Canadian Heritage’s quarterly financial report for the quarter ended June 30, 2018

Table of contents

1. Introduction

This first quarterly financial report should be read in conjunction with the 2018-19 Main Estimates and Budget Implementation Vote items approved as of June 30, 2018 along with 2017-18’s Main Estimates and Supplementary Estimates (A). It has been prepared by management as required by section 65.1 - Quarterly financial reports of the Financial Administration Act and 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 first 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.

1.2. Basis of presentation

This first 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 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 first quarter have decreased by approximately $137.5 million when compared to the same quarter of 2017-2018. More specifically, the total available for use decreased by $114.5 million in Vote 5 - Grants and contributions, $22.8 million in Vote 1 - Operating expenditures and $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 first quarter:

Changes in authorities observed from 2017-2018 to 2018-2019 at the end of the first quarter (in millions of dollars)
Items Vote 1 Vote 5 Statutory Total
New funding in Budget 2017 to support a new investment in the Canada Cultural Spaces Fund in order to strengthen cultural infrastructure 0.0 29.9 0.0 29.9
New funding in Budget 2017 for the Aboriginal Languages Initiative (ALI) to support the preservation, revitalization and promotion of Indigenous languages 3.1 19.1 0.4 22.6
Increase for negotiated salary adjustments 5.6 0.0 0.6 6.2
Increase in funding to support high-performance athletes 0.0 5.0 0.0 5.0
Increase in funding to support the Next Generation of Canadian Olympic and Paralympic athletes 0.0 5.0 0.0 5.0
Increase in funding to invest in community educational infrastructures in the provinces and territories 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 0.0 3.2 0.0 3.2
Increase in funding to support Indigenous Youth and Sport 0.5 2.1 0.0 2.6
Increase due to the one time transfer to the National Arts Centre (NAC) for the 2017 Canada Scene (Canada 150) 0.0 1.5 0.0 1.5
Increase in funding to support the Youth Employment Strategy (YES) 0.0 0.2 0.0 0.2
Change in funding to support the Court Challenges Program (0.5) 0.5 0.0 0.0
Other Adjustments (0.2) (0.5) (0.2) (0.9)
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 temporary funding to support the promotion of Canadian artists and cultural industries on the world stage (Budget 2016) (2.4) (2.6) (0.2) (5.2)
Sunsetting of temporary funding to support the celebrations of Montreal’s 375th anniversary 0.0 (6.4) 0.0 (6.4)
Sunsetting of the short term investment announced in Budget 2016 for Cultural Infrastructure (0.3) (83.9) (0.1) (84.3)
Sunsetting of temporary funding for the celebrations of the 150th anniversary of Confederation (26.1) (91.5) (0.4) (118.0)
Grand Total (22.8) (114.5) (0.2) (137.5)

2.2. Departmental budgetary expenditures by standard object

Total expenditures for the first quarter of 2018-19 have decreased by $10.9M (3.4%) from $319.5M to $308.6M compared to the same quarter of 2017-18.

The Vote 5 – Grants and Contributions expenditures for the first quarter of 2018-19 have remained relatively constant compared to the previous year’s first quarter—still, a decrease of $10.4M, from $267.0M to $256.6M, was observed. This 3.9% decrease is mainly due to the net effect of the following increases and decreases:

  • ($66.2M) – Canada Celebration & Commemoration Program: the decrease is triggered by Canada’s 150th anniversary of Confederation ($60.1M) and Montreal’s 375th anniversary ($6.1M);
  • ($9.1M) – Enhancement of Official Languages Program: the decrease is mainly caused by payments being made later in 2018-19 compared to 2017-18. The difference will be resolved in the next quarter;
  • ($6.9M) – Canada Cultural Spaces Fund: the decrease is due to a reduction in funding for the social infrastructure initiative which supports 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; and
  • $71.0M – Canada Periodical Fund: the increase is mainly due to a timing in payments which were made in the first quarter of 2018-19 compared to the second quarter of 2017-18.

The Vote 1 – Operating expenditures for the first quarter of 2018-19 have decreased by $0.3M when compared to 2017-18. This is mainly due to the $1.7M decrease in Professional and special services, $0.6M decrease in Utilities, materials and supplies and $0.5M in Information. These decreases are offset by $1.8M increase in Personnel expenditures and $0.7M increase in Other subsidies and payments.

The rise in Personnel expenditures is mainly due to the ongoing effect of the remnants of last year's ratified collective agreements, completed personnel hiring related to initiatives in the recent Federal Budget and other pay related issues. Together, these occurrences triggered a higher amounts in regular basic pay for permanent and casual employees. Further, the $0.7M increase in Other subsidies and payments is due to an increase in interdepartmental settlement expenses compared to the first quarter of 2017-18. The $1.7M decrease in Professional and Special services compared to the same quarter in 2017-18 is a result of the Capital Experience Program involvement in Canada's 150th anniversary of Confederation which incurred less expenses for such events like Canada Day celebrations than in the same quarter of 2017-18. On the same note, the $0.6M decrease in Utilities, materials and supplies is mainly related to Canada 150th promotional materials. Lastly, the decrease in Information is due to last year's Advertising Services used by the Capital Experience and Celebration & Commemoration programs as part of Canada's 150th anniversary initiative.

