Archived - Department of Finance Canada
Quarterly Financial Report for the Quarter
Ended September 30, 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 that 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 (and Supplementary Estimates A as applicable) for which full supply was released on June 27, 2011.

Total authorities

Total 2011-12 budgetary authorities available for use as at September 30, 2011 decreased by $1.435 billion compared to the same period in 2010-11. This decrease was in voted operating and grants and contributions authorities ($159.6 million) and statutory authorities ($1.276 billion). This was offset by an increase in non-budgetary authorities ($20.6 million).

The 2011-12 Estimates do not yet reflect Budget 2011 statutory projections.

Voted budgetary authorities

Total  2011-12 operating authorities available for use as at September 30, 2011 decreased by $21.9 million compared to the same period in 2010-11. This decrease is mainly attributable to time-limited funding of various initiatives including Government advertising programs ($6 million); 2010 G8 Summit in Muskoka ($4.2 million); implementation of the harmonized value-added tax framework ($2.6 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); Budget 2010 cost containment measures ($1 million); and the Payments Task Force ($0.7 million).

Available authorities for voted grants and contributions as at September 30, 2011 decreased by $137.8 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 $59.3 million for scheduled payments to Toronto Waterfront Revitalization Initiative and the Harbourfront Centre in 2011-12.

Statutory budgetary authorities

Statutory authorities, as at September 30, 2011, for the Federal-Provincial Fiscal Arrangement Act decreased by $75.4 million compared to the same period in 2010-11. This decrease is largely attributable to a decrease in the schedule of payments for transitional assistance related to the harmonized value-added tax framework ($1.889 billion); a decrease in 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; a decrease for the incentive for provinces to eliminate taxes on capital ($188 million) which reflects the temporary nature and timing of payments of this measure; and a decrease in Alternative Payments for Standing Programs ($163 million) which are forecast based on projected personal income tax data; offset by:  legislative framework increases in Fiscal Equalization, the Canada Health Transfer, the Canada Social Transfer and Territorial Formula Financing ($2.36 billion).

Interest and Other Costs related to Public Debt authorities, for the period ended September 30, 2011, decreased by $1.09 billion compared to the same period in 2010-11. These costs vary depending on changes to debt levels and interest rates.  The decrease is largely due to a reduction in payments to consolidated specified purpose accounts as a result of the Jobs and Economic Growth Act which received Royal Assent in July 2010.

The remaining statutory authorities (as at September 30, 2011) decreased by nearly $111 million compared to the same period in 2010-11 largely due to a reduction in subsidy resources to the International Monetary Fund’s Poverty Reduction and Growth Trust ($40.0 million) as per Section 8 of the Bretton Woods and Related Agreements Act, and a decrease under the Youth Allowances Recovery program ($35 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 second quarter decreased by $970.2 million compared to the same quarter in 2010-11. This decrease was in voted operating and grants and contributions ($34.4 million) and statutory ($935.8 billion). Non-budgetary expenditures for the second quarter 2011-12 decreased by $5.087 billion compared to the same quarter in 2010-11. Year to date expenditures for the period ended September 30, 2011 are consistent with 2010-11 results for the same period (slight increase of $62.5 million).

Voted budgetary expenditures

The decrease in voted expenditures for the second quarter of 2011-12 ($34.4 million) compared to the same quarter in 2010-11 is primarily attributable to the timing of bilateral debt relief payments ($23.1 million) and payments for the Toronto Waterfront Revitalization Initiative ($14.2 million) under voted grants and contributions. This was offset by an increase in voted operating expenditures ($2.9 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 second quarter decreased by $935.8 million compared to the same quarter in 2010-11. This decrease is primarily attributable to lower transfer payments pursuant to the Federal-Provincial Fiscal Arrangements Act ($938.1 million), decreased public debt charges ($145.3 million), losses on foreign exchange ($46.8 million), and a reduction in subsidy resources to the International Monetary Fund’s Poverty Reduction and Growth Trust ($40.0 million) as per Section 8 of the Bretton Woods and Related Agreements Act. These decreases are offset by 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 related to the Canadian Millennium Scholarship Foundation ($121.3 million). The Foundation was dissolved in 2010-11 and the residual amount of the original payment made in 1998-99 was credited to the consolidated revenue fund.

