Western Economic Diversification Canada
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Western Economic Diversification Canada's Quarterly Financial Report for the quarter ended December 31, 2012

Statement outlining results, risks and significant changes in operations, personnel and program


Introduction

This quarterly financial report should be read in conjunction with the Main Estimates, Supplementary Estimates (B), Canada's Economic Action Plan 2012 (Budget 2012) and the Quarterly Financial Report for the quarters ended June 30 and September 30, 2012. It 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. This quarterly report has not been subject to an external audit or review.

Authority, Mandate and Program Activities

Western Economic Diversification Canada (WD) is mandated to "promote the development and diversification of the economy of Western Canada and to advance the interests of the West in national economic policy, program and project development and implementation."

The Report on Plans and Priorities and Main Estimates provide further information on WD's authority, mandate and program activities.

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 (B) for fiscal year 2012–13. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before moneys 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 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.

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 2012–13, 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.

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

Total Authorities Available for Use and Planned Expenditures for the Year Ending March 31, 2013

Planned departmental spending is concentrated in transfer payments (74 percent) and personnel (18 percent)—combined, they account for 92 percent of total planned expenditures (refer to the fiscal year 2012–13 pie chart below). This planned spending pattern remains consistent when compared to fiscal year 2011–12 and it is expected to continue for fiscal year 2012–13.

The department experienced an overall decrease in total funding available for use and planned expenditures to $197.5 million for fiscal year 2012–13, compared to $216.9 million for fiscal year 2011–12, as illustrated in the "Statement of Authorities" and "Departmental Budgetary Expenditures by Standard Object" tables. The significant decrease of $19.4 million (9 percent) is due to:

  • an increase in funding for the Community Infrastructure Investment Fund ($23.1 million);
  • an increase in receipts from repayable contributions ($1.1 million);
  • a decrease related to the wind down of funding for the Recreational Infrastructure Canada (RInC) program ($14.9 million);
  • a decrease in cash flow requirements for the Alberta-Saskatchewan Centenaries project ($13.9 million);
  • a decrease realized through the savings measures announced in Budget 2012 ($6.6 million);
  • a decrease resulting from the transfer of operating funds to Shared Services Canada (SSC) ($2.6 million);
  • a decrease realized through the 2010 Strategic Review exercise ($2.4 million);
  • a decrease in funding for certain operational requirements such as severance pay ($2.1 million);
  • a net decrease in operating funds to administer programs on behalf of Infrastructure Canada ($619 thousand);
  • a decrease in funding for the Western Diversification Program ($455 thousand).

Text Version (Link 1): Pie Chart: Planned Expenditures for Fiscal Year 2012—2013

(in thousands of dollars)

This pie chart breaks down planned expenditures for the fiscal year 2012–13 This pie chart breaks down planned expenditures for the fiscal year 2011–12.

Total Authorities Used and Expended for the Quarter Ended December 31, 2012 and YTD Used at Quarter-End

Total authorities used for the third quarter and year to date is concentrated in transfer payments (64 percent quarterly; 59 percent year to date) and personnel (30 percent quarterly; 35 percent year to date)—combined, they account for 94 percent of third quarter and year to date actual expenditures (refer to the fiscal year 2012–13 pie charts below). This spending pattern remains consistent when compared to the same periods of fiscal year 2011–12 and it is expected to continue for fiscal year 2012–13.

Third quarter and year to date spending reflect overall declines in total authorities used and actual expenditures to $29.4 million and $80 million (respectively) for fiscal year 2012–13, compared to $31.8 million and $88.3 million for fiscal year 2011–12, as illustrated in the "Statement of Authorities" and "Departmental Budgetary Expenditures by Standard Object" tables. The significant third quarter decrease of $2.4 million (8 percent) and year to date decrease of $8.3 million (9 percent) is due to:

  • an overall reduction in departmental staff, notably the transfer of personnel to SSC, the continued implementation of Strategic Review savings and the non-extension of term employees ($1.4 million quarterly; $4.3 million year to date);
  • other operating cost reductions, notably the transfer of costs to SSC and managed expenditure reductions (net quarterly and year to date decreases of $810 thousand and $2.4 million, respectively);
  • the completion of the RInC program and timing differences in the processing of claims for various transfer payment programs. These contributed to a net decrease in transfer payment expenditures ($246 thousand quarterly; $1.6 million year to date).

