Archived - Quarterly Financial Report for the Quarter Ended September 30, 2015 (unaudited)

1. Introduction

1.1 Authority, Mandate and Program Activities

1.2 Basis of Presentation

1.3 Department of Finance – Financial Structure

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

2.1 Authorities Analysis

2.2 Expenditure Analysis

3. Risks and Uncertainties

4. Significant changes in relation to operations, personnel and programs

5. Approval by Senior Officials

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 and Supplementary Estimates of the Department of Finance Canada.

The quarterly financial report has not been subject to an external audit or review.

The Department of Finance Canada (the 'Department') provides the Government of Canada with high quality advice on appropriate economic, fiscal, tax, social, security, international and financial sector policies and programs with the goal of strengthening the Canadian economy and maintaining sustainable fiscal policy and social programs.

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 2014-15.

Sections 2.1 and 2.2 below highlight the significant items that contributed to the increase in the resources available from 2014-15 to 2015-16 and the decrease in actual expenditures as at September 30, 2014 and September 30, 2015. 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 2014-15 and 2015-16.

Comparison of Budgetary Authorities and Year to Date Budgetary Expenditures for the Quarter ended September 30 of Fiscal Years 2014-15 and 2015-16

In 2015-16, Q2 Authorities were $89,646 million, Q2 Expenditures were $22,168 million, and Q1 Expenditures were $22,468 million. In 2014-15, Q2 Authorities were $87,616 million, Q2 Expenditures were $21,147 million, and Q1 Expenditures were $22,908 million.
Percentages reflect the utilization of authorities at quarter-end.

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 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 2014-15 and 2015-16

Variance

Authorities Available (in millions) 2015-16 2014-15 $ %
Budgetary
Voted: 100.0 115.0 (15.0) -13.0%
Vote 1 - Operating Expenditures 3.0 5.0 (2.0) -40.4%
Vote 5 - Grants and Contributions
Statutory:
Major transfers to other levels of government 63,312.4 60,552.3 2,760.1 4.6%
Interest on Unmatured Debt and Interest on Other Liabilities 25,618.0 26,297.0 (679.0) -2.6%
Direct program expenses 613.0 646.4 (33.4) -5.2%
Total statutory 89,543.4 87,495.7 2,047.7 2.3%
Total Budgetary authorities 89,646.4 87,615.7 2,030.7 2.3%
Non-Budgetary - - - -
Total authorities 89,646.4 87,615.7 2,030.7 2.3%

Authorities available in fiscal year 2015-16 are $89,646.4 million at the end of the second quarter as compared to $87,615.7 million at the end of the second quarter of 2014-15, representing an increase of $2,030.7 million.

Total 2015-16 Vote 1 operating authorities available as at September 30, 2015 are $100.0 million compared to $115.0 million for the same period in 2014-15, representing a decrease of $15.0 million. This decrease is mainly attributable to the following factors:

At the end of the second quarter in 2015-16, Vote 5 authorities are $3.0 million compared to $5.0 million at the end of the second quarter of 2014-15. The year-to-year change in Vote 5 authorities is due to the payment schedule for the Harbourfront Centre Funding Program, which had spending of $5.0 million in 2014-15 and $3.0 million in 2015-16, the final year of the program. From 2011-12 to 2015-16, the Harbourfront Centre Funding Program provided Harbourfront Centre with a total of $25.0 million over a five year period. Budget 2015 announced the program's renewal with funding of $25.0 million over five years, from 2016-17 to 2020-21.

Statutory Authorities available in fiscal year 2015-16 are $89,543.4 million at the end of the second quarter compared to $87,495.7 million at the end of the same quarter of 2014-15, representing an increase of $2,047.7 million.

This increase of $2,047.7 million relates to three broad categories: an increase of $2,760.1 million in major transfers to other levels of government, offset by a decrease in authorities for direct program expenses of $33.4 million and a decrease of $679.0 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, 2015 are $63,312.4 million compared to $60,552.3 million for the same period in 2014-15. The increase of $2,760.1 million is mainly due to the net effect of the following factors:

Authorities for direct program expenses at the end of the second quarter of fiscal year 2015-16 are $613.0 million as compared to $646.4 million at the same period in 2014-15, representing a decrease of $33.4 million. This decrease is primarily due to the following factors:

Authorities for the Interest on Unmatured Debt and Interest on Other Liabilities as at September 30, 2015 are $25,618.0 million compared to $26,297.0 million at the same period in 2014-15. The decrease of $679.0 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 2014-15 and 2015-16

Variance

Year to date expenditures (in millions) 2015-16 2014-15 $ %
Budgetary
Voted:
Vote 1 - Operating Expenditures 46.5 49.5 (3.0) -6.1%
Vote 5 - Grants and Contributions 2.5 2.5 0.0 0.0%
Statutory:
Major transfers to other levels of government 31,975.3 30,498.4 1,476.9 4.8%
Interest on Unmatured Debt and Interest on Other Liabilities 12,435.2 12,762.5 (327.3) -2.6%
Direct program expenses 177.3 742.2 (564.9) -76.1%
Sub Total Statutory 44,587.8 44,003.1 584.7 1.3%
Total Budgetary expenditures 44,636.8 44,055.1 581.7 1.3%
Non-Budgetary 29,634.2 41,349.6 (11,715.4) -28.3%
Total year to date expenditures 74,271.0 85,404.7 (11,133.7) -13.0%

At the end of the second quarter of the 2015-16 fiscal year, total expenditures were $74,271.0 million compared to $85,404.7 million reported in the same period of 2014-15, representing a decrease of $11,133.7 million or 13.0%.

