Canadian Heritage’s Quarterly Financial Report

For the quarter ended December 31, 2011

Table of contents

1. Introduction

This quarterly financial report should be read in conjunction with the Main Estimates and Supplementary Estimates. It has been prepared by management as required by section 65.1 - Quarterly financial reports of the Financial Administration Act and in the form and manner prescribed by the Treasury Board Accounting Standard 1.3 - Departmental and Agency Quarterly Financial Report . The quarterly report has not been subject to an external audit or review.

1.1 Authority, Mandate and Program Activities

Canadian Heritage promotes an environment in which all Canadians take full advantage of dynamic cultural experiences, celebrating our history and heritage, and participating in building stronger communities.

Further details on PCH’s authority, mandate and program activities can be found in the 2011-12 Report on Plans and Priorities and the 2011-12 Main Estimates.

1.2 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 to those used by the department consistent with the Main Estimates and Supplementary Estimates (B) for the 2011-12 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 funds can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation granting 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 fiscal year in which it is issued.

PCH 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.

1.3 Canadian Heritage Financial Structure

Canadian Heritage has a financial structure composed of voted budgetary authorities that include Vote 1 – Operating Expenditures and Vote 5 – Grants and Contributions, and statutory authorities which is composed of Contributions to employee benefits plans, Minister’s Salary and motor car allowance and Salaries of Lieutenant-Governors.

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

2.1 Statement of Authorities

PCH’s 2011-12 authorities available for use have increased by approximately $1.0M when compared to the same quarter of 2010-2011.  More specifically, the total available for use has decreased by $17.2M in Operating authorities and increased by $18.1M in grants and contributions authorities.

The decrease of $17.2M in Operating authorities is mainly due to a reduction in funding due to past government-wide resource re-allocation measures ($37.0M), offset in part by an increase in pay list requirements ($14.9M) and funding for the Commemoration of the War of 1812 ($2.3M).

The increase of $18.1M in Grants and contributions authorities is mainly due to new funding received through the 2011-12 Supplementary Estimates (B) for the Toronto 2015 Pan American and Parapan American Games ($13.5M) and the Commemoration of the War of 1812 ($2.5M).

The following table summarizes the major changes in authorities from 2010-11 to 2011-12.

Items

(in millions)

Vote 1

Vote 5

Total

An increase in pay list requirements (for example, Severance pay)

$14.9

$0.0

$14.9

An increase for the Hosting Program to support the Government of Canada's Contribution to the Capital Budget of the Toronto 2015 Pan American and Parapan American Games

$0.0

$13.5

$13.5

Commemoration of the War of 1812

$2.3

$2.5

$4.8

A decrease in funding due to past Government-wide resource re-allocation measures

($37.0)

$0.0

($37.0)

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

Total expenditures, for the quarter ended December 31, have decreased by $62.0M in 2011-12 when compared to the same quarter of 2010-11.

As noted in the table below, PCH has spent 17% ($231.7M) of its authorities in the third quarter of 2011-12, which is lower than the 22% ($293.7M) that was spent during the same period in 2010-11.

This variation is mainly explained by a decrease of $63.7M in transfer payment expenditures. This decrease is mostly due to the Canada Media Fund ($23.3M), the Sport Support Program ($21.1M), Enhancement of Official Language ($9.7M), Canada Arts Training Funds ($6.0M) for which expenditures have decreased in the third quarter of 2011-12 when compared to the same quarter of 2010-11. However, this decrease is mainly explained by timing since a greater percentage of payments for these programs were made earlier in the year.

The third quarter operating expenditures are at a similar level if we compare the 2010-11 expenditures ($51.0M) to the 2011-12 expenditures ($52.0M).

The Year-to-date used in 2011-12 is 62% ($834.3M) compared to 66% ($879.8M) in 2010-11.  This variation is mainly due to a decrease in transfer payment expenditures ($33.6M) for programs such as the Canada Periodical Fund ($14.5M), Aboriginal Peoples Program ($7.5M), Official Languages Programs ($6.3M) and the Canada Cultural Spaces Fund ($5.4M) due to timing.  The remainder of the variance is mainly explained by a decrease in Operating expenditures ($10.5M) for goods and services such as Professional and Special Services ($6.4M) and Transportation and Communications ($2.4M).  When compared to 2010-11, the 2011-12 Year-to-date personnel expenditures seem to be at the same level.  However, an important fact to take into account is that expenditures include an increase of $14.9M from 2010-11 to 2011-12 for paylist requirements (i.e. Severance pay).

