Archived - Department of Finance Canada Quarterly Financial Report for the Quarter Ended June 30, 2013 (unaudited)

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

3. Risks and Uncertainties
4. Significant changes in relation to operations, personnel and programs
5. Budget 2012 Implementation

This quarterly financial report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board Accounting Standard 1.3. This quarterly financial report should be read in conjunction with the Main Estimates, Supplementary Estimates as well as Canada’s Economic Action Plan 2012 (Budget 2012). The quarterly financial report has not been subject to an external audit or review.

The Department helps the Government of Canada develop and implement strong and sustainable economic, fiscal, tax, social, security, international and financial sector policies and programs. It plays an important central agency role, working with other departments to ensure that the government's agenda is carried out and that ministers are supported with high-quality analysis and advice.

The Department's responsibilities include the following:

The Minister of Finance is accountable for ensuring that his responsibilities are fulfilled both within his portfolio and with respect to the authorities assigned through legislation. The Minister has direct responsibility for a number of acts and is assigned specific responsibilities in other acts that are under the responsibility of other ministers.

The description of the program activities for the Department of Finance Canada (the ‘Department’) can be found in Part II of the Main Estimates - [1.71 MB] and the Report on Plans and Priorities.

This quarterly 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 for both fiscal years. This quarterly financial 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 monies 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.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates. Similarly, measures announced in Budget 2013 (March 21, 2013) could not be reflected in the 2013-14 Main Estimates.

In fiscal year 2012-2013, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013-2014, frozen allotments were not required as the changes to departmental authorities were reflected in the 2013-2014 Main Estimates tabled in Parliament.

The Department 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.

The Department has three major categories of expenditure authority. These categories are:

This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates A of 2012-13.

Sections 2.1 and 2.2 below highlight the significant items that contributed to the increase in the resources available for use from 2012-13 to 2013-14 and the increase in actual expenditures as at June 30, 2012 and June 30, 2013.

The following graph provides a comparison of net authorities available for spending for the full fiscal year and expenditures for the first three months of 2012-13 and 2013-14.

Comparison of Net Budgetary Authorities and Year to Date Expenditures for the Quarter ended June 30 of Fiscal Years 2012-13 and 2013-14

In 2013-14, Q1 Authorities were $87,612 million and Q1 Expenditures were $38,956 million. In 2012-13, Q1 Authorities were $85,419 million and Q1 Expenditures were $38,248 million.

Total authorities

The following table provides a comparison of cumulative authorities by vote for the current and previous fiscal years

Comparison of Authorities Available for Spending for the Year
as at June 30 of Fiscal Years 2012-13 and 2013-14

Variance

Authorities Available (in millions) 2013-14 2012-13 $ %
Budgetary
Voted:
Vote 1 - Operating Expenditures 111.2 114.6 (3.4) -3.0%
Vote 5 - Grants and Contributions 5.0 215.0 (210.0) -97.7%
Statutory:
Federal-Provincial Fiscal Arrangements Act payments 60,368.7 56,148.7 4,220.0 7.5%
Interest on Unmatured Debt and Interest on Other Liabilities 27,134.0 28,862.0 (1,728.0) -6.0%
Other (7.1) 58.1 (65.2) -112.2%
Total statutory 87,495.6 85,068.8 2,426.8 2.9%
Total Budgetary authorities 87,611.8 85,398.4 2,213.4 2.6%
Non-Budgetary - 20.6 (20.6) -100.0%
Total authorities 87,611.8 85,419.0 2,192.8 2.6%

Authorities available for spending in fiscal year 2013-14 are $87,611.8 million at the end of the first quarter as compared to $85,419.0 million at the end of the first quarter of 2012-13, representing an increase of $2,192.8 million, or 2.6 %.

