Department of Finance Canada Quarterly Financial Report for the Quarter Ended June 30, 2018 (unaudited)

1. Introduction
2. Highlights of Fiscal Quarter and Fiscal Year-to-Date Results

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’) helps the Government of Canada develop and implement strong and sustainable economic, fiscal, tax, social, security, international and financial sector policies and programs. It plays an important central agency role, working with other departments to ensure that the Government's agenda is carried out and that ministers are supported with high-quality analysis and advice.

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 of 2017-18.

The following graph provides a comparison of budgetary authorities available for the full fiscal year and budgetary expenditures for the first three months of 2017-18 and 2018-19. 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 2017-18 and 2018-19

Comparison of Budgetary Authorities and Year to Date Budgetary  Expenditures for the Quarter ended June 30 of Fiscal Years 2017-18 and 2018-19
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 2017-18 to 2018-19 and the increase in actual expenditures as at June 30, 2018 compared to June 30, 2017. 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 June 30 of Fiscal Years 2017-18 and 2018-19

Variance

Authorities Available (in millions) 2018-19 2017-18 $ %
Budgetary
Voted:
Vote 1 - Program Authority 95.8 89.3 6.5 7.3%
Statutory:
Major transfers to other levels of government 70,438.9 67,956.4 2,482.5 3.7%
Interest on Unmatured Debt and Interest on Other Liabilities 22,838.0 21,490.0 1,348.0 6.3%
Direct program expenses 599.5 607.9 (8.4) -1.4%
Total statutory 93,876.4 90,054.3 3,822.1 4.2%
Total Budgetary authorities 93,972.2 90,143.6 3,828.6 4.2%
Non-Budgetary 52.3 - 52.3 -
Total authorities 94,024.5 90,143.6 3,880.9 4.3%

Total 2018-19 Vote 1 program authorities available as at June 30, 2018 are $95.8 million compared to $89.3 million for the same period in 2017-18, representing an increase of $6.5 million. This increase is primarily due to the following:

These increases are partially offset by a $1.8 million decrease in sunsetting funding relating to the Cooperative Capital Market Regulatory System.

Statutory budgetary authorities increased by $3,822.1 million. The details describing the factors that caused this increase can be found in Part II of the 2018-19 Main Estimates.

Non-budgetary authorities increased by $52.3 million for Canada’s purchase of initial shares pursuant to the Asian Infrastructure Investment Bank Agreement Act.

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 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. 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 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 2017-18 and 2018-19

Variance

Year to date expenditures (in millions) 2018-19 2017-18 $ %
Budgetary
Voted:
Vote 1 - Program Expenditures 25.8 21.2 4.6 21.7%
Statutory:
Major transfers to other levels of government 17,919.1 17,312.1 607.0 3.5%
Interest on Unmatured Debt and Interest on Other Liabilities 5,949.9 5,321.2 628.7 11.8%
Direct program expenses 49.2 85.1 (35.9) -42.2%
Sub Total Statutory 23,918.2 22,718.4 1,199.8 5.3%
Total Budgetary expenditures 23,944.0 22,739.6 1,204.4 5.3%
Non-Budgetary 11,072.1 11,309.1 (237.0) -2.1%
Total year to date expenditures 35,016.1 34,048.7 967.4 2.8%

Total 2018-19 Vote 1 program expenditures at the end of the first quarter were $25.8 million compared to $21.2 million for the same period in fiscal year 2017-18, representing an increase of $4.6 million consisting of the following:

Major transfers to other levels of government increased by $607 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 increased by $628.7 million, due to the net impact the following two factors:

Direct program expenses decreased by $35.9 million primarily due to a decrease in the Losses on Foreign Exchange caused by the revaluation of International Monetary Fund related accounts.

Non-budgetary expenditures at the end of the first quarter of 2018-19 decreased by $237 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.

Table 2, located at the end of this report, presents the budgetary expenditures by standard object (SO). The main variances in expenditures between 2018-19 and 2017-18 by SO are as follows:

The complex and horizontal issues with which the Department is concerned require ongoing discussions, consultations and coordination with central agencies, other departments and governments, and external stakeholders. In this context, the Department of Finance Canada will need to maintain high-level engagement and strong collaborative relationships with domestic and international partners to fulfill its commitments and deliver for Canadians.

The Department operates in an environment where the decisions and actions of its employees can have far-reaching impacts on the Canadian public and economy. As a knowledge–based organization, the Department recognizes that its employees are its strength. The Department will continue to focus on providing its employees with a healthy and enabling work environment, so that it can attract, develop and retain a diverse and high–performing workforce that is fully committed to the success of the organization.

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 Associate Deputy Minister of Finance, Ava Yaskiel, joined the department on February 5, 2018.

