Quarterly Financial Report - June 30, 2011

From: Transport Canada

Statement outlining results, risks and significant changes in operations, personnel and program for the Quarter ended June 30, 2011

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Table of Contents

1. Introduction

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 Treasury Board Accounting Standard 1.3.  The quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates.

1.1 Authority, Mandate and Program Activities

A summary description of Transport Canada’s program activities can be found in Part II of the 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 Transport Canada’s spending authorities granted by Parliament and those used by the department consistent with the Main Estimates and Supplementary Estimates (A) for the 2011-2012 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 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 fiscal year in which it is issued.

Transport 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 and published in the Departmental Performance Report.  However, the spending authorities voted by Parliament remain on an expenditure basis.

This quarterly report has not been subject to an external audit or review.

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

2.1 Statement of Authorities

This statement (attached at the end) illustrates authorities used for the quarter as well as authorities used to date for both the current and previous fiscal year.  Transport Canada’s authorities available for use in 2011-12 decreased by approximately $322 million when compared to the same quarter of the previous fiscal year, as summarized below:

Description of activity
(in million of dollars) 		Expenditures Revenues Net Expenditures
Vote 1 – Operating Expenditures (68) 4 (64)
Vote 5 – Capital Expenditures (126) - (126)
Vote 10 – Grants and Contributions (171) - (171)
Employee Benefit Plan 5 - 5
Other Statutory Payments 17 - 17
Payments to Transportation’s Crown Corporations 69 - 69
Payments to Other Crown Corporations (linked to the same portfolio) (52)   (52)
Total Variance (326) 4 (322)
2.1.1 Vote 1 – Net Operating expenditures (decrease of $64M) 

The variance is primarily a result of decreased planned spending on a number of initiatives including the remediation and assessment of projects to be carried out under the Federal Contaminated Sites Action Plan ($62.1 million), the sunsetting of the ecoTransport Strategy Initiative Program ($8.0 million) and decreased planned spending for the 2008 Strategic Review Reduction ($5.1 million).  These reductions are offset by new funding for items such as the Air Cargo Security Program of $13.6 million.

Total authorities used to date have increased by $2.4 million when compared to the first quarter of the current and previous year. The increase in expenditures is primarily a result of a decrease in respendable revenue in Aviation Safety ($1.7 million), resulting in increased expenditures over the same quarter for 2010-11.

2.1.2 Vote 5 – Capital expenditures (decrease of $126M) 

The variance is primarily explained by a decrease in the planned spending for the Detroit River Crossing Major Crown Project ($111.4 million) and a decrease in planned spending for the Modernizing of Federal Laboratories as announced in Budget 2009 ($9.7 million). 

Expenditures for the first quarter have decreased by approximately $4.0 million when comparing the previous year to the current year.  The decrease is primarily related to the completion of two projects:  Laboratory Maintenance – Motor Vehicle Test Centre ($2.5 million) and Cap-aux-Meules – Réparation Côt est Brise-Lames ($1.7 million).

2.1.3 Vote 10 – Grants and Contributions (decrease of $171M)

The variance is largely due to a decrease in planned spending regarding the Gateways and Border Crossing Fund ($263.1 million), along with a decrease in the Port Divestiture Fund ($20.4 million), offset by increases in planned spending for the Asia Pacific Gateway and Corridor Transportation Infrastructure Fund of $95.7 million and increases in the Airports Capital Assistance Program for $22.0 million. 

There was an increase in expenditures of $2.6 million for the first quarter of 2011-12 when compared to 2010-11.  This is mainly attributable to additional spending for the Ferry Services Contribution Program ($2.2 million)

2.1.4 Other Statutory Payments (increase of $17M) 

The variance is related to increased payments required to the capital portion of the statutory payment of the St. Lawrence Seaway Management Corporation ($17.0 million) reflecting significantly increased costs associated with maintaining the federally owned infrastructure. 

The increased expenditure of $12.0 million for the first quarter of 2011-12 when compared to the same quarter of 2010-11 is explained by the same reason.

