Canadian Heritage’s quarterly financial report for the quarter ended December 31, 2017

Table of contents

1. Introduction

This third quarterly financial report should be read in conjunction with the Main Estimates and Supplementary Estimates (A & B). It has been prepared by management as required by section 65.1 - Quarterly financial reports of the Financial Administration Act and is in the form and manner prescribed by the Treasury Board in accordance with the special purpose financial reporting framework described in the GC4400 policy instrument. The third quarterly report has not been subject to an external audit or review.

The quarterly financial report outlines the results, risks and significant changes in operations, personnel and programs and includes financial information tables for the quarter. The purpose of the quarterly financial information tables is to provide a comparison of in-year departmental spending with authorities granted by Parliament, as well as comparative financial information for the preceding year.

1.1. Authority, mandate and program activities

The Department of Canadian Heritage and its Portfolio organizations play a vital role in the cultural, civic and economic life of Canadians. Our policies and programs promote an environment where Canadians can experience dynamic cultural expressions, celebrate our history and heritage and build strong communities. The Department invests in the future by supporting the arts, our official and indigenous languages and our athletes and the sport system.

Further details on the Department of Canadian Heritage’s (PCH) authority, mandate and program activities can be found in the 2017-18 Departmental Plan and the 2017-18 Main Estimates.(PDF., 1.44MB)

1.2. Basis of presentation

This third quarterly financial report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the department’s spending authorities granted by Parliament, and those used by the department consistent with the Main Estimates and Supplementary Estimates (A & B) for the 2017-18 fiscal year.

The authority of Parliament is required before money 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.

PCH uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

1.3. Canadian Heritage financial structure

PCH has a financial structure composed of voted budgetary authorities that include Vote 1 – Operating expenditures and Vote 5 – Grants and Contributions, and Statutory authorities which are composed of contributions to employee benefits plans, Ministers’ Salary and motor car allowances and Statutory Payments for Lieutenant Governors.

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

2.1. Statement of authorities

PCH’s 2017-18 authorities available for use at the end of the third quarter have increased by $95.0 million when compared to the same quarter of 2016-17. More specifically, the total available for use increased by $59.7 million in Vote 5 - Grants and Contributions and $35.2 million in Vote 1 - Operating expenditures.

The overall increase of $95.0 million is mainly due to new initiatives whose funding was secured late last year in the 2016-17 Supplementary Estimates process—and reflected in the 2017-2018 Main Estimates—as well as funding secured in this year’s Supplementary Estimates (A&B).

The following table provides details on the changes in authorities observed from 2016-17 to 2017-18 at the end of the third quarter (Main Estimates and Supplementary Estimates (A), (B) and other transfers from Treasury Board of Canada Secretariat (TBS) Central Votes).

Changes in authorities observed from 2016-2017 to 2017-2018 at the end of the third quarter (in millions of dollars)
Items Vote 1 Vote 5 Statutory Total

Increase in funding for the celebrations of the 150th anniversary of Confederation

5.9

11.9

0.0

17.8

Funding to support the provision of services in the Territories in French and Indigenous languages

0.0

17.6

0.0

17.6

Funding for the Grants and Contributions Modernization Initiative including repairs to the roof of the Canadian Conservation Institute

10.5

0.0

1.3

11.8

Funding to support the promotion of Canadian artists and cultural industries on the world stage

4.8

5.6

0.4

10.8

Funding to support the celebrations of Montreal’s 375th anniversary

0.0

6.4

0.0

6.4

Compensation Allocations for new Collective Bargaining Agreements

6.0

0.0

0.0

6.0

Funding to support the Next Generation of Canadian Olympic and Paralympic athletes (Budget 2015)

0.0

5.0

0.0

5.0

Funding for the Support of High Performance Athletes (Budget 2017)

0.0

5.0

0.0

5.0

Increase funding to support the Young Canada Works Program

0.1

4.8

0.0

4.9

Increase in the Operating Budget Carryforward

4.7

0.0

0.0

4.7

Increase in funding related to government advertising programs - Canada's 150th anniversary of Confederation

4.5

0.0

0.0

4.5

Funding for the Harbourfront Centre Funding Program

0.0

4.0

0.0

4.0

Funding to support the new Court Challenges Program

0.5

1.9

0.0

2.4

Transfer from the Department of Indian Affairs and Northern Development to support activities related to the production of an Indigenous Peoples Atlas of Canada

0.0

1.1

0.0

1.1

Other Adjustments

(0.9)

1.4

(1.6)

(1.1)

Decrease in funding for the Budget 2016 reductions in Professional Services, Advertising and Travel

(0.9)

0.0

0.0

(0.9)

Decrease due to the phasing out of the previous Aboriginal Languages Initiative that is being replaced with an enhanced initiative. The funding authorities for this new Aboriginal Languages Initiative, that will support Indigenous community efforts across Canada to preserve, revitalize and promote their Indigenous languages, will be sought in the fourth quarter of 2017-18.

