Archived - Department of Finance Canada Quarterly Financial Report for the Quarter Ended June 30, 2017 (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 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 Directive on Accounting Standards, GC 4400 Departmental Quarterly Financial Reports. 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 Departmental Plan.

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 2016-17.

The following graph provides a comparison of budgetary authorities available for the full fiscal year and budgetary expenditures for the first three months of 2016-17 and 2017-18. 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 2016-17 and 2017-18

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.
Percentages reflect the utilization of authorities at quarter-end.

Sections 2.1 and 2.2 below highlight the significant items that contributed to the increase in the resources available from 2016-17 to 2017-18 and the increase in actual expenditures as at June 30, 2016 compared to June 30, 2017. Full details can be found in Table 1, Statement of Authorities found at the end 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 2016-17 and 2017-18

Variance

Authorities Available (in millions) 2017-18 2016-17 $ %
Budgetary
Voted:
Vote 1 - Program Authority 89.3 90.7 (1.4) -1.5%
Statutory:
Major transfers to other levels of government 67,956.4 65,989.9 1,966.5 3.0%
Interest on Unmatured Debt and Interest on Other Liabilities 21,490.0 22,782.0 (1,292.0) -5.7%
Direct program expenses 607.9 601.2 6.7 1.1%
Total statutory 90,054.3 89,373.1 681.2 0.8%
Total Budgetary authorities 90,143.6 89,463.8 679.8 0.8%
Non-Budgetary - - - -
Total authorities 90,143.6 89,463.8 679.8 0.8%

Authorities available in fiscal year 2017-18 are $90,143.6 million at the end of the first quarter as compared to $89,463.8 million at the end of the first quarter of 2016-17, representing an increase of $679.8 million.

Total 2017-18 Vote 1 program authorities available as at June 30, 2017 are $89.3 million compared to $90.7 million for the same period in 2016-17, representing a decrease of $1.4 million. This decrease is mainly attributable to the following factors:

Statutory Authorities available in fiscal year 2017-18 are $90,054.3 million at the end of the first quarter compared to $89,373.1 million at the end of the same quarter of 2016-17, representing an increase $681.2 million.

This increase of $681.2 million relates to three broad categories: an increase of $1,966.5 million in major transfers to other levels of government, an increase of $6.7 million in authorities for direct program expenses and a decrease of $1,292.0 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, 2017 are $67,956.4 million compared to $65,989.9 million for the same period in 2016-17. The increase of $1,966.5 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 2017-18 are $607.9 million as compared to $601.2 million at the same period in 2016-17, representing an increase of $6.7 million. This increase of $6.7 million is 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, 2017 are $21,490.0 million compared to $22,782.0 million at the same period in 2016-17. The decrease of $1,292.0 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
June 30 of Fiscal Years 2016-17 and 2017-18

Variance

Year to date expenditures (in millions) 2017-18 2016-17 $ %
Budgetary
Voted:
Vote 1 - Program Expenditures 21.2 23.7 (2.5) -10.5%
Statutory:
Major transfers to other levels of government 17,312.1 16,846.9 465.2 2.8%
Interest on Unmatured Debt and Interest on Other Liabilities 5,321.2 5,669.1 (347.9) -6.1%
Direct program expenses 85.1 50.3 34.8 69.2%
Sub Total Statutory 22,718.4 22,566.3 152.1 0.7%
Total Budgetary expenditures 22,739.6 22,590.0 149.6 0.7%
Non-Budgetary 11,309.1 12,855.4 (1,546.3) -12.0%
Total year to date expenditures 34,048.7 35,445.4 (1,396.7) -3.9%

At the end of the first quarter of the 2017-18 fiscal year, total expenditures were $34,048.7 million compared to $35,445.4 million reported in the same period of 2016-17, representing a decrease of $1,396.7 million or 3.9%.

Total 2017-18 Vote 1 operating expenditures at the end of the first quarter were $21.2 million compared to $23.7 million for the same period in fiscal year 2016-17, representing a decrease of $2.5 million or 10.5%. The decrease is mainly attributable to:

Total statutory expenditures at the end of the first quarter of 2017-18 are $22,718.4 million as compared to $22,566.3 million at the end of the first quarter of 2016-17 representing an increase of $152.1 million or 0.7%.