Voted budgetary authorities

Total 2013-14 Vote 1 operating authorities available for use as at June 30, 2013 are $111.2 million as compared to $114.6 million at the same period in 2012-13, representing a decrease of $3.4 million which is mainly attributable to the net effect of the following factors:

At the end of the first quarter in 2013-14, Vote 5 authorities available are $5.0 million compared to $215.0 million at the end of the first quarter of 2012-13, representing a decrease of $210.0 million. This decrease is due to the cessation of payments to Export Development Canada for debt relief via the Paris Club.

Statutory budgetary authorities

Statutory Authorities available for spending in fiscal year 2013-14 are $87,495.6 million at the end of the first quarter as compared to $85,068.8 million at the end of the first quarter of 2012-13, representing an increase of $2,426.8 million, or 2.9 %.

This increase of $2,426.8 million relates to 3 broad categories; increases of $4,220.0 million in payments pursuant to the Federal-Provincial Fiscal Arrangements Act, offset by decreases in Interest on Unmatured Debt and Interest on Other Liabilities ($1,302.0 million and $426.0 million respectively) and a decrease of $65.2 million in other statutory payments. Additional details are provided below.

Authorities for payments pursuant to the Federal Provincial Fiscal Arrangements Act payments as at June 30, 2013 are $60,368.7 million compared to $56,148.7 at the same period in 2012-13. The increase of $4,220.0 million is mainly due to the net effect of the following factors:

Authorities for the Interest on Unmatured Debt and Interest on Other Liabilities as at June 30, 2013 are $27,134.0 million compared to $28,862.0 at the same period in 2012-13. The decrease of $1,728.0 million is mainly due to following factors:

Non-Budgetary Authorities

Non-budgetary authorities related to the value of loans disbursed to Crown Corporations participating in the Crown Borrowing Framework are not reflected in the Estimates. The gross borrowing requirements for Crown Corporations are driven by the need to match the term and structure of the borrowing requirements of corporations’ clients. These activities are influenced by current, and expectations of future, economic conditions and can vary greatly over a short period of time. For example, if clients of the Crown Corporation are seeking short-term, floating rate loans, the Crown Corporation will seek to match that with short-term borrowings from the government. This will result in the loan being refinanced several times through the year, with higher gross borrowings associated with a smaller net borrowing amount. This can change very quickly should market conditions suggest interest rates are going to rise and their clients seek to lock in their borrowing costs through longer term borrowings. As such, there can be very large and significant variances both inter-year and intra-year. Given the risk of forecast inaccuracy and that the gross advances to Crown Corporations are a non-budgetary item and do not impact on the net-debt of the government, the Department only reports on actual borrowings by the Crown Corporations.

There is a decrease of $20.6M in the authorities for the statutory vote Payments to International Bank for Reconstruction and Development from 2012-13 to 2013-14 as no further payments are expected as the full amount was paid over the two year period of 2011-12 and 2012-13.

Total Expenditures

The following table provides a comparison of cumulative spending by vote for the current and previous fiscal years.

Comparison of Year to Date Expenditures for the Quarter Ended
June 30 of Fiscal Years 2012-13 and 2013-14

Variance
Year to date expenditures (in millions) 2013-14 2012-13 $ %
Budgetary
Voted:
Vote 1 - Operating Expenditures 21.3 23.6 (2.3) -9.7%
Vote 5 - Grants and Contributions 2.0 2.0 (0.0) -0.2%
Statutory:
Federal-Provincial Fiscal Arrangements Act payments 15,120.3 14,390.6 729.7 5.1%
Interest on Unmatured Debt and Interest on Other Liabilities 6,914.2 7,038.3 (124.1) -1.8%
Other 151.9 137.6 14.3 10.4%
Sub Total Statutory 22,186.4 21,566.5 619.9 2.9%
Total Budgetary expenditures 22,209.7 21,592.1 617.6 2.9%
Non-Budgetary 16,745.9 16,655.9 90.0 0.5%
Total year to date expenditures 38,955.6 38,248.0 707.6 1.9%

During the first quarter of the 2013-14 fiscal year, total expenditures were $38,955.6 million compared to $38,248.0 million reported in the same period of 2012-13, representing an increase of $707.6 million or 1.9%.