Total 2015-16 Vote 1 operating expenditures at the end of the second quarter were $46.5 million compared to $49.5 million for the same period in fiscal year 2014-15, representing a decrease of $3.0 million or 6.1%. The decrease is mainly attributable to costs associated with the move to the James Michael Flaherty Building which the department incurred in the first half of 2014-15.

There is no change to 2015-16 Vote 5 expenditures compared to the same period in fiscal year 2014-15.

Total statutory expenditures at the end of the second quarter of 2015-16 are $44,587.8 million as compared to $44,003.1 million at the end of the second quarter of 2014-15 representing an increase of $584.7 million or 1.3%.

This increase is primarily attributable to an increase of $1,476.9 million in major transfers to other levels of government, offset by a decrease of $564.9 million in direct program expenses, and a decrease of $327.3 million in Interest on Unmatured Debt and Interest on Other Liabilities (decrease of $37.2 million and decrease of $290.1 million, respectively).

Expenditures related to major transfers to other levels of government as at September 30, 2015 are $31,975.3 million compared to $30,498.4 million for the same period in 2014-15 representing an increase of $1,476.9 million. This increase is mainly due to the net effect of the following factors:

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

Direct Program Expenditures at the end of the second quarter of fiscal year 2015-16 are $177.3 million as compared to $742.2 million at the same period in 2014-15, representing a decrease of $564.9 million. This decrease is primarily due to the net effect of the following factors:

Expenditures for the Interest on Unmatured Debt and Interest on Other Liabilities as at September 30, 2015 are $12,435.2 million compared to $12,762.5 million at the same period in 2014-15 representing a decrease of $327.3 million. The decrease is mainly due to the following factors:

Non-budgetary expenditures at the end of the second quarter of 2015-16 are $29,634.2 million compared to $41,349.6 million at the end of the same quarter in the prior year representing a decrease of $11,715.4 million. This decrease is due to the net effect of the following factors:

Table 2, located at the end of this report, presents Budgetary Expenditures by Standard Object (SO). The main variance in expenditures between 2015-16 and 2014-15 by standard object are as follows:

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

Quarterly Spending

Expenditures in the second quarter of fiscal 2015-16 were $38,745.1 million compared with $42,597.5 million for the second quarter of 2014-15, representing a decrease of $3,852.3 million or 9.0% in quarterly spending.

Comparison of Quarterly Expenditures for the Second Quarter Ended
September 30 of Fiscal Years 2014-15 and 2015-16

Variance

Expenditures for the Second Quarter (in millions) 2015-16 2014-15 $ %
Budgetary
Voted:
Vote 1 - Operating Expenditures 22.3 25.2 (2.9) -11.5%
Vote 5 - Grants and Contributions 0.5 0.5 0.0 0.0%
Statutory:
Major transfers to other levels of government 15,876.0 15,140.9 735.1 4.9%
Interest on Unmatured Debt and Interest on Other Liabilities 6,176.0 5,925.6 250.4 4.2%
Direct program expenses 93.6 55.1 38.5 69.9%
Sub Total Statutory 22,145.6 21,121.6 1,024.0 4.8%
Total Budgetary expenditures 22,168.4 21,147.3 1,021.1 4.8%
Non-Budgetary 16,576.7 21,450.1 (4,873.4) -22.7%
Total expenditures for the second quarter 38,745.1 42,597.4 (3,852.3) -9.0%

Variance explanations of the quarterly spending are in line with year to date variance explanations provided in Section 2.2.

Private sector economists expect moderate growth in the Canadian economy, as ongoing strength in domestic demand is expected to be moderated by a fragile global recovery and sharp declines in global crude oil prices. In the euro area, the recovery is uncertain and the risk of deflation is increasing. In China, the challenges that the authorities face in introducing necessary policy reforms while maintaining their targeted growth objectives could lead to slower and more-variable-than-expected growth. Furthermore, volatility in other global commodity markets also poses challenges and risks to Canada's economy. In contrast to these developments, the U.S. economic recovery appears to be gaining traction.

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.

There have been no significant changes in relation to operations, personnel and programs.

