Canadian Heritage’s quarterly financial report for the quarter ended December 31, 2018

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1. Introduction

This third quarterly financial report should be read in conjunction with the 2018-19 Main Estimates, Budget Implementation Vote items and Supplementary Estimates A approved as of December 31, 2018 along with 2017-18 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 2018-19 Departmental Plan and the 2018-19 Main Estimates  (PDF format, 1.79 MB).

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, Budget Implementation Vote items and Supplementary Estimates A approved as of December 31, 2018 for the 2018-19 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 2018-19 authorities available for use at the end of the third quarter have decreased by approximately $140.0 million when compared to the same quarter of 2017-18. More specifically, the total available for use decreased by $114.5 million in Vote 5 - Grants and Contributions, $25.7 million in Vote 1 - Operating expenditures and increased by $0.2 million in Statutory authorities.

The following table provides details on the changes in authorities observed from 2017-18 to 2018-19 at the end of the third quarter:

Changes in authorities observed from 2017-18 to 2018-19 at the end of the third quarter (in millions of dollars)
Items Vote 1 Vote 5 Statutory Total
New funding for the Aboriginal Languages Initiative (ALI) to support the preservation, revitalization and promotion of Indigenous languages (Budget 2017) 3.1 19.1 0.4 22.6
Increase in funding to support the bid to host the 2026 Olympic and Paralympic Winter games 0.6 13.0 0.1 13.7
New funding for Creative Export Strategy in order to sustain and stimulate the exports and international promotion of Canadian creative works partially offset by sunsetting of temporary funding to support the promotion of Canadian artists and cultural industries on the world stage (Budget 2016 & 2017) 1.4 5.4 0.2 7.0
Increase for negotiated salary adjustments 5.6 0.0 0.6 6.2
Increase in funding to invest in community educational infrastructures in the provinces and territories (Budget 2017) 0.1 3.9 0.0 4.0
Increase in funding to support the provision of services in French and Indigenous languages in the Territories (Budget 2016) 0.0 3.2 0.0 3.2
Increase in funding to support Indigenous Youth and Sport (Budget 2017) 0.5 2.1 0.0 2.6
Other Adjustments (3.5) 2.6 (0.3) (1.2)
Decrease in funding for the Grants and Contributions Modernization Project and repairs to the roof of the Canadian Conservation Institute (2.6) 0.0 (0.3) (2.9)
Sunsetting of the short term investment announced in Budget 2016 for Cultural Infrastructure, partially offset by new funding announced in Budget 2017 to strengthen Cultural Infrastructure (0.3) (54.0) (0.1) (54.4)
Sunsetting of temporary funding for the celebrations of the 150th anniversary of Confederation, including Montreal’s 375th anniversary and temporary funding related to government advertising programs (30.6) (109.8) (0.4) (140.8)
Grand Total (25.7) (114.5) 0.2 (140.0)

2.2. Departmental budgetary expenditures by standard object

Total expenditures for the third quarter of 2018-19 have increased by $21.7M (9%) from $229.1M to $250.8M compared to the same quarter of 2017-18.

The Vote 5 – Grants and Contributions expenditures for the third quarter of 2018-19 increased by $19.5M, from $180.2M to $199.7M. This 11% increase is mainly due to the following items:

Increases:

  • $14.2M – Enhancement of Official Languages Program: the increase is mainly caused by the timing in payments which were more significant in 2018-19 third quarter compared to the same quarter in 2017-18;
  • $8.8M – Sport Support Program: the increase is mainly due to the timing in payments which were more significant in 2018-19 third quarter compared to the same quarter in 2017-18;
  • $7.9M – Hosting Program: the increase in 2018-19 is mainly due to the new funding towards the support for the bid to the Calgary Corporation to host the 2026 Olympic and Paralympic Winter games ($2.7M) as well as supplementary funds received for 2019 Canada Winter Games ($4.4M); and
  • $7.5M – Development of Official Languages Program: the increase is mainly caused by the timing in payments which were more significant in 2018-19 third quarter compared to the same quarter in 2017-18.

Decreases:

  • ($12.0M) – Canada Celebration & Commemoration Program: the decrease is a result of the sunsetting of the short term funding for Canada’s 150th anniversary of Confederation;
  • ($4.7M) – Aboriginal Peoples Program: the decrease is mainly due to the timing in payments which were more significant in 2017-18 third quarter compared to the same quarter of 2018-19; and
  • ($4.2M) – Canada Cultural Spaces Fund: the decrease is due to a reduction in funding for the social infrastructure initiative which support the improvement, renovation and construction of arts and heritage facilities, the acquisition of specialized equipment, and the conducting of feasibility studies for cultural infrastructure projects.

The Vote 1 – Operating expenditures for the third quarter of 2018-19 have increased by $4.7M, from $42.1M to $46.8M compared to the same quarter of 2017-18. This 11% increase is mainly due to the net effect of the below items:

Increases

  • $2.3M in Other subsidies and payments expenditures which are due to an increase in interdepartmental settlement expenses compared to the third quarter of 2017-18;
  • $1.5M in Personnel expenditures (excluding statutory expenditures for contributions to employee benefit plans) which are mainly due to an increase in the number of PCH staff in comparison to the third quarter of 2017-18;
  • $1.1M in Professional and Special services expenditures which are mainly due to the timing of legal services payments to Justice Canada which were more significant in the 2018-19 third quarter compared to the same quarter of 2017-18;
  • $0.4M in Rental expenditures which are mainly due to the timing of License and Maintenance fees payments compared to the third quarter in 2017-18.

