Department of Finance Canada Quarterly Financial Report for the Quarter Ended June 30, 2019 (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 Financial 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 2019-20 Main Estimates, 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 three months of 2018–19 and 2019-20. 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 2018-19 and 2019-20

Comparison of Budgetary Authorities and Year to Date Budgetary  Expenditures for the Quarter ended June 30 of Fiscal Years 2018-19 and 2019-20
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 2018-19 to 2019-20 and the increase in actual expenditures as at June 30, 2019 compared to June 30, 2018. 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 Authorities Available for Use for the Year as at June 30 of Fiscal Years 2018-19 and 2019-20
Variance
Authorities Available (in millions) 2019-20 2018-19 $ %
Budgetary
  Voted:
    Vote 1 - Program Authorities 100.0 95.8 4.2 4.4%
  Statutory:
    Major transfers to other levels of government 73,584.5 70,438.9 3,145.6 4.5%
    Interest on Unmatured Debt and Interest on Other Liabilities 24,691.0 22,838.0 1,853.0 8.1%
    Direct program expenses 590.1 599.5 (9.4) -1.6%
  Total statutory 98,865.6 93,876.4 4,989.2 5.3%
Total Budgetary authorities 98,965.6 93,972.2 4,993.4 5.3%
Non-Budgetary 51.4 52.3 (0.9) -1.7%
Total authorities 99,017.0 94,024.5 4,992.5 5.3%

Total 2019–20 Vote 1 program authorities available as at June 30, 2019 are $100.0 million compared to $95.8 million for the same period in 2018–19, representing an increase of $4.2 million. This increase is attributable to:

Major transfer to other levels of government increased by $3,145.6 million, primarily due to the net effect of the following factors:

Total increases were $3,286.6 million and consist of:

Decreases were $141.0 million and consist of:

Interest on Unmatured Debt and Interest on Other Liabilities increased by $1,853.0 million, due to the net impact of the following factors:

Direct program expenses decreased by $9.4 million, due to the following factors:

These decreases were slightly offset by $0.7 million in increased authorities for various programs.

Total 2019–20 non-budgetary authorities decreased by $0.9 million, from $52.3 million to $51.4 million, due to:

The following table provides a comparison of Year-to-Date spending as at June 30 by vote for the current and previous fiscal years.

Comparison of Year to Date Expenditures for the Quarter Ended
June 30 of Fiscal Years 2018-19 and 2019-20
Variance
Year to date expenditures (in millions) 2019-20 2018-19 $ %
Budgetary
  Voted:
    Vote 1 - Program Expenditures 24.2 25.8 (1.6) -6.2%
  Statutory:
    Major transfers to other levels of government 18,692.0 17,919.1 772.9 4.3%
    Interest on Unmatured Debt and Interest on Other Liabilities 6,637.7 5,949.9 687.8 11.6%
    Direct program expenses 296.1 49.2 246.9 501.8%
  Sub Total Statutory 25,625.8 23,918.2 1,707.6 7.1%
Total Budgetary expenditures 25,650.0 23,944.0 1,706.0 7.1%
Non-Budgetary 11,910.7 11,072.1 838.6 7.6%
Total year to date expenditures 37,560.7 35,016.1 2,544.6 7.3%

Total 2019–20 Vote 1 program expenditures at the end of the first quarter were $24.2 million compared to $25.8 million for the same period in fiscal year 2018–19, representing a decrease of $1.6 million. This decrease is primarily attributable to:

Major transfers to other levels of government increased by $772.9 million, primarily due to the increases for the following:

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 $687.8 million, due to the net impact of the following two factors:

Direct program expenses increased by $246.9 million primarily due to the following factors:

These increases were partially offset by a decrease of $5.5 million in the Purchase of Domestic Coinage.

Non-budgetary expenditures at the end of the first quarter of 2019-20 increased by $838.6 million primarily due to the following factors:

An $8.2 million decrease in Payments under Bretton Woods and Related Agreements Act – International Organizations (Gross) 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 2019–20 and 2018-19 by standard object are as follows:

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.

Katharine Rechico assumed the position of Assistant Deputy Minister, International Trade and Finance, effective April 23, 2019.

Approved by:

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

Ottawa, Canada
August 29, 2019

Department of Finance Canada
Quarterly Financial Report for the quarter ended June 30, 2019
Table 1 - Statement of Authorities ( unaudited)
(in thousands of dollars)
Fiscal year 2019-2020 Fiscal year 2018-2019
Total available for use for the
year ending
March 31, 2020*
Used during the
quarter ended
June 30, 2019
Year to date used at
quarter-end
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
Budgetary Authorities
  Voted authorities
    Program expenditures 100,015 24,162 24,162 95,782 25,822 25,822
  Total voted authorities 100,015 24,162 24,162 95,782 25,822 25,822
  Statutory authorities
  Major transfers to other levels of government
    Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 40,372,636 10,093,159 10,093,159 38,583,703 9,645,926 9,645,926
    Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) 14,585,672 3,646,418 3,646,418 14,160,847 3,540,212 3,540,212
    Fiscal arrangements
      Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) 19,837,259 4,959,315 4,959,315 18,958,259 4,739,565 4,739,565
      Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangement Act) 3,948,403 1,531,980 1,531,980 3,785,322 1,468,705 1,468,705
      Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 42,484 1,237 1,237 42,356 1,237 1,237
      Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (932,853) (466,427) (466,427) (909,825) (454,913) (454,913)
    Other major transfers
      Additional Fiscal Equalization Offset Payment to Nova Scotia (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) 8,227 - - 18,092 - -
      Additional Fiscal Equalization to Nova Scotia (Part I - Federal-Provincial Fiscal Arrangements Act) (72,587) (22,456) (22,456) (113,203) - -
      Alternative Payments for Standing Programs (Part VI - Federal-Provincial Fiscal Arrangements Act) (4,204,769) (1,051,192) (1,051,192) (4,086,656) (1,021,664) (1,021,664)
  Total major transfers to other levels of government 73,584,472 18,692,034 18,692,034 70,438,895 17,919,068 17,919,068
  Interest on Unmatured Debt and Interest on Other Liabilities
    Interest on Unmatured Debt and Other Public Debt Costs 18,684,000 5,094,251 5,094,251 16,591,000 4,334,680 4,334,680
    Interest on Other Liabilities 6,007,000 1,543,413 1,543,413 6,247,000 1,615,221 1,615,221
  Total Interest on Unmatured Debt and Interest on Other Liabilities 24,691,000 6,637,664 6,637,664 22,838,000 5,949,901 5,949,901
  Direct program expenses
    Operating expenses
      Purchase of Domestic Coinage 88,000 19,977 19,977 95,000 25,473 25,473
      Contributions to Employee Benefit Plans 12,364 3,064 3,064 11,628 2,889 2,889
      Minister of Finance - Salary and motor car allowance 88 22 22 86 22 22
    Transfer payments
      Payments to International Development Association 441,620 - - 441,610 - -
      Debt payments on behalf of poor countries to International Organizations pursuant to section 18(1) of the Economic Recovery Act 48,080 - - 51,200 - -
    Other
      Losses on Foreign Exchange - 37,673 37,673 - 19,914 19,914
      Payment of Liabilities Previously Recorded as Revenue - 903 903 - 910 910
      Payment to the Canada Infrastructure Bank (Canada Infrastructure Bank Act) - 234,500 234,500 - - -
  Total direct program expenses 590,152 296,139 296,139 599,524 49,208 49,208
  Total statutory authorities 98,865,624 25,625,837 25,625,837 93,876,419 23,918,177 23,918,177
Total budgetary authorities 98,965,639 25,649,999 25,649,999 93,972,201 23,943,999 23,943,999
Non-budgetary authorities
  Purchase of initial shares pursuant to the Asian Infrastructure Investment Bank Agreement Act 51,400 52,300
  Advances to Crown corporations (Gross) - 11,902,725 11,902,725 - 11,060,888 11,060,888
  Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) - 8,000 8,000 - 3,000 3,000
  Payments under Bretton Woods and Related Agreements Act - International Organizations (Gross) - - - 8,253 8,253
Total non-budgetary authorities 51,400 11,910,725 11,910,725 52,300 11,072,141 11,072,141
Total authorities 99,017,039 37,560,724 37,560,724 94,024,501 35,016,140 35,016,140
* 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, 2019
Table 2 - Departmental budgetary expenditures by Standard Object ( unaudited)
(in thousands of dollars)
Fiscal year 2019-2020 Fiscal year 2018-2019
Planned expenditures for the year
ending
March 31, 2020
Expended during the
quarter ended
June 30, 2019
Year to date
used at
quarter-end
Planned expenditures for the year
ending
March 31, 2019
Expended during the
quarter ended
June 30, 2018
Year to date
used at
quarter-end
Expenditures:
  Personnel 92,952 21,858 21,858 88,097 21,734 21,734
  Transportation and communications 2,547 692 692 3,248 790 790
  Information 1,839 380 380 1,834 362 362
  Professional and special services 11,566 2,084 2,084 10,571 2,456 2,456
  Rentals 1,148 479 479 1,177 1,885 1,885
  Repair and maintenance 322 12 12 328 12 12
  Utilities, materials and supplies 88,314 20,010 20,010 95,560 25,505 25,505
  Acquisition of machinery and equipment 1,893 44 44 1,753 351 351
Transfer payments 74,074,207 18,692,584 18,692,584 70,931,762 17,919,468 17,919,468
  Public debt charges 24,691,000 6,637,664 6,637,664 22,838,000 5,949,901 5,949,901
  Other subsidies and payments 1 274,192 274,192 21 21,535 21,535
Total gross budgetary expenditures 98,965,789 25,649,999 25,649,999 93,972,351 23,943,999 23,943,999
Less Revenues netted against expenditures 150 - - 150 - -
Total net budgetary expenditures 98,965,639 25,649,999 25,649,999 93,972,201 23,943,999 23,943,999
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