Approved by:

Original signed by
Paul Rochon, Deputy Minister
Original signed by
Randy Larkin, Chief Financial Officer

Ottawa, Canada
November 27, 2015

Department of Finance Canada
Quarterly Financial Report for the quarter ended September 30, 2015
Table 1 - Statement of Authorities (unaudited)
(in thousands of dollars)

Fiscal year 2015-2016 Fiscal year 2014-2015


Total available for use for the
year ending
March 31, 2016 *
Used during the
quarter ended
September 30, 2015
Year to date used at
quarter-end
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
Budgetary Authorities
Voted authorities
Operating expenditures 99,937 22,287 46,467 114,981 25,152 49,525
Grants and contributions 3,035 500 2,502 5,035 500 2,500


Total voted authorities 102,972 22,787 48,969 120,016 25,652 52,025


Statutory authorities
Major transfers to other levels of government
Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 34,026,107 8,506,527 17,013,054 32,114,033 8,028,509 16,057,017
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 12,959,181 3,239,796 6,479,591 12,581,729 3,145,432 6,290,864
Fiscal arrangements
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 17,341,310 4,335,327 8,670,655 16,669,278 4,167,319 8,334,639
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,561,034 726,451 2,108,132 3,469,215 707,720 2,053,776
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 34,378 15,945 17,182 34,119 15,951 17,189
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (853,046) - (417,261) (815,902) - (407,036)
Other major transfers
Addtional Fiscal Equalization Offset Payment to Nova Scotia (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) 36,779 - - 64,481 - -
Additional Fiscal Equalization to Nova Scotia (Part I - Federal-Provincial Fiscal Arrangements Act) 79,348 - - 138,275 - -
Alternative Payments for Standing Programs (Part VI - Federal-Provincial Fiscal Arrangements Act) (3,872,657) (948,037) (1,896,073) (3,702,944) (924,005) (1,848,011)


Total major transfers to other levels of government 63,312,434 15,876,009 31,975,280 60,552,284 15,140,926 30,498,438
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 17,988,000 4,322,028 8,598,645 18,147,000 3,871,478 8,635,846
Interest on Other Liabilities 7,630,000 1,853,958 3,836,565 8,150,000 2,054,121 4,126,639


Total Interest on Unmatured Debt and Interest on Other Liabilities 25,618,000 6,175,986 12,435,210 26,297,000 5,925,599 12,762,485
Direct program expenses
Operating expenses
Purchase of Domestic Coinage 108,000 25,060 48,622 122,500 30,246 54,865
Contributions to Employee Benefit Plans 12,097 3,025 6,049 11,938 2,984 5,969
Minister of Finance - Salary and motor car allowance 82 21 41 80 40 40
Minister of State – Motor car allowance 2 - 1 2 - 1
Transfer payments
Incentive for Provinces to Eliminate Taxes on Capital (Part IV - Federal-Provincial Fiscal Arrangements Act) - 28,000 28,000 - 90,100
Payments to International Development Association 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 - -
Other
Losses on Foreign Exchange - 36,807 93,296 - (25,181) 102,004
Refunds of Previous Years Revenue - - - - 11 127
Payment of Liabilities Previously Recorded as Revenue - 677 1,270 - 1,194 1,721


Total direct program expenses 612,991 93,590 177,279 646,431 55,094 742,237


Total statutory authorities 89,543,425 22,145,585 44,587,769 87,495,715 21,121,619 44,003,160


Total budgetary authorities 89,646,397 22,168,372 44,636,738 87,615,731 21,147,271 44,055,185


Non-budgetary authorities
Advances to Crown corporations (Gross) - 16,424,084 29,425,195 - 21,227,462 40,929,551
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 3,000 5,000 - 6,000 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) - 65,287 93,588 - 3,481 3,481
Payments to the International Monetary Fund New Arrangements to Borrow - 84,307 110,384 - 13,190 210,533


Total non-budgetary authorities - 16,576,678 29,634,167 - 21,450,133 41,349,565


Total authorities 89,646,397 38,745,050 74,270,905 87,615,731 42,597,404 85,404,750
* 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, 2015
Table 2 - Departmental budgetary expenditures by Standard Object (unaudited)
(in thousands of dollars)

Fiscal year 2015-2016 Fiscal year 2014-2015


Planned expenditures for the year
ending
March 31, 2016
Expended during the
quarter ended
September 30, 2015
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2015
Expended during the
quarter ended
September 30, 2014
Year to date
used at
quarter-end
Expenditures:
Personnel 84,190 20,325 41,114 84,372 20,686 42,171
Transportation and communications 2,309 415 1,037 2,558 774 1,246
Information 8,763 2,179 5,543 11,072 177 731
Professional and special services 13,159 2,210 4,033 18,905 2,990 4,407
Rentals 1,156 62 470 1,757 103 419
Repair and maintenance 62 38 48 42 52 53
Utilities, materials and supplies 108,363 25,114 48,736 123,737 30,339 55,022
Acquisition of land, buildings and works - (29) - - 1,453 1,453
Acquisition of machinery and equipment 2,217 34 91 7,188 1,978 2,038
Transfer payments 63,808,279 15,904,509 32,005,782 61,069,229 15,202,677 31,093,899
Public debt charges 25,618,000 6,175,986 12,435,210 26,297,000 5,925,599 12,762,485
Other subsidies and payments 49 37,554 94,699 20 (39,557) 91,261

Total gross budgetary expenditures 89,646,547 22,168,397 44,636,763 87,615,881 21,147,271 44,055,185
Less Revenues netted against expenditures 150 25 25 150 - -

Total net budgetary expenditures 89,646,397 22,168,372 44,636,738 87,615,731 21,147,271 44,055,185
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