Department of Finance Canada Quarterly Financial Report for the Quarter Ended December 31, 2018 (unaudited)

1. Introduction

2. Highlights of fiscal quarter and fiscal year-to-date (YTD) 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’) 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 2017–18 Main Estimates and Supplementary Estimates A and B, as well as transfers from Treasury Board Central Votes that were approved by the end of the quarter.

The following graph provides a comparison of budgetary authorities available for the full fiscal year and budgetary expenditures for the first nine 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 full fiscal year Budgetary Authorities and Year to Date Budgetary Expenditures for the Quarter ended December 31

In 2018-19, Q3 Authorities were $94,473 million, Q1 Expenditures were $23,944 million, Q2 Expenditures were $23,528 million and Q3 Expenditures were $23,346 million. In 2017-18, Q3 Authorities were $90,441 million, Q1 Expenditures were $22,740 million, Q2 Expenditures were $22,392 million and Q3 Expenditures were $22,273 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 2017–18 to 2018–19 and the increase in actual expenditures as at December 31, 2018 compared to December 31, 2017. Full details on authorities and expenditures can be found in Table 1, Statement of Authorities 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 Cumulative Authorities Available for Use
as at December 31
      Variance
Authorities Available (in millions) 2018-19 2017-18 $ %
Budgetary        
  Voted:        
    Vote 1 - Program Authorities 107.9 131.1 (23.2) -17.7%
  Statutory:        
    Major transfers to other levels of government 70,438.9 68,107.0 2,331.9 3.4%
    Interest on Unmatured Debt and Interest on Other Liabilities 22,838.0 21,295.0 1,543.0 7.2%
    Direct program expenses 1,088.4 908.0 180.4 19.9%
  Total statutory 94,365.3 90,310.0 4,055.3 4.5%
Total Budgetary authorities 94,473.2 90,441.1 4,032.1 4.5%
Non-Budgetary 52.3 - 52.3 -
Total authorities 94,525.5 90,441.1 4,084.4 4.5%

Total 2018–19 Vote 1 program authorities available as at December 31, 2018 are $107.9 million compared to $131.1 million for the same period in 2017–18, representing a decrease of $23.2 million. This variance is primarily attributable to a one time $30 million funding received in 2017–18 for a grant to the Government of Alberta to support provincial actions that would stimulate economic activity and employment in Alberta’s resource sector. Apart from this item, the 2018–19 voted budgetary authorities increased by $6.8 million primarily due to:

These increases were partially offset by the following:

Major transfer to other levels of government increased by $2,331.9 million, primarily due to the net effect of the following factors:

Increases include:

Decreases include:

Interest on Unmatured Debt and Interest on Other Liabilities increased by $1,543 million, due to the following factors:

Direct program expenses increased by $180.4 million, due primarily to the net effect of the following factors:

These increases were offset by the $300 million in funding received in 2017–18 for Home Care Services and Mental Health Care Services that did not reoccur in 2018–19. Remaining immaterial decreases were for various programs.

Total 2018–19 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.

As an 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 throughout 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 Year-to-Date spending as at December 31 by vote for the current and previous fiscal years.

Comparison of Year to Date Expenditures for the Quarter Ended
December 31
      Variance
Year to date expenditures (in millions) 2018-19 2017-18 $ %
Budgetary        
  Voted:        
    Vote 1 - Program Expenditures 73.7 98.2 (24.5) -24.9%
  Statutory:        
    Major transfers to other levels of government 53,239.9 51,420.7 1,819.2 3.5%
    Interest on Unmatured Debt and Interest on Other Liabilities 17,114.1 15,364.6 1,749.5 11.4%
    Direct program expenses 389.6 521.8 (132.2) -25.3%
  Sub Total Statutory 70,743.6 67,307.1 3,436.5 5.1%
Total Budgetary expenditures 70,817.3 67,405.3 3,412.0 5.1%
Non-Budgetary 32,833.5 32,316.2 517.3 1.6%
Total year to date expenditures 103,650.8 99,721.5 3,929.3 3.9%