Voted budgetary expenditures

Total 2013-14 Vote 1 operating expenditures at the end of the first quarter were $21.3 million as compared to $23.6 million at the same period of fiscal year 2012-13, representing a decrease of $2.3 million or 9.7%. This decrease is mainly attributable to timing differences in payments to Justice Canada for billable legal services and Treasury Board Secretariat for shared corporate services, as well as saving identified as part of Budget 2012 Spending Review.

Statutory budgetary expenditures

Total statutory expenditures for the first quarter of 2013-14 are $22,186.4 million as compared to $21,566.5 at the end of the first quarter of 2012-13 representing an increase of $619.9 million, or 2.9%.

This increase is primarily attributable to an increase in transfer payments pursuant to the Federal-Provincial Fiscal Arrangements Act ($729.7 million), decreases of $124.1 million in Interest on Unmatured Debt and Interest on Other Liabilities ($12.9 million and $111.2 million respectively) and an increase of $14.3 million in other statutory payments.

Expenditures for payments pursuant to the Federal Provincial Fiscal Arrangements Act as at June 30, 2013 are $15,120.3 million compared to $14,390.6 million at the same period in 2012-13 representing an increase of $729.7 million. This increase is mainly due to increases for the Canada Health Transfer ($428.5 million), Fiscal Equalization ($170.7 million), Canada Social Transfer ($88.9 million), Territorial Financing ($68.9 million), and Payments to Provinces Regarding Sales Tax Harmonization ($14.0 million), offset by a decrease in the Alternative Payments for Standing Programs ($41.4 million). Explanations for these changes are consistent with the variance explanations outlined under the statutory budgetary authorities found in Section 2.1.

Expenditures for the Interest on Unmatured Debt and Interest on Other Liabilities as at June 30, 2013 are $6,914.2 million compared to $7.038.3 million at the same period in 2012-13 representing a decrease of $124.1 million. Explanations for these changes are consistent with the variance explanations outlined under the statutory budgetary authorities found in Section 2.1.

Other Statutory payments at the end of the first quarter of fiscal year 2013-14 are $151.9 million as compared to $137.6 million at the same period in 2012-13, representing an increase of $14.3 million. This increase is primarily due to the net effect of the following factors:

Non-budgetary expenditures

Non-budgetary expenditures for the first quarter of 2013-14 are $16,745.9 million compared to $16,655.9 million at the same quarter in the prior year representing an increase of $90.0 million. This is explained by an increase related to the value of loans disbursed to Crown Corporations participating in the Crown Borrowing Framework. Gross borrowings by Crown Corporations are based on demand and the business requirements of the participating entities, and also depend on the terms of the Crown Corporation borrowings. As such, amounts can vary significantly from year to year.

Significant Changes on the Departmental budgetary expenditures by Standard Object table

Table 2, located at the end of this report, presents Budgetary Expenditures by Standard Object (SO). The main variance in expenditures between 2013-14 and 2012-13 by standard object are as follows:

The year over year variances are explained in detail in the preceding Section 2.2.

Private sector economists expect moderate growth in the Canadian economy, as growth in domestic demand is expected to be moderated by a fragile global recovery and the related near- to medium-term risks. In particular, uncertainty stems from ongoing concerns about the U.S. federal government's fiscal position, although the U.S. economy is showing signs of improvement, as well as the ongoing banking and sovereign debt sustainability issues in Europe. In addition, any potential slowdown in the major emerging market economies could affect the Canadian economy owing to weaker commodity prices and exports and slower global growth. Domestically, the key risk continues to be elevated household debt.

The Department of Finance Canada remains committed to ensuring a strong economy and sound public finances for Canadians. In meeting this commitment, the Department is exposed to a broad range of risks. Effective risk management is therefore critical to its ability to deliver results for Canadians, and the Department has put in place mechanisms to systematically identify and manage its corporate risks, notably policy, people and relationships, infrastructure and process risks.