The decrease in transfer payments under the Federal-Provincial Fiscal Arrangements Act for the second quarter of 2011-12 ($938.1 million) compared to the same quarter in 2010-11 is primarily the result of a decrease in the schedule of payments for transitional assistance related to the harmonized value-added tax framework ($1.889 billion), offset by legislative framework increases in Fiscal Equalization, the Canada Health Transfer, the Canada Social Transfer and Territorial Formula Financing ($580.2 million) and further offset by additional payments ($426.9 million) under Total Transfer Protection, first announced in December 2009 for 2010-11 and extended to 2011-12. Total Transfer Protection payments are intended to prevent declines in major transfers between 2010-11 and 2011-12. Note that these payments appear in Equalization and the Canada Health Transfer in reports for 2010-11.

While there has been a decrease in public debt charges for the second quarter of 2011-12 ($145.3 million) compared to the same quarter in 2010-11, year to date expenditures for public debt have increased by $455.2 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 increases 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.

Non-budgetary expenditures

Non-budgetary expenditures for the second quarter of 2011-12 decreased by $5.087 billion compared to the same quarter in the prior year. This decrease is primarily related to the value of loans disbursed to Crown Corporations ($5.2 billion) 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. As well, Ontario and Prince Edward Island received recoverable payments totalling $151.4 million in the second quarter as a result of restated Fiscal Equalization amounts for 2011-12 due to a data error.

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

There have been no significant changes to operations, personnel and programs over the last year.

Approved by:

Originally signed by:
Michael Horgan, Deputy Minister

Originally signed by:
Sherry Harrison, Chief Financial Officer

Ottawa, Canada

November 17, 2011

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
September 30, 2011
Year to date used at
quarter-end
Total available for use for the
year ending
March 31, 2011*
Used during the
quarter ended
September 30, 2010
Year to date used at
quarter-end
Budgetary Authorities            
  Voted authorities            
    Operating
     expenditures
100,883 27,495 51,549 122,745 24,594 50,751
    Grants and
     contributions
181,416 3,735 13,787 319,195 41,088 43,093
 

  Total voted
   authorities
282,299 31,230 65,336 441,940 65,682 93,844
 

  Statutory authorities            
  Federal-Provincial Fiscal
   Arrangements Act
   payments
           
    Fiscal Equalization      
     (Part I - Federal-
     Provincial Fiscal
     Arrangements Act)
14,658,570 3,664,643 7,329,285 14,372,000 3,593,000 7,186,000
    Canada Health
     Transfer (Part V.1 -
     Federal-Provincial
     Fiscal Arrangements
     Act)
26,951,863 6,737,952 13,475,918 25,426,286 6,356,571 12,713,143
    Canada Social
     Transfer (Part V.1 -
     Federal-Provincial
     Fiscal Arrangements
     Act)
11,514,064 2,878,516 5,757,032 11,178,703 2,794,676 5,589,352
    Territorial Financing
     (Part I.1 - Federal-
     Provincial Fiscal
     Arrangement Act)
2,876,083 586,721 1,702,641 2,663,567 543,369 1,576,832
    Wait Times Reduction
     Transfer (Part V.1 -
     Federal-Provincial
     Fiscal Arrangements
     Act)
250,000 62,500 125,000 250,000 62,500 125,000
    Alternative Payments
     for Standing Programs
     (Part VI - Federal-
     Provincial Fiscal
     Arrangements Act)
(3,112,956) (786,887) (1,657,533) (2,949,851) (823,556) (1,474,925)
    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 1,880,000 3,769,000 3,769,000 3,769,000
    Incentive for
     Provinces to Eliminate
     Taxes on Capital
     (Part IV - Federal-
     Provincial Fiscal
     Arrangements Act)
- (4) (4) 188,000 39,414 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)1
- - - - 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
    Payment to Ontario
     related to the Canada
     Health Transfer (Part
     V.1 - Federal-
     Provincial Fiscal
     Arrangements Act)2
- - - 195,300 53,450 106,900
 