Total 2018–19 Vote 1 program expenditures at the end of the third quarter were $73.7 million compared to $98.2 million for the same period in fiscal year 2017–18, representing a decrease of $24.5 million. This decrease is primarily attributable to a one-time $30 million grant payment made in
2017–18 to the Government of Alberta to support provincial actions that would stimulate economic activity and employment in Alberta’s resource sector. Apart from this item, the 2018–19 voted expenditures increased by $5.5 million primarily due to:

Major transfers to other levels of government increased by $1,819.2 million, primarily due to the net effect of the following factors:

The increases above were offset by:

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 $1,749.5 million, due to the net impact of the following two factors:

Direct program expenses decreased by $132.2 million primarily due to the following factors:

A $273.4 million increase in the payment to the Canada Infrastructure Bank (CIB) significantly offset the total decrease. The remaining $0.6 million variance relates to various, individually immaterial, expenditures.

Non-budgetary expenditures at the end of the third quarter of 2018–19 increased by $517.3 million primarily due to the following:

A $4 million decrease in Advances made pursuant to section 13(1) of the Financial Consumer Agency of Canada Act served to offset the increases above.

Significant Changes on the Departmental Budgetary Expenditures by Standard Object Table

Table 2 located at the end of this report, presents budgetary expenditures by standard object. The main variance in year-to-date expenditures between 2018–19 and 2017–18 by standard object are as follows:

Quarterly Spending

The following table provides a comparison of quarterly spending by vote for the current and previous fiscal years.

Comparison of Quarterly Expenditures for the Third Quarter Ended
December 31
      Variance
Expenditures for the Third Quarter (in millions) 2018-19 2017-18 $ %
Budgetary        
  Voted:        
    Vote 1 - Program Expenditures 23.9 53.6 (29.7) -55.4%
  Statutory:        
    Major transfers to other levels of government 17,624.7 17,024.5 600.2 3.5%
    Interest on Unmatured Debt and Interest on Other Liabilities 5,405.1 5,197.3 207.8 4.0%
    Direct program expenses 291.9 (2.2) 294.1 -13,368.2%
  Sub Total Statutory 23,321.7 22,219.6 1,102.1 5.0%
Total Budgetary expenditures 23,345.6 22,273.2 1,072.4 4.8%
Non-Budgetary 10,830.1 10,561.4 268.7 2.5%
Total expenditures for the third quarter 34,175.7 32,834.6 1,341.1 4.1%

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

The complex and horizontal issues of the Department require ongoing discussions, consultations and coordination with central agencies, other departments and governments, and external stakeholders. In this context, the Department maintains 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 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 (IT) issues. The Department relies on efficient and effective Information Management (IM) 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 (BCP) is in place to ensure that critical services 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 IT infrastructure and ensure the effective protection of its information assets.

The Department’s Corporate Risk Profile provides a snapshot of the Department’s key corporate risks. The Department monitors its corporate risks and associated risk responses to identify areas of opportunity and to reflect progress made in implementing mitigation strategies.

Pamela Aung-Thin vacated the position of Assistant Deputy Minister, Consultations and Communications Branch, effective December 19, 2018. Marie-Elise Rancourt is currently the Acting Assistant Deputy Minister.

Approved by:

Original signed by
Paul Rochon, Deputy Minister
Original signed by
Darlene Bess, Chief Financial Officer

