Archived - Department of Finance Canada Quarterly Financial Report for the Quarter Ended December 31, 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 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 reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates A and B of 2016-17.

The following graph provides a comparison of budgetary authorities available for the full fiscal year and budgetary expenditures for the first nine 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 December 31 of Fiscal Years 2016-17 and 2017-18

Comparison of Budgetary Authorities and Year to Date Budgetary Expenditures for the Quarter ended December 31 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 December 31, 2017 compared to December 31, 2016. Full details can be found in Table 1, Statement of Authorities located 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 December 31 of Fiscal Years 2016-17 and 2017-18

Variance

Authorities Available (in millions) 2017-18 2016-17 $ %
Budgetary
Voted:
Vote 1 - Program Authorities 131.1 101.2 29.9 29.5%
Statutory:
Major transfers to other levels of government 68,107.0 66,413.4 1,693.6 2.6%
Interest on Unmatured Debt and Interest on Other Liabilities 21,295.0 22,901.0 (1,606.0) -7.0%
Direct program expenses 908.0 601.2 306.8 51.0%
Total statutory 90,310.0 89,915.6 394.4 0.4%
Total Budgetary authorities 90,441.1 90,016.8 424.3 0.5%
Non-Budgetary - - - -
Total authorities 90,441.1 90,016.8 424.3 0.5%

Voted budgetary authorities

Total 2017-18 Vote 1 program authorities available as at December 31, 2017 are $131.1 million compared to $101.2 million for the same period in 2016-17, representing an increase of $29.9 million. Through Supplementary Estimates B, $30 million in funding was received for a grant to the Government of Alberta to support provincial actions that will stimulate economic activity and employment in Alberta’s resource sector.

Statutory budgetary authorities

Major transfers to other levels of government increased by $1,693.6 million, primarily due to the net effect of the following factors:

Increases include:

Decreases include:

Interest on Unmatured Debt and Interest on Other Liabilities decreased by $1,606.0 million, due to the following factors:

Direct program expenses increased by $306.8 million, due primarily to the funding for Home Care Services and Mental Health Care Services. Budget 2017 committed to make available to provinces and territories an additional $11 billion over 10 years, starting in 2017-18, to support better home care and mental health initiatives. $300 million was paid to provinces in 2017-18 ($200 million for home care services and $100 million for mental health services).

Non-budgetary authorities

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
December 31 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 98.2 67.6 30.6 45.3%
Statutory:
Major transfers to other levels of government 51,420.7 50,073.6 1,347.1 2.7%
Interest on Unmatured Debt and Interest on Other Liabilities 15,364.6 16,048.5 (683.9) -4.3%
Direct program expenses 521.8 130.1 391.7 301.1%
Sub Total Statutory 67,307.1 66,252.2 1,054.9 1.6%
Total Budgetary expenditures 67,405.3 66,319.8 1,085.5 1.6%
Non-Budgetary 32,316.2 39,702.4 (7,386.2) -18.6%
Total year to date expenditures 99,721.5 106,022.2 (6,300.7) -5.9%

Voted budgetary expenditures

Total 2017-18 Vote 1 program expenditures at the end of the third quarter were $98.2 million compared to $67.6 million for the same period in fiscal year 2016-17, representing an increase of $30.6 million or 45.3%. The increase is primarily due to a $30.0 million grant payment made to the Government of Alberta, to support provincial actions that will stimulate economic activity and employment in Alberta’s resource sector.

Statutory budgetary expenditures

Major transfers to other levels of government increased by $1,347.1 million, 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.

Interest on unmatured debt and interest on other liabilities decreased by $683.9million, due to the following factors:

Direct program expenses increased by $391.7 million primarily due to the net effect of the following factors:

Increases include:

Decreases include:

Non-budgetary expenditures

Non-budgetary expenditures at the end of the third quarter of 2017-18 decreased by $7,386.2 million and is primarily due to the value of loans disbursed to Crown Corporations participating in the Crown Borrowing Framework. Gross borrowings by Crown Corporations are based on demand and the business requirements of the participating entities, and also depend on the terms of the Crown Corporation borrowings. As such, amounts can vary significantly from year to year.

Significant changes on the departmental budgetary expenditures by standard object table

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

Quarterly Spending

Comparison of Quarterly Expenditures for the Third Quarter Ended
December 31 of Fiscal Years 2016-17 and 2017-18

Variance

Expenditures for the Third Quarter (in millions) 2017-18 2016-17 $ %
Budgetary
Voted:
Vote 1 - Program Expenditures 53.6 20.7 32.9 158.9%
Statutory:
Major transfers to other levels of government 17,024.5 16,532.9 491.6 3.0%
Interest on Unmatured Debt and Interest on Other Liabilities 5,197.3 5,117.2 80.1 1.6%
Direct program expenses (2.2) 67.7 (69.9) -103.2%
Sub Total Statutory 22,219.6 21,717.8 501.8 2.3%
Total Budgetary expenditures 22,273.2 21,738.5 534.7 2.5%
Non-Budgetary 10,561.4 12,922.1 (2,360.7) -18.3%
Total expenditures for the third quarter 32,834.6 34,660.6 (1,826.0) -5.3%

Variance explanations are in line with year to date variance explanations provided earlier in this section.

