Canadian Heritage’s quarterly financial report for the quarter ended June 30, 2019

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1. Introduction

This first quarterly financial report should be read in conjunction with the 2019-20 Main Estimates and Budget Implementation Vote items approved as of June 30, 2019 along with 2018-19 Main Estimates and Budget Implementation Vote items. 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 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 2019-20 Departmental Plan and the 2019-20 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 and Budget Implementation Vote items approved as of June 30, 2019 for the 2019-20 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 2019-20 authorities available for use at the end of the first quarter have increased by approximately $184.4 million when compared to the same quarter of 2018-19. More specifically, the total available for use increased by $170.8 million in Vote 5 - Grants and Contributions, $12.2 million in Vote 1 - Operating expenditures and $1.4 million in Statutory authorities.

The following table provides details on the changes observed in authorities from 2018-19 to 2019-20 at the end of the first quarter:

Changes in authorities observed from 2018-19 to 2019-20 at the end of the first quarter (in millions of dollars)
Items Vote 1 Vote 5 Statutory Total
New funding for the Action Plan for Official Languages (2018-2023) (Budget 2018) 6.4 63.4 0.1 69.9
New funding to support Artists, Cultural Events and Commemorations (Budget 2019) 1.3 34.1 0.1 35.5
Funding for the Creative Export Strategy in order to sustain and stimulate the exports and international promotion of Canadian creative works 6.2 11.0 0.5 17.7
New funding to support the development and implementation of a new federal anti-racism strategy (Budget 2019) 7.0 9.7 0.2 16.9
New funding to support the implementation of the Indigenous Languages Act (Budget 2019) 0.4 14.6 0.1 15.1
New funding for Digital Democracy Project to address online disinformation (Budget 2019) 1.9 9.4 0.3 11.6
Funding for Strengthening Multiculturalism initiative (Budget 2018) 1.9 9.1 0.3 11.3
Funding to support gender parity in the Canadian Sports System (Budget 2018) 0.9 7.9 0.1 8.9
New funding to ensure a safe and healthy sport system to enable Canadian sports organizations to promote accessible, ethical, equitable and safe sports (Budget 2019) 0.0 6.0 0.0 6.0
New funding for Visual Impairments and other print disabilities to support Canada's independent publishing industry to increase the production of accessible reading materials (Budget 2019) 0.3 4.0 0.1 4.4
New funding to support the preparation of the 2026 FIFA World Cup 0.0 2.5 0.0 2.5
Increase in funding to support Indigenous Youth and Sport (Budget 2018) 0.0 1.5 0.0 1.5
Other Adjustments (3.2) 1.4 (0.4) (2.2)
Decrease in funding to support the Youth Employment Strategy (YES) (0.2) (3.8) 0.0 (4.0)
Sunset funding for the Grants and Contributions Modernization Project and repayment of the loan to the Management Reserve (10.7) 0.0 0.0 (10.7)
Grand Total 12.2 170.8 1.4 184.4

2.2. Departmental budgetary expenditures by standard object

Total expenditures for the first quarter of 2019-20 have increased by $22.6 million (7%) from $308.6 million to $331.2 million compared to the same quarter of 2018-19.

The Vote 5 – Grants and Contributions expenditures for the first quarter of 2019-20 increased by $24.0 million, from $256.6 million to $280.6 million. This 9% increase is mainly due to the following items:

Increases:

Decreases:

The decreases in spending in the following programs are mainly caused by the timing in payments which were less significant in the first quarter of 2019-20 compared to the same quarter in 2018-19;

The Vote 1 – Operating expenditures for the first quarter of 2019-20 have decreased by $1.7 million, from $45.9 million to $44.2 million, compared to the same quarter in 2018-19. This 4% decrease is mainly due to the net effect of the below items:

Increases:

Decreases:

Statutory Expenditures for the first quarter are at a similar level to those observed in 2018-19.

