Public Services and Procurement Canada
Quarterly Financial Report for the quarter ended June 30, 2019
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1. Introduction
This Quarterly Financial Report (QFR) should be read in conjunction with the Main Estimates. It has been prepared by management as required under 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 Report. It has not been subject to an external audit or review.
1.1 Raison d'être
Public Works and Government Services Canada (PWGSC) was established effective June 20, 1996, under the department of Public Works and Government Services Act. As of November 4, 2015, PWGSC started operating as Public Services and Procurement Canada (PSPC). PSPC plays an important role in the daily operations of the Government of Canada. It supports federal departments and agencies in the achievement of their mandated objectives as their central purchasing agent, real property manager, linguistic authority, treasurer, accountant, pay and pension administrator, and common service provider. The department's vision is to excel in government operations, and its strategic outcome and mission are to deliver high-quality, central programs and services that ensure sound stewardship on behalf of Canadians and meet the program needs of federal institutions.
A summary description of the department's core responsibilities can be found in Part II of the Main Estimates.
1.2 Basis of presentation
This quarterly 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 Table 1—Statement of authorities (unaudited) includes the department's spending authorities granted by Parliament, and those used by the department are consistent with the Main Estimates for the current fiscal year.
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.
The department 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.
1.3 Public Services and Procurement Canada's financial structure
PSPC provides services to many government departments, agencies and Crown corporations through a variety of funding mechanisms. This includes budgetary authorities that are comprised of voted and statutory authorities, as well as non-budgetary authorities. The voted budgetary authorities include operating expenditures, vote-netted revenues and capital expenditures, while the statutory authorities are mainly composed of revolving funds, employee benefit plans and payments in lieu of taxes (PILT). The non-budgetary authorities consist primarily of the Seized Property Working Capital Account (see description below).
PSPC's complex financial structure may result in significant fluctuations in authorities on a quarterly basis, which are due to timing differences that are resolved by year-end. These are summarized as follows:
- for the most part, PSPC delivers its services on a cost-recovery basis, generating revenues via revolving-fund ("the Funds") organizations and programs within the operating vote. These organizations and programs are mainly designed to provide services to other government organizations, and are expected to recover the cost of their operations through revenues. However, the costs incurred by the Funds are usually disbursed prior to invoicing the client, which generally occurs upon completion of a project or after services are rendered, and thus revenues may be collected in a subsequent quarter
- PSPC manages a variety of real property projects that progress through phases from planning to funding and from procurement to construction. Historical trends have shown that expenditures against these projects are not incurred evenly throughout the year; thus, quarter-to-quarter fluctuations are normal. Such projects include the Alaska Highway in British Columbia and Yukon, and the rehabilitation of the Parliamentary Precinct in Ottawa
- PILT issued by PSPC are funded through a statutory vote and paid on behalf of other participating federal departments. Payments are subsequently recovered from the participating departments and are recorded as statutory grants in the Public Accounts of Canada. Timing fluctuations can occur between the payments and the recoveries
- PSPC also manages seized property for the Government of Canada pursuant to the Seized Property Management Act. The financial management of this activity is undertaken through the non-budgetary Seized Property Working Capital Account. Charged to this account are expenditures and advances made to maintain and manage any seized or restrained property. PSPC recovers its costs from this account once the property owner loses the right to the property and it is disposed of
2. Highlights of fiscal quarter and fiscal year-to-date results
2.1 Significant changes to authorities
When compared to the same quarter of the previous year, year-to-date PSPC's authorities available for use increased by $285.3 million ($3,275.8 million in Q1 of the fiscal year ending March 31, 2019; $3,561.1 million in Q1 of the fiscal year ending March 31, 2020) as reflected in Table 1—Statement of authorities (unaudited). Major reasons for the increase are outlined below:
| Project | Operating | Capital | Budgetary statutory authorities | Total variances |
|---|---|---|---|---|
| Phoenix pay system | 291.0 | (1.2) | 46.2 | 336.0 |
| Price and volume protection | 63.2 | 0 | 0 | 63.2 |
| Long Term Vision and Plan | (17.1) | 60.6 | 0 | 43.5 |
| E-Procurement Solution | 21.1 | 0 | 0.2 | 21.3 |
| Revolving funds | 0 | 0 | 8.6 | 8.6 |
| Engineering assets | (2.4) | (77.9) | 0 | (80.3) |
| Carling Campus | (0.6) | (45.5) | 0 | (46.1) |
| Real Property Program Integrity | 0 | (33.3) | 0 | (33.3) |
| Federal infrastructure | (2.3) | (26.3) | 0 | (28.6) |
| Vote transfer | 21.2 | (21.2) | 0 | 0 |
| Other | (5.5) | 1.9 | 4.6 | 1.0 |
| Cumulative variance in authorities available for use | 368.6 | (142.9) | 59.6 | 285.3 |
Groupings can change between quarters due to materiality of initiatives.
