Archived - Department of Finance Canada Quarterly Financial Report for the Quarter Ended June 30, 2016 (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:

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 2015-16.

The following graph provides a comparison of budgetary authorities available for the full fiscal year and budgetary expenditures for the first three months of 2015-16 and 2016-17. 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.

Comparison of Budgetary Authorities and Year to Date Budgetary Expenditures for the Quarter ended June 30 of Fiscal Years 2015-16 and 2016-17

In 2016-17, Q1 Authorities were $89,464 million, Q1 Expenditures were $22,590 million. In 2015-16, Q1 Authorities were $89,646 million, Q1 Expenditures were $22,468 million.

Sections 2.1 and 2.2 below highlight the significant items that contributed to the decrease in the resources available from 2015-16 to 2016-17 and the decrease in actual expenditures as at June 30, 2015 compared to June 30, 2016. Full details can be found in Table 1, Statement of Authorities found on page 12 of this document.

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 June 30 of Fiscal Years 2015-16 and 2016-17

Variance

Authorities Available (in millions) 2016-17 2015-16 $ %
Budgetary
Voted:
Vote 1 - Program Authority 90.7 103.0 (12.3) -11.9%
Statutory:
Major transfers to other levels of government 65,989.9 63312.4 2,677.5 4.2%
Interest on Unmatured Debt and Interest on Other Liabilities 22,782.0 25,618.0 (2,836.0) -11.1%
Direct program expenses 601.2 613.0 (11.8) -1.9%
Total statutory 89,373.1 89,543.4 (170.3) -0.2%
Total Budgetary authorities 89,463.8 89,646.4 (182.6) -0.2%
Non-Budgetary - - - -
Total authorities 89,463.8 89,646.4 (182.6) -0.2%

Authorities available in fiscal year 2016-17 are $89,463.8 million at the end of the first quarter as compared to $89,646.4 million at the end of the first quarter of 2015-16, representing a decrease of $182.6 million.

Starting in 2016-17, departmental operating expenditures and grants and contributions are consolidated into Vote 1 – Program Expenditures. This change provides a more efficient approach to the management of voted expenditures.

Total 2016-17 Vote 1 program authorities available as at June 30, 2016 are $90.7 million compared to $103.0 million for the same period in 2015-16, representing a decrease of $12.3 million. This decrease is mainly attributable to the following factors:

Statutory Authorities available in fiscal year 2016-17 are $89,373.1 million at the end of the first quarter compared to $89,543.4 million at the end of the same quarter of 2015-16, representing a decrease of $170.3 million.

This decrease of $170.3 million relates to three broad categories: an increase of $2,677.5 million in major transfers to other levels of government, offset by a decrease in authorities for direct program expenses of $11.8 million and a decrease of $2,836.0 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, 2016 are $65,989.9 million compared to $63,312.4 million for the same period in 2015-16. The increase of $2,677.5 million is due to the net effect of the following increases and decreases in transfers:

Increases include:
Decreases include:

Authorities for direct program expenses at the end of the first quarter of fiscal year 2016-17 are $601.2 million as compared to $613.0 million at the same period in 2015-16, representing a decrease of $11.8 million. This decrease is primarily due to the following factor:

Authorities for the Interest on Unmatured Debt and Interest on Other Liabilities as at June 30, 2016 are $22,782.0 million compared to $25,618.0 million at the same period in 2015-16. The decrease of $2,836 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
June 30 of Fiscal Years 2015-16 and 2016-17

Variance

Year to date expenditures (in millions) 2016-17 2015-16 $ %
Budgetary
Voted:
Vote 1 - Program Expenditures 23.7 26.2 (2.5) -9.5%
Statutory:
Major transfers to other levels of government 16,846.9 16,099.3 747.6 4.6%
Interest on Unmatured Debt and Interest on Other Liabilities 5,669.1 6,259.2 (590.1) -9.4%
Direct program expenses 50.3 83.7 (33.4) -39.9%
Sub Total Statutory 22,566.3 22,442.2 124.1 0.6%
Total Budgetary expenditures 22,590.0 22,468.4 121.6 0.5%
Non-Budgetary 12,855.4 13,057.5 (202.1) -1.5%
Total year to date expenditures 35,445.4 35,525.9 (80.5) -0.2%

At the end of the first quarter of the 2016-17 fiscal year, total expenditures were $35,445.4 million compared to $35,525.9 million reported in the same period of 2015-16, representing a decrease of $80.5 million or 0.2%.

