Archived - Department of Finance Canada Quarterly Financial Report for the Quarter Ended September 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 six 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 September 30 of Fiscal Years 2015-16 and 2016-17

In 2016-17, Q1 Authorities were $89,464 million, Q1 Expenditures were $22,590 million and Q2 Expenditures were $21,991 million. In 2015-16, Q1 Authorities were $89,646 million, Q1 Expenditures were $22,468 million and Q2 Expenditures were $22,168 million.
Percentages reflect the utilization of authorities at quarter-end.

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 September 30, 2015 compared to September 30, 2016. Full details can be found in Table 1, Statement of Authorities found at the end of this document.

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 Use for the Year
as at September 30 of Fiscal Years 2015-16 and 2016-17

Variance

Authorities Available (in millions) 2016-17 2015-16 $ %
Budgetary
Voted:
Vote 1 - Program Authorities 90.7 103.0 (12.3) -11.9%
Statutory:
Major transfers to other levels of government 65,989.9 63,312.4 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 second quarter as compared to $89,646.4 million at the end of the second 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 September 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 second 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 September 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 second 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 September 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 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 2015-16 and 2016-17

Variance

Year to date expenditures (in millions) 2016-17 2015-16 $ %
Budgetary
Voted:
Vote 1 - Program Expenditures 46.9 49.0 (2.1) -4.3%
Statutory:
Major transfers to other levels of government 33,540.7 31,975.3 1,565.4 4.9%
Interest on Unmatured Debt and Interest on Other Liabilities 10,931.4 12,435.2 (1,503.8) -12.1%
Direct program expenses 62.3 177.3 (115.0) -64.9%
Sub Total Statutory 44,534.4 44,587.8 (53.4) -0.1%
Total Budgetary expenditures 44,581.3 44,636.8 (55.5) -0.1%
Non-Budgetary 26,750.3 29,634.2 (2,883.9) -9.7%
Total year to date expenditures 71,331.6 74,271.0 (2,939.4) -4.0%

At the end of the second quarter of the 2016-17 fiscal year, total expenditures were $71,331.6 million compared to $74,271.0 million reported in the same period of 2015-16, representing a decrease of $2,939.4 million or 4.0%.

Total 2016-17 Vote 1 program expenditures at the end of the second quarter were $46.9 million compared to $49.0 million for the same period in fiscal year 2015-16, representing a decrease of $2.1 million or 4.3%. The decrease is mainly attributable to reduced government advertising expenditures.

Total statutory expenditures at the end of the second quarter of 2016-17 are $44,534.4 million as compared to $44,587.8 million at the end of the second quarter of 2015-16 representing a decrease of $53.4 million or 0.1%.

This decrease is primarily attributable to a decrease of $1,503.8 million in Interest on Unmatured Debt and Interest on Other Liabilities (decrease of $1,231.4 million and decrease of $272.4 million, respectively) and a decrease of $115.0 million in direct program expenses, offset by an increase of 1,565.4 in major transfers to other levels of government.

Expenditures related to major transfers to other levels of government as at September 30, 2016 are $33,540.7 million compared to $31,975.3 million for the same period in 2015-16 representing an increase of $1,565.4 million. This increase is due to 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 2016-17 are $62.3 million as compared to $177.3 million at the same period in 2015-16, representing a decrease of $115.0 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, 2016 are $10,931.4 million compared to $12,435.2 million at the same period in 2015-16 representing a decrease of $1,503.8 million. The decrease is due to the following factors:

Non-budgetary expenditures at the end of the second quarter of 2016-17 are $26,750.3 million compared to $29,634.2 million at the end of the same quarter in the prior year representing a decrease of $2,883.9 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.

Expenditures in the second quarter of fiscal 2016-17 were $35,916.2 million compared with $38,745.1 million for the second quarter of 2015-16, representing a decrease of $2,828.9 million or 7.3% in quarterly spending.

Comparison of Quarterly Expenditures for the Second Quarter Ended
September 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 23.2 22.8 0.4 1.8%
Statutory:
Major transfers to other levels of government 16,693.9 15,876.0 817.9 5.2%
Interest on Unmatured Debt and Interest on Other Liabilities 5,262.3 6,176.0 (913.7) -14.8%
Direct program expenses 12.0 93.6 (81.6) -87.2%
Sub Total Statutory 21,968.2 22,145.6 (177.4) -0.8%
Total Budgetary expenditures 21,991.4 22,168.4 (177.0) -0.8%
Non-Budgetary 13,924.8 16,576.7 (2,651.9) -16.0%
Total year to date expenditures 35,916.2 38,745.1 (2,828.9) -7.3%

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

The Canadian economy continues to adjust to lower oil prices and a soft global economic backdrop. Non-oil related sectors of the economy have been broadly resilient and household consumption has held steady.

