Archived - Department of Finance Canada Quarterly Financial Report for the Quarter Ended September 30, 2017 (unaudited)

1. Introduction

1.1 Authority, Mandate and Program Activities
1.2 Basis of Presentation
1.3 Department of Finance Canada – 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 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 2017-18-estimates.html">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 six 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 September 30 of Fiscal Years 2016-17 and 2017-18

Comparison of Budgetary Authorities and Year to Date Budgetary Expenditures for the Quarter ended September 30
of Fiscal Years 2016-17 and 2017-18
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 September 30, 2017 compared to September 30, 2016. 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 September 30 of Fiscal Years 2016-17 and 2017-18

Variance

Authorities Available (in millions) 2017-18 2016-17 $ %
Budgetary
Voted:
Vote 1 - Program Authorities 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 second quarter as compared to $89,463.8 million at the end of the second quarter of 2016–17, representing an increase of $679.8 million.

Total 2017-18 Vote 1 program authorities available as at September 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 second 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 September 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 second 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 September 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
September 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 44.6 46.9 (2.3) -4.9
Statutory:
Major transfers to other levels of government 34,396.2 33,540.7 855.5 2.6
Interest on Unmatured Debt and Interest on Other Liabilities 10,167.3 10,931.4 (764.1) -7.0
Direct program expenses 524.0 62.3 461.7 741.1
Sub Total Statutory 45,087.5 44,534.4 553.1 1.2
Total Budgetary expenditures 45,132.1 44,581.3 550.8 1.2
Non-Budgetary 21,754.8 26,750.3 (4,995.5) -18.7
Total year to date expenditures 66,886.9 71,331.6 (4,444.7) -6.2

At the end of the second quarter of the 2017-18 fiscal year, total expenditures were $68,886.9 million compared to $71,331.6 million reported in the same period of 2016–17, representing a decrease of $4,444.7 million or 6.2%.

Total 2017-18 Vote 1 program expenditures at the end of the second quarter were $44.6 million compared to $46.9 million for the same period in fiscal year 2016-17, representing a decrease of $2.3 million or 4.9%. The decrease is primarily due to the net effect of the following factors

Decreases include:

There is a salary increase of $3.7 million arising from updated collective bargaining agreements.

Total statutory expenditures at the end of the second quarter of 2017-18 are $45,087.5 million as compared to $44,534.4 million at the end of the second quarter of 2016-17 representing an increase of $553.1 million or 1.2%.

This increase is primarily attributable to an increase of $855.5 million in major transfers to other levels of government and an increase of $461.7 million in direct program expenses, offset by a decrease of $764.1 million in Interest on Unmatured Debt and Interest on Other Liabilities (decrease of $521.7 million and decrease of $242.4 million, respectively).

Expenditures related to major transfers to other levels of government as at September 30, 2017 are $34,396.2 million compared to $33,540.7 million for the same period in 2016–17 representing an increase of $855.5 million. This increase is primarily due to the net effect of following factors:

Increases include:

Decreases include:

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 second quarter of fiscal year 2017-18 are $524.0 million as compared to $62.3 million for the same period in 2016-17 representing an increase of $461.7 million. This increase is primarily due to the net effect of the following factors:

Increases include:

There is a decrease of $1.1 million in Payment of Liabilities Previously Recorded as Revenue.

Expenditures for the Interest on Unmatured Debt and Interest on Other Liabilities as at September 30, 2017 are $10,167.3 million compared to $10.931.4 million at the same period in 2016-17 representing a decrease of $764.1 million. The decrease is due to the following factors:

Non-budgetary expenditures at the end of the second quarter of 2017-18 are $21,745.8 million compared to $26,750.3 million at the end of the same quarter in the prior year representing a decrease of $4,995.5 million. This decrease is due to the net of following factors:

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.

Expenditures in the second quarter of fiscal 2017-18 were $32,838.1 million compared with $35,916.2 million for the second quarter of 2016-17, representing a decrease of $3,078.1 million or 8.6% in quarterly spending.

Comparison of Quarterly Expenditures for the Second Quarter Ended
September 30 of Fiscal Years 2016-17 and 2017-18

Variance

Expenditures for the Second Quarter (in millions) 2017-18 2016-17 $ %
Budgetary
Voted:
Vote 1 - Program Expenditures 23.4 23.2 0.2 0.9%
Statutory:
Major transfers to other levels of government 17,084.1 16,693.9 390.2 2.3%
Interest on Unmatured Debt and Interest on Other Liabilities 4,846.1 5,262.3 (416.2) -7.9%
Direct program expenses 438.8 12.0 426.8 3556.7%
Sub Total Statutory 22,369.0 21,968.2 400.8 1.8%
Total Budgetary expenditures 22,392.4 21,991.4 401.0 1.8%
Non-Budgetary 10,445.7 13,924.8 (3,479.1) -25.0%
Total expenditures for the third quarter 32,838.1 35,916.2 (3,078.1) -8.6%

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

Effective September 11, 2017, Adelle Laniel was appointed as Chief Financial Officer for the Department of Finance.