Ottawa, Canada
February 28, 2019

Department of Finance Canada
Quarterly Financial Report for the quarter ended December 31, 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
December 31, 2018
Year to date used at
quarter-end
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
Budgetary Authorities
  Voted authorities
    Program expenditures 107,912 23,948 73,724 131,063 53,627 98,237
  Total voted authorities 107,912 23,948 73,724 131,063 53,627 98,237
  Statutory authorities
  Major transfers to other levels of government
    Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 38,583,703 9,645,925 28,937,777 37,149,703 9,287,426 27,862,277
    Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 14,160,847 3,540,213 10,620,636 13,748,395 3,437,098 10,311,296
    Fiscal arrangements
      Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 18,958,259 4,739,564 14,218,694 18,253,657 4,563,414 13,690,243
      Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,785,322 772,206 3,013,116 3,681,831 751,093 2,930,737
      Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 42,356 1,237 22,415 42,356 1,237 22,415
      Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (909,825) - (454,913) (861,423) - (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) (1,074,484) (3,117,812) (3,899,594) (1,015,791) (2,965,588)
  Total major transfers to other levels of government 70,438,895 17,624,661 53,239,913 68,106,964 17,024,477 51,420,668
  Interest on Unmatured Debt and Interest on Other Liabilities
    Interest on Unmatured Debt and Other Public Debt Costs 16,591,000 3,782,595 12,300,897 14,728,000 3,561,301 10,406,854
    Interest on Other Liabilities 6,247,000 1,622,531 4,813,250 6,567,000 1,635,968 4,957,734
  Total Interest on Unmatured Debt and Interest on Other Liabilities 22,838,000 5,405,126 17,114,147 21,295,000 5,197,269 15,364,588
  Direct program expenses
    Operating expenses
      Purchase of Domestic Coinage 95,000 19,971 70,555 104,000 22,427 74,988
      Contributions to Employee Benefit Plans 11,802 2,890 8,667 11,147 2,760 8,278
      Minister of Finance - Salary and motor car allowance 86 22 65 84 21 63
    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 - -
      Canadian Securities Regulation Regime Transition Office (Canadian Securities Regulation Regime Transition Office Act) 11,400 - - - - -
      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 - (10,747) 28,824 - (28,332) 130,631
      Payment of Liabilities Previously Recorded as Revenue - 780 2,465 - 935 2,203
      Payment to the Canada Infrastructure Bank (Canada Infrastructure Bank Act) 477,284 279,000 279,000 - - 5,610
  Total direct program expenses 1,088,382 291,916 389,576 908,041 (2,189) 521,773
  Total statutory authorities 94,365,277 23,321,703 70,743,636 90,310,005 22,219,557 67,307,029
Total budgetary authorities 94,473,189 23,345,651 70,817,360 90,441,068 22,273,184 67,405,266
Non-budgetary authorities
  Purchase of initial shares pursuant to the Asian Infrastructure Investment Bank Agreement Act 52,300
  Advances to Crown corporations (Gross) - 10,829,078 32,802,486 - 10,559,417 32,305,192
  Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 1,000 7,000 - 2,000 11,000
  Payments under Bretton Woods and Related Agreements Act - International Organizations (Gross) - 23,991 - - -
Total non-budgetary authorities 52,300 10,830,078 32,833,477 - 10,561,417 32,316,192
Total authorities 94,525,489 34,175,729 103,650,837 90,441,068 32,834,601 99,721,458
* 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, 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
December 31, 2018
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2018
Expended during the
quarter ended
December 31, 2017
Year to date
used at
quarter-end
Expenditures:            
  Personnel 94,655 23,395 66,724 89,521 21,280 64,674
  Transportation and communications 3,352 801 2,375 3,063 813 1,765
  Information 1,856 262 1,181 2,133 292 779
  Professional and special services 13,521 2,620 8,387 13,446 3,256 6,880
  Rentals 1,177 (357) 1,551 1,972 204 698
  Repair and maintenance 648 82 192 405 70 153
  Utilities, materials and supplies 95,561 20,015 70,750 104,388 22,473 75,125
  Acquisition of machinery and equipment 2,102 71 488 1,195 93 318
  Transfer payments 70,945,162 17,624,706 53,240,403 68,930,059 17,054,525 51,750,852
  Public debt charges 22,838,000 5,405,126 17,114,147 21,295,000 5,197,269 15,364,588
  Other subsidies and payments 477,305 268,930 311,162 36 (27,091) 139,434
Total gross budgetary expenditures 94,473,339 23,345,651 70,817,360 90,441,218 22,273,184 67,405,266
Less Revenues netted against expenditures 150     150    
Total net budgetary expenditures 94,473,189 23,345,651 70,817,360 90,441,068 22,273,184 67,405,266
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