Amounts may not balance with other public documents due to rounding.
The net increase of $285.3 million from the first quarter of the year ending March 31, 2019 can be explained by:
- Phoenix Pay System—increase of $336.0 million
- As announced in Budget 2019, this funding ensures that adequate resources are dedicated to address pay issues and system support. This funding is comparable to the previous year, however, it was received earlier in the fiscal year.
- Price and volume protection—increase of $63.2 million
- This funding increase for accommodation costs protects Public Services and Procurement Canada for inflation (price) and any variations in space requirements for public servants (volumes).
- Long Term Vision and Plan (LTVP)—increase of $43.5 million
- This funding increase is to continue the implementation of the Parliamentary Precinct Rehabilitation. Major projects such as the Center Block, the East Block and the Visitors Center (Phase II) will preserve Parliament buildings as heritage assets and national symbols.
- E-Procurement Solution—increase of $21.3 million
- This funding increase is to continue with the implementation of the E-Procurement Solution (EPS) as announced in Budget 2018 for a simpler and a better procurement.
- Revolving funds—increase of $8.6 million
- The variance is mainly due to investments in the modernization of service delivery tools and the workplace renewal initiative within the Real Property Services Revolving Fund.
- Engineering assets—decrease of $80.3 million
- Consist of reduction in Budget 2016 capital funding to address program integrity funding pressures faced by the Real Property Program for its portfolio of 17 public infrastructures across Canada.
- Carling Campus—decrease of $46.1 million
- Reduction of Budget 2010 funding for the design and construction of necessary base building upgrades, special purpose space, information technology (IT), and security for the Carling Campus Project.
- Federal infrastructure: Program Integrity—decrease of $33.3 million
- Decrease of Budget 2016 capital funding for the recapitalization and rehabilitation of federal buildings in order to provide a safe, healthy, and secure workplace.
- Federal infrastructure: Accelerated Infrastructure Program—decrease of $28.6 million
- The sunset of Budget 2016 funding to ensure that Canadians continue to benefit from modern, efficient and sustainable infrastructure.
- Vote transfer—net variance of $0 million
- PSPC has transferred some activities that cannot be capitalized such as swing space and minor accommodation adjustments under the Refit/Fit-up project.
- Other—increase of $1.0 million
- The net increase of $1 million is the result of funding variances in miscellaneous projects and activities such as Real Property initiatives.
2.2 Significant changes to year-to-date net expenditures
As presented in Table 2—Departmental budgetary expenditures by standard object (unaudited), year-to-date total net budgetary expenditures have decreased by $90.7 million when compared with the same quarter of the previous year ($1,232.4 million in the current fiscal year compared with $1,323.1 million in the previous fiscal year).
Overall, total spending at the end of the first quarter represents 35% of annual planned expenditures for this current fiscal year, compared with 40% for the first quarter of the previous year.
| Standard object | June 30, 2019 Year-to-date used at quarter end | June 30, 2018 Year-to-date used at quarter end | Year-over-year variance |
|---|---|---|---|
| Personnel | 361.2 | 323.7 | 37.5 |
| Professional and special services | 232.1 | 258.7 | (26.6) |
| Rentals | 354.8 | 367.9 | (13.1) |
| Repair and maintenance | 191.6 | 182.4 | 9.2 |
| Acquisition of land, buildings and works | 67.4 | 58.3 | 9.1 |
| Transfer payments | 362.8 | 327.6 | 35.2 |
| Other expenditures | 132.7 | 134.7 | (2.0) |
| Revenues netted against expenditures | (470.2) | (330.2) | (140.0) |
| Total net budgetary expenditures | 1,232.4 | 1,323.1 | (90.7) |
Comparative figures have been reclassified to conform to the current year's presentation.
Amounts may not balance with other public documents due to rounding.
