Archived - Department of Finance Canada
Quarterly Financial Report for the Quarter Ended December 31, 2011 (unaudited)

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Table of Contents

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


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 Treasury Board Accounting Standard 1.3. This quarterly financial report should be read in conjunction with the Main Estimates and Supplementary Estimates. The quarterly financial report has not been subject to an external audit or review.

The description of the program activities for the Department of Finance Canada (the ‘Department’) can be found in Part II of the Main Estimates.

1.1 Basis of Presentation

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. 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 of Finance Canada 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.

2. Highlights of fiscal quarter and fiscal year-to-date (YTD) results

2.1 Authorities Analysis

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 grants 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. Departmental statutory payments include those made under the Federal-Provincial Fiscal Arrangements Act as well as Interest and Other Costs incurred in connection with the Public Debt of Canada.
  • Non-budgetary authorities: included in this category are disbursements made by the Department which do not have a direct budgetary impact to the Government. This includes the value of loans initially disbursed to Crown Corporations participating in the Crown Borrowing Framework.

This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates for which full supply was released on June 27, 2011 and Supplementary Estimates A and B.

Total authorities

Total 2011-12 authorities available for use as at December 31, 2011 increased by $1.956 billion compared to the same period in 2010-11, reflecting an increase of $2.070 billion in 2011-12 budgetary authorities, partially offset by a decrease in non-budgetary authorities ($113.7 million). The increase in budgetary authorities was composed of an increase in statutory authorities ($2.214 billion), offset in part by a decrease in voted operating and grants and contributions authorities ($144.5 million).

Voted budgetary authorities

Total 2011-12 operating authorities available for use as at December 31, 2011 decreased by $13.7 million compared to the same period in 2010-11, reflecting decreases in a number of areas, including:

  • time-limited funding of various initiatives including 2010 G8 Summit in Muskoka ($4.2 million);
  • Government advertising programs ($3.6 million);
  • the Task Force on Financial Literacy ($2.6 million);
  • improving access to financing and strengthening Canada’s financial system ($2.6 million);
  • litigation related to the application of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act ($1.1 million);
  • implementation of the harmonized value-added tax framework ($1 million); and
  • Budget 2010 cost containment measures ($1 million).

These decreases were partially offset by an increase in the paylist (i.e. severance and maternity) requirements funding ($2.6 million).

Available authorities for voted grants and contributions as at December 31, 2011 decreased by $130.8 million compared to the same period in 2010-11. Of this amount, $78.5 million is related to changes in planned bilateral debt relief payments, and $52.3 million for scheduled payments to Toronto Waterfront Revitalization Initiative and the Harbourfront Centre in 2011-12.

Statutory budgetary authorities

Statutory authorities, as at December 31, 2011, for the Federal-Provincial Fiscal Arrangement Act increased by $381.2 million compared to the same period in 2010-11. This increase is largely attributable to the legislative framework increases in Fiscal Equalization, the Canada Health Transfer, the Canada Social Transfer and Territorial Formula Financing ($2.36 billion); and the Total Transfer Protection ($443 million), partially offset by decreases in:

  • the schedule of payments for transitional assistance related to the harmonized value-added tax framework ($1.889 billion);
  • Alternative Payments for Standing Programs ($198 million) which are forecast based on projected personal income tax data;
  • the payment to Ontario related to the Canada Health Transfer, which was approved under the Budget Implementation Act, 2009 ($195 million), since no such payments are legislated for fiscal years after 2010-11; and
  • the incentive for provinces to eliminate taxes on capital ($142 million), which reflects the temporary nature and timing of payments of this measure.

Interest and Other Costs related to Public Debt authorities, for the period ended December 31, 2011, increased by $1.409 billion compared to the same period in 2010-11. These costs vary depending on changes to debt levels and interest rates. The increase largely reflects the incremental debt that is being added to finance the 2011-12 deficit.

The remaining statutory authorities (as at December 31, 2011) increased by nearly $424 million compared to the same period in 2010-11 largely due to an increase in payments under the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act ($570 million). This increase was partially offset by a decrease in payments per Section 8 of the Bretton Woods and Related Agreements Act ($67 million), and a decrease under the Youth Allowances Recovery program ($44 million), which is forecast based on projected personal income tax data.