A downward trend in transfer payment (grants and contributions) and operating (personnel, other operating costs) spending is expected by fiscal year-end with the implementation of departmental spending reduction initiatives.

Text Version (Link 2): Pie Chart: Actual Expenditures for Fiscal Year 2012—2013

(in thousands of dollars)

This pie chart breaks down actual expenditures for the quarter ended December 31, 2012. This pie chart breaks down actual expenditures for the quarter ended December 31, 2011.

This pie chart breaks down actual expenditures YTD for the quarter ended December 31, 2012. This pie chart breaks down actual expenditures YTD for the quarter ended December 31, 2011.

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Risks and Uncertainties

Departmental operating budgets were frozen at 2010–11 levels for fiscal years 2011–12 and 2012–13 as a result of cost containment measures announced in Budget 2010 and Budget 2011. This includes no additional funding for fiscal year 2012–13 to cover annual salary increases of approximately $498 thousand against negotiated collective agreements, plus a further forecasted amount of $381 thousand for collective agreements currently under review.

The department was required to review its programs and spending in fiscal year 2010–11 as a result of the 2010 strategic review exercise. This review has presented opportunities to streamline operations, re-align programs and eliminate others that are no longer necessary. The department will realize cumulative three-year savings of $8.9 million as outlined in Budget 2011, of which $5.6 million has been reduced from the 2012–13 funding level.

The department is addressing reduced flexibility to its transfer payment and operating budgets by managing the implementation of cost containment measures and strategic review savings within a well-defined framework of accountabilities, policies and procedures. It has the necessary system of budgets, reporting and other internal controls to manage within available resources and Parliamentary authorities. Proportionally reduced budget allocations to business and internal services units, supported by the regular review of staffing, and actual and forecast expenditure reports ensure resource utilization remains in line with financial and human resources planning, such that adjustments can be made on time.

The department maintains its financial management processes and it will continue to strengthen them, such that budget management remains effective. This includes assessing the impact of project timing fluctuations and the process for forecasting multi-year funding requirements. The decision-making process facilitates the re-allocation of financial resources to higher-priority initiatives.

Significant changes in relation to operations, personnel and programs

Shared Services Canada (SSC) was established on August 4, 2011, "to consolidate, streamline and improve information technology infrastructure services […] across the federal government." As a result, WD transferred $2.6 million to SSC—personnel costs of $702 thousand and other operating costs of $1.9 million.

Budget 2012 Implementation

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 businesses to deal with their government; and, modernize and reduce the back office.

The department will achieve savings of $16.3 million by fiscal year 2014–15 through efficiency measures and scaling back where the need is reduced; transforming how it works internally; and by consolidating and streamlining. The department has undertaken a review of internal services that will consolidate functions, notably procurement and accounting operations, to eliminate duplication and reduce operating costs. Other savings measures include: the transfer of the internal audit function to the Office of the Comptroller General; adopting a life cycle approach to the management of transfer payment projects; and various other managed expenditure reductions such as travel, professional services and transfer payments. With these changes, WD will focus on supporting management excellence and accountability across government.

In the first year of implementation, WD will achieve savings of $6.6 million related to Budget 2012—transfer payment savings of $6.2 million, personnel savings of $94 thousand and other operating savings of $304 thousand. This reduction is reflected in the third quarter variance of $19.4 million in total authorities available for use and planned expenditures between fiscal years 2011–12 and 2012–13. Savings will increase to $9.3 million in 2013–14 and will result in ongoing savings of $16.3 million by 2014–15.

