Quarterly Financial Report
For the quarter ended June 30, 2011
Statement outlining results, risks and significant changes in operations, personnel and program

Introduction

This quarterly 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. This quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates.

Infrastructure Canada's raison d'être is to lead the Government of Canada's efforts in addressing Canada's public infrastructure challenges. Strong, modern, world-class public infrastructure is a key factor in achieving the Government of Canada's priorities of a stronger economy, a cleaner environment and more prosperous, safer communities.

Further information on Infrastructure Canada's mandate, responsibilities, and programs can be found in the Infrastructure Canada 2011-12 Main Estimates.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the Infrastructure Canada spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates for the 2011-12 fiscal year (FY). 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.

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 FY in which it is issued.

Infrastructure 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.

It should be noted that this quarterly report has not been subject to an external audit or review.

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

During 2010-11, the second year of the EAP implementation, Infrastructure Canada shifted primary efforts from reviewing and approving projects and committing funds, to focusing on oversight and delivery of project funding. In the current FY, the Department had $4.9B in authorities at Quarter 1 (Q1), compared to $8.1B in Q1 in the prior year (FY 2010-11). This represents a decrease of approximately 39.5%. The overall decrease can be explained primarily by the net decrease in the Main Estimates of $3.3B in contribution funds, due to the planned completion of programs announced under Canada's Economic Action Plan. That being said, on December 2, 2010, the deadline for projects funded by the Infrastructure Stimulus Fund and the Building Canada Fund-Communities Component Top-Up, two of the programs under the Economic Action Plan, was extended from March 31, 2011 to October 31, 2011. Because of the timing of this announcement, it was not possible for funding to be included in the 2011-12 Main Estimates. As a result, the 2011-12 funding requirements for these two programs will be requested through the 2011-12 Supplementary Estimates process.

As can be seen in Figure 1, the Department has spent 19.5% of its authorities in the current FY, compared to 16.3% in the same quarter of the prior FY. This can be explained by the overall decrease ($364M) in Transfer payment spending. While most transfer payment spending occurs later in the fiscal year, the Gas Tax Fund is an exception. Payments to provinces and territories go out twice per year and the first payment is typically made upon release of full supply, which happened, slightly earlier than usual this year, on June 27, 2011. Although Gas Tax Fund payments make up the majority of the transfer payment spending in Q1, total transfer payment spending has decreased slightly when compared to the same quarter last FY, due to the fact that, unlike FY 2010-11, no advance payments were made under the Infrastructure Stimulus Fund.

Figure 1 - Bar graph of Expenditures Compared to Annual Authorities (as at Quarter 1)

Risks and Uncertainties

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.

In Budget 2010 - Leading the Way on Jobs and Growth, the Minister of Finance announced that the operating budgets of departments, as appropriated by Parliament, would be frozen at their 2010-11 levels for the years 2011-12 and 2012-13. Infrastructure Canada has no ongoing base level of funding for administration and operating costs. Its operating requirements have always been funded entirely from infrastructure programs and related administrative costs are confirmed by Treasury Board on an annual basis.

There is a risk that contribution financial forecasts generated by the Department will be inaccurate, due to insufficient claims and information from partners and recipients. This risk could cause an eventual lapse of funds. The majority of the Department's contribution payments occur in the latter part of the FY. This can contribute to some uncertainty when forecasting cash requirements to Parliament. Within Q1 of the current year, the unique spending profile for contribution programs (see Highlights of Fiscal Quarter) will indicate a low proportion of the Department's authorities as being spent. It is important to note that the department's cash flows almost always lag behind the actual rate of construction of projects. Work begins upon project approval: contracts are put in place, plans drawn up, materials are ordered and construction starts. While the department commits funds upon project approval, federal funding does not actually flow to recipients until they have submitted claims for actual costs incurred. This is a key risk-management approach for the department, one that ensures that it only pays for work that has already been undertaken. In many cases, recipients choose to wait until completion of the project before submitting a claim. Upon receiving completed claims, the department pays in 30 days. The department works continually with its partners to ensure that forecasts are as accurate as possible, and to re-profile Infrastructure Canada's funding to meet the needs of its partners.

Mitigation of Risks and Uncertainties:

Without ongoing operating funding, the Department is uncertain as to how a budget freeze will affect its operations. Management is reviewing various options to adjust from a focus on delivering the Economic Action Plan to a focus on the Building Canada Fund, the Gas Tax Fund, and any new long-term infrastructure funding.

The Department is taking steps to minimize the size of future contribution funding lapses and improve its expenditure forecasting over the long-term. This issue has been raised with provincial/territorial Ministers and Deputy Ministers, and Infrastructure Canada's federal delivery partners. Particular emphasis is being placed on ensuring that:

  • Forecasted expenditures submitted by partners better reflect the real cash flow needs of their infrastructure projects; and
  • Claims are submitted as quickly as possible by partners for the costs they have incurred.

That being said, funding lapses will never be totally eliminated due to the complex nature of infrastructure projects. In particular, such projects can encounter legitimate delays that are related to environmental assessments, public consultations, shortages in materials and labour, weather, etc.

