statement of Authorities (unaudited)

Innovation, Science and Economic Development Canada
For the quarter ended December 31, 2016

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