As noted in the table below, PCH has spent 22.1% ($331.3 million) of its authorities in the first quarter of 2019-20, which is comparable to last year's consumption of 23.5% ($308.6 million).

Expenditures compared to annual authorities

(in millions of dollars)

Expenditures compared to annual authorities (in millions of dollars) – text version:
2019-20 2018-19
Total available for use 1,499 (100.0%) 1,314 (100.0%)
Used during the quarter 331 (22.1%) 309 (23.5%)
Year-to-date used 331 (22.1%) 309 (23.5%)

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 initiatives such as Financial Management Transformation (FMT) 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 in 2015 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. Further, the department has strengthened and invested in its Internal Services, in particular in the Human Resources and Financial Management branches in order to better support PCH 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 last quarter of 2018-19, there were changes to Canadian Heritage's senior management personnel.

The Chief Financial Officer, Andrew Francis, has left PCH as of June 26, 2019 and was replaced by Eric Doiron, effective August 5, 2019.

5. Approval by senior officials

Approved by:

Original signed
Hélène Laurendeau, Deputy Minister

Gatineau, Canada
Date: August 21, 2019

Original signed
Eric Doiron, Chief Financial Officer

Gatineau, Canada
Date: August 16, 2019

Statement of authorities (unaudited)

Fiscal year 2019-20 and 2018-19 (in thousands of dollars)
Authorities Total available for use for the year ending March 31, 2020* Used during the quarter ended June 30, 2019 Year to date used at quarter-end 2019-20 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
Vote 1 - Operating expenditures 198,507 44,187 44,187 186,316 45,852 45,852
Vote 5 - Grants and contributions 1,272,919 280,595 280,595 1,102,160 256,591 256,591
Statutory - Contributions to employee benefit plans 24,920 6,091 6,091 23,569 5,892 5,892
Statutory - Minister of Canadian Heritage and Multiculturalism - Salary and motor car allowance 88 22 22 86 22 22
Statutory - Minister of State (Minister of Science and Sport) - Motor car allowance 88 0 0 2 0 0
Statutory - Salaries of the Lieutenant-Governors 1,196 372 372 1,196 276 276
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 4 0 0 20 0 0
Total Budgetary authorities 1,498,541 331,267 331,267 1,314,168 308,633 308,633
Total authorities 1,498,541 331,267 331,267 1,314,168 308,633 308,633

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

Departmental budgetary expenditures by standard object (unaudited)

Expenditures for fiscal year 2019-20 and 2018-19 (in thousands of dollars)
Expenditures Total available for use for the year ending March 31, 2020* Used during the quarter ended June 30, 2019 Year to date used at quarter-end 2019-20 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
Personnel 187,591 45,332 45,332 179,913 44,635 44,635
Transportation and communications 4,611 807 807 3,692 916 916
Information 2,140 519 519 3,580 285 285
Professional and special services 28,430 3,401 3,401 19,160 3,509 3,509
Rentals 4,095 628 628 3,940 786 786
Repair and maintenance 878 117 117 871 78 78
Utilities, materials and supplies 2,529 259 259 2,988 379 379
Acquisition of machinery and equipment 3,255 243 243 5,294 267 267
Transfer payments 1,273,738 280,595 280,595 1,102,979 256,591 256,591
Other subsidies and payments 1,231 727 727 1,708 2,069 2,069
Total gross budgetary expenditures 1,508,498 332,628 332,628 1,324,125 309,515 309,515
Less revenues netted against expenditures for fiscal year 2019-20 and 2018-19 (in thousands of dollars)
Expenditures Total available for use for the year ending March 31, 2020* Used during the quarter ended June 30, 2019 Year to date used at quarter-end 2019-2020 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
Revenue credited to the Vote -9,957 -1,361 -1,361 -9,957 -882 -882
Total Revenues netted against expenditures -9,957 -1,361 -1,361 -9,957 -882 -882
Total net budgetary expenditures 1,498,541 331,267 331,267 1,314,168 308,633 308,633

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

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