This increase is primarily attributable to an increase of $465.2 million in major transfers to other levels of government and an increase of $34.8 million in direct program expenses, offset by a decrease of $347.9 million in Interest on Unmatured Debt and Interest on Other Liabilities (decrease of $217.8 million and decrease of $130.1 million, respectively).

Expenditures related to major transfers to other levels of government as at June 30, 2017 are $17,312.1 million compared to $16,846.9 million for the same period in 2016-17 representing an increase of $465.2 million. This increase is mainly due to the following factors:

Explanations for the changes 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 2017-18 are $85.1 million as compared to $50.3 million at the same period in 2016-17, representing an increase of $34.8 million. This increase 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, 2017 are $5,321.2 million compared to $5,669.1 million at the same period in 2016-17 representing a decrease of $347.9 million. The decrease is mainly due to the following factors:

Non-budgetary expenditures at the end of the first quarter of 2017-18 are $11,309.1 million compared to $12,855.4 million at the end of the same quarter in the prior year representing a decrease of $1,546.3 million. This decrease is due primarily to the following factor:

Table 2, located at the end of this report, presents Budgetary Expenditures by Standard Object (SO). The main variance in expenditures between 2017-18 and 2016-17 by standard object are as follows:

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

The Department of Finance Canada’s plans and commitments respond to, and are shaped by, changes in the global economic situation and the Canadian outlook. The Department relies on the skills and experience of its employees to detect, monitor and respond to changes in the operating environment. The Department continues to focus on employee development, particularly strengthening analytical capacity. The Department also relies on close and effective collaborative relationships with partners and stakeholders to establish priorities, provide high-quality analysis, and ensure coordinated responses to urgent issues.

Planned activities in support of the Department’s objectives are also vulnerable to information technology issues. The Department relies on efficient and effective information management and technology to deliver informed policy advice and operate as an agile and responsive knowledge-based institution, while protecting its highly sensitive institutional information. Cybersecurity incidents and failures in supporting systems have been identified as risks that could cause serious disruptions and affect the Department’s ability to execute critical government operations, including tax and transfer payments, and public debt-related transactions. A Business Continuity Plan is in place to ensure that critical payments are maintained in case of a system failure. Further, the Department is committed to building on recent improvements to increase the security posture of its information technology (IT) infrastructure and ensure the effective protection of its information assets.

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.

The Chief Financial Officer (CFO), Christopher Meyers, left the Department on April 28, 2017. Dale Denny assumed the duties of CFO on an acting basis. In addition, Chris Forbes, Associate Deputy Minister left the Department on May 29, 2017.

Approved by:

Original signed by
Paul Rochon, Deputy Minister
Original signed by
Dale Denny, Acting Chief Financial Officer

Ottawa, Canada
August 28, 2017

Department of Finance Canada
Quarterly Financial Report for the quarter ended June 30, 2017
Table 1 - Statement of Authorities (unaudited)
(in thousands of dollars)

Fiscal year 2017-2018 Fiscal year 2016-2017


Total available for use for the
year ending
March 31, 2018*
Used during the
quarter ended
June 30, 2017
Year to date used at
quarter-end
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
Budgetary Authorities
Voted authorities
Program expenditures 89,280 21,175 21,175 90,741 23,669 23,669


Total voted authorities 89,280 21,175 21,175 90,741 23,669 23,669


Statutory authorities
Major transfers to other levels of government
Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 37,149,703 9,287,426 9,287,426 36,067,673 9,016,918 9,016,918
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 13,748,395 3,437,099 3,437,099 13,347,956 3,336,989 3,336,989
Fiscal arrangements
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 18,253,657 4,563,414 4,563,414 17,880,415 4,470,104 4,470,104
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,681,831 1,428,550 1,428,550 3,536,328 1,372,095 1,372,095
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 42,356 1,237 1,237 42,363 1,238 1,238
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (888,654) (430,712) (430,712) (890,667) (412,317) (412,317)
Other major transfers
Addtional Fiscal Equalization Offset Payment to Nova Scotia (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) 19,957 - - 33,255 - -
Additional Fiscal Equalization to Nova Scotia (Part I - Federal-Provincial Fiscal Arrangements Act) (27,918) - - 16,026 - -
Alternative Payments for Standing Programs (Part VI - Federal-Provincial Fiscal Arrangements Act) (4,022,927) (974,898) (974,898) (4,043,422) (938,163) (938,163)