Total authorities used and actual expenditures for the third quarter have declined significantly by $2.4 million relative to the same period of 2011–12, with Budget 2012 initiatives accounting for minimal impacts. The balance of Budget 2012 savings will continue to be reflected through to fiscal year-end.

The department will continue to manage financial risks and uncertainties related to the anticipated costs of implementing personnel reduction measures in order to achieve the savings outlined in Budget 2012; the costs of which will vary depending on the timing of employee departures. WD continues to mitigate the implementation of Budget 2012 savings through financial management and monitoring processes that facilitate the re-allocation of resources, and financial and human resources planning.

There were minimal changes in relation to operations, personnel and programs for this reporting period related to Budget 2012 initiatives. During the third quarter, the department proceeded with staffing processes for centralized accounting operations and procurement units. As the centralized units become staffed and operational, the balance of Budget 2012 savings will be reflected in subsequent quarterly reports.

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Approval by Senior Officials

Approved by:

Daphne Meredith
Deputy Minister
Jim Saunderson
Chief Financial Officer

Edmonton, Canada
Date: February 15, 2013

 

Statement of Authorities (unaudited)

(in thousands of dollars) Fiscal year 2012—13
Total available for use for the
year ending March 31, 2013 * **
Used during the quarter ended December 31, 2012 Year to date used at quarter-end
Vote 1 — Net operating expenditures 45,766 9,399 28,727
Vote 5 — Grants and contributions 142,148 18,698 45,389
Budgetary statutory authorities
Employee benefit plan 5,086 1,271 3,814
Grants and contributions 4,500 - 2,017
Other 17 5 17
Total authorities 197,517 29,373 79,964

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(in thousands of dollars) Fiscal year 2011—12
Total available for use for the
year ended March 31, 2012*
Used during the quarter ended December 31, 2011 Year to date used at quarter-end
Vote 1 – Net operating expenditures 52,137 11,601 35,426
Vote 5 – Grants and contributions 155,098 18,944 46,865
Budgetary statutory authorities
Employee benefit plan 5,171 1,293 3,879
Grants and contributions 4,500 - 2,175
Other 2 - 2
Total authorities 216,908 31,838 88,347
Note: Variances between quarters are due to rounding.

More information is available in the following table.

* Includes only authorities available for use and granted by Parliament at quarter-end.
** Total available for use reflects measures announced in Budget 2012.

 

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars) Fiscal year 2012—13
Planned expenditures for the year ending March 31, 2013 * Expended during the quarter ended December 31, 2012 Year to date used at quarter-end
Expenditures
Personnel 34,781 8,869 27,557
Transportation and communications 3,539 349 859
Information 470 53 163
Professional and special services 8,305 954 2,757
Rentals 860 247 860
Repair and maintenance 255 3 14
Utilities, materials and supplies 722 30 132
Acquisition of machinery and equipment 1,938 136 146
Transfer payments 146,647 18,698 47,406
Other subsidies and payments - 34 70
Total net budgetary expenditures 197,517 29,373 79,964
* Planned expenditures reflect measures announced in Budget 2012.

 

(in thousands of dollars) Fiscal year 2011—12
Planned expenditures for the year ended March 31, 2012 Expended during the quarter ended December 31, 2011 Year to date used at quarter-end
Expenditures
Personnel 37,504 10,278 31,896
Transportation and communications 4,764 911 2,260
Information 397 55 153
Professional and special services 10,442 1,380 3,520
Rentals 1,210 177 468
Repair and maintenance 612 10 81
Utilities, materials and supplies 794 80 230
Acquisition of machinery and equipment 1,587 36 320
Transfer payments 159,598 18,944 49,040
Other subsidies and payments - (33) 379
Total net budgetary expenditures 216,908 31,838 88,347
Note: Variances between quarters are due to rounding.