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.

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

Approved by:

Paul Rochon, Deputy Minister
Adelle Laniel, Chief Financial Officer

Ottawa, Canada
February 28, 2018

Quarterly Financial Report
For the quarter ended December 31, 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
December 31, 2017
Year to date used at
quarter-end
Total available for use for the
year ending
March 31, 2017 *
Used during the
quarter ended
December 31, 2016
Year to date used at
quarter-end
Budgetary Authorities
Voted authorities
Program expenditures 131,063 53,627 98,237 101,190 20,743 67,646


Total voted authorities 131,063 53,627 98,237 101,190 20,743 67,646


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 27,862,277 36,067,673 9,016,919 27,050,755
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 13,748,395 3,437,098 10,311,296 13,347,956 3,336,989 10,010,967
Fiscal arrangements
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 18,253,657 4,563,414 13,690,243 17,880,415 4,470,103 13,410,311
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,681,831 751,093 2,930,737 3,602,980 721,411 2,881,569
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 42,356 1,237 22,415 42,363 1,238 22,419
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (861,423) - (430,712) (824,634) - (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) (3,899,594) (1,015,791) (2,965,588) (3,752,650) (1,013,741) (2,890,066)


Total major transfers to other levels of government 68,106,964 17,024,477 51,420,668 66,413,384 16,532,919 50,073,638
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 14,728,000 3,561,301 10,406,854 15,812,000 3,390,737 10,757,996
Interest on Other Liabilities 6,567,000 1,635,968 4,957,734 7,089,000 1,726,420 5,290,541


Total Interest on Unmatured Debt and Interest on Other Liabilities 21,295,000 5,197,269 15,364,588 22,901,000 5,117,157 16,048,537
Direct program expenses
Operating expenses
Purchase of Domestic Coinage 104,000 22,427 74,988 96,000 27,878 80,839
Contributions to Employee Benefit Plans 11,147 2,760 8,278 12,304 3,055 9,166
Minister of Finance - Salary and motor car allowance 84 21 63 83 21 56
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 - (28,332) 130,631 - 35,943 36,761
Payment of Liabilities Previously Recorded as Revenue - 935 2,203 767 3,163
Payment to the Canada Infrastructure Bank (Canada Infrastructure Bank Act) - - 5,610 - - -


Total direct program expenses 908,041 (2,189) 521,773 601,207 67,664 129,985


Total statutory authorities 90,310,005 22,219,557 67,307,029 89,915,591 21,717,740 66,252,160


Total budgetary authorities 90,441,068 22,273,184 67,405,266 90,016,781 21,738,483 66,319,806


Non-budgetary authorities
Advances to Crown corporations (Gross) - 10,559,417 32,305,192 - 12,919,124 39,693,408
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 2,000 11,000 - 3,000 9,000


Total non-budgetary authorities - 10,561,417 32,316,192 - 12,922,124 39,702,408


Total authorities 90,441,068 32,834,601 99,721,458 90,016,781 34,660,607 106,022,214
* Includes only Authorities available for use and granted by Parliament at quarter-end

Department of Finance Canada
Quarterly Financial Report
For the quarter ended December 31, 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
December 31, 2017
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2017
Expended during the
quarter ended
December 31, 2016
Year to date
used at
quarter-end
Expenditures:
Personnel 89,521 21,280 64,674 86,309 19,837 60,599
Transportation and communications 3,063 813 1,765 3,317 746 1,926
Information 2,133 292 779 1,754 305 743
Professional and special services 13,446 3,256 6,880 15,063 1,817 7,415
Rentals 1,972 204 698 1,586 463 965
Repair and maintenance 405 70 153 200 46 89
Utilities, materials and supplies 104,388 22,473 75,125 96,487 27,940 80,992
Acquisition of machinery and equipment 1,195 93 318 912 25 145
Transfer payments 68,930,059 17,054,525 51,750,852 66,910,239 16,532,929 50,077,648
Public debt charges 21,295,000 5,197,269 15,364,588 22,901,000 5,117,157 16,048,537
Other subsidies and payments 36 (27,091) 139,434 64 37,273 40,829

Total gross budgetary expenditures 90,441,218 22,273,184 67,405,266 90,016,931 21,738,538 66,319,888
Less Revenues netted against expenditures 150 - - 150 55 82

Total net budgetary expenditures 90,441,068 22,273,184 67,405,266 90,016,781 21,738,483 66,319,806

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