Total major transfers to other levels of government 67,956,400 17,312,116 17,312,116 65,989,927 16,846,864 16,846,864
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 14,924,000 3,650,220 3,650,220 15,688,000 3,868,026 3,868,026
Interest on Other Liabilities 6,566,000 1,670,960 1,670,960 7,094,000 1,801,087 1,801,087


Total Interest on Unmatured Debt and Interest on Other Liabilities 21,490,000 5,321,180 5,321,180 22,782,000 5,669,113 5,669,113
Direct program expenses
Operating expenses
Purchase of Domestic Coinage 104,000 25,022 25,022 96,000 27,369 27,369
Contributions to Employee Benefit Plans 11,037 2,759 2,759 12,222 3,056 3,056
Minister of Finance - Salary and motor car allowance 84 21 21 83 7 7
Transfer payments
Payments to International Development Association 441,610 - - 441,620 - -
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 - 57,032 57,032 - 19,130 19,130
Payment of Liabilities Previously Recorded as Revenue - 317 317 - 760 760


Total direct program expenses 607,931 85,151 85,151 601,125 50,322 50,322


Total statutory authorities 90,054,331 22,718,447 22,718,447 89,373,052 22,566,299 22,566,299


Total budgetary authorities 90,143,611 22,739,622 22,739,622 89,463,793 22,589,968 22,589,968


Non-budgetary authorities
Advances to Crown corporations (Gross) - 11,306,103 11,306,103 - 12,853,434 12,853,434
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 3,000 3,000 - 2,000 2,000


Total non-budgetary authorities - 11,309,103 11,309,103 - 12,855,434 12,855,434


Total authorities 90,143,611 34,048,725 34,048,725 89,463,793 35,445,402 35,445,402
* Includes only Authorities available for use and granted by Parliament at quarter-end.
Note: The amounts in the Fiscal year 2016-2017 "Year to date used at quarter-end" column have been updated from the prior year report to $3,056 for Employee Benefit Plans and to $19,130 for Losses on Foreign Exchange thereby adjusting the Total for Direct Program Expenses to $50,322.

Department of Finance Canada
Quarterly Financial Report for the quarter ended June 30, 2017
Table 2 - Departmental budgetary expenditures by Standard Object (unaudited)
(in thousands of dollars)

Fiscal year 2017-2018 Fiscal year 2016-2017


Planned expenditures for the year
ending
March 31, 2018
Expended during the
quarter ended
June 30, 2017
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2017
Expended during the
quarter ended
June 30, 2016
Year to date
used at
quarter-end
Expenditures:
Personnel 81,419 20,081 20,081 83,362 20,228 20,228
Transportation and communications 2,802 529 529 2,884 633 633
Information 2,133 152 152 1,580 332 332
Professional and special services 11,759 2,249 2,249 12,519 2,841 2,841
Rentals 1,292 387 387 1,430 393 393
Repair and maintenance 189 9 9 68 - -
Utilities, materials and supplies 104,361 25,035 25,035 96,440 27,413 27,413
Acquisition of land, buildings and works - - - - - -
Acquisition of machinery and equipment 525 34 34 820 32 32
Transfer payments 68,449,245 17,312,116 17,312,116 66,482,782 16,848,864 16,848,864
Public debt charges 21,490,000 5,321,180 5,321,180 22,782,000 5,669,113 5,669,113
Other subsidies and payments 36 57,850 57,850 58 20,119 20,119

Total gross budgetary expenditures 90,143,761 22,739,622 22,739,622 89,463,943 22,589,968 22,589,968
Less Revenues netted against expenditures 150 - 150 - -

Total net budgetary expenditures 90,143,611 22,739,622 22,739,622 89,463,793 22,589,968 22,589,968
Note: The amounts in the Fiscal Year 2016-2017 "Year to date used at quarter-end" column have been updated from the prior year report to $20,228 for Personnel, $393 for Rentals, $5,669,113 for Public Debt Charges, and $20,119 for Other subsidies and payments.
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