Canadian Heritage’s quarterly financial report for the quarter ended September 30, 2016

1.1 Authority, mandate and programs

Canadian Heritage promotes an environment in which all Canadians take full advantage of dynamic cultural experiences, celebrating our history and heritage, and participating in building creative communities.

1.2 Basis of presentation

This second quarterly financial report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities compares the Department’s spending authorities granted by Parliament to those used by the Department consistent with the Main Estimates and Supplementary Estimates (A) for the 2016-2017 fiscal year.

This quarterly 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.

The authority of Parliament is required before funds can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation granting 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 performance 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 benefit plans, Ministers’ Salary and motor car allowance and Statutory Payments for Lieutenant Governors.

2.1 Statement of authorities

PCH’s 2016-2017 authorities available for use at the end of the second quarter have increased by approximately $136.2M when compared to the same quarter of 2015-2016. More specifically, the total available for use increased by $9.5M in Vote 1 - Operating expenditures, $125.6M in Vote 5 - Grants and Contributions and by $1.1M in Statutory authorities.

The increase of $9.5M in Vote 1 – Operating expenditures is primarily due to the following:

Increases

• $20.4M – Increase in funding to support Celebrations of Canada’s 150th anniversary of Confederation in 2017;
• $1.3M – Increase in funding for affordable housing and social infrastructure projects to support new and old arts and heritage facilities (Budget 2016).

Decreases

• $7.2M – Decrease in funding for the government advertising programs, component of the Canada 150 campaign;
• $2.0M – Operating Budget Carry Forward difference from $6.6M in 2015-2016 to $4.6M in 2016-2017; and
• $1.9M – Decrease in funding for the Aboriginal Peoples’ Program mainly explained by the sunset of a portion of funding which remained at Canadian Heritage since the transfer of Cultural Connections for Aboriginal Youth component to Indigenous and Northern Affairs Canada.

The increase of $125.6M in Vote 5 - Grants and Contributions is mainly due to the following:

Increases

• $83.8M – Increase in funding to support Celebrations of Canada’s150th anniversary of Confederation in 2017;
• $82.1M – Increase in funding for affordable housing and social infrastructure projects to support new and old arts and heritage facilities (Budget 2016); and
• $8.5M – Transfer of funding and responsibilities for the Multiculturalism Program from Immigration, Refugees and Citizenship Canada.

Decreases

• $37.5M – Decrease in funding for the Toronto 2015 Pan American and Parapan American Games as the Games came to a close in August 2015;
• $10.0M – Decrease in funding for Celebrations of Canada’s 150th anniversary of Confederation – Road to 2017 component; and
• $2.0M – Decrease in funding for the Cultural Strategy for the Toronto 2015 Pan American and Parapan American Games – Reprofile of funds.

The increase of $1.1M in Statutory expenses is mainly due to the employee benefit plans in accordance with Treasury Board Secretariat guidelines.

The following table provides more details on the changes in authorities observed from 2015-2016 to 2016-2017 at the end of the second quarter (Main Estimates, Supplementary Estimates (A) and Operating Budget Carry Forward).

2.2 Departmental budgetary expenditures by standard object

Total expenditures for the second quarter of 2016-2017 have decreased by a net of $177.2M when compared to the same quarter of 2015-2016.

Most of the variance is observed in Vote 5 - Grants and Contributions expenditures which have decreased by $181.7M. This variance is mainly explained by a change in timing of payments for the programs listed below. This change in timing of payments may be explained, in some cases, by the implementation, in December 2015, of a new delegation of authority for the approval for Grants and Contributions at Canadian Heritage. Most specifically:

The decrease of $107.5M for the Canada Media Fund is caused by delays in amending Terms and Conditions.  Payments will be reflected in the next quarter.

The decreases of $68.4M for the Canada Periodical Fund and $11.1M for the Sport Support Program are explained by payments being made earlier this year (in the first quarter of 2016-17) compared to the second quarter of 2015-16.

A decrease of $13.1M for the Canada Book Fund: Last year, payments were made in the first quarter of 2015-16 as opposed to the usual third quarter.  Payments will be reflected in the next quarterly financial report.

An increase of $8.7M is observed in the Celebration and Commemoration Program which is due to funding allocated as part of Celebrations of Canada’s 150th anniversary of Confederation activities.

The $5.8M increase in the Canada Cultural Spaces Fund can be explained by the fact that the program started to spend the additional funding of $82.1M for affordable housing and social infrastructure projects that was received via the 2016-2017 Supplementary Estimates (A), as part of Budget 2016. The remaining amount received is foreseen to be spent by fiscal year end.

The increase of $5.0M in Exchange Canada Program is due in part to the timing of payments posted and the anticipated additional funding of $1.8M for the Youth Employment Strategy Program; the latter was announced via Budget 2016.

Decreases

• $107.5M – Canada Media Fund;
• $68.4M – Canada Periodical Fund;
• $13.1M – Canada Book Fund;
• $11.1M – Sport Support Program;
• $1.8M – Canada Arts Training Fund;
• $1.5M – Canada Music Fund;
• $1.3M – Canada Arts Presentation Fund;
• $1.3M – Enhancement of Official Languages Program; and
• $1.1M – Canada History Fund.

Increases

• $8.7M – Celebration & Commemoration Program;
• $5.8M – Canada Cultural Spaces Fund;
• $5.0M – Exchanges Canada Program;
• $3.2M – Sport Hosting Program; and
• $1.2M – Aboriginal Peoples’ Program.

The Vote 1 and Statutory expenses for the second quarter of 2016-2017 have increased by $4.4M when compared to 2015-2016. This is mainly as a result of a $6.6M increase in Personnel and a decrease of $2.3M in Information. The increase in Personnel is due to a difference in the timing of expenditures recognition in this quarter compared to the same quarter of 2015-2016. The decrease observed in Information is as a result of advertising funding not yet received in 2016-2017 when compared to expenses incurred in 2015-2016 for Celebrations of Canada’s 150th anniversary of Confederation activities and in part to the Budget 2016’s effort to reduce government wide advertising expenses. The variance observed in the rest of statutory expenditures, notably for Payments under the Lieutenant Governors Superannuation Act and Supplementary retirement benefits, is because of an internal timing difference in posting and allocating the payments in PCH’s financial system, compared to 2015-2016.

As noted in the table below, PCH has spent 13.2% ($185M) of its authorities in the second quarter of 2016-2017, which is lower than the 28.7% ($362M) spent during the same period in 2015-2016. As indicated above, this decrease in spending is primarily due to the timing differences observed in grants and contributions payments.

Year to date spending follows a similar trend, where the only notable change was in the decrease in grants and contributions payments of 11.6%. This variance is in large caused by a timing difference of payments for the Canada Media Fund Program of $107.5M.