Archived - Department of Finance Canada Quarterly Financial Report for the Quarter Ended June 30, 2014 (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 of Finance Canada (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:

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 as well as transfers from Treasury Board central votes that are approved by the end of the quarter. 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.

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 2013-14.

Sections 2.1 and 2.2 below highlight the significant items that contributed to the increase in the resources available from 2013-14 to 2014-15 and the increase in actual expenditures as at June 30, 2013 and June 30, 2014. Full details can be found in Table 1 Statement of Authorities found at the end of this document.

The following graph provides a comparison of budgetary authorities available for the full fiscal year and budgetary expenditures for the first three months of 2013-14 and 2014-15.

Comparison of Budgetary Authorities and Year to Date Budgetary Expenditures for the Quarter ended June 30 of Fiscal Years 2013-14 and 2014-15

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.

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.

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 the Year
as at June 30 of Fiscal Years 2013-14 and 2014-15

Variance

Authorities Available (in millions) 2014-15 2013-14 $ %
Budgetary
Voted:
Vote 1 - Operating Expenditures 115.0 111.2 3.8 3.4%
Vote 5 - Grants and Contributions 5.0 5.0 - 0.0%
Statutory:
Major transfers to other levels of government 60,552.3 59,720.0 832.3 1.4%
Interest on Unmatured Debt and Interest on Other Liabilities 26,297.0 27,134.0 (837.0) -3.1%
Direct program expenses 646.4 641.6 4.8 0.8%
Total statutory 87,495.7 87,495.6 0.1 0.0%
Total Budgetary authorities 87,615.7 87,611.8 3.9 0.0%
Non-Budgetary - - - -
Total authorities 87,615.7 87,611.8 3.9 0.0%

Authorities available in fiscal year 2014-15 are $87,615.7 million at the end of the first quarter as compared to $87,611.8 million at the end of the first quarter of 2013-14, representing an increase of $3.9 million.

Voted budgetary authorities

Total 2014-15 Vote 1 operating authorities available as at June 30, 2014 are $115.0 million as compared to $111.2 million at the same period in 2013-14, representing an increase of $3.8 million, which is mainly attributable to the net effect of the following factors:

There is no change to 2014-15 Vote 5 authorities compared to fiscal year 2013-14.

Statutory budgetary authorities

Statutory Authorities available in fiscal year 2014-15 are $87,495.7 million at the end of the first quarter as compared to $87,495.6 million at the end of the same quarter of 2013-14, representing an increase of $0.1 million.

This increase of $0.1 million relates to three broad categories; increases of $832.3 million in major transfers to other levels of government, an increase in authorities for direct program expenses of $4.8 million, offset by a decrease of $837.0 million in Interest on Unmatured Debt and Interest on Other Liabilities. Additional details are provided below.

Authorities for major transfers to other levels of government as at June 30, 2014 are $60,552.3 million compared to $59,720.0 million for the same period in 2013-14. The increase of $832.3 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, 2014 are $26,297.0 million compared to $27,134.0 million at the same period in 2013-14. The decrease of $837.0 million is mainly due to the 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.

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 2013-14 and 2014-15

Variance
Year to date expenditures (in millions) 2014-15 2013-14 $ %
Budgetary
Voted:
Vote 1 - Operating Expenditures 24.4 21.3 3.1 14.4%
Vote 5 - Grants and Contributions 2.0 2.0 - 0.0%
Statutory:
Major transfers to other levels of government 15,357.5 14,733.2 624.3 4.2%
Interest on Unmatured Debt and Interest on Other Liabilities 6,836.9 6,914.2 (77.3) -1.1%
Direct program expenses 687.1 539.0 148.1 27.5%
Sub Total Statutory 22,881.5 22,186.4 695.1 3.1%
Total Budgetary expenditures 22,907.9 22,209.7 698.2 3.1%
Non-Budgetary 19,899.4 16,745.9 3,153.5 18.8%
Total year to date expenditures 42,807.3 38,955.6 3,851.7 9.9%

At the end of the first quarter of the 2014-15 fiscal year, total expenditures were $42,807.3 million compared to $38,955.6 million reported in the same period of 2013-14, representing an increase of $3,851.7 million or 9.9%.

Voted budgetary expenditures

Total 2014-15 Vote 1 operating expenditures at the end of the first quarter were $24.4 million as compared to $21.3 million at the same period of fiscal year 2013-14, representing an increase of $3.1 million or 14.4%. The increase is mainly attributable to the Government-wide Payment in Arrears initiative.

There is no change to 2014-15 Vote 5 expenditures compared to the same period in fiscal year 2013-14.

Statutory budgetary expenditures

Total statutory expenditures at the end of the first quarter of 2014-15 are $22,881.5 million as compared to $22,186.4 million at the end of the first quarter of 2013-14 representing an increase of $695.1 million, or 3.1%.

