Archived - Department of Finance Canada Quarterly Financial Report for the Quarter Ended September 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:

The description of the program activities for the Department can be found in Part II of the Main Estimates 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 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 September 30, 2013 and September 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 six months of 2013-14 and 2014-15.

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

In 2014-15, Q2 Authorities were $87,616 million, Q2 Expenditures were $21,147 million, and Q1 Expenditures were $22,908 million. In 2013-14, Q2 Authorities were $87,614 million, Q2 Expenditures were $21,153 million, and Q1 Expenditures were $22,210 million.

Percentages reflect the utilization of authorities at quarter-end.

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

Comparison of Authorities Available for Use for the Year
as at September 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 7.2 (2.2) -30.4%
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 87,614.0 1.7 0.0%
Non-Budgetary - - - -
Total authorities 87,615.7 87,614.0 1.7 0.0%
Note: Figures may not add due to rounding.

Authorities available in fiscal year 2014-15 are $87,615.7 million at the end of the second quarter as compared to $87,614.0 million at the end of the second quarter of 2013-14, representing an increase of $1.7 million.

Total 2014-15 Vote 1 operating authorities available as at September 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:

At the end of the second quarter in 2014-15, Vote 5 authorities are $5.0 million compared to $7.2 million at the end of the second quarter of 2013-14, representing a decrease of $2.2 million. This decrease of $2.2 million is attributable to the conclusion of the interim funding arrangement with the Canadian Securities Regulation Regime Transition Office.

Statutory Authorities available in fiscal year 2014-15 are $87,495.7 million at the end of the second 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 September 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 September 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 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.

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
September 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 49.5 45.9 3.6 7.8%
Vote 5 - Grants and Contributions 2.5 6.7 (4.2) -62.7%
Statutory:
Major transfers to other levels of government 30,498.4 29,305.0 1,193.4 4.1%
Interest on Unmatured Debt and Interest on Other Liabilities 12,762.5 13,373.5 (611.0) -4.6%
Direct program expenses 742.2 631.2 111.0 17.6%
Sub Total Statutory 44,003.1 43,309.7 693.4 1.6%
Total Budgetary expenditures 44,055.1 43,362.3 692.8 1.6%
Non-Budgetary 41,349.6 36,438.9 4,910.7 13.5%
Total year to date expenditures 85,404.7 79,801.2 5,603.5 7.0%
Note: Figures may not add due to rounding.

At the end of the second quarter of the 2014-15 fiscal year, total expenditures were $85,404.7 million compared to $79,801.2 million reported in the same period of 2013-14, representing an increase of $5,603.5 million or 7.0%.

Total 2014-15 Vote 1 operating expenditures at the end of the second quarter were $49.5 million as compared to $45.9 million at the same period of fiscal year 2013-14, representing an increase of $3.6 million or 7.8%. The increase is mainly attributable to the Government-wide Payment in Arrears initiative and the cost associated with the move to 90 Elgin.

Total 2014-15 Vote 5 grants and contribution expenditures at the end of the second quarter were $2.5 million as compared to $6.7 million at the same period of fiscal year 2013-14, representing a decrease of $4.2 million. This decrease is attributable to interim funding of $4.2 million last fiscal year to the Canadian Securities Regulation Regime Transition Office (CSTO).

Total statutory expenditures at the end of the second quarter of 2014-15 are $44,003.1 million as compared to $43,309.7 million at the end of the second quarter of 2013-14 representing an increase of $693.4 million, or 1.6%.

This increase is primarily attributable to an increase of $1,193.4 million in major transfers to other levels of government, an increase of $111.0 million in direct program expenses and a decrease of $611.0 million in Interest on Unmatured Debt and Interest on Other Liabilities (decrease of $418.9 million and $192.1 million, respectively).

Expenditures related to major transfers to other levels of government as at September 30, 2014 are $30,498.4 million compared to $29,305.0 million at the same period in 2013-14 representing an increase of $1,193.4 million. This increase is mainly due to the net effect of the following factors:

Explanations for all but one of the items listed above are consistent with the explanations found under the statutory budgetary authorities in Section 2.1. The decrease of $55.8 million in 2014-15 in Additional Fiscal Equalization Payment – Total Transfer Protection relates to one-time payments last fiscal year to New Brunswick and Manitoba to prevent by-province declines in major transfers between 2012-13 and 2013-14.