0.0

(5.0)

0.0

(5.0)

Grand Total

35.2

59.7

0.1

95.0

2.2. Departmental budgetary expenditures by standard object

Total expenditures for the third quarter of 2017-18 have decreased by $123.9M (-35%) from $353.0M to $229.1M compared to the same quarter of 2016-17.

Transfer Payments expenditures for the third quarter of 2017-18 have decreased by $121.7M, from $302.4M to $180.7M. This 40% decrease is mainly due to the following:

Decreases:

  • $101.8M – Canada Media Fund: the decrease was caused by the timing difference of last year’s third quarter payment as time was taken to amend the Terms and Conditions. The payment was posted during the second quarter this fiscal year;
  • $25.5M – Development and Enhancement of Official Languages Programs: the decrease was mainly a result of the bilateral agreements which are subject to specific conditions and can result in fluctuations in the amounts and timing of payments throughout the year;
  • $3.9M – Canada Celebration & Commemoration Program: the decrease was triggered by the winding down of Canada’s 150th Anniversary of Confederation whose events were mainly in the summer of 2017;
  • $3.2M – Canada Arts Presentation Fund Program: the decrease was caused by a difference in timing for payments that are now made earlier in the fiscal year; and

Increases:

  • $8.7M – Aboriginal Peoples’ Program: the spending increase was related to the new funding to be received in support the Aboriginal Languages Initiative;
  • $3.3M – Athlete Assistant Program: the increase was in relation to the extra funding received in Supplementary Estimates (B) for High Performance Athletes; and
  • $1.5M – Museums Assistance Program: the increase was due to the expending of funds received for the Youth Canada Works Program whose financing is part of the Youth Employment Strategy Initiative.

Operating expenditures for the third quarter of 2017-18 have decreased by $2.2M when compared to 2016-17. This 5.1% decrease is mainly due to the ($0.7M) in Other subsidies and Payments, ($0.5M) in Professional and Special Services, an increase of $1.9M in revenues netted against expenditures offset by an increase of $0.9M in Personnel. The ($0.7M) decrease in Other Subsidies and Payments is primarily as a result of improvement in coding precision and timing differences for recoverables of salary advances due to Phoenix issues. The ($0.5M) fall in Professional and Special services is mainly due the Capital Experience Program which incurred less expenses than in the same quarter of 2016-17 as activities for Canada’s 150th anniversary of Confederation started January 1st 2017. The rise in Personnel costs of $0.9M is explained by the disbursements of retroactive salary payments as well as the overall increase in regular salary costs for indeterminate, term, casual and student employees, following the ratification and signing of collective agreements. Lastly, the $1.9M increase in revenues netted against expenditures is in part due to the increase in volume but also to earlier processing of Film & Video Production credits, the increase in Canada 150th activities as well as the timing of funds received for the provision of internal support services compared to 2016-17.

As noted in the table below, PCH has spent 15.3% ($229M) of its authorities in the third quarter of 2017-18, which is significantly lower than last year’s 25.2% ($353M) for the same period of 2016-17 mostly as a result of the above mentioned Transfer payments’ disbursement schedules. The increase in the year to date spending of 11.9% ($102M) from $854M to $956M is mostly attributable to the increase in spending for Canada 150th anniversary from Confederation events as well as for the social infrastructure projects under the Canada Cultural Spaces Fund and the disbursements of retroactive salary payments and overall increase in regular salary costs following the ratification and signing of collective agreements.

Expenditures compared to annual authorities

(in millions of dollars)

Expenditures compared to annual authorities (in millions of dollars) – text version:
2017-2018 2016-2017

Total available for use

1,499 (100.0%)

1,404 (100.0%)

Used during the quarter

229 (15.3%)

353 (25.2%)

Year-to-date used

956 (63.8%)

854 (60.8%)

3. Risks and uncertainties

Canadian Heritage continues to operate in a time of change. The standardization and consolidation of processes, as part of the government-wide enabling functions initiative, requires the analysis of financial and non-financial risks and the implementation of adequate internal controls and other risk mitigation strategies to ensure effective and efficient processes in order to support strong management oversight.

The Government of Canada has implemented a new pay system as part of the pay transformation initiative. Since its implementation, Phoenix has experienced issues—under and over payments to employees—which Public Services and Procurement Canada (PSPC) is working hard to resolve. In order to mitigate against this impact, PCH has issued emergency salary advances to affected employees. PCH has also put controls in place to monitor this risk and will monitor the situation closely in consultation with PSPC and Treasury Board Secretariat.