The year-over-year net decrease of $90.7 million is mainly attributable to:
- personnel—increase of $37.5 million
- The increase is mainly due to the hiring of additional resources to support pay operations and to stabilize the pay system
- professional and special services—decrease of $26.6 million
- The decrease is mainly due to decreased professional, architectural, engineering and consulting services resulting from the completion of major phases of the Parliamentary Precinct project as per the project plans
- The decrease is partially offset by an increase in consulting services to support pay operations across the country as well as engineering and digital transformation projects
- rentals—decrease of $13.1 million
- The decrease is attributable to the previous year costs being higher due to the G7 Summit and to a decrease in the variable component of rental costs
- repair and maintenance—increase of $9.2 million
- The increase is mainly due to major work undertaken in Esquimalt and at federal institutions in British Columbia and Saskatchewan
- acquisition of land, buildings and works—increase of $9.1 million
- The increase is mainly due to increased activities for office accommodation in Toronto and in the National Capital area as well as increased business volume of Real Property projects for other government departments
- transfer payments—increase of $35.2 million
- There is no overall change in payment in lieu of taxes (PILT) expenditures. The variance is the result of a timing difference between when a PILT payment is issued and when the cost is recovered from other government departments
- other expenditures—decrease of $2.0 million
- The decrease is mainly due to timing difference between when costs are incurred and when recovered from clients
- revenues netted against expenditures—increase of $140.0 million
- The increase is primarily due to timing differences for revenues collected from other government departments for pension services as well as property and facilities management services
3. Risks and uncertainties
PSPC integrates risk management principles into business planning, decision-making and organizational processes to minimize negative impacts and maximize opportunities across our diverse range of services and operations. Risk management at PSPC is carried out in accordance with Treasury Board Secretariat (TBS)'s Framework for the Management of Risk, the Management Accountability Framework, and PSPC's Policy on Integrated Risk Management.
The following key risks were identified as having a potential financial impact on PSPC's operations:
- PSPC's dependency on clients' expenditures: more than half of PSPC's financial and human resources are tied directly to cost-recovered services and activities. In a context of reduced expenditures on the part of client departments and agencies, there is a risk that PSPC could face unpredictable and reduced business volumes and associated reduced resources. In response to this risk, PSPC continually adjusts to fluctuations in operational demands while maintaining the quality of its services. This includes sustaining rigorous management of revenues, expenditures, forecasting and commitment monitoring, and working closely with other departments through the client service network to identify changing requirements and their impacts on the department
- PSPC's ability to undertake and deliver complex, transformational and interdepartmental major projects and procurements: there are inherent risks in PSPC undertaking and delivering complex, transformational and interdepartmental major projects and procurements on time, within the approved budget and according to scope, which could ultimately have an impact on the department's service strategy. In order to address these risks, PSPC has implemented disciplined investment and project management processes; established service agreements and service standards with clear identification of responsibilities; ensured sound contract management; engaged early with client departments and other stakeholders; and developed the departmental Integrated Investment Plan (IIP)
- PSPC's potential fraud risk exposure: PSPC has undertaken a 3 phase departmental fraud risk assessment, in addition to the fraud risk responses already in place, such as the Integrity Regime and Fairness Monitoring on procurement contracts. Phase 1 assessed PSPC's contracting activities. Results of the assessment have been incorporated in the development of departmental documents including the Departmental Risk Profile 2017 to 2019. Phase 2 assessed PSPC's Real Property activities and is in the process of being finalized. Phase 3 will assess remaining areas of fraud risk during 2020
- as reported in previous quarters, the department implemented a new pay system as part of the Pay Transformation Initiative. The implementation was a major undertaking that experienced challenges. In collaboration with other departments, central agencies and union partners, the department will continue to address the recommendations related to Phoenix from the 2017 Fall Report and 2018 Spring Report delivered by the Auditor General of Canada to the Parliament of Canada
