Archived - Department of Finance Canada Quarterly Financial Report for the Quarter Ended June 30, 2012 (unaudited)
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TABLE OF CONTENTS
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, Supplementary Estimates as well as Canada’s Economic Action Plan 2012 (Budget 2012). 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 (PDF 2.79 MB).
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.
As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.
In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.
The Department 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.
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 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 of 2011-12.
Total 2012-13 authorities available for use as at June 30, 2012 decreased by $238.4 million compared to the same period in 2011-12. The decrease is reflected in budgetary authorities. There were no changes to non-budgetary authorities. The decrease in budgetary authorities was composed of a decrease in statutory authorities ($285.7 million), offset in part by an increase in voted operating and grants and contributions authorities ($47.3 million).
Voted budgetary authorities
Total 2012-13 operating authorities available for use as at June 30, 2012 increased by $13.7 million compared to the same period in 2011-12, reflecting increases related to:
- government advertising programs ($12.0 million);
- review of GST Technical Issues ($2.7 million);
- funding to support corporate information management/information technology ($1.9 million);
- maintaining the strength of Canada’s financial system ($1.9 million);
- implementation of the harmonized value-added tax framework ($1.6 million);
- funding for G-20 Framework Working Group ($0.9 million);
- support for corporate finance and asset management ($0.4 million); and
- personal income tax initiatives ($0.2 million).
These increases were partially offset by:
- a transfer of funding to Shared Services Canada for the provision of centralized email, data centre and network services to departments as a result of the November 15, 2011, Order-in-Council ($2.8 million);
- time-limited funding for the Task Force for the Payments System Review, which completed its mandate of assisting the Minister in charting the future of the Canadian payments system ($2.2 million);
- a decrease in funding for the Canada Securities Regulator for which funds were used to establish a new Division in the Department of Finance and provide the necessary expert legal resources ($1.9 million);
- sunsetting of the Task Force on Financial Literacy which was funded to support the creation of an independent task force, which made recommendations on a cohesive national strategy on financial literacy ($0.7 million); and
- litigation related to the application of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act ($0.5 million).
Available authorities for voted grants and contributions as at June 30, 2012 increased by $33.6 million compared to the same period in 2011-12. Of this amount, $59.5 million is related to changes in planned bilateral debt relief payments as well as an increase of $5 million related to the Harbourfront Centre. The above increases were offset by a decrease of $30.9 million for scheduled payments to Toronto Waterfront Revitalization Initiative in 2012-13.
Statutory budgetary authorities
Statutory authorities decreased by $285.7 million, as at June 30, 2012, compared to the same period in 2011-12.
This was in part due to an increase in the authorities for the Federal-Provincial Fiscal Arrangement Act of $1.131 billion compared to the same period in 2011-12. 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 ($3.287 billion); and is partially offset by decreases in:
- the schedule of payments for transitional assistance related to the harmonized value-added tax framework ($1.880 billion);
- Alternative Payments for Standing Programs ($276 million) which are forecast based on projected personal income tax data.
Effective 2012-13, the Department of Finance statutory vote for Public Debt–Interest and Other Costs is presented as two distinct categories, Interest on Unmatured Debt and Other Interest Costs. Interest on Unmatured Debt represents the interest resulting from certificates of indebtedness issued by the Government of Canada that have not yet become due. Other Interest Costs represents the interest related to superannuation accounts, deposit and trust accounts and other specified purpose accounts. The purpose of this change was to more clearly distinguish the significant components of interest costs.
Interest on Unmatured Debt, for the period ended June 30, 2012, decreased by $1.0 billion compared to the same period in 2011-12. The decrease is due to the revision of forecasted interest rates by private sector economists, consistent with the 2011 Update of Economic and Fiscal Projections. Other Interest Costs decreased by $386 million. The decrease reflects the decrease in the average long-term bond rate, which is used to calculate interest on the superannuation accounts pertaining to pre-April 1, 2000 service.
The remaining statutory authorities (as at June 30, 2012) decreased by $27.8 million compared to the same period in 2011-12 largely due to decreases in a number of areas. There was a decrease related to the establishment of the Canadian Securities Regulator ($161 million). This decrease was mainly due to a Supreme Court ruling that the proposed Canadian Securities Act as drafted was not valid under the general branch of the federal power to regulate trade and commerce under the Constitution for which Budget 2009 set aside $150 million for financial arrangements with participating provinces and territories. The remaining decrease of $11 million relates to payments to the Canadian Securities Regulation Regime Transition Office. The Minister of Finance, under section 14 of the Canadian Securities Regulation Regime Transition Office Act, was authorized to make direct payments to the Canadian Securities Transition Office to fulfill its purpose in an amount not to exceed $33 million for a three-year period. The Transition Office began operating on July 13, 2009. The third and final payment for this statutory vote was made in 2011-12. There was also a decrease of $60.5 million for the Youth Allowances Recovery.