Non-Budgetary Authorities

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 gross 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. For 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 through the year, with higher gross borrowings associated with a smaller net borrowing amount. This can change very quickly should the 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 significant forecast errors and that the gross 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.

2.2 Expenditure Analysis

Total Expenditures

Total 2011-12 budgetary expenditures for the third quarter increased by $447.6 million compared to the same quarter in 2010-11. This increase reflected an increase in statutory expenditures ($456.8 million), offset in part by a decrease in voted operating and grants and contributions ($9.3 million). Non-budgetary expenditures for the third quarter 2011-12 decreased by $546.6 million compared to the same quarter in 2010-11.

Year-to-date expenditures for the period ended December 31, 2011 increased by $510.1 million, or less than 1% of total spending, compared to the same period in 2010-11. This increase is related to Interest and Other Costs as well as a transitional payment to Newfoundland and Labrador pursuant to the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act.

Voted budgetary expenditures

The decrease in voted expenditures for the third quarter of 2011-12 ($9.3 million) compared to the same quarter in 2010-11 is primarily attributable to payments to the Toronto Waterfront Revitalization Initiative ($13.6 million) and the Harbourfront Centre ($0.6 million) under voted grants and contributions. This was offset in part by an increase in the timing of bilateral debt relief payments under voted grants and contributions ($1.9 million) and in voted operating expenditures ($3.0 million) which can be explained by the amendment to the Program and Administrative (PA) Services collective bargaining agreement regarding severance payments.

Statutory budgetary expenditures

Total 2011-12 statutory expenditures for the third quarter increased by $456.8 million compared to the same quarter in 2010-11. This increase is primarily attributable to an increase in transfer payments pursuant to the Federal-Provincial Fiscal Arrangements Act ($390.0 million), a Transitional Payment to Newfoundland and Labrador ($137.2 million) pursuant to the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act, and an increase in domestic coinage production costs ($8.6 million). These increases were partially offset by decreases in interest and other costs ($67.6 million) and losses on foreign exchange ($13.9 million).

The increase in transfer payments under the Federal-Provincial Fiscal Arrangements Act for the third quarter of 2011-12 ($390.0 million) compared to the same quarter in 2010-11 is primarily the result of the legislative framework increases in Fiscal Equalization, the Canada Health Transfer, the Canada Social Transfer and Territorial Formula Financing ($460.1 million), offset in part by decreases in Alternative Payments for Standing Programs ($29.1 million) and the payment to Ontario related to the Canada Health Transfer ($41.1 million).

While there has been a decrease in interest and other costs for the third quarter of 2011-12 ($67.6 million) compared to the same quarter in 2010-11, year-to-date expenditures for public debt have increased by $387.6 million compared to the same period in 2010-11. This increase is primarily owing to real return bond adjustments, which are determined by movements in the Consumer Price Index, as well as an increase in the stock of interest-bearing debt.

The Canadian Securities Regulation Regime Transition Office Act authorizes the Minister of Finance to make direct payments to the Canadian Securities Transition Office for its use in fulfilling its mandate in an amount not to exceed $33 million for a three-year period commencing on July 13, 2009. Three equal $11 million tranches were planned over the course of its mandate. Actual funding transferred to the Transition Office reflected its shorter initial year of operation for fiscal year 2009-10 ($5.4 million) as well as its anticipated work for fiscal year 2010-11 ($13.2 million) and the remaining period ending July 2012 ($14.3 million). The revised funding profile was not available when the 2010-11 Estimates were finalized. In light of the Supreme Court of Canada decision on December 22, 2011, which ruled that “the Canadian Securities Act as presently drafted is not valid”, the government is assessing the decision and the role of the Canadian Securities Transition Office.

Non-budgetary expenditures

Non-budgetary expenditures for the third quarter of 2011-12 decreased by $546.6 million compared to the same quarter in the prior year. This decrease is related to the value of loans disbursed to Crown Corporations ($546.6 million) participating in the Crown Borrowing Framework. Gross borrowings by Crown Corporations are based on demand and the business requirements of the participating entities, and also depend on the terms of the Crown Corporation borrowings. As such, amounts can vary significantly from year-to-year.