4. Significant changes to operations, personnel and programs
There were no significant changes to operations, personnel and programs during the first quarter ended June 30, 2019.
Original signed by:
Bill Matthews
Deputy Minister
Public Services and Procurement Canada
Gatineau, Canada
August 29, 2019
Marty Muldoon, CPA, CMA, MBA
Chief Financial Officer
Public Services and Procurement Canada
Gatineau, Canada
August 29, 2019
| Fiscal year ending March 31, 2020 | Fiscal year ending March 31, 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 | |
| Vote 1 | ||||||
| Gross operating expenditures | 3,572,470 | 794,994 | 794,994 | 3,126,233 | 746,896 | 746,896 |
| Vote-netted revenues | (1,226,007) | (250,656) | (250,656) | (1,148,387) | (138,961) | (138,961) |
| Net operating expenditures | 2,346,463 | 544,338 | 544,338 | 1,977,846 | 607,935 | 607,935 |
| Vote 5—Capital expenditures | 1,038,155 | 158,486 | 158,486 | 1,181,026 | 205,406 | 205,406 |
| Revolving fund authorities Real Property Services Revolving Fund |
||||||
| Gross expenditures | 1,991,322 | 310,046 | 310,046 | 1,857,643 | 306,218 | 306,218 |
| Revenues | (1,980,108) | (167,245) | (167,245) | (1,853,943) | (144,088) | (144,088) |
| Net expenditures | 11,214 | 142,801 | 142,801 | 3,700 | 162,130 | 162,130 |
| Translation Bureau Revolving Fund | ||||||
| Gross expenditures | 174,057 | 33,644 | 33,644 | 164,741 | 28,660 | 28,660 |
| Revenues | (165,908) | (31,256) | (31,256) | (157,433) | (30,759) | (30,759) |
| Net expenditures | 8,149 | 2,388 | 2,388 | 7,308 | (2,099) | (2,099) |
| Optional Services Revolving Fund | ||||||
| Gross expenditures | 176,708 | 15,492 | 15,492 | 180,056 | 12,578 | 12,578 |
| Revenues | (176,500) | (21,043) | (21,043) | (180,056) | (16,387) | (16,387) |
| Net expenditures | 208 | (5,551) | (5,551) | 0 | (3,809) | (3,809) |
| Total of all revolving funds | ||||||
| Gross expenditures | 2,342,087 | 359,182 | 359,182 | 2,202,440 | 347,456 | 347,456 |
| Revenues | (2,322,516) | (219,544) | (219,544) | (2,191,432) | (191,234) | (191,234) |
| Total revolving fund net expenditures | 19,571 | 139,638 | 139,638 | 11,008 | 156,222 | 156,222 |
| Other budgetary statutory authorities | ||||||
| Contributions to employee benefit plans | 156,569 | 27,120 | 27,120 | 105,586 | 25,892 | 25,892 |
| Minister of PSP salary and motor car allowance | 88 | 22 | 22 | 86 | 22 | 22 |
| Refunds of amounts credited to revenues in previous years | 0 | 0 | 0 | 0 | 0 | 0 |
| Spending of proceeds from the disposal of surplus Crown assets | 266 | 0 | 0 | 218 | 0 | 0 |
| Payment in lieu of taxes to municipalities and other taxing authoritiestable 1 note 2 | 0 | 362,760 | 362,760 | 0 | 327,638 | 327,638 |
| Total other budgetary statutory authorities | 156,923 | 389,902 | 389,902 | 105,890 | 353,552 | 353,552 |
| Total budgetary authorities | 3,561,112 | 1,232,364 | 1,232,364 | 3,275,770 | 1,323,115 | 1,323,115 |
| Non-budgetary authority | ||||||
| Seized Property Working Capital Account | 0 | 0 | 0 | 0 | 0 | 0 |
| Total authorities | 3,561,112 | 1,232,364 | 1,232,364 | 3,275,770 | 1,323,115 | 1,323,115 |
Table 1—Statement of authorities (unaudited) Notes
|
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| Fiscal year ending March 31, 2020 | Fiscal year ending March 31, 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 | 1,483,419 | 361,151 | 361,151 | 1,184,598 | 323,664 | 323,664 |
| Transportation and communications | 80,405 | 15,236 | 15,236 | 72,139 | 14,508 | 14,508 |
| Information | 22,410 | 2,268 | 2,268 | 21,317 | 1,843 | 1,843 |
| Professional and special services | 1,888,189 | 232,057 | 232,057 | 1,838,504 | 258,712 | 258,712 |
| Rentals | 1,146,697 | 354,830 | 354,830 | 1,265,713 | 367,926 | 367,926 |
| Repair and maintenance | 1,112,854 | 191,580 | 191,580 | 1,055,548 | 182,370 | 182,370 |
| Utilities, materials and supplies | 261,054 | 26,434 | 26,434 | 107,729 | 23,934 | 23,934 |
| Acquisition of land, buildings and works | 421,188 | 67,441 | 67,441 | 373,026 | 58,310 | 58,310 |
| Acquisition of machinery and equipment | 108,665 | 17,108 | 17,108 | 92,657 | 16,591 | 16,591 |
| Transfer paymentstable 2 note 2 | 0 | 362,760 | 362,760 | 0 | 327,638 | 327,638 |
| Public Debt charges | 123,452 | 30,863 | 30,863 | 128,574 | 33,046 | 33,046 |
| Other subsidies and payments | 461,301 | 40,836 | 40,836 | 475,784 | 44,768 | 44,768 |
| Total gross budgetary expenditures | 7,109,634 | 1,702,564 | 1,702,564 | 6,615,589 | 1,653,310 | 1,653,310 |
| Less revenues netted against expenditures | ||||||
| Revolving funds revenues | (2,322,515) | (219,544) | (219,544) | (2,191,432) | (191,234) | (191,234) |
| Vote-netted revenues | (1,226,007) | (250,656) | (250,656) | (1,148,387) | (138,961) | (138,961) |
| Total revenues netted against expenditures | (3,548,522) | (470,200) | (470,200) | (3,339,819) | (330,195) | (330,195) |
| Total net budgetary expenditures | 3,561,112 | 1,232,364 | 1,232,364 | 3,275,770 | 1,323,115 | 1,323,115 |
Table 2—Departmental budgetary expenditures by standard object (unaudited) Notes
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