Expenditures for the Interest on Unmatured Debt and Interest on Other Liabilities as at September 30, 2014 are $12,762.5 million compared to $13,373.5 million at the same period in 2013-14 representing a decrease of $611.0 million. The decrease is mainly due to the following factors:

Direct Program Expenditures at the end of the second quarter of fiscal year 2014-15 are $742.2 million as compared to $631.2 million at the same period in 2013-14, representing an increase of $111.0 million. This increase is primarily due to the net effect of the following factors:

Non-budgetary expenditures at the end of the second quarter of 2014-15 are $41,349.6 million compared to $36,438.9 million at the end of the same quarter in the prior year representing an increase of $4,910.7 million. This increase is due to an increase of $4,594.0 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. There is also an increase of $200.0 million related to a payment to the Ukraine for financial assistance under the Bretton Woods and Related Agreements Act and an increase of $113.4 million in payments to the International Monetary Fund New Arrangement to Borrow.

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.

Expenditures in the second quarter of fiscal 2014-15 were $42,597.4 million compared with $40,845.7 million for the second quarter of 2013-14, representing an increase of $1,751.7 million or 4.3% in quarterly spending.

Comparison of Quarterly Expenditures for the Second Quarter Ended
September 30 of Fiscal Years 2013-14 and 2014-15

Variance

Expenditures for the Second Quarter (in millions) 2014-15 2013-14 $ %
Budgetary
Voted:
Vote 1 - Operating Expenditures 25.2 24.6 0.6 2.4%
Vote 5 - Grants and Contributions 0.5 4.7 (4.2) -89.4%
Statutory:
Major transfers to other levels of government 15,140.9 14,571.9 569.0 3.9%
Interest on Unmatured Debt and Interest on Other Liabilities 5,925.6 6,459.4 (533.8) -8.3%
Direct program expenses 55.1 92.1 (37.0) -40.2%
Sub Total Statutory 21,121.6 21,123.4 (1.8) 0.0%
Total Budgetary expenditures 21,147.3 21,152.7 (5.4) 0.0%
Non-Budgetary 21,450.1 19,693.0 1,757.1 8.9%
Total year to date expenditures 42,597.4 40,845.7 1,751.7 4.3%
Note: Figures may not add due to rounding.

Variance explanations of the quarterly spending are in line with the year to date variance explanations provided in 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.

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 July 28th, Louise Levonian, former Associate Deputy Minister of Finance, left the department. She has been replaced by Marta Morgan effective August 4, 2014.

Effective August 29th, 2014, Senior Associate Deputy Minister of Finance and G7 Deputy of Canada, Jean Boivin left the department. He has not yet been replaced.

In September 2014, the Department of Finance completed its move from 140 O’Connor Street to 90 Elgin Street.

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
November 24, 2014

Department of Finance Canada
Quarterly Financial Report for the quarter ended September 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
September 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
September 30, 2013
Year to date used at
quarter-end
Budgetary Authorities
Voted authorities
Operating expenditures 114,981 25,152 49,525 111,169 24,632 45,937
Grants and contributions 5,035 500 2,500 7,235 4,710 6,710


Total voted authorities 120,016 25,652 52,025 118,404 29,342 52,647


Statutory authorities
Major transfers to other levels of government
Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 32,114,033 8,028,509 16,057,017 30,283,114 7,570,778 15,141,557
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 12,581,729 3,145,432 6,290,864 12,215,271 3,053,818 6,107,636
Fiscal arrangements
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 16,669,278 4,167,319 8,334,639 16,105,194 4,026,298 8,052,597
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,469,215 707,720 2,053,776 3,288,282 670,810 1,946,663
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 34,119 15,951 17,189 32,149 14,837 16,075
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (815,902) - (407,036) (770,280) - (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 - -
Additional Fiscal Equalization Payment - Total Transfer Protection (Part I - Federal-Provincial Fiscal Arrangements Act) - - - - 55,806 55,806
Payments to Provinces Regarding Sales Tax Harmonization (Part III.1 — Federal-Provincial Fiscal Arrangements Act) - - - 1,481,000 - 14,000
Wait Times Reduction Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) - - - 250,000 62,500 125,000
Alternative Payments for Standing Programs (Part VI - Federal-Provincial Fiscal Arrangements Act) (3,702,944) (924,005) (1,848,011) (3,499,933) (882,990) (1,765,980)


