Department of Finance Canada Quarterly Financial Report for the quarter ended December 31, 2023 (unaudited)
Table of contents
1. Introduction
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 2023-24 Main Estimates and Supplementary Estimates of the Department of Finance Canada.
This Quarterly Financial Report has not been subject to an external audit or review.
1.1 Authority, Mandate and Program Activities
The Department of Finance Canada (the Department) helps the Government of Canada (the government) 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:
- Preparing the federal budget and the Fall Economic Statement;
- Preparing the Annual Financial Report of the Government of Canada and, in cooperation with the Treasury Board of Canada Secretariat and the Receiver General for Canada, the Public Accounts of Canada;
- Developing tax and tariff policy and legislation;
- Managing federal borrowing on financial markets;
- Designing and administering major transfers of federal funds to the provinces and territories;
- Developing financial sector policy and legislation; and
- Representing Canada in various international financial institutions and groups.
The description of the program activities for the Department can be found in Part II of the Main Estimates and the Departmental Plan.
1.2 Basis of Presentation
This Quarterly Financial Report has been prepared by management using an expenditure basis of accounting, and a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities. 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 (2022-23 and 2023-24) as well as transfers from Treasury Board central votes that are approved by the end of the quarter.
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 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.
1.3 Department of Finance Canada – Financial Structure
The Department has three major categories of expenditure authority. These categories are:
- Voted budgetary authorities: Included in this category are the operational expenditures of the Department itself as well as authorized expenditures under grant and contribution programs. These expenditures must be specifically approved by Parliament through an appropriation act.
- Statutory budgetary authorities: Included in this category are expenditure authorities that are granted through an existing Act of Parliament. Further parliamentary approval is not required for expenditures related to statutory amounts and it is within the normal course of business that statutory expenditures may in some cases exceed planned spending estimates.
- Non-budgetary authorities: Included in this category are disbursements made by the Department that do not have a direct budgetary impact on the government. This includes the value of loans initially disbursed to Crown corporations participating in the Crown Borrowing Program.
2. Highlights of Fiscal Quarter Results
The following section highlights the financial results and provides explanations for the fiscal quarter ended December 31, 2023 as compared to the same period last year.
| 2023-24 Authorities as at December 31, 2023 | 2022-23 Authorities as at December 31, 2022 | Variance in Authorities | Expenditures during the quarter ended December 31, 2023 | Expenditures during the quarter ended December 31, 2022 | Variance in Expenditures | |
|---|---|---|---|---|---|---|
| Budgetary Authorities | ||||||
| Vote 1 - Program Expenditures | 428,751 | 335,870 | 92,881 | 316,716 | 30,706 | 286,010 |
| Statutory Authorities | ||||||
| Major transfers to other levels of government | 89,682,756 | 84,185,883 | 5,496,873 | 22,185,232 | 20,120,326 | 2,064,906 |
| Interest on Unmatured Debt and Interest on Other Liabilities | 38,550,000 | 24,750,000 | 13,800,000 | 10,799,596 | 7,668,362 | 3,131,234 |
| Direct program expenses | 3,559,653 | 5,595,060 | (2,035,407) | 675,784 | 74,028 | 601,756 |
| Total Statutory Authorities | 131,792,409 | 114,530,943 | 17,261,466 | 33,660,612 | 27,862,716 | 5,797,896 |
| Total Budgetary Authorities | 132,221,160 | 114,866,813 | 17,354,347 | 33,977,328 | 27,893,422 | 6,083,906 |
| Non-Budgetary Authorities | - | 2,311,709 | (2,311,709) | 16,025,359 | 16,489,572 | (464,213) |
| Total Authorities | 132,221,160 | 117,178,522 | 15,042,638 | 50,002,687 | 44,382,994 | 5,619,693 |
2.1 Statement of Authorities
As per Table 1 – Statement of Authorities (unaudited), the total authorities available for use increased by $15,043 million, as compared to the same quarter in 2022-23, from $117,178 million to $132,221 million.