Expenditures Compared to Annual Authorities(in millions of dollars)

Expenditures Compared to Annual Authorities
(in millions of dollars)

 

2011-12

2010-11

Total available for use

1,337.7 (100%)

1,336.6 (100%)

Used during the quarter

231.7 (17%)

293.7 (22%)

Year-to-date used

834.3 (62%)

879.8 (66%)

3. Risks and Uncertainties

In 2010-11, the Department embarked on an important Transformation Initiative exercise. This exercise will continue over the course of fiscal year 2011-12. Its aim is to modernize the Department of Canadian Heritage’s operations and seek innovative solutions to better serve Canadians and address departmental financial challenges. The following are key initiatives addressed through the Transformation Initiative to mitigate the risks related to previously planned departmental budget reductions:

  • An Internal Services Review (ISR) initiative designed to streamline and simplify internal corporate processes to effectively support the Department’s mandate while meeting central agency and legislative requirements.  The ISR was carried out in 2010-11 with several initiatives being implemented in
    2011-12.
  • The Grants and Contributions Modernization initiative is a major Transformation project that is in progress.  It is designed to simplify processes for repeat, reliable clients, implement affordable technological improvements, and standardize our business processes to significantly reduce costs while improving services.

In addition to these planned reductions, Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-11 levels for fiscal years    2011-12 and 2012-13. Savings to offset increased costs are being achieved through internal operating budget reallocations, as part of the department’s resource allocation and financial plans.

4. Significant Changes in Relation to Operations, Personnel and Programs

There have been no significant changes in relation to operations, personnel and programs in this quarter.  However, the following changes to senior management personnel were announced in December and will take effect in the next quarter:

  • Hubert Lussier, Assistant Deputy Minister – Citizenship and Heritage sector;
  • Jean-Stéphen Piché, Assistant Deputy Minister – Strategic Policy, Planning and Corporate Affairs;
  • Robert Hertzog, Chief Financial Officer.

Approved by:

Daniel Jean, Deputy Minister

Robert Hertzog, Chief Financial Officer

Statement of Authorities (unaudited)

(in thousands of dollars)

 

Fiscal year 2011-12

Fiscal year 2010-11

Total available for use for the year ending March 31, 2012 *

Used during the quarter ended
December 31, 2011

Year to date used at quarter-end

Total available for use for the year ended March 31, 2011*

Used during the quarter ended
December 31, 2010

Year to date used  at quarter-end

Vote   1 - Net Operating expenditures 

219,579

51,996

147,820

236,815

51,021

158,301

Vote 5 - Grants and contributions           

1,090,002

171,481

666,910

1,071,951

235,145

700,469

Budgetary statutory authorities

28,083

8,247

19,599

27,858

7,528

21,072

Total Budgetary authorities

1,337,665

231,724

834,329

1,336,623

293,694

879,842

Total authorities

1,337,665

231,724

834,329

1,336,623

293,694

879,842

More information is available in the attached table.
*Includes only Authorities available for use and granted by Parliament at quarter-end.

Departmental budgetary expenditures by Standard Object (unaudited)

(In thousand of dollars)

Expenditures

 Fiscal year 2011-12

 

Fiscal year 2010-11

Planned expenditures for the year ending March 31, 2012

Expended during the quarter ended December 31, 2011

Year to date used at quarter-end

Planned expenditures for the year ending March 31, 2011

Expended during the quarter ended December 31, 2010

Year to date used at quarter-end

Personnel

168,781

45,365

142,076

194,573

44,295

142,434

Transportation and communications

10,722

2,885

4,667

12,391

3,760

7,014

Information

15,874

1,861

5,292

8,812

3,077

4,685

Professional and special services

40,932

4,856

10,710

30,425

6,765

17,097

Rentals

2,448

379

1,224

1,662

576

2,044

Repair and maintenance

2,760

482

1,041

2,158

643

1,189

Utilities, materials and supplies

4,127

753

1,625

3,039

701

2,858

Acquisition of machinery and equipment

4,344

330

1,031

6,747

582

923

Transfer payments

1,090,821

171,481

667,174

1,071,330

235,145

700,469

Other subsidies and payments*

1,256

4,209

2,156

10,186

-147

3,861

Total gross budgetary expenditures

1,342,065

232,601

836,996

1,341,323

295,398

882,575

Less Revenues netted against expenditures:

 

 

 

 

 

 

Revenue credited to the Vote

-4,400

-877

-2,667

-4,700

-1,704

-2,733

Total Revenues netted against expenditures:

-4,400

-877

-2,667

-4,700

-1,704

-2,733

Total net budgetary expenditures

1,337,665

231,724

834,329

1,336,623

293,694

879,842

*Expenditures temporarily include credits which will be reallocated to other standard objects before the fiscal year-end