3. Risks and Uncertainties

The Canadian economy, which continues to recover from the worst global recession since the 1930s, has fared much better than other major advanced economies over the past several years, reflecting the significant policy stimulus provided in the recession and Canada's solid economic fundamentals. Going forward, private sector economists expect that economic growth in Canada will continue to be moderate. Nevertheless, the uncertainty surrounding the global economic outlook remains elevated, posing risk to the Canadian outlook.

The Department of Finance Canada must manage these risks. To do so, it must have in place the infrastructure, resources and authorities needed to respond to an evolving economic and financial sector environment. It must manage the increased requirement for coordinated international decision making to deal with uncertain world economic conditions. It must also ensure that responsible agencies take effective coordinated action to support the soundness, integrity and reputation of the Canadian financial system.

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-11 levels for the fiscal years 2011-12 and 2012-13. The impact on departmental activities has been managed through personnel turnover, by identifying efficiencies in areas such as travel, and by using other control mechanisms, such as those related to executive staffing.

4. Significant changes in relation to operations, personnel and programs

With the move of the department scheduled for 2014 and the relocation of the TBS Data Centre last fall, the TBS and Finance shared networks were split such that Finance now has a dedicated IT network and services.

Finance will continue to work closely with the new Shared Services Canada organization to consolidate the existing resources and personnel relating to e-mail, data centres and networks, and associated internal services.

Approved by:

Originally signed by:
Michael Horgan, Deputy Minister

Originally signed by:
Sherry Harrison, Chief Financial Officer

Ottawa, Canada

February 14, 2012

 

Statement of Authorities (unaudited)
  Fiscal year 2011-2012 Fiscal year 2010-2011
 

(in thousands of dollars) Total available
for use for
the year ending
March
31, 2012 *
Used during
the quarter
ended
December
31, 2011
Year to
date used
at
quarter-end
Total
available for
use for the
year ending
March
31, 2011 *
Used during
the quarter
ended
December
31, 2010
Year to
date used
at quarter-end
Budgetary Authorities            
Voted authorities            
  Operating expenditures1 113 515 25 667 77 216 127 196 22 649 73 400
  Grants and contributions 188 416 10 953 24 740 319 195 23 240 66 333
 

Total voted authorities 301 931 36 620 101 956 446 391 45 889 139 733
           
 

Statutory authorities
Federal-Provincial Fiscal
 Arrangements Act payments
           
  Fiscal Equalization
   (Part I - Federal-Provincial
   Fiscal Arrangements Act
)
14 658 570 3 664 643 10 993 928 14 372 000 3 593 000 10 779 000
  Canada Health Transfer
   (Part V.1 - Federal-Provincial
   Fiscal Arrangements Act
)
26 951 863 6 728 010 20 203 928 25 426 286 6 466 595 19 179 738
  Canada Social Transfer
   (Part V.1 - Federal-Provincial
   Fiscal Arrangements Act
)
11 514 064 2 878 516 8 635 548 11 178 703 2 794 797 8 384 149
  Territorial Financing
   (Part I.1 - Federal-Provincial
   Fiscal Arrangement Act
)
2 876 083 586 721 2 289 362 2 663 567 543 367 2 120 199
   Wait Times Reduction Transfer
    (Part V.1 - Federal-Provincial
     Fiscal Arrangements Act
)
250 000 62 500 187 500 250 000 62 500 187 500
  Alternative Payments for
   Standing Programs
   (Part VI - Federal-Provincial
    Fiscal Arrangements Act
)
(3 147 547) (726 696) (2 384 229) (2 949 851) (697 603) (2 172 528)
  Transitional assistance
   to provinces entering into the
   harmonized value-added
   tax framework
   (Part III.1 Federal-Provincial
   Fiscal Arrangements Act
)
1 880 000 - 1 880 000 3 769 000 - 3 769 000
  Incentive for Provinces to
   Eliminate Taxes on Capital
   (Part IV - Federal-Provincial
   Fiscal Arrangements Act
)
86 390 - (4) 228 100 - 39 414
  Canada Health Transfer and
   Canada Social Transfer to
   Saskatchewan and
   Newfoundland and Labrador
   - Total Transfer
   Protection (Part V.1 -
   Federal-Provincial
   Fiscal Arrangements Act
)2
- - - 15 712 - 15 712
  Additional Fiscal Equalization
   Payment - Total Transfer
   Protection (Part I -
   Federal-Provincial
   Fiscal Arrangements Act
)
952 107 - 952 107 509 503 - 509 503
  Additional Fiscal Equalization
   to Nova Scotia (Part I -
   Federal-Provincial
   Fiscal Arrangements Act
)
17 988 - - - - -
  Payment to Ontario
   related to the Canada Health
   Transfer (Part V.1 -
   Federal-Provincial
   Fiscal Arrangements Act
)3
- (8 992) (8 992) 195 300 32 088 138 988
 