Significant Changes in Relation to Operations, Personnel and Programs

Changes in Key Senior Personnel

Infrastructure Canada's Chief Audit Executive left the Department during Q4 of the prior FY and since that time, Transport Canada's Chief Audit Executive has also been serving in the role for Infrastructure Canada.

Changes in Operations

There have been no significant changes to operations over the last quarter, excluding the impact of administering the extension of the Economic Action Plan programs mentioned in the following paragraph. This change was known prior to the beginning of the FY and its implications were included in Departmental plans.

Changes in Programs

As the deadline for projects under the Economic Action Plan was extended from March 31, 2011 to October 31, 2011, the Department continued to work with its funding partners to ensure that projects are completed in a timely manner, and to provide proper stewardship and oversight in processing thousands of claims. Much of the work associated with the payment of claims related to expenditure in fiscal year 2010-2011. It is noteworthy that almost 80 percent of the stimulus project costs were incurred by the original March 31, 2011 deadline. The extension of the construction deadline to October 31, 2011 is expected to allow sufficient time for virtually all the remaining projects to be completed.

Approval by Senior Officials

Approved by:

Original signed by:

Yaprak Baltacıoğlu,
Deputy Head

Date

David Miller,
Chief Financial Officer

Date

Signed in Ottawa, Ontario, August 29, 2011

Quarterly Financial Report
For the quarter ended June 30, 2011
Statement of Authorities (unaudited)
Fiscal year 2011-2012
(in thousands of dollars)

  Total available for use for the year ending
March 31, 2012 *
Used during the quarter ended
June 30, 2011
Year to date used at quarter-end
Vote 50** - Operating expenditures 50,031 10,842 10,842
Vote 55 - Contributions 4,693,333 937,189 937,189
Budgetary statutory authorities      
(S) - Contributions to employee benefit programs 5,038 1,260 1,260
(S) - Infrastructure Stimulus Fund   - -
(S) - Provincial - Territorial Infrastructure Base Funding Program 62,652 - -
(S) - Building Canada Fund Communities Component Top-Up   - -
(S) - Green Infrastructure Fund 70,118 267 267
Total Budgetary authorities 4,881,172 949,558 949,558
Non-budgetary authorities      
Total authorities 4,881,172 949,558 949,58

Statement of Authorities (unaudited) (continued)
Fiscal year 2010-2011
(in thousands of dollars)

  Total available for use for the year ending*
March 31, 2011
Used during the quarter ended
June 30, 2010
Year to date used at quarter-end
Vote 50** - Operating expenditures 56,132 9,782 9,782
Vote 55 - Contributions 6,562,620 1,269,168 1,269,168
Budgetary statutory authorities      
(S) - Contributions to employee benefit programs 5,156 1,289 1,289
(S) - Infrastructure Stimulus Fund 874,499 21,526 21,526
(S) - Provincial - Territorial Infrastructure Base Funding Program 240,000 10,350 10,350
(S) - Building Canada Fund Communities Component Top-Up 135,245 855 855
(S) - Green Infrastructure Fund 186,334 - -
Total Budgetary authorities 8,059,986 1,312,970 1,312,970
Non-budgetary authorities      
Total authorities 8,059,986 1,312,970 1,312,970

*Includes only Authorities available for use and granted by Parliament at quarter-end.

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Quarterly Financial Report
For the quarter ended June 30, 2011
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2011-2012
(in thousands of dollars)

  Planned expenditures for the year ending**
March 31, 2012
Expended during the quarter ended June 30, 2011 Year to date used at quarter-end
Expenditures:
Personnel 33,027 9,202 9,202
Transportation and communications 606 186 186
Information 5,816 73 73
Professional and special services 10,389 1,792 1,792
Rentals 1,920 802 802
Repair and maintenance 320 16 16
Utilities, materials and supplies 168 16 16
Acquisition of land, buildings and works - - -
Acquisition of machinery and equipment 2,798 12 12
Transfer payments 4,826,103 937,457 937,457
Other subsidies and payments 25 2 2
Total gross budgetary expenditures 4,881,172 949,558 949,558
Total net budgetary expenditures 4,881,172 949,558 949,558

Departmental budgetary expenditures by Standard Object (unaudited) (continued)

Fiscal year 2010-2011
(in thousands of dollars)

  Planned expenditures for the year ending**
March 31, 2011
Expended during the quarter ended
June 30, 2010
Year to date used at quarter-end
Expenditures:
Personnel 35,488 8,078 8,078
Transportation and communications 3,500 89 89
Information 1,007 135 135
Professional and special services 15,366 1,888 1,888
Rentals 2,799 211 211
Repair and maintenance 500 2 2
Utilities, materials and supplies 542 13 13
Acquisition of land, buildings and works - - -
Acquisition of machinery and equipment 2,085 649 649
Transfer payments 7,998,699 1,301,899 1,301,899
Other subsidies and payments - 6 6
Total gross budgetary expenditures 8,059,986 1,312,970 1,312,970
Total net budgetary expenditures 8,059,986 1,312,970 1,312,970

**Includes only Authorities available for use and granted by Parliament at quarter-end.

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