Statutory Expenditures are at a similar level to those observed in 2017-18.

As noted in the table below, PCH has spent 23.5% ($309M) of its authorities in the first quarter of 2018-19, which is relatively on par with last year's 22.0% ($319M) for the same period of 2017-18.

Expenditures compared to annual authorities (in millions of dollars)

Expenditures compared to annual authorities (in millions of dollars) – text version:
2018-19 2017-18
Total available for use 1,314 (100.0%) 1,452 (100.0%)
Used during the quarter 309 (23.5%) 319 (22.0%)
Year-to-date used 309 (23.5%) 319 (22.0%)

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

On July 18, 2018, the Right Honourable Justin Trudeau, Prime Minister of Canada announced that the Honourable Pablo Rodriguez is the new Minister of Canadian Heritage and Multiculturalism. The Honourable Mélanie Joly is the new Minister of Tourism, Official Languages and La Francophonie and the Honourable Kirsty Duncan is the Minister of Science and Sport.

The Department will support Minister Joly in her role of Minister responsible for Official Languages and Minister Duncan in her role of the Minister responsible for Sport.

Since last quarter, changes to the senior management personnel were implemented. As of May 7, 2018, Véronique Dériger was appointed Director General, Human Resources and Workplace Management Branch and Chantal Reinert was appointed Director General, Communications and Bimal Sandhu was appointed Chief Audit Executive on July 19, 2018.

5. Approval by senior officials

Approved by:

Original signed
Graham Flack, Deputy Minister

Gatineau, Canada
Date: August 23, 2018

Original signed
Andrew Francis, Chief Financial Officer

Gatineau, Canada
Date: August 23, 2018

Statement of authorities (unaudited)

Fiscal year 2018-19 and 2017-18 (in thousands of dollars)
Expenses Total available for use for the year ending March 31, 2019* Used during the quarter ended June 30, 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 June 30, 2017 Year to date used at quarter-end 2017-18
Vote 1 - Operating expenditures 186,316 45,852 45,852 209,085 46,156 46,156
Vote 5 - Grants and contributions 1,102,160 256,591 256,591 1,216,635 266,985 266,985
Statutory - Contributions to employee benefit plans 23,569 5,892 5,892 23,757 5,929 5,929
Statutory - Minister of Canadian Heritage - Salary and motor car allowance 86 22 22 84 22 22
Statutory - Minister of State (Minister of Sport and Persons with Disabilities) - Motor car allowance 2 0 0 2 0 0
Statutory - Minister of State (Minister of Status of Women) - Motor car allowance 0 0 0 0 0 0
Statutory - Salaries of the Lieutenant-Governors 1,196 276 276 1,196 359 359
Statutory - Payments under the Lieutenant Governors Superannuation Act  (R.S.C., 1985, c. L-8) 637 0 0 637 0 0
Statutory - Supplementary Retirement Benefits - Former Lieutenant-Governors 182 0 0 182 0 0
Spending of Crown Asset Proceeds 20 0 0 21 0 0
Total Budgetary authorities 1,314,168 308,633 308,633 1,451,599 319,451 319,451
Total authorities 1,314,168 308,633 308,633 1,451,599 319,451 319,451

*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 June 30, 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 June 30, 2018 Year to date used at quarter-end 2017-18
Personnel 179,913 44,635 44,635 176,300 42,872 42,872
Transportation and communications 3,692 916 916 6,532 828 828
Information 3,580 285 285 5,283 774 774
Professional and special services 19,160 3,509 3,509 37,736 5,234 5,234
Rentals 3,940 786 786 6,980 876 876
Repair and maintenance 871 78 78 2,220 164 164
Utilities, materials and supplies 2,988 379 379 5,304 994 994
Acquisition of machinery and equipment 5,294 267 267 3,689 170 170
Transfer payments 1,102,979 256,591 256,591 1,217,454 266,985 266,985
Other subsidies and payments 1,708 2,069 2,069 2,707 1,321 1,321
Total gross budgetary expenditures 1,324,125 309,515 309,515 1,464,206 320,218 320,218

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 June 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 June 30, 2017 Year to date used at quarter-end 2017-2018
Revenue credited to the Vote -9,957 -882 -882 -12,607 -767 -767
Total Revenues netted against expenditures -9,957 -882 -882 -12,607 -767 -767
Total net budgetary expenditures 1,314,168 308,633 308,633 1,451,599 319,451 319,451

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

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