This increase is primarily attributable to an increase of $624.3 million in major transfers to other levels of government, an increase of $148.1 million in direct program expenses and a decrease of $77.3 million in Interest on Unmatured Debt and Interest on Other Liabilities (increase of $17.1 million and decrease of $94.4 million, respectively).

Expenditures related to major transfers to other levels of government as at June 30, 2014 are $15,357.5 million compared to $14,733.2 million at the same period in 2013-14 representing an increase of $624.3 million. This increase is mainly due to the net effect of the following factors:

Explanations for all of the items listed above are consistent with the explanations found under the statutory budgetary authorities in Section 2.1.

Expenditures for the Interest on Unmatured Debt and Interest on Other Liabilities as at June 30, 2014 are $6,836.9 million compared to $6,914.2 million at the same period in 2013-14 representing a decrease of $77.3 million. The decrease is mainly due to the following factors:

Direct Program Expenditures at the end of the first quarter of fiscal year 2014-15 are $687.1 million as compared to $539.0 million at the same period in 2013-14, representing an increase of $148.1 million. This increase is primarily due to the net effect of the following factors:

Non-budgetary expenditures

Non-budgetary expenditures at the end of the first quarter of 2014-15 are $19,899.4 million compared to $16,745.9 million at the end of the same quarter in the prior year representing an increase of $3,153.5 million. This increase is due to an increase of $2,958.2 million 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. The increase is also explained by an increase of $197.3 million in payments to the International Monetary Fund New Arrangement to Borrow offset by a decrease of $2.0 million in advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act.

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 2014-15 and 2013-14 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 continued, moderate growth in the Canadian economy, as ongoing strength in domestic demand is expected to be moderated by a fragile global recovery and the related short- to medium-term risks. In particular, uncertainty stems from ongoing concerns over the U.S. government’s fiscal position, although the U.S. economy continues to show signs of improvement. In addition, any further slowdown in China and other emerging market economies would impact commodity prices.

On the domestic front, the key risk remains elevated household debt. However, the government has taken proactive measures over the past five years, through adjustments to the rules for government-backed mortgage insurance, to help prevent households from becoming overextended. In addition, Canada’s aging population, combined with relatively weak productivity growth, poses a long-term risk to Canadians’ standard of living.

The Department of Finance Canada’s Corporate Risk Profile provides a snapshot of the Department’s key corporate risks. It focuses the attention and action of senior management on measures to mitigate the adverse effects of global economic uncertainty and their impact on the Canadian economy. The Department monitors its corporate risks and associated risk responses to identify areas of opportunity and to reflect progress made in implementing measures to mitigate risks.

Effective January 6, 2014, Sylvain Michaud joined the department as Deputy Chief Financial Officer.

On February 3, 2014, Randy Larkin joined the department as Chief Financial Officer.

On March 19, 2014, the Right Honorable Stephen Harper appointed the Honourable Joe Oliver as Minister of Finance.

Effective April 21, 2014, Paul Rochon became Deputy Minister of Finance.

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.

Administration costs related to the phase out of the penny in 2013-14 were significantly lower than previously estimated. The Royal Canadian Mint contracted an external company to carry out the processing of the pennies, which significantly reduced capital and processing costs. These savings are expected to continue into 2014-15 and 2015-16.

Approved by:

Paul Rochon,
Deputy Minister

Randy Larkin,
Chief Financial Officer

Ottawa, Canada
August 25, 2014

Department of Finance Canada
Quarterly Financial Report for the quarter ended June 30, 2014
Table 1 - Statement of Authorities (unaudited)
(in thousands of dollars)

Fiscal year 2014-2015 Fiscal year 2013-2014


Total available for use for the
year ending
March 31, 2015 *
Used during the
quarter ended
June 30, 2014
Year to date used at
quarter-end
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
Budgetary Authorities
Voted authorities
Operating expenditures 114,981 24,373 24,373 111,169 21,305 21,305
Grants and contributions 5,035 2,000 2,000 5,035 2,000 2,000


Total voted authorities 120,016 26,373 26,373 116,204 23,305 23,305


Statutory authorities
Major transfers to other levels of government
Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 32,114,033 8,028,508 8,028,508 30,283,114 7,570,779 7,570,779
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 12,581,729 3,145,432 3,145,432 12,215,271 3,053,818 3,053,818
Fiscal arrangements
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 16,669,278 4,167,320 4,167,320 16,105,194 4,026,299 4,026,299
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,469,215 1,346,056 1,346,056 3,288,282 1,275,853 1,275,853
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 34,119 1,238 1,238 32,149 1,238 1,238
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (815,902) (407,036) (407,036) (770,280) (388,371) (388,371)
Other major transfers
Addtional Fiscal Equalization Offset Payment to Nova Scotia (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) 64,481 - - 89,461 - -
Additional Fiscal Equalization to Nova Scotia (Part I - Federal-Provincial Fiscal Arrangements Act) 138,275 - - 245,785 - -
Payments to Provinces Regarding Sales Tax Harmonization (Part III.1 — Federal-Provincial Fiscal Arrangements Act) - - - 1,481,000 14,000 14,000
Wait Times Reduction Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) - - - 250,000 62,500 62,500
Alternative Payments for Standing Programs (Part VI - Federal-Provincial Fiscal Arrangements Act) (3,702,944) (924,006) (924,006) (3,499,933) (882,990) (882,990)