With respect to the fragile global economic situation, the Department will continue to monitor developments and risks in key regions and countries. The global economy is undergoing a fundamental structural shift. Populations in advanced economies are aging, thereby reducing workforce growth. Some emerging economies, notably China, are undergoing transitions away from investment- and trade-intensive industrialization toward more moderate consumption-based growth. At the same time, the decision of the United Kingdom (U.K.) to leave the European Union (EU) and growing numbers of anti-trade measures among major economies point to an increasing trend toward protectionism globally. Finally, the global economy continues to be affected by the 2008–2009 financial crisis and its aftermath—namely the build-up of debt in some countries and the need for financial system repair in others. These factors are being increasingly reflected in slower growth in global trade and investment, persistently low commodity prices and slower global growth.

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
Christopher Meyers, Chief Financial Officer

Ottawa, Canada
November 29, 2016

Department of Finance Canada
Quarterly Financial Report for the quarter ended September 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
September 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
September 30, 2015
Year to date used at
quarter-end
Budgetary Authorities
Voted authorities
Program expenditures 90,741 23,234 46,903 102,972 22,787 48,969


Total voted authorities 90,741 23,234 46,903 102,972 22,787 48,969


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 18,033,836 34,026,107 8,506,527 17,013,054
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 13,347,956 3,336,989 6,673,978 12,959,181 3,239,796 6,479,591
Fiscal arrangements
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 17,880,415 4,470,104 8,940,208 17,341,310 4,335,327 8,670,655
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,536,328 788,063 2,160,158 3,561,034 726,451 2,108,132
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 42,363 19,943 21,181 34,378 15,945 17,182
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (890,667) - (412,317) (853,046) - (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) (938,162) (1,876,325) (3,872,657) (948,037) (1,896,073)


Total major transfers to other levels of government 65,989,927 16,693,855 33,540,719 63,312,434 15,876,009 31,975,280
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 15,688,000 3,499,233 7,367,259 17,988,000 4,322,028 8,598,645
Interest on Other Liabilities 7,094,000 1,763,034 3,564,121 7,630,000 1,853,958 3,836,565


Total Interest on Unmatured Debt and Interest on Other Liabilities 22,782,000 5,262,267 10,931,380 25,618,000 6,175,986 12,435,210
Direct program expenses
Operating expenses
Purchase of Domestic Coinage 96,000 25,592 52,961 108,000 25,060 48,622
Contributions to Employee Benefit Plans 12,222 3,055 6,111 12,097 3,025 6,049
Minister of Finance - Salary and motor car allowance 83 28 35 82 21 41
Minister of State – Motor car allowance - - - 2 - 1
Transfer payments
Incentive for Provinces to Eliminate Taxes on Capital (Part IV - Federal-Provincial Fiscal Arrangements Act) - - - - 28,000 28,000
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 - (18,312) 818 - 36,807 93,296
Payment of Liabilities Previously Recorded as Revenue - 1,636 2,396 - 677 1,270


Total direct program expenses 601,125 11,999 62,321 612,991 93,590 177,279


Total statutory authorities 89,373,052 21,968,121 44,534,420 89,543,425 22,145,585 44,587,769


Total budgetary authorities 89,463,793 21,991,355 44,581,323 89,646,397 22,168,372 44,636,738


Non-budgetary authorities
Advances to Crown corporations (Gross) - 13,920,850 26,744,284 - 16,424,084 29,425,195
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 4,000 6,000 - 3,000 5,000
Payments under Bretton Woods and Related Agreements Act - International Organizations (Gross) - - - - 65,287 93,588
Payments to the International Monetary Fund New Arrangements to Borrow - - - - 84,307 110,384


Total non-budgetary authorities - 13,924,850 26,750,284 - 16,576,678 29,634,167


Total authorities 89,463,793 35,916,205 71,331,607 89,646,397 38,745,050 74,270,905
* 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, 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
September 30, 2016
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2016
Expended during the
quarter ended
September 30, 2015
Year to date
used at
quarter-end
Expenditures:
Personnel 83,362 20,534 40,762 84,190 20,325 41,114
Transportation and communications 2,884 547 1,180 2,309 415 1,037
Information 1,580 106 438 8,763 2,179 5,543
Professional and special services 12,519 2,757 5,598 13,159 2,210 4,033
Rentals 1,430 109 502 1,156 62 470
Repair and maintenance 68 43 43 62 38 48
Utilities, materials and supplies 96,440 25,639 53,052 108,363 25,114 48,736
Acquisition of land, buildings and works - - - - (29) -
Acquisition of machinery and equipment 820 88 120 2,217 34 91
Transfer payments 66,482,782 16,695,855 33,544,719 63,808,279 15,904,509 32,005,782
Public debt charges 22,782,000 5,262,267 10,931,380 25,618,000 6,175,986 12,435,210
Other subsidies and payments 58 (16,563) 3,556 49 37,554 94,699

Total gross budgetary expenditures 89,463,943 21,991,382 44,581,350 89,646,547 22,168,397 44,636,763
Less Revenues netted against expenditures 150 27 27 150 25 25

Total net budgetary expenditures 89,463,793 21,991,355 44,581,323 89,646,397 22,168,372 44,636,738
* Note: Numbers may not add due to rounding.
* Planned expenditures do not reflect measures announced in Budget 2012
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