A dominant financial risk lies in the fact that departments are required to absorb or fund activities within its existing spending authorities, or to cash manage until increased spending authorities are approved without compromising program results. As an example, the Department will have to self-fund an ongoing portion of salary increases for the ratified collective bargaining agreements from the last round of public service negotiations.

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

Since the Department’s second quarter of 2017-18, changes to the Canadian Heritage senior management personnel were implemented. Andrew Campbell will, for the time being, replace Marie-Geneviève Mounier as Assistant Deputy Minister for Sport, Major Events and Commemorations as she is to become the new Associate Secretary, to Her Excellency the Right Honourable Julie Payette, the Governor General of Canada, effective February 14, 2018. The Honourable Kristy Duncan became the Minister of Sport and Persons with Disabilities on January 25, 2018 in addition to being Minister of Science.

5. Approval by senior officials

Approved by:

Original signed
Graham Flack, Deputy Minister

Gatineau, Canada
Date: February 23, 2018

Original signed
Andrew Francis, Chief Financial Officer

Gatineau, Canada
Date: February 22, 2018

Statement of authorities (unaudited)

Fiscal year 2017-2018 and 2016-2017 (in thousands of dollars)
Expenses Total available for use for the year ending March 31, 2018* Used during the quarter ended December 31, 2017 Year to date used at quarter-end 2017-2018 Total available for use for the year ending March 31, 2017* Used during the quarter ended December 31, 2016 Year to date used at quarter-end 2016-2017

Vote 1 - Operating expenditures

230,818

42,121

149,830

195,618

44,369

127,648

Vote 5 - Grants and contributions

1,241,713

180,177

786,803

1,182,053

301,812

707,053

Statutory - Contributions to employee benefit plans

23,901

5,929

17,787

23,741

5,874

17,623

Statutory - Minister of Canadian Heritage - Salary and motor car allowance

84

21

63

84

21

56

Statutory - Minister of State (Minister of Sport and Persons with Disabilities) - Motor car allowance

2

0

2

2

0

0

Statutory - Minister of State (Minister of Status of Women) - Motor car allowance

0

0

0

2

0

0

Statutory - Salaries of the Lieutenant-Governors

1,196

357

1,073

1,196

376

1,073

Statutory - Payments under the Lieutenant Governors Superannuation Act (R.S.C., 1985, c. L-8)

637

432

432

637

463

463

Statutory - Supplementary Retirement Benefits - Former Lieutenant-Governors

182

80

80

182

93

93

Spending of Crown Asset Proceeds

37

0

0

40

0

0

Total Budgetary authorities

1,498,570

229,117

956,070

1,403,555

353,008

854,009

Total authorities

1,498,570

229,117

956,070

1,403,555

353,008

854,009

*Includes only Authorities available for use and granted by Parliament at quarter-end.

Departmental budgetary expenditures by standard object (unaudited)

Expenditures for fiscal year 2017-2018 and 2016-2017 (in thousands of dollars)
Expenses Total available for use for the year ending March 31, 2018* Used during the quarter ended December 31, 2017 Year to date used at quarter-end 2017-2018 Total available for use for the year ending March 31, 2017* Used during the quarter ended December 31, 2016 Year to date used at quarter-end 2016-2017

Personnel

187,432

41,413

138,382

171,150

40,529

123,850

Transportation and communications

8,425

1,029

3,396

5,461

988

2,364

Information

10,309

1,851

5,887

4,250

1,576

2,649

Professional and special services

40,410

4,904

16,733

34,667

5,428

13,126

Rentals

6,980

729

3,490

5,790

591

2,480

Repair and maintenance

2,220

175

723

1,332

372

727

Utilities, materials and supplies

5,304

647

2,521

5,041

582

1,693

Acquisition of machinery and equipment

4,859

309

934

2,425

513

694

Transfer payments

1,242,531

180,689

787,316

1,182,873

302,368

707,610

Other subsidies and payments

2,707

99

2,601

2,119

873

2,180

Total gross budgetary expenditures 1,511,177 231,845 961,983 1,415,108 353,820 857,373
Less revenues netted against expenditures for fiscal year 2017-2018 and 2016-2017 (in thousands of dollars)
Expenses Total available for use for the year ending March 31, 2018* Used during the quarter ended December 31, 2017 Year to date used at quarter-end 2017-2018 Total available for use for the year ending March 31, 2017* Used during the quarter ended December 31, 2016 Year to date used at quarter-end 2016-2017

Revenue credited to the Vote

-12,607

-2,728

-5,913

-11,553

-812

-3,364

Total Revenues netted against expenditures -12,607 -2,728 -5,913 -11,553 -812 -3,364
Total net budgetary expenditures 1,498,570 229,117 956,070 1,403,555 353,008 854,009

*Includes only Authorities available for use and granted by Parliament at quarter-end.

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