Western Economic Diversification Canada’s Quarterly Financial Report for the quarter ended December 31, 2019

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Statement Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs

Introduction

This quarterly financial report should be read in conjunction with the Main Estimates. It has been prepared by management as required by section 65.1 of the Financial Administration Act (FAA) 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 Departmental Plan 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 for the 2019-2020 fiscal year. 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 money 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 results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

Financial Structure

WD manages its expenditures under two votes:

• Vote 1 – Net operating expenditures include salary, and other operating costs (e.g., transportation and communications; professional and special services).
• Vote 5 – Grants and contributions include all transfer payments.

Budgetary statutory authorities represent payments made under legislation approved by Parliament, and include items such as the Government of Canada’s share of employee benefit plans and other minor items.

Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results

The following section highlights significant changes to fiscal quarter results as of December 31, 2019.

Statement of Authorities: Vote 1 – Net Operating Expenditures

Total authorities available for use for fiscal year 2019-2020 are $44.5 million, a net increase of $4.6 million, or 12%, compared to the $39.9 million for 2018-2019. The net increase is explained by:

• $2.9 million increase to deliver programming for investing in a diverse and growing Western economy;
• $1.3 million increase for the salary allocations of the new collective bargaining agreements;
• $1.0 million increase for protecting water and soil in the prairies;
• $0.1 million increase for launching a federal strategy on jobs and tourism;
• $0.5 million decrease in the operating budget carry forward, and
• $0.2 million net decrease from other minor adjustments.

Total authorities used year-to-date increased to $29.6 million for the quarter ended December 31, 2019, compared to $26.3 million at December 31, 2018. The $3.3 million increase, or 13%, is mainly explained by the increased salary costs to cover various transfer payment programming and retroactive payments from the settlement of various collective bargaining agreements, increases for office and technology fit-ups and offset mainly by savings from workplace 2.0 fit-up costs.

Graph 1 illustrates total authorities available for use for the fiscal year, and authorities used at quarter-end.

(in thousands of dollars)

Statement of Authorities: Vote 5 – Grants and Contributions

Total authorities available for use for fiscal year 2019-2020 are $261.6 million, a net increase of $61.8 million, or 31%, compared to the $199.8 million for 2018-2019. The net increase is explained by:

• $29.3 million increase for investing in a diverse and growing Western economy;
• $25.0 million increase in funding to support small and medium-sized enterprise users of steel and aluminum;
• $5.0 million increase in funding from the conclusion of WD’s commitment towards the thirty meter telescope;
• $4.0 million increase to fund the Canada Coal Transition Initiative;
• $3.5 million increase for the LNG Haisla Bridge;
• $3.4 million increase for launching a federal strategy on jobs and tourism;
• $2.6 million increase for receipts from Repayable Contributions, and
• $11.0 million decrease to restore rail service to Churchill, Manitoba.

Total authorities used year-to-date for the quarter-ended December 31, 2019 decreased to $113.0 million, compared to $124.9 million at December 31, 2018. The $11.9 million decrease, or -10%, is explained by:

• $20.4 million increase in Regional Economic Growth through Innovation payments funding the Innovation and Skills Plan;
• $5.1 million increase in Western Diversification Program payments, investing in a diverse and growing economy;
• $3.8 million increase to the Praxis Spinal Cord Institute;
• $8.0 million increase in payments supporting small and medium-sized enterprise users of steel and aluminum;
• $44.0 million decrease for payments restoring rail service to Churchill, Manitoba; and
• $5.2 million decrease for payment timing differences made to network partners.

Graph 2 illustrates total authorities available for use for the fiscal year, and authorities used at quarter-end.

(in thousands of dollars)

Statement of Authorities: Budgetary Statutory Authorities

Budgetary statutory authorities available for use for fiscal year 2019-2020 changed to $4.8 million, an increase of $0.8 million when compared to the $4.0 million in 2018-2019. The increase is a result of additional salary funding provided through Budget 2018 and Budget 2019 announcements and to incorporate additional funding as the employee benefit plan rate increased to 27%.

There is a slight increase in budgetary statutory authorities used for this reporting period when compared to the previous fiscal year.

Graph 3 illustrates total authorities available for use for the fiscal year, and authorities used at quarter-end.

(in thousands of dollars)

Statement of the Departmental Budgetary Expenditures by Standard Object

Expenditures by standard object for the quarter ended December 31, 2019, were $67.2 million, which reflects an increase of $24.7 million, or 58%, from the $42.5 million at December 31, 2018. This variance is explained by:

• $14.2 million increase in Regional Economic Growth through Innovation payments funding the Innovation and Skills Plan;
• $6.5 million increase in payments supporting small and medium-sized enterprise users of steel and aluminum;
• $2.6 million increase in Western Diversification Program payments, investing in a diverse and growing economy;
• $1.9 million increase in salary costs to cover various transfer payment programming;
• $0.4 million increase in office and technology fit-ups and other operating expenses; and
• $0.9 million decrease for payment timing differences made to network partners.

Additional information can be found in the Statement of Authorities, Vote 1 and Vote 5 sections above.

Graphs 4 and 5 illustrate actual expenditures for the quarter’s end.

(in thousands of dollars)

Risks and Uncertainties

The department is managing the allocation of resources within a well-defined framework of accountabilities, policies and procedures including a system of budgets, reporting and other internal controls to manage within available resources and Parliamentary authorities. WD also conducts an annual risk assessment exercise as part of its overall risk management approach. WD has not identified any significant financial risks from their annual risk assessment.

The department maintains financial management processes to ensure effective budget management.  Processes are in place to assess 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 priority initiatives.

Significant Changes in Relation to Operations, Personnel and Programs

There are no significant changes in relation to operations, personnel and programs for this reporting period.

Approval by Senior Officials

Approved by:

Statement of Authorities (unaudited)

Fiscal year 2019-2020 (in thousands of dollars)

Fiscal year 2018-2019 (in thousands of dollars)

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

Departmental Budgetary Expenditures by Standard Object (unaudited)

Fiscal Year 2019-2020 (in thousands of dollars)

Departmental Budgetary Expenditures by Standard Object (unaudited)

Fiscal Year 2018-2019 (in thousands of dollars)

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