In addition, there was a $10 million decrease in the statutory budgetary authorities for the Purchase of Domestic Coinage to primarily reflect expected lower production costs associated with the introduction of plated $1 and $2 coins that had been referenced in Budget 2011.
The above decreases were partially offset by an increase under the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act ($146 million) and payments to the International Developments Association ($57.4 million).
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 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.
The authorities related to the Bretton Woods and Related Agreements Act for the purchase of shares of the International Bank for Reconstruction and Development in 2011-12 became the authorities for the statutory vote Payments to International Bank for Reconstruction and Development in 2012-13. The decrease of this authority from 2011-12 is being offset by the same increase of the new statutory vote in 2012-13.
Total 2012-13 budgetary expenditures for the first quarter increased by $173.5 million compared to the same quarter in 2011-12. This was due to an increase in statutory expenditures ($182.0 million), which was partially offset by a decrease in voted operating and grants and contributions ($8.5 million). Non-budgetary expenditures for the first quarter 2012-13 increased by $318.4 million compared to the same quarter in 2011-12.
Voted budgetary expenditures
The decrease in voted expenditures for the first quarter of 2012-13 ($8.5 million) compared to the same quarter in 2011-12 is primarily attributable to payments to the Toronto Waterfront Revitalization Initiative ($9.1 million), offset by an increase in payments to the Harbourfront Centre ($1.1 million) under voted grants and contributions. Operating expenditure patterns in the first quarter of 2012-13 are consistent with those of 2011-12. Operating expenditures represent 21% of authorities available for use during the quarter compared to 24% last year.
Statutory budgetary expenditures
Total 2012-13 statutory expenditures for the first quarter increased by $182.0 million compared to the same quarter in 2011-12. This increase is primarily attributable to an increase in transfer payments pursuant to the Federal-Provincial Fiscal Arrangements Act ($801.7 million), as well as an increase in payments to the International Development Association ($57.3 million). This increase was offset by decreases in interest on unmatured debt and other interest costs ($470.7 million), a decrease in Transitional Payment to Newfoundland and Labrador ($124.6 million) pursuant to the Nova Scotia and Newfoundland and Labrador Additional Fiscal Equalization Offset Payments Act, losses on foreign exchange ($32.1 million), an increase in Youth Allowances Recovery ($24.8 million), decreases in payments to the Canadian Securities Regulation Regime Transition Office ($14.3 million) and payments of Liabilities Previously Recorded as Revenue ($11.9 million).
The increase in transfer payments under the Federal-Provincial Fiscal Arrangements Act for the first quarter of 2012-13 ($801.7 million) compared to the same quarter in 2011-12 is primarily the result of the legislative framework increases in Fiscal Equalization, the Canada Health Transfer, the Canada Social Transfer and Territorial Formula Financing and also reflects decreased recoveries under the Alternative Payments for Standing Programs.
The increase of $57.3 million in payment this year to the International Development Association reflects the increased value of payments required under the 16th replenishment compared to the values required under the 15th replenishment.
The total decrease in interest and other costs related to public debt was $470.7 million. This was attributable to decreases in interest on unmatured debt ($347.6 million) and other interest costs ($123.2 million) for the first quarter of 2012-13 compared to the same quarter in 2011-12. The decrease in interest on unmatured debt reflects lower Consumer Price Index adjustments on real return bonds and a lower effective interest rate on the stock of unmatured debt. The decrease in other interest costs reflects the decrease in the average long-term bond rate, which is used to calculate interest on the public sector pensions obligations pertaining to service pre-April 1, 2000.
The $1.2 million increase in Purchase of Domestic Coinage in the first quarter in 2012-13 compared to the same quarter last year is attributable to normal variations in the demand for coinage from businesses and consumers and in the timing of costs incurred for coinage procurement throughout the year.
Non-budgetary expenditures for the first quarter of 2012-13 increased by $318.4 million compared to the same quarter in the prior year. This increase is related to the value of loans disbursed to Crown Corporations 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.