Decreases

  • ($1.6M) in Information expenditures which is mainly due to Advertising Services used by the Capital Experience and Celebration & Commemoration programs as part of Canada’s 150th anniversary initiative in 2017-18;

Statutory Expenditures for the third quarter of 2018-19 have decreased by $2.5M ($2.0M related to Personnel expenditures and $0.5M to Grants) from $6.8M to $4.3M compared to the same quarter of 2017-18. This 37% decrease is mainly due to the timing in the recording of payments related to contributions to employee benefit plans in 2018-19. These expenses will be recorded in the next quarter.

As noted in the table below, PCH has spent 18.5% ($251.0M) of its authorities in the third quarter of 2018-19, which is more than last year’s consumption of 15.3% ($229.0M). However, the years are similar in terms of spending rate to the end of the third quarter.

Bar chart - Expenditures compared to annual authorities. Description follows.

Figure 1. Expenditures compared to annual authorities (in millions of dollars)

Expenditures compared to annual authorities (in millions of dollars) – text version
Figure 1. Expenditures compared to annual authorities (in millions of dollars)
2018-19 2017-18
Total available for use 1,359 (100.0%) 1,499 (100.0%)
Used during the quarter 251 (18.5%) 229 (15.3%)
Year-to-date used 830 (61.1%) 956 (63.8%)

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.

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

Since the Department’s second quarter of 2018-19, there were changes to Canadian Heritage’s senior management personnel.

David Dendooven was appointed Assistant Deputy Minister of Strategic Policy, Planning and Corporate Affairs, effective February 4, 2019, in replacement of Jennifer Aitken who was appointed Senior General Counsel at the Department of Finance.

5. Approval by senior officials

Approved by:

Original signed
Hélène Laurendeau, Deputy Minister

Gatineau, Canada
Date: February 20, 2019

Original signed
Andrew Francis, Chief Financial Officer

Gatineau, Canada
Date: February 20, 2019

Statement of authorities (unaudited)

Fiscal year 2018-19 and 2017-18 (in thousands of dollars)
Authorities Total available for use for the year ending March 31, 2019* Used during the quarter ended December 31, 2018 Year to date used at quarter-end 2018-19 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 2017-18
Vote 1 - Operating expenditures 205,146 46,862 141,023 230,818 42,121 149,830
Vote 5 - Grants and contributions 1,127,167 199,650 672,070 1,241,713 180,177 786,803
Statutory - Contributions to employee benefit plans 24,107 3,929 15,713 23,901 5,929 17,787
Statutory - Minister of Canadian Heritage and Multiculturalism - Salary and motor car allowance 86 7 57 84 21 63
Statutory - Minister of State (Minister of Science and Sport) - Motor car allowance 2 0 0 2 0 2
Statutory - Minister of State (Minister of Status of Women) - Motor car allowance 0 0 0 0 0 0
Statutory - Salaries of the Lieutenant-Governors 1,196 362 1,092 1,196 357 1,073
Statutory - Payments under the Lieutenant Governors Superannuation Act (R.S.C., 1985, c. L-8) 637 0 0 637 432 432
Statutory - Supplementary Retirement Benefits - Former Lieutenant-Governors 182 0 0 182 80 80
Spending of Crown Asset Proceeds 20 0 0 37 0 0
Total Budgetary authorities 1,358,543 250,810 829,955 1,498,570 229,117 956,070
Total authorities 1,358,543 250,810 829,955 1,498,570 229,117 956,070

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

Departmental budgetary expenditures by standard object (unaudited)

Expenditures for fiscal year 2018-19 and 2017-18 (in thousands of dollars)
Expenditures Total available for use for the year ending March 31, 2019* Used during the quarter ended December 31, 2018 Year to date used at quarter-end 2018-19 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 2017-18
Personnel 189,473 40,903 130,489 187,431 41,413 138,382
Transportation and communications 3,810 1,232 3,097 8,425 1,029 3,396
Information 3,580 263 970 10,309 1,851 5,887
Professional and special services 27,078 6,017 15,087 40,410 4,904 16,733
Rentals 3,940 1,150 2,922 6,980 729 3,490
Repair and maintenance 871 393 651 2,220 175 723
Utilities, materials and supplies 3,708 715 1,710 5,304 647 2,521
Acquisition of machinery and equipment 6,347 347 1,808 4,859 309 934
Transfer payments 1,127,985 199,650 672,070 1,242,531 180,689 787,316
Other subsidies and payments 1,708 2,448 6,638 2,707 99 2,601
Total gross budgetary expenditures 1,368,500 253,118 835,442 1,511,176 231,845 961,983
Less revenues netted against expenditures for fiscal year 2018-19 and 2017-18 (in thousands of dollars)
Expenditures Total available for use for the year ending March 31, 2019* Used during the quarter ended September 30, 2018 Year to date used at quarter-end 2018-2019 Total available for use for the year ending March 31, 2018* Used during the quarter ended September 30, 2017 Year to date used at quarter-end 2017-2018
Revenue credited to the Vote -9,957 -2,308 -5,487 -12,606 -2,728 -5,913
Total Revenues netted against expenditures -9,957 -2,308 -5,487 -12,606 -2,728 -5,913
Total net budgetary expenditures 1,358,543 250,810 829,955 1,498,570 229,117 956,070

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

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