Total Federal-Provincial Fiscal Arrangements Act payments 56 039 518 13 184 702 42 749 148 55 658 320 12 794 744 42 950 675
Public Debt - Interest and Other Costs 29 841 000 6 898 992 21 232 070 28 432 000 6 966 637 20 844 513
Transitional Payment to Newfoundland and Labrador (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) 536 121 137 177 398 944 - - -
Additional Fiscal Equalization Offset Payment to Nova Scotia (Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act) 33 695 - - - - -
Youth Allowances Recovery (Federal-Provincial Fiscal Revision Act, 1964) (693 597) - (346 799) (649 810) - (324 905)
Canadian Millenium Scholarship Foundation (Budget Implementation Act, 1998) - - - - (1) (121 258)
Payments to International Development Association 384 280 - 384 280 384 280 - 384 280
Debt payments on behalf of poor countries to International Organizations pursuant to section 18(1) of the Economic Recovery Act 51 200 - - 76 200 - 22 218
Establishment of a Canadian Securities Regulation Regime and Canadian Regulatory Authority (Budget Implementation Act, 2009) 150 000 - - 150 000 - -
Canadian Securities Regulation Regime Transition Office (Canadian Securities Regulation Regime Transition Office Act) 11 000 - 14 345 11 000 - 13 255
Purchase of Domestic Coinage 130 000 36 404 88 090 140 000 27 844 79 416
Statutory Subsidies (Constitution Acts, 1867-1982, and Other Statutory Authorities) 32 149 1 238 17 312 32 000 1 237 17 316
Contributions to Employee Benefit Plans 12 790 3 197 9 592 12 836 3 209 9 627
Minister of Finance - Salary and motor car allowance 78 18 58 79 19 58
Minister of State - Motor car allowance 2 2 2 - - -
Other            
  Subsidy Resources
   to the International
   Monetary Fund's Poverty
   Reduction and Growth Trust
   (Section 8 - Bretton Woods
   and Related Agreements Act
)
- - - 40 000 - 40 000
  Small and Medium Enterprise (SME)
   Finance Challenge (Bretton Woods
   and Related Agreements Act
,
    Section 8)
- - - 20 000 - -
  Fast Start Climate Change
   Financing (Bretton Woods and
   Related Agreements Act
, Section 8)
- - - 5 830 - -
  Agriculture Advance
   Market Commitment
   (Bretton Woods and
   Related Agreements Act
,
   Section 8)
- - - 1 000 - -
  Losses on Foreign Exchange - 40 326 61 500 - 54 189 157 756
  Court awards - Crown
   Liability and
   Proceedings Act
- - - - (2 587) -
  Payment of
   Liabilities Previously
   Recorded as Revenue
- 481 13 458 - 398 1 171
  Refunds of Previous Years Revenue - - - - - 1
  Payments for Pensions
   Grants or Allowances in
   respect to the Halifax
   Relief Pension
   Continuation Act
- - - - - 1
 

Total statutory authorities 86 528 236 20 302 537 64 622 000 84 313 735 19 845 689 64 074 124
 

Total Budgetary Authorities 86 830 167 20 339 157 64 723 956 84 760 126 19 891 578 64 213 857
 