The global economic recovery has recently weakened, becoming more uneven and uncertain, and the world economy continues to face significant challenges, including the European sovereign and banking debt crisis. Going forward, private sector economists are calling for positive, but modest growth in Canada and the United States. With this forecast, the Department's program priorities and associated plans are designed to mitigate the risks to the Canadian economy while seizing opportunities to strengthen economic growth and job creation and to advance Canada's leadership internationally.
In particular, the Department will continue to manage the economic volatility risks by ensuring it has in place the infrastructure, resources and authorities needed to respond to an evolving economic and financial sector environment. The Department will also manage the increased requirement for coordinated international decision making to deal with uncertain world economic conditions, with attention to ensuring that responsible agencies take effective coordinated action to support the soundness, integrity and reputation of the Canadian financial system.
The Department continues to work closely with Shared Services Canada to ensure the successful transfer of responsibilities, resources, and personnel relating to e-mail, data centres, networks, and associated internal services.
This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.
The Department of Finance will achieve Budget 2012 savings of $32.4 million by fiscal year 2014-15 by reconfiguring and modernizing the Department’s internal services and policy analysis functions. It is also taking a further significant step to reduce coinage procurement costs by changing the metal composition of $1 and $2 coins from metal alloys to plated steel cores and eliminating the penny. The estimated cost to the Government of supplying pennies to the economy is about $11 million per year.
The Department’s available funding reflects a reduction of $10 million associated with the introduction of plated $1 and $2 coins. This measure is part of Finance Canada’s contribution to the Government’s deficit reduction action plan. Further savings generated by other measures that comprise the Department’s contribution to the plan have not been reflected in the Estimates or this quarterly financial statement. However these additional amounts have been frozen and are not available for spending.
There are no financial risks or uncertainties related to these savings.
Originally signed by:
Michael Horgan, Deputy Minister
Originally signed by:
Sherry Harrison, Chief Financial Officer
August 23, 2012
Department of Finance Canada
Quarterly Financial Report
For the quarter ended June 30, 2012
|Fiscal year 2012-2013||Fiscal year 2011-2012|
for use for
2013 * **
|Year to date
for use for
|Year to date
| Grants and
| Total voted
| Fiscal Equalization
(Part I - Federal-
| Canada Health
Transfer (Part V.1 -
| Canada Social
Transfer (Part V.1 -
| Territorial Financing
(Part I.1 - Federal-
| Wait Times Reduction
Transfer (Part V.1 -
| Alternative Payments
for Standing Programs
(Part VI - Federal-
| Transitional assistance
to provinces entering
into the harmonized
(Part III.1 - Federal-
| Additional Fiscal
Equalization to Nova
Scotia (Part I -
| Total Federal-Provincial
| Interest on
Unmatured Debt 1
|Other Interest Costs 1||9,159,000||2,278,083||2,278,083||9,545,000||2,401,264||2,401,264|
| Transitional Payment to
Labrador (Nova Scotia
and Newfoundland and
Labrador Additional Fiscal
| Addtional Fiscal
Payment to Nova Scotia
(Nova Scotia and
Offshore Payments Act)
| Youth Allowances
Revision Act, 1964)
| Payments to
| Debt payments on behalf
of poor countries to
pursuant to section 18(1)
of the Economic
| Establishment of a
Regulation Regime and
Implementation Act, 2009)
| Canadian Securities
Transition Office Act)
| Purchase of
| Statutory Subsidies
1867-1982, and Other
| Contributions to
| Minister of
Finance - Salary
and motor car
| Losses on Foreign
| Payment of Liabilities
| Total statutory
| Pursuant to section 8(2)
of the Bretton Woods
and Related Agreements
Act, the amount of
provided by the Minister
of Finance for the
purchase of shares of
the International Bank for
Development shall not
exceed an amount of
$98,141,398 in United
States dollars over the
| Advances to Crown
| Advances pursuant to
of the Financial
of Canada Act (Gross)
In accordance with the
| Payment to
|* Includes only Authorities available for use and granted by Parliament at quarter-end
** Total available for use does not reflect measures announced in Budget 2012
1 Effective 2012-13, the Department of Finance’s statutory vote for Public Debt–Interest and Other Costs has been divided into two categories, Interest on Unmatured Debt and Other Interest Costs.
|Fiscal year 2012-2013||Fiscal year 2011-2012|
|(in thousands of dollars)||Planned
for the year
March 31, 2013 *
|Expended during the
June 30, 2012
for the year
March 31, 2012
|Expended during the
June 30, 2011
| Repair and
| Acquisition of
| Public debt
| Other subsidies
|* Planned expenditures do not reflect measures announced in Budget 2012|