In particular, the Department will continue to manage the economic volatility risks by ensuring it has in place the infrastructure, resources and authorities needed to respond to an evolving economic and financial sector environment. The Department will also manage the increased requirement for coordinated international decision making, to deal with uncertain world economic conditions and to support the soundness of the global financial system. At the same time, the Department will continue to ensure that responsible financial sector agencies take effective coordinated action to support the soundness, integrity and reputation of the Canadian financial system.

While implementing the 2012 expenditure review measures, the Department also recognizes that as a knowledge-based organization, its continued success depends on attracting, developing and retaining a highly skilled and adaptable workforce. The Department will continue to focus on strategic recruitment, cost-effective training and development initiatives, performance management and staff retention as a successful way of achieving desired outcomes.

The Department continues to work closely with Shared Services Canada to standardize and consolidate end user device hardware and software.

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

The Department of Finance will achieve Budget 2012 savings of $32.4 million by fiscal year 2014-15 by reconfiguring and modernizing the Department’s internal services and policy analysis functions. It is also taking further significant steps to reduce coinage costs including, for example, measures such as changing the metal composition of $1 and $2 coins from metal alloys to plated steel cores and eliminating the penny.

All savings measures are on track to meet their planned savings. Staff reductions were fully completed in 2012-13.

The statutory forecast for the Purchase of Domestic Coinage includes the savings identified as part of the Budget 2012 Spending Review.

Approved by:

Michael Horgan,
Deputy Minister

Sherry Harrison,
Chief Financial Officer

Ottawa, Canada
August 15, 2013

Department of Finance Canada
Quarterly Financial Report for the quarter ended June 30, 2013
Table 1 - Statement of Authorities (unaudited)

Fiscal year 2013-2014 Fiscal year 2012-2013


(in thousands of dollars) Total available for use for the
year ending
March 31, 2014 *
Used during the
quarter ended
June 30, 2013
Year to date used at
quarter-end
Total available for use for the
year ending
March 31, 2013 * **
Used during the
quarter ended
June 30, 2012
Year to date used at
quarter-end
Budgetary Authorities
Voted authorities
Operating expenditures 111,169 21,305 21,305 114,591 23,581 23,581
Grants and contributions 5,035 2,000 2,000 215,000 2,005 2,005

Total voted authorities 116,204 23,305 23,305 329,591 25,586 25,586

Statutory authorities
Federal-Provincial Fiscal Arrangements Act payments
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 16,105,194 4,026,299 4,026,299 15,422,503 3,855,626 3,855,626
Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 30,283,114 7,570,779 7,570,779 28,568,975 7,142,244 7,142,244
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 12,215,271 3,053,818 3,053,818 11,859,486 2,964,872 2,964,872
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,288,282 1,275,853 1,275,853 3,110,680 1,206,944 1,206,944
Wait Times Reduction Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 250,000 62,500 62,500 250,000 62,500 62,500
Alternative Payments for Standing Programs (Part VI - Federal-Provincial Fiscal Arrangements Act) (3,499,933) (882,990) (882,990) (3,388,677) (841,604) (841,604)
Payments to Provinces Regarding Sales Tax Harmonization (Part III.1 — Federal-Provincial Fiscal Arrangements Act) 1,481,000 14,000 14,000 - - -
Additional Fiscal Equalization to Nova Scotia (Part I - Federal-Provincial Fiscal Arrangements Act) 245,785 - - 325,779 - -

Total Federal-Provincial Fiscal Arrangements Act payments 60,368,713 15,120,259 15,120,259 56,148,746 14,390,582 14,390,582
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 18,401,000 4,747,276 4,747,276 19,703,000 4,760,208 4,760,208
Interest on Other Liabilities 8,733,000 2,166,890 2,166,890 9,159,000 2,278,083 2,278,083