Approved by:

Paul Rochon, Deputy Minister
Adelle Laniel, Chief Financial Officer

Ottawa, Canada
November 29, 2017

Quarterly Financial Report
For the quarter ended September 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
September 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
September 30, 2016
Year to date used at
quarter-end
Budgetary Authorities
Voted authorities
Program expenditures 89,280 23,435 44,610 90,741 23,234 46,903


Total voted authorities 89,280 23,435 44,610 90,741 23,234 46,903


Statutory authorities
Major transfers to other levels of government
Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 37,149,703 9,287,425 18,574,851 36,067,673 9,016,918 18,033,836
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 13,748,395 3,437,099 6,874,198 13,347,956 3,336,989 6,673,978
Fiscal arrangements
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 18,253,657 4,563,415 9,126,829 17,880,415 4,470,104 8,940,208
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,681,831 751,094 2,179,644 3,536,328 788,063 2,160,158
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 42,356 19,941 21,178 42,363 19,943 21,181
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (888,654) - (430,712) (890,667) - (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) (974,899) (1,949,797) (4,043,422) (938,162) (1,876,325)


Total major transfers to other levels of government 67,956,400 17,084,075 34,396,191 65,989,927 16,693,855 33,540,719
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 14,924,000 3,195,333 6,845,553 15,688,000 3,499,233 7,367,259
Interest on Other Liabilities 6,566,000 1,650,806 3,321,766 7,094,000 1,763,034 3,564,121


Total Interest on Unmatured Debt and Interest on Other Liabilities 21,490,000 4,846,139 10,167,319 22,782,000 5,262,267 10,931,380
Direct program expenses
Operating expenses
Purchase of Domestic Coinage 104,000 27,539 52,561 96,000 25,592 52,961
Contributions to Employee Benefit Plans 11,037 2,759 5,518 12,222 3,055 6,111
Minister of Finance - Salary and motor car allowance 84 21 42 83 28 35
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 - -
Funding for Home Care Services and Mental Health Care Services (Budget Implementation Act, 2017 No. 1) - 300,000 300,000 - - -
Other
Losses on Foreign Exchange - 101,931 158,963 - (18,312) 818
Payment of Liabilities Previously Recorded as Revenue - 951 1,268 1,636 2,396
Payment to the Canada Infrastructure Bank (Canada Infrastructure Bank Act) - 5,610 5,610 - - -


Total direct program expenses 607,931 438,811 523,962 601,125 11,999 62,321


Total statutory authorities 90,054,331 22,369,025 45,087,472 89,373,052 21,968,121 44,534,420


Total budgetary authorities 90,143,611 22,392,460 45,132,082 89,463,793 21,991,355 44,581,323


Non-budgetary authorities
Advances to Crown corporations (Gross) - 10,439,672 21,745,775 - 13,920,850 26,744,284
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 6,000 9,000 - 4,000 6,000


Total non-budgetary authorities - 10,445,672 21,754,775 - 13,924,850 26,750,284


Total authorities 90,143,611 32,838,132 66,886,857 89,463,793 35,916,205 71,331,607
* 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, 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
September 30, 2017
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2017
Expended during the
quarter ended
September 30, 2016
Year to date
used at
quarter-end
Expenditures:
Personnel 81,419 23,313 43,394 83,362 20,534 40,762
Transportation and communications 2,802 423 952 2,884 547 1,180
Information 2,133 335 487 1,580 106 438
Professional and special services 11,759 1,375 3,624 12,519 2,757 5,598
Rentals 1,292 107 494 1,430 109 502
Repair and maintenance 189 74 83 68 43 43
Utilities, materials and supplies 104,361 27,617 52,652 96,440 25,639 53,052
Acquisition of machinery and equipment 525 191 225 820 88 120
Transfer payments 68,449,245 17,384,211 34,696,327 66,482,782 16,695,855 33,544,719
Public debt charges 21,490,000 4,846,139 10,167,319 22,782,000 5,262,267 10,931,380
Other subsidies and payments 36 108,675 166,525 58 (16,563) 3,556

Total gross budgetary expenditures 90,143,761 22,392,460 45,132,082 89,463,943 21,991,382 44,581,350
Less Revenues netted against expenditures 150 - - 150 27 27

Total net budgetary expenditures 90,143,611 22,392,460 45,132,082 89,463,793 21,991,355 44,581,323

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