Quarterly Financial Report

POLAR KNOWLEDGE CANADA
Quarterly Financial Report
For the quarter ended December 31, 2018

Statement Outlining results, risks and significant changes in operations, personnel and programs

Introduction

This quarterly financial report has been prepared as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This report should be read in conjunction with the 2018-19 Main Estimates and the Supplementary Estimates. This quarterly report has not been subject to an external audit or review.

Polar Knowledge Canada (POLAR) was created pursuant to the Canadian High Arctic Research Station Act and came into force on June 1, 2015. POLAR’s mandate is to advance knowledge of the Canadian Arctic to improve economic opportunities, environmental stewardship and the quality of life of its residents and all other Canadians; promote the development and dissemination of knowledge of the other circumpolar regions, including the Antarctic; strengthen Canada’s leadership on Arctic issues, and establish a hub for scientific research in the Canadian Arctic.

Further information on the mandate, roles, responsibilities and programs of POLAR can be found by accessing the 2018-19 Main Estimates.

Basis of Presentation

This quarterly report has been prepared using an expenditure basis of accounting. The accompanying Statement of Authorities includes POLAR's spending authorities granted by Parliament and those used by POLAR, consistent with the Main Estimates for the 2018-19 fiscal year. This quarterly 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 money 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.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

POLAR uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

POLAR’s financial structure is composed of voted program authorities and statutory authorities for contributions to employee benefit plans.

For the period ending December 31, 2018, POLAR had total annual authorities of $28.0 million. Presented in Graph 1 below are the budgetary authorities and expenditures for the three quarters of 2018-19 and 2017-18. For more details, refer to the Statement of Authorities.

Graph 1: Comparison of budgetary authorities and expenditures for the fiscal quarter ended December 31, 2018, and December 31, 2017.
Graph 1

In 2018-19, POLAR incurred a total of $14.9 million in expenditures in the first three quarters, representing approximately 53% of the total available annual authorities. The expenses were allocated mostly to personnel expenditures in the amount of $5.8 million, accounting for 39% of the total and transfer payments in the amount of $5.3 million, accounting for 36% of the total. The remaining 25% mainly consists of expenses for transport and communications, professional and special services, as well as rentals. Refer to the Departmental Budgetary Expenditures by Standard Object for more details.

Significant Changes to Authorities

(Please refer to the Statement of Authorities table)

As of December 31, 2018, the total budgetary authorities available for use for the year increased from $22.3 million in 2017-18 to $28.0 million in 2018-19. The increase is mainly due to additional funds approved in the original Treasury Board submission for the equipment and on-going operations of the Canadian High Arctic Research Station (CHARS) in Cambridge Bay and the carry forward from 2017-18 to 2018-19 of $0.9 million to fulfill commitments of the organisation.

Significant Changes to Expenditures

(Please refer to the Departmental Budgetary Expenditures by Standard Object table)

3rd Quarter

At the end of the third Quarter, budgetary expenditures had decreased by $1.4 million compared to the same period last year. Significant changes result primarily from the following:

  • An increase of $533 thousand for salaries and benefits is due to an increase in number of staff.
  • A decrease of $434 thousand for transportation and communications is due to a timing delay of the receipt of the invoice for freight expenditures in the amount of $380 thousand, an increase in freight expenses of $12 thousand, an increase of travel of $86 thousand, a decrease in telecommunications services of $18 thousand, and a decrease in relocations of staff in the amount of $134 thousand.
  • A decrease in transfer payments of $2.6 million mainly due to the timing of the approval of contribution agreements and payments.
  • An increase in other operating expenses resulting from the growth of the organization and the upcoming opening of the CHARS campus.

Year to date

The year-to-date net budgetary expenditures have increased from $13.2 million in 2017-18 to $14.9 million in 2018-19 mainly due to an increase in personnel expenditures, a decrease in transfer payments and the overall growth of the organization.

Risks and Uncertainties

As a new agency, there are a number of risks outside of POLAR’s control that can potentially impact the achievement of planned results. Efforts are underway to try to mitigate these risks through sustained engagement, capacity building, funding programs, partnership development and staffing processes.