The following table provides a detailed explanation of the significant changes in the authorities available for use:
| Budgetary Authorities (2023-24 compared to 2022-23) |
Change |
|---|---|
| Vote 1 - Program Expenditures | |
| Increase in program expenditures largely due to the nonrecurring conditional transfer of the Hibernia Net Profits Interest and Incidental Net Profits Interest Revenues to Newfoundland and Labrador ($88.6 million), funding for various collective agreements ($5.3 million), funding for the Financial Sector Legislative Review ($2.8 million) and various changes in time limited programs ($0.2M). These increases were partially offset by reductions in funding for operational resource requirements in information management and information technology investments ($1.8 million), government advertising ($1.5 million) and the Refocusing Government Spending initiative ($0.8 million). | 92,881 |
| Sub-total Vote 1 - Program Expenditures | 92,881 |
| Statutory Authorities | |
| Increase in major transfers to other levels of government largely due to payments related to legislated increases in the Canada Health Transfer ($4.2 billion), Fiscal Equalization ($2 billion), Canada Social Transfer ($478 million), and Territorial Formula Financing ($282 million). These increases were partially offset by payments in the previous year in relation to transit and housing ($750 million) and increased recoveries in 2023-24 related to the Alternative Payments for Standing Programs ($635 million). | 5,496,873 |
| Decrease in direct program expenses mostly due to a decrease in authorities related to planned payments to the Canada Infrastructure Bank ($1.6 billion) and the International Development Association ($425 million). These decreases were partially offset by an increase in contributions to the employee benefit plan as a result of new funding ($1.5 million). | (2,035,407) |
| Increase in interest on unmatured debt ($14 billion) primarily due to higher interest rate expectations of Government of Canada bonds anticipated by private sector economists, partially offset by a decrease in interest on other liabilities ($238 million). | 13,800,000 |
| Sub-total Statutory Authorities | 17,261,466 |
| Total Budgetary Authorities | 17,354,347 |
| Non-Budgetary Authorities | |
| Decrease in non-budgetary authorities mainly due to previous year's financial assistance to Ukraine ($1.95 billion) and a decrease in authorities for financial assistance to the International Development Association ($362 million). | (2,311,709) |
| Total Non-Budgetary Authorities | (2,311,709) |
| Total Authorities | 15,042,638 |
2.2 Statement of Departmental Budgetary Expenditures by Standard Object
As per Table 2 – Departmental budgetary expenditures by Standard Object (unaudited), the total net budgetary expenditures in the third quarter of 2023-24 increased by $6,083.9 million, as compared to the same quarter in 2022-23 largely due to the following:
- Expenditures related to Public debt charges increased by $3,131.2 million, primarily due to an increase in interest rates and an increase in the stock of debt of approximately $58 billion over the same quarter of the previous year.
- Expenditures related to Transfer payments increased by $2,305 million, primarily due to legislated increases in major transfer payments to the provinces and territories ($1,740.9 million), payment to Newfoundland and Labrador for the Hibernia net profits interest, incidental net profits interest revenues and Hibernia Dividend Backed Annuity Agreement ($317.4 million), and a decrease in recoveries for Alternative Payments for Standing Programs ($299.6 million). These increases were partially offset by payments in the previous year to the International Monetary Fund (IMF) Resilience and Sustainability Trust ($40.1 million) and by a refund from British Columbia for the clean up of orphan and inactive oil and gas wells ($12.9 million).
- Expenditures related to Other subsidies and payments increased by $640.2 million, primarily due to payments to the Canada Infrastructure Bank ($607.1 million) as a result of increased needs over last year and an increase in foreign exchange on sovereign loans and revaluation of International Monetary Fund related accounts ($31.2 million).
2.3 Non-Budgetary Expenditures
Total net non-budgetary expenditures in the third quarter of 2023-24 decreased by $464.2 million, as compared to the same quarter in 2022-23. This is largely due to a loan resource provided to the Government of Ukraine in the previous year ($500 million), decrease in repayments to the IMF Resilience and Sustainability Trust ($333.6 million), and a decrease in the value of loans disbursed to Crown corporations participating in the Crown Borrowing Program, resulting from a decrease in business requirements of the participating entities ($132.9 million). These decreases were partially offset by an increase in payment for the acquisition of shares in the Canada Growth Fund ($290 million) and payment to the IMF Poverty Reduction and Growth Trust ($212.3 million).