  Total Federal-Provincial
   Fiscal Arrangements
   Act payments
55,017,624 15,975,548 29,564,446 55,093,005 16,913,639 30,155,931
  Public Debt - Interest
   and Other Costs
30,251,000 6,824,036 14,333,078 31,341,000 6,969,366 13,877,876
  Transitional Payment to
   Newfoundland and
   Labrador (Nova Scotia
   and Newfoundland and
   Labrador Additional
   Fiscal Equalization
   Offset Payments Act)
- 137,177 261,767 - - -
  Youth Allowances
   Recovery (Federal-
   Provincial Fiscal
   Revision Act, 1964)
(685,644) - (346,799) (649,810) - (324,905)
  Canadian Millenium
   Scholarship Foundation
   (Budget
   Implementation Act,
   1998)
- - - - (121,257) (121,257)
  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 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 23,888 51,686 140,000 25,940 51,572
  Statutory Subsidies
   (Constitution Acts,
   1867-1982, and Other
   Statutory Authorities)
32,149 14,836 16,074 32,000 14,841 16,079
  Contributions to
   Employee Benefit Plans
12,790 3,198 6,395 12,836 3,209 6,418
  Minister of Finance -
   Salary and motor car
   allowance
78 20 40 79 20 39
  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 40,000
    Losses on Foreign
     Exchange
- (44,450) 21,174 - 2,384 103,567
    Court awards - Crown
     Liability and
     Proceedings Act
- - - - - 2,587
    Payment of Liabilities
     Previously Recorded
     as Revenue
- 702 12,977 - 408 773
    Refunds of Previous
     Years Revenue
- - - - (18) 1
    Payments for Pensions
     Grants or Allowances
     in respect to the
     Halifax Relief Pension
     Continuation Act
- - - - - 1
 

  Total statutory
   authorities
85,354,477 22,934,955 44,319,463 86,630,590 23,870,750 44,228,435
 

Total Budgetary
 Authorities
85,636,776 22,966,185 44,384,799 87,072,530 23,936,432 44,322,279
 

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)
- 15,914,609 32,250,104 - 21,155,010 44,539,731
    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)
- 4,000 6,000 - 2,000 4,000
    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
     $384,280,000 to
     the International
     Development
     Association
- - - - - -
 

Total Non-budgetary
 authorities
20,611 16,070,063 32,407,558 - 21,157,010 44,543,731
 

Total authorities 85,657,387 39,036,248 76,792,357 87,072,530 45,093,442 88,866,010
* Includes only Authorities available for use and granted by Parliament at quarter-end
1 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 paymentsbetween 2010-11 and 2011-12.
2 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
September 30, 2011
Year to date used
at
quarter-end
Planned expenditures for the year
ending
March 31, 2011
Expended during the
quarter ended
September 30, 2010
Year to date used
at
quarter-end
Expenditures:            
  Personnel 83,922 21,790 45,935 88,860 22,703 48,229
  Transportation and
   communications
5,600 815 1,560 18,091 1,442 2,353
  Information 5,500 3,863 3,948 1,596 225 397
  Professional and
   special services
14,000 3,669 5,025 19,392 3,975 6,340
  Rentals 800 86 220 903 117 230
  Repair and
   maintenance
600 55 82 644 87 124
  Utilities, materials
   and supplies
131,200 24,031 51,948 142,008 26,119 51,886
  Acquisition of
   machinery and
   equipment
2,529 251 910 4,566 93 456
  Transfer payments 55,131,025 16,131,296 29,893,555 55,444,870 16,910,529 30,215,439
  Public debt charges 30,251,000 6,824,036 14,333,078 31,341,000 6,968,795 13,876,555
  Other subsidies and
   payments
11,000 (43,707) 48,538 11,000 2,347 120,270
 

Total gross
 budgetary
 expenditures
85,637,176 22,966,185 44,384,799 87,072,930 23,936,432 44,322,279
Less Revenues
 netted against
 expenditures
400 - - 400 - -
 

Total net
 budgetary
 expenditures
85,636,776 22,966,185 44,384,799 87,072,530 23,936,432 44,322,279