Community buy-in is one possible risk given the upcoming opening of the CHARS campus in Cambridge Bay, which will serve as the headquarters of POLAR. The internal conditions influencing this risk include the ongoing staffing process and relocation of employees to Nunavut, the soon to be launched Grants and Contributions competitive funding process and ongoing community engagement. Stakeholder expectations regarding the benefits derived from the CHARS campus are extremely high in terms of employment opportunities for local people, economic development in Nunavut, and support for local businesses and organizations. POLAR is seeking to mitigate this risk through outreach and engagement, hiring of local people, and support for education programs and science camps in Cambridge Bay. There are also expectations by other jurisdictions in Canada’s North regarding the ability of POLAR’s programs to have an impact in other areas of Canada (specifically Yukon, the Northwest Territories, Nunavik and Nunatsiavut) as well as the trickledown effect from having the CHARS campus as a “hub” for national and international science activities.

Inability to deliver on objectives of the pan-northern S&T Program is a specific risk for POLAR as a science-based agency. The scope of the S&T program is very broad and has increased expectations by partner organizations for POLAR to be fulfilling a world-class science function as well as a coordination role in Canada on Arctic and Antarctic science. The breadth and complexity of this work will make delivery a challenge with current resource levels. To mitigate this risk, POLAR is developing partnerships to help address gaps in capacity and science expertise. Partnership efforts include multiple stakeholders, such as federal government departments/agencies, northern organizations, territorial governments, academia, Indigenous organizations and international players.

Recruitment and retention of highly-qualified staff will be an ongoing risk for POLAR. Many factors, including the interest, availability and preparedness of Inuit for positions within POLAR, will have implications for POLAR’s obligations under the Nunavut Agreement to work towards 85% representation of Inuit across job groups and levels. Although POLAR will continue to give preference to job applicants who self-identify as Inuit under the Nunavut Agreement, increasing Inuit representation will be especially challenging given that there are science-specific classifications and post-graduate (M.Sc., Ph.D.) education requirements for many positions related to the S&T program. This risk is compounded by the fact that the CHARS campus is in a small Northern community with a limited local labour pool for science-focused positions. As a result, POLAR will continue to support Pilimmaksaivik in the development and implementation of a whole-of-government (WoG) approach to Inuit employment and training, and develop and implement a POLAR-specific Inuit Employment and Pre-employment Training Plan that supplements and leverages WoG initiatives. This includes continuing efforts to support long-term capacity building among youth in Nunavut, including through funding science camps and workshops.

Addressing the risks highlighted is important to the agency as successful mitigation will ultimately allow POLAR to implement its mandate and meet stakeholder expectations. The upcoming opening of the CHARS campus will be a key transition period for the organization and for the Cambridge Bay community. In addition, the potential positive impact of the science and knowledge generated by the S&T program will help Canadians better understand fundamental changes occurring in the Northern environment. Employment and training opportunities offered by POLAR in Cambridge Bay should also contribute positively to the economic development of the region.

Significant Changes in Relation to Operations, Personnel and Programs

Although the timing of the official opening has not been confirmed, the construction of the CHARS campus is nearing completion. Relocation of employees to Cambridge Bay has been on-going since August 2017 and will continue as new positions are staffed.

As of this fiscal year and under the new Treasury Board Secretariat Policy on Results, departments will be implementing the new Departmental Results Framework. This framework consists of departmental core responsibilities and their related programs.

Approval by Senior Officials

Approved by:

________________________
David J. Scott, Ph.D., President & Chief Executive Officer
Ottawa, Canada
February 20, 2019

________________________
Martin Turpin, Director and Chief Financial Officer
Finance and Facilities Management
Cambridge Bay, Canada
February 20, 2019

Statement of Authorities (unaudited)

(in thousands of dollars)

Fiscal year 2018-19 Fiscal year 2017-18
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
Vote 1 – Program expenditures 26,973 3,834 14,155 21,700 5,296 12,728
Budgetary statutory authorities 1,017 254 763 631 158 473
Total Budgetary authorities 27,990 4,088 14,918 22,331 5,454 13,201

*Includes only Authorities available for use and granted by Parliament at quarter-end

Departmental budgetary expenditures by Standard Object (unaudited)

(in thousands of dollars)

Fiscal year 2018-19 Fiscal year 2017-18
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 8,237 1,994 5,807 6,640 1,461 3,917
Transportation and communications 3,792 315 1,327 2,276 749 1,273
Information 1,294 105 139 180 37 75
Professional and special services 3,030 381 798 1,859 81 757
Rentals 1,238 461 859 1,090 198 583
Repair and maintenance 593 356 359 35 1 2
Utilities, materials, and supplies 518 131 208 349 29 62
Acquisition of machinery and equipment 1,880 82 111 267 9 29
Transfer payments 7,408 265 5,311 9,635 2,890 6,508
Other subsidies and payments 0 -2 -1 0 -1 -5
Total net budgetary expenditures 27,990 4,088 14,918 22,331 5,454 13,201
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