Total Interest on Unmatured Debt and Interest on Other Liabilities 27,134,000 6,914,166 6,914,166 28,862,000 7,038,291 7,038,291
Other
Addtional Fiscal Equalization Offset Payment to Nova Scotia (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) 89,461 - - 146,059 - -
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (770,280) (388,371) (388,371) (746,180) (371,616) (371,616)
Canadian Millenium Scholarship Foundation (Budget Implementation Act, 1998) - (11) (11) - - -
Payments to International Development Association 441,610 441,610 441,610 441,620 441,620 441,620
Debt payments on behalf of poor countries to International Organizations pursuant to section 18(1) of the Economic Recovery Act 51,200 - - 51,200 - -
Purchase of Domestic Coinage 126,500 27,910 27,910 120,000 29,037 29,037
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 32,149 1,238 1,238 32,149 1,375 1,375
Contributions to Employee Benefit Plans 12,204 3,051 3,051 13,143 3,286 3,286
Minister of Finance - Salary and motor car allowance 79 19 19 78 20 20
Minister of State – Motor car allowance 2 1 1 - - -
Payment to the International Bank for Reconstruction and Development for the Agriculture Advance Market Commitment (Bretton Woods and Related Agreements Act, section 8) 10,000 - - - - -
Losses on Foreign Exchange - 65,857 65,857 - 33,488 33,488
Payment of Liabilities Previously Recorded as Revenue - 588 588 - 405 405

Total Other (7,075) 151,892 151,892 58,069 137,615 137,615

Total statutory authorities 87,495,638 22,186,317 22,186,317 85,068,815 21,566,488 21,566,488

Total budgetary authorities 87,611,842 22,209,622 22,209,622 85,398,406 21,592,074 21,592,074

Non-budgetary authorities
Advances to Crown corporations (Gross) - 16,743,932 16,743,932 - 16,653,878 16,653,878
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 2,000 2,000 - 2,000 2,000
Payment to International Bank for Reconstruction and Development - - - 20,611 - -

Total non-budgetary authorities - 16,745,932 16,745,932 20,611 16,655,878 16,655,878

Total authorities 87,611,842 38,955,554 38,955,554 85,419,017 38,247,952 38,247,952
* Includes only Authorities available for use and granted by Parliament at quarter-end
** Total available for use does not reflect measures announced in Budget 2012

Department of Finance Canada
Quarterly Financial Report for the quarter ended June 30, 2013
Table 2 - Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2013-2014 Fiscal year 2012-2013


(in thousands of dollars) Planned expenditures for the year
ending
March 31, 2014
Expended during the
quarter ended
June 30, 2013
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2013 *
Expended during the
quarter ended
June 30, 2012
Year to date
used at
quarter-end
Expenditures:
Personnel 82,420 21,458 21,458 87,898 23,673 23,673
Transportation and communications 4,000 513 513 4,500 561 561
Information 11,300 927 927 17,100 239 239
Professional and special services 15,400 593 593 14,800 1,162 1,162
Rentals 400 524 524 500 487 487
Repair and maintenance 500 12 12 500 3 3
Utilities, materials and supplies 127,500 27,987 27,987 120,900 29,253 29,253
Acquisition of machinery and equipment 8,834 44 44 2,013 49 49
Transfer payments 60,227,888 15,239,131 15,239,131 56,288,595 14,490,855 14,490,855
Public debt charges 27,134,000 6,914,166 6,914,166 28,862,000 7,038,291 7,038,291
Other subsidies and payments - 4,267 4,267 - 7,531 7,531

Total gross budgetary expenditures 87,612,242 22,209,622 22,209,622 85,398,806 21,592,104 21,592,104
Less Revenues netted against expenditures 400 - - 400 30 30

Total net budgetary expenditures 87,611,842 22,209,622 22,209,622 85,398,406 21,592,074 21,592,074
* Planned expenditures do not reflect measures announced in Budget 2012
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