3. Risks and Uncertainties
The most significant risk this quarter continues to be interest rate risk on the Public debt (the risk that cash flows of the Public debt will change because of movements in market interest rates). The Department's Debt Management Strategy, developed in consultation with market participants, is used to mitigate this risk by providing a prudent approach to Public debt management in the face of rising interest rates and volatility, globally. Interest rate risk and other financial risks are discussed further in the notes to the Department of Finance Canada's Annual Financial Statements.
The Department remains vigilant in preparing for risks, situations and events impacting its operating environment. We maintain effective security and business continuity plans and monitor changes to domestic and global economic and social conditions. At the same time, we proactively manage related risks through ongoing cooperation, engagement, and sharing of expertise and best practice with other federal departments and agencies, provincial and territorial governments, as well as stakeholders and international counterparts. These strategies enable the Department, as a central agency, a policy department, and a knowledge-based organization, to mitigate against adverse impacts on the government's capacity to advance Canada's domestic and international fiscal, economic, and social policy interests.
In the fiscal quarter ended December 31, 2023, the Department renewed its Internal Control Framework to incorporate financial management elements and align with updated central agency guidance. The revised framework introduces a set of measures and activities that provide reasonable assurance of the effectiveness and efficiency of the Department's financial management activities. The intent is to reinforce controls aimed at the prudent use of public resources throughout the organization and to effectively manage inherent risks associated with planning, program costing and procurement. The updated framework was implemented on February 1, 2024.
4. Significant Changes in Relation to Operations, Personnel and Programs
Kari Swarbrick vacated the position of Chief Audit Executive, Internal Audit, effective October 9, 2023 with Marie-Josée Yelle acting in the position.
Nick Leswick vacated the position of Associate Deputy Minister on November 9, 2023.
5. Approval by Senior Officials
Approved by:
Chris Forbes, Deputy Minister
Ottawa, Canada
February 23, 2024
Christopher Veilleux CPA, CMA, PMP
Chief Financial Officer
Ottawa, Canada
February 23, 2024
| Fiscal year 2023 - 2024 | Fiscal year 2022 - 2023 | |||||
|---|---|---|---|---|---|---|
| Total available for use for the year ending March 31, 2024* | Used during the quarter ended December 31, 2023 | Year to date used at quarter-end | Total available for use for the year ending March 31, 2023* | Used during the quarter ended December 31, 2022 | Year to date used at quarter-end | |
| Budgetary Authorities | ||||||
| Voted authorities | ||||||
Program expenditures |
428,751 | 316,716 | 382,508 | 335,870 | 30,706 | 278,781 |
| Total voted authorities | 428,751 | 316,716 | 382,508 | 335,870 | 30,706 | 278,781 |
| Statutory authorities | ||||||
| Major transfers to other levels of government | ||||||
Canada Health Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) |
49,420,572 | 12,355,143 | 37,065,429 | 45,207,608 | 11,301,902 | 33,905,706 |
Canada Social Transfer (Part V.1 - Federal-Provincial Fiscal Arrangements Act) |
16,416,302 | 4,104,076 | 12,312,227 | 15,938,157 | 3,984,540 | 11,953,618 |
Payments related to Canada Health Transfer (Sections 24.73 and 24.74 - Federal-Provincial Fiscal Arrangements Act) |
2,000,000 | - | 2,000,000 | 2,000,000 | - | 2,000,000 |