Total 2016-17 Vote 1 program expenditures at the end of the first quarter were $23.7 million compared to $26.2 million for the same period in fiscal year 2015-16, representing a decrease of $2.5 million or 9.5%. The decrease is mainly attributable to reduced government advertising expenditures.

Total statutory expenditures at the end of the first quarter of 2016-17 are $22,566.3 million as compared to $22,442.2 million at the end of the first quarter of 2015-16 representing an increase of $124.1 million or 0.6%.

This increase is primarily attributable to an increase of $747.6 million in major transfers to other levels of government, offset by a decrease of $33.4 million in direct program expenses, and a decrease of $590.1 million in Interest on Unmatured Debt and Interest on Other Liabilities (decrease of $408.6 million and decrease of $181.5 million, respectively).

Expenditures related to major transfers to other levels of government as at June 30, 2016 are $16,846.9 million compared to $16,099.3 million for the same period in 2015-16 representing an increase of $747.6 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 first quarter of fiscal year 2016-17 are $50.3 million as compared to $83.7 million at the same period in 2015-16, representing a decrease of $33.4 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 June 30, 2016 are $5,669.1 million compared to $6,259.2 million at the same period in 2015-16 representing a decrease of $590.1 million. The decrease is mainly due to the following factors:

Non-budgetary expenditures at the end of the first quarter of 2016-17 are $12,855.4 million compared to $13,057.5 million at the end of the same quarter in the prior year representing a decrease of $202.1 million. This decrease is due to 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 2016-17 and 2015-16 by standard object are as follows:

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

Reflecting the ongoing impact of low and volatile crude oil prices and the overall weak and fragile global economic situation, growth in the Canadian economy has slowed considerably since 2014.

With respect to the fragile global economic situation, the Department will continue to monitor developments and risks in key regions and countries. Notable among these are the slowdown in large emerging market economies, the weak European economic recovery, the escalation of geopolitical tensions in the Middle East, slowing short-to-medium-term growth in both advanced and emerging economies, and the challenges associated with the normalization of U.S. monetary policy, which in turn poses risks for emerging markets with long-standing economic and financial vulnerabilities. Over the planning period, the Department will continue to foster international economic policy coordination, contribute to international efforts to mitigate and prevent economic crises, and manage the allocation of scarce fiscal resources.

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 June 27, 2016, Christopher Meyers replaced Randy Larkin as Chief Financial Officer for the Department of Finance Canada.

Approved by:

Original signed by
Paul Rochon, Deputy Minister
Original signed by
Christopher Meyers, Chief Financial Officer

Ottawa, Canada
August 29, 2016

Department of Finance Canada
Quarterly Financial Report for the quarter ended June 30, 2016
Table 1 - Statement of Authorities (unaudited)
(in thousands of dollars)

Fiscal year 2016-2017 Fiscal year 2015-2016


Total available for use for the
year ending
March 31, 2017 *
Used during the
quarter ended
June 30, 2016
Year to date used at
quarter-end
Total available for use for the
year ending
March 31, 2016 *
Used during the
quarter ended
June 30, 2015
Year to date used at
quarter-end
Budgetary Authorities
Voted authorities
Program expenditures 90,741 23,669 23,669 102,972 26,182 26,182


Total voted authorities 90,741 23,669 23,669 102,972 26,182 26,182


Statutory authorities
Major transfers to other levels of government
Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 36,067,673 9,016,918 9,016,918 34,026,107 8,506,527 8,506,527
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 13,347,956 3,336,989 3,336,989 12,959,181 3,239,795 3,239,795
Fiscal arrangements
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 17,880,415 4,470,104 4,470,104 17,341,310 4,335,328 4,335,328
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,536,328 1,372,095 1,372,095 3,561,034 1,381,681 1,381,681
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 42,363 1,238 1,238 34,378 1,237 1,237
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (890,667) (412,317) (412,317) (853,046) (417,261) (417,261)
Other major transfers
Addtional Fiscal Equalization Offset Payment to Nova Scotia (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) 33,255 - - 36,779 - -
Additional Fiscal Equalization to Nova Scotia (Part I - Federal-Provincial Fiscal Arrangements Act) 16,026 - - 79,348 - -
Alternative Payments for Standing Programs (Part VI - Federal-Provincial Fiscal Arrangements Act) (4,043,422) (938,163) (938,163) (3,872,657) (948,036) (948,036)