Non-budgetary authorities
  Pursuant to section 8(c) of the
   Bretton Woods and Related
   Agreements Act
, the amount
   of financial assistance provided
   by the Minister of Finance for the
   purchase on behalf of Her Majesty
   in right of Canada of shares of the
   International Bank for Reconstruction
   and Development shall not
   exceed an amount of $98,141,398
   in United States dollars
   over the period 2011-12 to 2015-16,
   and in respect of the period
   commencing on April 1, 2011
   and ending on March 31, 2012,
   an amount of $20,082,471
   in United States dollars,
   notwithstanding that the amount
   may exceed the equivalent in
   Canadian dollars estimated
   at $20,610,640 on
   September 24, 2010
20 611 - - - - -
  Advances to Crown corporations (Gross) - 14 950 377 47 200 481 - 15 495 927 60 035 658
  Payment to Ontario and
   Prince Edward Island
   (Part I.01 - Federal-Provincial
   Fiscal Arrangements Act
)
151 454 - 151 454 - - -
  Advances pursuant
   to section 13(1)
   of the Financial
   Consumer Agency
   of Canada Act
(Gross)
- 2 000 8 000 - 3 000 7 000
  Payment to the
   International Finance
   Corporation in support
   of the Fast Start
   Climate Change Financing
   Initiative (Bretton Woods
   and Related Agreements Act
,
   Section 8)
- - - 285 720 - -
  In accordance with
   the Bretton Woods and
   Related Agreements Act
,
   the issuance and payment
   of non-interest bearing,
   non-negotiable demand
   notes in an amount
   not to exceed $441,620,000
   to the International
   Development Association
- - - - - -
 

Total Non-budgetary authorities 172 065 14 952 377 47 359 935 285 720 15 498 927 60 042 658
           
 

Total authorities 87 002 232 35 291 534 112 083 891 85 045 846 35 390 505 124 256 515
* Includes only Authorities available for use and granted by Parliament at quarter-end
1 The total available for use for the year ended March 31, 2012 for Vote 1 Operating expenditures includes $1,232,603 which is deemed to be appropriated to Shared Services Canada Operating Expenditures pursuant to s. 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, which results in a reduction for the same amount in Department of Finance Canada, Vote 1, Appropriation Act No. 1, 2011-2012. To date $113,000 expenditures have been incurred on behalf of Shared Services Canada by Department of Finance Canada against Shared Services Canada Operating Expenditures.
2 Total Transfer Protection Payments related to Fiscal Equalization and the Canada Health Transfer have been reclassified under the Federal-Provincial Fiscal Arrangements Act payments section. This modification provides for a more comparative analysis of payments between 2010-11 and 2011-12.
3
The Payment to Ontario related to the Canada Health Transfer has been moved from the section “Other” to the Federal-Provincial Fiscal Arrangements Act payments section to better reflect the legislative source of the payment.

 

Table 1
Departmental budgetary expenditures by Standard Object (unaudited)
  Fiscal year 2011-2012 Fiscal year 2010-2011
 

(in thousands
of dollars)
Planned
expenditures
for the year
ending March
31, 2012
Expended
during the
quarter
ended
December
31, 2011
Year to date
used at quarter-end
Planned
expenditures
for the year
ending March
31, 2011
Expended during
the quarter
ended
December
31, 2010
Year to date
used at
quarter-end
Expenditures:            
  Personnel 87 876 24 091 70 026 88 860 20 840 69 069
  Transportation and
   communications
6 582 980 2 540 19 091 1 218 3 571
  Information 8 821 208 4 156 1 786 235 632
  Professional and
   special services
17 491 2 493 7 518 21 645 3 717 10 057
  Rentals 934 18 238 1 017 77 307
  Repair and maintenance 700 47 129 707 69 193
  Utilities, materials
   and supplies
131 429 36 586 88 534 142 261 28 088 79 974
  Acquisition of machinery
   and equipment
2 952 538 1 448 5 144 257 713
  Transfer payments 56 721 782 13 334 070 43 227 625 56 037 015 12 819 220 43 034 659
  Public debt charges 29 841 000 6 898 992 21 232 070 28 432 000 6 965 882 20 842 437
  Other subsidies
   and payments
11 000 41 134 89 672 11 000 51 975 172 245
 

Total gross budgetary
 expenditures
86 830 567 20 339 157 64 723 956 84 760 526 19 891 578 64 213 857
Less Revenues netted
 against expenditures
400 - - 400 - -
 

Total net budgetary
 expenditures
86 830 167 20 339 157 64 723 956 84 760 126 19 891 578 64 213 857