Approved by:

Original signed by
Paul Rochon, Deputy Minister
Original signed by
Adelle Laniel, Chief Financial Officer

Ottawa, Canada
August 29, 2018

Department of Finance Canada
Quarterly Financial Report for the quarter ended June 30, 2018
Table 1 - Statement of Authorities (unaudited)
(in thousands of dollars)

Fiscal year 2018-2019 Fiscal year 2017-2018


Total available for use for the
year ending
March 31, 2019*
Used during the
quarter ended
June 30, 2018
Year to date used at
quarter-end
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
Budgetary Authorities
Voted authorities
Program expenditures 95,782 25,822 25,822 89,280 21,175 21,175


Total voted authorities 95,782 25,822 25,822 89,280 21,175 21,175


Statutory authorities
Major transfers to other levels of government
Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 38,583,703 9,645,926 9,645,926 37,149,703 9,287,426 9,287,426
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 14,160,847 3,540,212 3,540,212 13,748,395 3,437,099 3,437,099
Fiscal arrangements
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 18,958,259 4,739,565 4,739,565 18,253,657 4,563,414 4,563,414
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,785,322 1,468,705 1,468,705 3,681,831 1,428,550 1,428,550
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 42,356 1,237 1,237 42,356 1,237 1,237
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (909,825) (454,913) (454,913) (888,654) (430,712) (430,712)
Other major transfers
Addtional Fiscal Equalization Offset Payment to Nova Scotia (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) 18,092 - - 19,957 - -
Additional Fiscal Equalization to Nova Scotia (Part I - Federal-Provincial Fiscal Arrangements Act) (113,203) - - (27,918) - -
Alternative Payments for Standing Programs (Part VI - Federal-Provincial Fiscal Arrangements Act) (4,086,656) (1,021,664) (1,021,664) (4,022,927) (974,898) (974,898)


Total major transfers to other levels of government 70,438,895 17,919,068 17,919,068 67,956,400 17,312,116 17,312,116
Interest on Unmatured Debt and Interest on Other Liabilities
Interest on Unmatured Debt and Other Public Debt Costs 16,591,000 4,334,680 4,334,680 14,924,000 3,650,220 3,650,220
Interest on Other Liabilities 6,247,000 1,615,221 1,615,221 6,566,000 1,670,960 1,670,960


Total Interest on Unmatured Debt and Interest on Other Liabilities 22,838,000 5,949,901 5,949,901 21,490,000 5,321,180 5,321,180
Direct program expenses
Operating expenses
Purchase of Domestic Coinage 95,000 25,473 25,473 104,000 25,022 25,022
Contributions to Employee Benefit Plans 11,628 2,889 2,889 11,037 2,759 2,759
Minister of Finance - Salary and motor car allowance 86 22 22 84 21 21
Transfer payments
Payments to International Development Association 441,610 - - 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 - 19,914 19,914 - 57,032 57,032
Payment of Liabilities Previously Recorded as Revenue - 910 910 - 317 317


Total direct program expenses 599,524 49,208 49,208 607,931 85,151 85,151


Total statutory authorities 93,876,419 23,918,177 23,918,177 90,054,331 22,718,447 22,718,447


Total budgetary authorities 93,972,201 23,943,999 23,943,999 90,143,611 22,739,622 22,739,622


Non-budgetary authorities
Purchase of initial shares pursuant to the Asian Infrastructure Investment Bank Agreement Act 52,300 - - - - -
Advances to Crown corporations (Gross) - 11,060,888 11,060,888 - 11,306,103 11,306,103
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 3,000 3,000 - 3,000 3,000
Payments under Bretton Woods and Related Agreements Act - International Organizations (Gross) - 8,253 8,253 - - -


Total non-budgetary authorities 52,300 11,072,141 11,072,141 - 11,309,103 11,309,103


Total authorities 94,024,501 35,016,140 35,016,140 90,143,611 34,048,725 34,048,725
* 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, 2018
Table 2 - Departmental budgetary expenditures by Standard Object (unaudited)
(in thousands of dollars)

Fiscal year 2018-2019 Fiscal year 2017-2018


Planned expenditures for the year
ending
March 31, 2019
Expended during the
quarter ended
June 30, 2018
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2018
Expended during the
quarter ended
June 30, 2017
Year to date
used at
quarter-end
Expenditures:
Personnel 88,097 21,734 21,734 81,419 20,081 20,081
Transportation and communications 3,248 790 790 2,802 529 529
Information 1,834 362 362 2,133 152 152
Professional and special services 10,571 2,456 2,456 11,759 2,249 2,249
Rentals 1,177 1,885 1,885 1,292 387 387
Repair and maintenance 328 12 12 189 9 9
Utilities, materials and supplies 95,560 25,505 25,505 104,361 25,035 25,035
Acquisition of land, buildings and works - - - - - -
Acquisition of machinery and equipment 1,753 351 351 525 34 34
Transfer payments 70,931,762 17,919,468 17,919,468 68,449,245 17,312,116 17,312,116
Public debt charges 22,838,000 5,949,901 5,949,901 21,490,000 5,321,180 5,321,180
Other subsidies and payments 21 21,535 21,535 36 57,850 57,850


Total gross budgetary expenditures 93,972,351 23,943,999 23,943,999 90,143,761 22,739,622 22,739,622
Less Revenues netted against expenditures 150 - 150 - -


Total net budgetary expenditures 93,972,201 23,943,999 23,943,999 90,143,611 22,739,622 22,739,622
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