Fiscal arrangements |
||||||
Fiscal Equalization (Part I - Federal-Provincial Fiscal Arrangements Act) |
23,963,000 | 5,990,750 | 17,972,250 | 21,920,222 | 5,480,056 | 16,440,167 |
Territorial Financing (Part I.1 - Federal-Provincial Fiscal Arrangements Act) |
4,834,418 | 986,222 | 3,848,197 | 4,552,785 | 928,768 | 3,624,017 |
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) |
42,639 | 1,237 | 22,557 | 42,639 | 1,237 | 22,557 |
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) |
(1,293,513) | - | (646,757) | (1,151,088) | - | - |
Other major transfers |
||||||
Additional Fiscal Equalization Offset Payment to Nova Scotia (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) |
- | - | - | 47,772 | - | - |
Fiscal Stabilization (Part II - Federal-Provincial Fiscal Arrangements Act) |
- | - | 576,511 | - | - | - |
Alternative Payments for Standing Programs (Part VI - Federal-Provincial Fiscal Arrangements Act) |
(5,857,512) | (1,377,292) | (4,306,048) | (5,222,212) | (1,676,910) | (4,288,016) |
Hibernia Dividend Backed Annuity Agreement (Budget Implementation Act, 2021, No. 1, Part 4, division 14) |
- | - | - | - | 100,733 | 100,733 |
Payment to Newfoundland and Labrador related to the Hibernia Dividend Backed Annuity Agreement (Section 200 - Budget Implementation Act, 2021, No.1) |
156,850 | 137,973 | 137,973 | - | - | - |
Payment to the Province of British Columbia pursuant to paragraph 60.2(2)b of the Financial Administration Act to clean up orphan and inactive oil and gas wells |
- | (12,877) | (12,877) | - | - | - |
Payments for school ventilation improvement pursuant to the Economic and Fiscal Update Implementation Act, 2021 |
- | - | - | 100,000 | - | 100,000 |
Payments in relation to transit and housing (Budget Implementation Act, 2022, No. 1) |
- | - | - | 750,000 | - | 750,000 |
| Total major transfers to other levels of government | 89,682,756 | 22,185,232 | 68,969,462 | 84,185,883 | 20,120,326 | 64,608,782 |
| Interest on Unmatured Debt and Interest on Other Liabilities | ||||||
Interest on Unmatured Debt |
33,676,000 | 9,296,450 | 26,768,178 | 19,638,000 | 6,279,147 | 19,188,450 |
Other Interest Costs |
4,874,000 | 1,503,146 | 4,542,034 | 5,112,000 | 1,389,215 | 3,982,095 |
| Total Interest on Unmatured Debt and Interest on Other Liabilities | 38,550,000 | 10,799,596 | 31,310,212 | 24,750,000 | 7,668,362 | 23,170,545 |
| Direct program expenses | ||||||
Operating expenses |
||||||
Purchase of Domestic Coinage |
83,000 | 22,406 | 62,004 | 82,000 | 20,596 | 66,952 |
Contributions to Employee Benefit Plans |
16,505 | 3,987 | 11,961 | 14,988 | 3,737 | 11,213 |
Deputy Prime Minister and Minister of Finance – Salary and motor car allowance |
95 | 25 | 72 | 93 | 23 | 69 |
Minister of Tourism and Associate Minister of Finance – Motor car allowance |
2 | - | - | 2 | - | - |
Transfer payments |
||||||
Payments to the International Development Association (Bretton Woods and Related Agreements Act) |
486,916 | - | - | 911,436 | - | - |
Debt payments on behalf of poor countries to International Organizations pursuant to section 18(1) of the Economic Recovery Act |
51,823 | - | - | 53,424 | - | - |
Payments of any amount that is required for the purpose of providing financial assistance, pursuant to section 8.3 of the Bretton Woods and Related Agreements Act |
- | 208 | 208 | - | 138 | 190 |
Grant Contribution to the IMF's Resilience and Sustainability Trust (Bretton Woods and Related Agreements Act, Section 8.1(2)) |
- | - | - | - | 40,144 | 40,144 |
Grant Contribution to the IMF's Poverty Reduction and Growth Trust (Bretton Woods and Related Agreements Act, Section 8.1(2)) |
- | - | 57,000 | - | - | - |
Other |
||||||
Losses on Foreign Exchange |