Total major transfers to other levels of government 60,552,284 15,357,512 15,357,512 59,720,043 14,733,126 14,733,126
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 18,147,000 4,764,368 4,764,368 18,401,000 4,747,276 4,747,276
Interest on Other Liabilities 8,150,000 2,072,518 2,072,518 8,733,000 2,166,890 2,166,890


Total Interest on Unmatured Debt and Interest on Other Liabilities 26,297,000 6,836,886 6,836,886 27,134,000 6,914,166 6,914,166
Direct program expenses
Operating expenses
Purchase of Domestic Coinage 122,500 24,619 24,619 126,500 27,910 27,910
Contributions to Employee Benefit Plans 11,938 2,985 2,985 12,204 3,051 3,051
Minister of Finance - Salary and motor car allowance 80 - - 79 19 19
Minister of State – Motor car allowance 2 1 1 2 1 1
Transfer payments
Incentive for Provinces to Eliminate Taxes on Capital (Part IV - Federal-Provincial Fiscal Arrangements Act) - 90,100 90,100 - - -
Canadian Millenium Scholarship Foundation (Budget Implementation Act, 1998) - - - - (11) (11)
Payments to International Development Association 441,610 441,610 441,610 441,610 441,610 441,610
Debt payments on behalf of poor countries to International Organizations pursuant to section 18(1) of the Economic Recovery Act 51,200 - - 51,200 - -
Canadian Securities Regulation Regime Transition Office (Canadian Securities Regulation Regime Transition Office Act) 9,100 - - - - -
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 - - 10,000 - -
Losses on Foreign Exchange - - - - 62,406 62,406
Other
Losses on Foreign Exchange - 127,185 127,185 - 3,451 3,451
Refunds of Previous Years Revenue - 116 116 - - -
Payment of Liabilities Previously Recorded as Revenue - 527 527 - 588 588


Total direct program expenses 646,431 687,143 687,143 641,595 539,025 539,025


Total statutory authorities 87,495,715 22,881,541 22,881,541 87,495,638 22,186,317 22,186,317


Total budgetary authorities 87,615,731 22,907,914 22,907,914 87,611,842 22,209,622 22,209,622


Non-budgetary authorities
Advances to Crown corporations (Gross) - 19,702,089 19,702,089 - 16,743,932 16,743,932
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - - - - 2,000 2,000
Payments to the International Monetary Fund New Arrangements to Borrow - 197,343 197,343 - - -


Total non-budgetary authorities - 19,899,432 19,899,432 - 16,745,932 16,745,932


Total authorities 87,615,731 42,807,346 42,807,346 87,611,842 38,955,554 38,955,554
Numbers may not add due to rounding
* Includes only Authorities available for use and granted by Parliament at quarter-end

Department of Finance Canada
Quarterly Financial Report for the quarter ended June 30, 2014
Table 2 - Departmental budgetary expenditures by Standard Object (unaudited)
(in thousands of dollars)

Fiscal year 2014-2015 Fiscal year 2013-2014


Planned expenditures for the year
ending
March 31, 2015
Expended during the
quarter ended
June 30, 2014
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2014
Expended during the
quarter ended
June 30, 2013
Year to date
used at
quarter-end
Expenditures:
Personnel 84,372 21,485 21,485 82,420 21,458 21,458
Transportation and communications 2,558 472 472 4,000 513 513
Information 11,072 554 554 11,300 927 927
Professional and special services 18,905 1,417 1,417 15,400 593 593
Rentals 1,757 316 316 400 524 524
Repair and maintenance 42 1 1 500 12 12
Utilities, materials and supplies 123,737 24,683 24,683 127,500 27,987 27,987
Acquisition of machinery and equipment 7,188 60 60 8,834 44 44
Transfer payments 61,069,229 15,891,222 15,891,222 60,227,888 15,239,131 15,239,131
Public debt charges 26,297,000 6,836,886 6,836,886 27,134,000 6,914,166 6,914,166
Other subsidies and payments 20 130,818 130,818 - 4,267 4,267

Total gross budgetary expenditures 87,615,881 22,907,914 22,907,914 87,612,242 22,209,622 22,209,622
Less Revenues netted against expenditures 150 - - 400 - -

Total net budgetary expenditures 87,615,731 22,907,914 22,907,914 87,611,842 22,209,622 22,209,622
Note: Numbers may not add due to rounding.
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