2.1.5 Payments to  Transportation’s Crown Corporation (increase of $69M) & Payment to Other Crown Corporations (decrease of $52M)
Transportation’s Corporations

The variance is largely due to an increase in planned spending on a number of programs including:  1) the Jacques Cartier and Champlain Bridges Incorporated for $38.4 million related to urgent safety repairs, asset preparation and preparatory work on asset replacement including the Champlain Bridge Corridor and other structures in Greater Montreal and increased funding for the redecking of the Honoré Mercier Bridge. 2) Marine Atlantic Inc. for $83.1 million to implement phase II of the revitalization strategy less the allocation of additional funding to charter a vessel to replace the MV Atlantic Freighter. 3) As announced in Budget 2011, $22.6 million owed by St. John Harbour Bridge Authority to Her Majesty ($22.6 million). 

These increases are offset by a net decrease for via Rail Canada Inc. ($44.2 million) in funding as a result of the sunsetting of major equipment maintenance, overhaul, and certain capital projects introduced in Budget

2007 and Budget 2009, as well as a reduction for the Old Port of Montreal Corporation ($28.1 million) which was transferred last year from Transport Canada to the Privy Council Office.

There has been no material change in year to date expenditures over the same period of last year.

Other Crown Corporations

The authorities for Crown Corporations have decreased by $52.0 million, primarily as a result of decreased planned spending in Infrastructure Stimulus Funding for the National Capital Commission for $45.6 million over last year 2010-11.

Year to date expenditures for the Crown Corporations have increased over the same quarter last year ($6.2 million) as a result of a timing difference in payments by the National Capital Commission.

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

Transport Canada’s total planned expenditures for the current fiscal year have decreased by approximately $322 million when compared to the previous fiscal year.  Overall, total expenditures for the first quarter approximate the same percentage of expenditures in relation to planned expenditures when comparing the current to previous year, 21% and 18% respectively.

There was a difference of approximately $19 million in the first quarter regarding personnel costs when comparing expenditures of the current to previous year.  The variance is largely attributed to a timing difference which saw the recognition of Employee Benefit Plan payments of $18.6 million incurred earlier this fiscal year over last year.

Expenditures relating to the acquisition of land, buildings and works decreased by approximately ($4 million) during the first quarter when compared to the previous year’s quarter.  The decrease is attributed to the completion of two projects:  Laboratory Maintenance – Motor Vehicle Test Centre ($2.5 million) and Cap-aux-Meules – Réparation des Brise-Lames ($1.7 million).

Transfer payments increased by approximately $4 million for the first quarter when compared to the same quarter of the previous year.  The increase is mainly related to an increase in Statutory payments for the Northumberland Crossing Subsidy for $1.4 million and an increase in the Ferry Services Contribution Program of $2.2 million.

Payments regarding other subsidies and payments increased by approximately $24.3 million when comparing the current quarter to the previous year’s quarter.  The variance is explained by increased transfer payments to Marine Atlantic for $17.4 million, St. Lawrence Seaway Management Corporation for $12.0 million, combined with a decrease in payments to the Old Port of Montreal Corporation ($7.0 million) which has been transferred last year from Transport Canada to the Privy Council Office.   

Revenues netted against expenditures decreased by approximately ($2.0 million) when comparing the quarter expenditures of the current to the previous year.  Respendable revenue decreased in 2011-12 in Aviation Safety ($1.7 million) over the same period of the previous year.

3. Risk and Uncertainties

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-11 levels for the fiscal years 2011-12 and 2012-13. Transport Canada has implemented strategies to manage the operating budget freeze within the department. These strategies include expenditure restraint in discretionary spending and re-allocating planned spending from lower to higher priorities.

Transport Canada is responsible for the Government of Canada’s transportation policies and programs. While not directly responsible for all aspects or modes of transportation, the Department plays a leadership role to ensure that all parts of the transportation system work together effectively.

The transportation system is a complex structure that includes multiple jurisdictions of government interacting with private-sector stakeholders and consumers.  In years ahead, emerging global pressures such as global restructuring, demographic shifts, natural resources scarcity, financial constraints, environmental pressures, ever present security threats and general uncertainty and complexity will present a number of new challenges for Canada’s transportation system.

The department has developed a Corporate Risk profile to manage its strategic risks which include finding the appropriate balance between the requirements of the national system and expectations of provincial and municipal jurisdictions and private sector entities; tensions in third party labour-employer relationships that impact the transportation system; tensions between users and providers of transportations services; increasingly limited public funds; aging infrastructure; constrained uptake of transportation innovation; and evolving international direction related to environmental issues and climate change.