- | 31,080 | 92,359 | - | (5,687) | 7,759 |
Payment of Liabilities Previously Recorded as Revenue |
- | 26 | 8,085 | - | 4,076 | 10,185 |
Payments to the Canada Infrastructure Bank (Canada Infrastructure Bank Act) |
2,921,312 | 618,051 | 1,177,761 | 4,533,117 | 11,000 | 384,450 |
Payment to the Bank of Canada pursuant to section 60.2 of the Financial Administration Act |
- | 1 | 1 | - | 1 | 1 |
| Total direct program expenses | 3,559,653 | 675,784 | 1,409,451 | 5,595,060 | 74,028 | 520,963 |
| Total statutory authorities | 131,792,409 | 33,660,612 | 101,689,125 | 114,530,943 | 27,862,716 | 88,300,290 |
| Total budgetary authorities | 132,221,160 | 33,977,328 | 102,071,633 | 114,866,813 | 27,893,422 | 88,579,071 |
| Non-budgetary authorities | ||||||
Advances to Crown corporations (Gross) |
- | 15,456,690 | 49,310,295 | - | 15,589,572 | 44,543,771 |
Advances pursuant to section 13(1) of the Financial Consumer Agency of Canada Act (Gross) |
- | 20,000 | - | - | 19,000 | |
Payments under Bretton Woods and Related Agreements Act - International Organizations (Gross) |
- | 278,669 | 560,310 | - | 400,000 | 400,000 |
Financial assistance to the International Development Association (Bretton Woods and Related Agreements Act, Section 8) |
- | - | - | 361,709 | - | - |
Financial Assistance to Ukraine through IMF Administered Account (Bretton Woods and Related Agreements Act, Section 8.3) |
- | - | - | 1,450,000 | 500,000 | 1,950,000 |
Bilateral Loan to Ukraine (Bretton Woods and Related Agreements Act, Section 8.3) |
- | - | - | 500,000 | - | 500,000 |
Payment for the acquisition of shares in the Canada Growth Fund pursuant to the Fall Economic Statement Implementation Act, 2022 |
- | 290,000 | 290,000 | - | - | - |
| Total non-budgetary authorities | - | 16,025,359 | 50,180,605 | 2,311,709 | 16,489,572 | 47,412,771 |
| Total authorities | 132,221,160 | 50,002,687 | 152,252,238 | 117,178,522 | 44,382,994 | 135,991,842 |
| * Includes only Authorities available for use and granted by Parliament at quarter-end | ||||||
| Fiscal year 2023 - 2024 | Fiscal year 2022 - 2023 | |||||
|---|---|---|---|---|---|---|
| Planned expenditures for the year ending March 31, 2024 | Expended during the quarter ended December 31, 2023 | Year to date used at quarter-end | Planned expenditures for the year ending March 31, 2023 | Expended during the quarter ended December 31, 2022 | Year to date used at quarter-end | |
| Expenditures: | ||||||
| Personnel | 134,493 | 33,317 | 97,683 | 122,004 | 29,015 | 83,673 |
| Transportation and communications | 3,219 | 662 | 1,959 | 3,095 | 661 | 1,413 |
| Information | 2,160 | 359 | 1,369 | 4,671 | 435 | 2,577 |
| Professional and special services | 20,353 | 4,761 | 10,016 | 19,601 | 3,359 | 8,031 |
| Rentals | 1,768 | 241 | 1,426 | 2,679 | 319 | 1,203 |
| Repair and maintenance | 580 | 38 | 47 | 187 | 89 | 200 |
| Utilities, materials and supplies | 83,520 | 22,432 | 62,149 | 82,372 | 20,709 | 67,121 |
| Acquisition of land, buildings and works | - | - | - | - | - | - |
| Acquisition of machinery and equipment | 2,149 | 599 | 902 | 6,860 | 338 | 830 |
| Transfer payments | 90,501,696 | 22,465,607 | 69,306,987 | 85,150,779 | 20,160,608 | 64,649,116 |
| Public debt charges | 38,550,000 | 10,799,596 | 31,310,212 | 24,750,000 | 7,668,362 | 23,170,545 |
| Other subsidies and payments | 2,921,372 | 649,717 | 1,278,883 | 4,724,715 | 9,527 | 594,362 |
| Total gross budgetary expenditures | 132,221,310 | 33,977,329 | 102,071,633 | 114,866,963 | 27,893,422 | 88,579,071 |
| Less Revenues netted against expenditures | 150 | - | - | 150 | - | - |
| Total net budgetary expenditures | 132,221,160 | 33,977,329 | 102,071,633 | 114,866,813 | 27,893,422 | 88,579,071 |
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