Total major transfers to other levels of government 60,552,284 15,140,926 30,498,438 59,720,043 14,571,857 29,304,983
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 18,147,000 3,871,478 8,635,846 18,401,000 4,307,483 9,054,759
Interest on Other Liabilities 8,150,000 2,054,121 4,126,639 8,733,000 2,151,896 4,318,786


Total Interest on Unmatured Debt and Interest on Other Liabilities 26,297,000 5,925,599 12,762,485 27,134,000 6,459,379 13,373,545
Direct program expenses
Operating expenses
Purchase of Domestic Coinage 122,500 30,246 54,865 126,500 31,371 59,281
Contributions to Employee Benefit Plans 11,938 2,984 5,969 12,204 3,051 6,102
Minister of Finance - Salary and motor car allowance 80 40 40 79 19 38
Minister of State – Motor car allowance 2 - 1 2 1 2
Transfer payments
Incentive for Provinces to Eliminate Taxes on Capital (Part IV - Federal-Provincial Fiscal Arrangements Act) - - 90,100 - 1,405 1,405
Canadian Millenium Scholarship Foundation (Budget Implementation Act, 1998) - - - - - (11)
Payments to International Development Association 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 - - - - -
Establishment of a Canadian Securities Regulation Regime and Canadian Regulatory Authority (Budget Implementation Act, 2009) - 45,800 45,800 - - -
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 - -
Other
Losses on Foreign Exchange - (25,181) 102,004 - 53,355 119,212
Refunds of Previous Years Revenue - 11 127 - - -
Payment of Liabilities Previously Recorded as Revenue - 1,194 1,721 - 2,939 3,527


Total direct program expenses 646,431 55,094 742,237 641,595 92,141 631,166


Total statutory authorities 87,495,715 21,121,619 44,003,160 87,495,638 21,123,377 43,309,694


Total budgetary authorities 87,615,731 21,147,271 44,055,185 87,614,042 21,152,719 43,362,341


Non-budgetary authorities
Advances to Crown corporations (Gross) - 21,227,462 40,929,551 - 19,591,572 36,335,504
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 6,000 6,000 - 4,000 6,000
Payments under Bretton Woods and Related Agreements Act - National Governements (Gross) - 200,000 200,000 - - -
Payments under Bretton Woods and Related Agreements Act - International Organizations (Gross) - 3,481 3,481 - - -
Payments to the International Monetary Fund New Arrangements to Borrow - 13,190 210,533 - 97,387 97,387


Total non-budgetary authorities - 21,450,133 41,349,565 - 19,692,959 36,438,891


Total authorities 87,615,731 42,597,404 85,404,750 87,614,042 40,845,678 79,801,232
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 September 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
September 30, 2014
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2014
Expended during the
quarter ended
September 30, 2013
Year to date
used at
quarter-end
Expenditures:
Personnel 84,372 20,686 42,171 82,420 21,299 42,757
Transportation and communications 2,558 774 1,246 4,000 693 1,206
Information 11,072 177 731 11,300 1,196 2,123
Professional and special services 18,905 2,990 4,407 15,400 3,690 4,283
Rentals 1,757 103 419 400 127 651
Repair and maintenance 42 52 53 500 655 667
Utilities, materials and supplies 123,737 30,339 55,022 127,500 31,474 59,461
Acquisition of land, buildings and works - 1,453 1,453 - - -
Acquisition of machinery and equipment 7,188 1,978 2,038 8,834 57 101
Transfer payments 61,069,229 15,202,677 31,093,899 60,230,088 14,535,402 29,774,533
Public debt charges 26,297,000 5,925,599 12,762,485 27,134,000 6,459,379 13,373,545
Other subsidies and payments 20 (39,557) 91,261 - 98,767 103,034

Total gross budgetary expenditures 87,615,881 21,147,271 44,055,185 87,614,442 21,152,739 43,362,361
Less Revenues netted against expenditures 150 - - 400 20 20

Total net budgetary expenditures 87,615,731 21,147,271 44,055,185 87,614,042 21,152,719 43,362,341
Note: Numbers may not add due to rounding.
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