Within this context, the key financial risk and uncertainties that could impact the department’s financial plan for the current year are summarized below. 

Risk Key Mitigation
  • Lack of clarity in roles and responsibilities in protocols and communication channels
  • Governance structures that establish clear lines of accountability, roles and responsibilities
  • Inability of information management and information technology systems to meet evolving management information needs
  • Incorporation of evolving information needs into strategic investment planning for information technology infrastructure
  • Inability to deliver on core responsibilities, given resource constraints and increased reporting burden.
  • Review of the efficiency and effectiveness of departmental operations and programs.

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

There have been no significant changes in relation to operations, personnel and programs over the last year.

Approved by:

Original signed by

Yaprak Baltacioğlu,
Deputy Minister
Ottawa, Canada

Date: August 29, 2011

Original signed by

André Morency,
Chief Financial Officer
Ottawa, Canada

Date: August 22, 2011

 

Statement of Authorities (unaudited)

Authorities
(in thousands of dollars) 		Fiscal year 2011-2012 Fiscal year 2010-2011
Total available for use for the year ending March 31, 2012 * Used during the quarter ended June 30, 2011 Year-to-date ( YTD ) used at quarter-end Total available for use for the year ended March 31, 2011 * Used during the quarter ended June 30, 2010 Year-to-date ( YTD ) used  at quarter-end
Vote 1 - Net Operating expenditures 549,895 125,419 125,419 613,757 122,960 122,960
Vote 5 - Capital expenditures 95,157 2,328 2,328 221,127 6,406 6,406
Vote 10 - Grants and contributions 669,077 9,971 9,971 840,113 7,323 7,323
Budgetary statutory authorities
Employee Benefit Plan 74,380 18,595 18,595 69,558 - -
Grants and Contributions 62,275 59,075 59,075 61,071 57,721 57,721
Other Statutory Payments 79,674 34,318 34,318 62,881 22,334 22,334
Non-Statutory Expenditures
Payments to Transportation’s Crown Corporations 1,507,718 372,708 372,708 1,438,588 371,929 371,929
Payments other Crown Corporations (linked to the same portfolio) 132,572 41,176 41,176 185,221 34,893 34,893
Total Budgetary authorities 3,170,748 663,590 663,590 3,492,316 623,566 623,566
Non-budgetary authorities - - - - - -
Total authorities 3,170,748 663,590 663,590 3,492,316 623,566 623,566

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

Departmental Budgetary Expenditures by Standard Object (unaudited)

Expense category
(in thousands of dollars) 		Fiscal year 2011-2012 Fiscal year 2010-2011
Planned expenditures for the year ending March 31, 2012 Expended during the quarter ended June 30th, 2011 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2011 Expended during the quarter ended June 30th, 2010 Year to date used at quarter-end
Expenditures:
Personnel 487,683 127,568 127,568 479,472 108,802 108,802
Transportation and communications 43,529 6,875 6,875 48,994 8,492 8,492
Information 4,715 299 299 7,194 514 514
Professional and special services 128,241 11,353 11,353 170,600 12,662 12,662
Rentals 4,943 778 778 5,699 925 925
Repair and maintenance 19,737 693 693 32,484 2,280 2,280
Utilities, materials and supplies 18,213 4,072 4,072 20,527 3,827 3,827
Acquisition of land, buildings and works 76,250 131 131 177,201 4,237 4,237
Acquisition of machinery and equipment 18,908 1,932 1,932 43,926 2,280 2,280
Transfer payments 731,352 69,046 69,046 901,184 65,044 65,044
Other subsidies and payments 1,719,883 453,348 453,348 1,686,623 429,043 429,043
Total gross budgetary expenditures 3,253,454 676,095 676,095 3,573,904 638,105 638,105
Less Revenues netted against expenditures:
Sale of Services (82,706) (11,656) (11,656) (81,588) (13,720) (13,720)
Other Revenue   (849) (849)   (543) (543)
Research & Development   0 0   (276) (276)
Total Revenues netted against expenditures: (82,706) (12,505) (12,505) (81,588) (14,539) (14,539)
Total net budgetary expenditures 3,170,748 663,590 663,590 3,492,316 623,566 623,566
 

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