Total major transfers to other levels of government 65,989,927 16,846,864 16,846,864 63,312,434 16,099,271 16,099,271
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 15,688,000 3,868,026 3,868,026 17,988,000 4,276,617 4,276,617
Interest on Other Liabilities 7,094,000 1,801,087 1,801,087 7,630,000 1,982,607 1,982,607


Total Interest on Unmatured Debt and Interest on Other Liabilities 22,782,000 5,669,113 5,669,113 25,618,000 6,259,224 6,259,224
Direct program expenses
Operating expenses
Purchase of Domestic Coinage 96,000 27,369 27,369 108,000 23,562 23,562
Contributions to Employee Benefit Plans 12,222 3,056 3,055 12,097 3,024 3,024
Minister of Finance - Salary and motor car allowance 83 7 7 82 20 20
Minister of State – Motor car allowance - - - 2 1 1
Transfer payments
Payments to International Development Association 441,620 - - 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 - -
Other
Losses on Foreign Exchange - 19,130 19,129 - 56,489 56,489
Payment of Liabilities Previously Recorded as Revenue - 760 760 - 593 593


Total direct program expenses 601,125 50,322 50,320 612,991 83,689 83,689


Total statutory authorities 89,373,052 22,566,299 22,566,299 89,543,425 22,442,184 22,442,184


Total budgetary authorities 89,463,793 22,589,968 22,589,968 89,646,397 22,468,366 22,468,366


Non-budgetary authorities
Advances to Crown corporations (Gross) - 12,853,434 12,853,434 - 13,001,111 13,001,111
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 2,000 2,000 - 2,000 2,000
Payments under Bretton Woods and Related Agreements Act - International Organizations (Gross) - - - - 28,301 28,301
Payments to the International Monetary Fund New Arrangements to Borrow - - - - 26,077 26,077


Total non-budgetary authorities - 12,855,434 12,855,434 - 13,057,489 13,057,489


Total authorities 89,463,793 35,445,402 35,445,402 89,646,397 35,525,855 35,525,855
* 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, 2016
Table 2 - Departmental budgetary expenditures by Standard Object (unaudited)
(in thousands of dollars)

Fiscal year 2016-2017 Fiscal year 2015-2016


Planned expenditures for the year
ending
March 31, 2017
Expended during the
quarter ended
June 30, 2016
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2016
Expended during the
quarter ended
June 30, 2015
Year to date
used at
quarter-end
Expenditures:
Personnel 83,362 20,228 20,227 84,190 20,789 20,789
Transportation and communications 2,884 633 633 2,309 622 622
Information 1,580 332 332 8,763 3,364 3,364
Professional and special services 12,519 2,841 2,841 13,159 1,823 1,823
Rentals 1,430 393 394 1,156 408 408
Repair and maintenance 68 - - 62 10 10
Utilities, materials and supplies 96,440 27,413 27,413 108,363 23,622 23,622
Acquisition of land, buildings and works - - - - 29 29
Acquisition of machinery and equipment 820 32 32 2,217 57 57
Transfer payments 66,482,782 16,848,864 16,848,864 63,808,279 16,101,273 16,101,273
Public debt charges 22,782,000 5,669,113 5,669,115 25,618,000 6,259,224 6,259,224
Other subsidies and payments 58 20,119 20,117 49 57,145 57,145

Total gross budgetary expenditures 89,463,943 22,589,968 22,589,968 89,646,547 22,468,366 22,468,366
Less Revenues netted against expenditures 150 - - 150 - -

Total net budgetary expenditures 89,463,793 22,589,968 22,589,968 89,646,397 22,468,366 22,468,366
* Note: Numbers may not add due to rounding.

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