Quarterly Financial Report for the quarter ended June 30, 2017

Quarterly Financial Report for the quarter ended June 30, 2017 (PDF, 312KB)

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1. Introduction

This Quarterly Financial Report (QFR) should be read in conjunction with the Main Estimates. It has been prepared by management as required under section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Directive on Accounting Standards, GC 4400 Departmental Quarterly Financial Report. It has not been subject to an external audit or review.

1.1 Raison d'être

Public Works and Government Services Canada (PWGSC) was established effective June 20, 1996, under the Department of Public Works and Government Services Act. As of November 4, 2015, PWGSC operates as Public Services and Procurement Canada (PSPC). PSPC plays an important role in the daily operations of the Government of Canada. It supports federal departments and agencies in the achievement of their mandated objectives as their central purchasing agent, real property manager, linguistic authority, treasurer, accountant, and pay and pension administrator, and common service provider. The department's vision is to excel in government operations, and its strategic outcome and mission are to deliver high-quality, central programs and services that ensure sound stewardship on behalf of Canadians and meet the program needs of federal institutions.

A summary description of the department'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 Table 1—Statement of authorities (unaudited) includes the department's spending authorities granted by Parliament, and those used by the department consistent with the Main Estimates for the current 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.

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.

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.

1.3 Public Services and Procurement Canada's financial structure

PSPC provides services to many government departments, agencies and Crown corporations through a variety of funding mechanisms. This includes budgetary authorities that are comprised of voted and statutory authorities, as well as non-budgetary authorities. The voted budgetary authorities include operating expenditures, vote-netted revenues and capital expenditures, while the statutory authorities are mainly comprised of revolving funds, employee benefit plans and payments in lieu of taxes (PILT). The non-budgetary authorities consist primarily of the Seized Property Working Capital Account (see description below).

PSPC's complex financial structure may result in significant fluctuations in authorities on a quarterly basis which are due to timing differences that are resolved by year end. These are summarized as follows:

2. Highlights of fiscal quarter and fiscal year to date results

2.1 Significant changes to authorities

When compared to the same quarter of the previous year, year to date PSPC's authorities available for use increased by $471.9 million ($3,222.5 million in the fiscal year ended March 31, 2017; $3,694.4 million in the fiscal year ending March 31, 2018) as reflected in Table 1—Statement of Authorities (unaudited). Major reasons for the increase are outlined below:

Year over year variances in authorities available for use (in millions of dollars)
Initiative Operating Capital Budgetary statutory authorities Total variances
Parliamentary Precinct Rehabilitation 25.5 80.0 0 105.5
Real Property Program Integrity 88.3 6.1 0 94.4
Price and Volume Protection 75.1 0 0 75.1
Engineering Assets - Phase II and Budget 2016 12.9 55.6 0 68.5
Energy Savings Acquisition Project 0 68.4 0 68.4
Refit / Fit-up 0 60.0 0 60.0
Federal Contaminated Sites Action Plan - Phase II and III 35.7 0 0 35.7
Capital Vote Implementation 45.6 (45.6) 0 0
Capital Leases 0 (7.5) 0 (7.5)
Grande Allée Armoury 0 (14.0) 0 (14.0)
Other (3.1) (5.3) (5.8) (14.2)
Cumulative variance in authorities available for use 280.0 197.7 (5.8) 471.9

Groupings can change between quarters due to materiality of initiatives.

Amounts may not balance with other public documents due to rounding.

The year to date net increase of $471.9 million can be explained by:

Parliamentary Precinct Rehabilitation—increase of $105.5 million
Work continues with the rehabilitation of the Parliamentary Precinct, in order to preserve these key heritage assets and national symbols for years to come. This initiative reduces the environmental footprint of the precinct and enriches visitor experience, while creating thousands of jobs and supporting the development of innovative technologies. This year, PSPC plans to deliver on the rehabilitation of West Block, including the courtyard infill for the interim House of Commons, and the construction of the Visitor Welcome Centre Phase 1.
Real Property Program Integrity—increase of $94.4 million
Being the Federal Government Real Estate Manager, part of PSPC's mandate includes making necessary repairs and maintenance of federal buildings across Canada in order to ensure a safe, healthy, and secure workplace. Major work on key building components will also take place on various buildings, such as Canada's Four Corners, Lester B Pearson and Postal Station B in Ottawa.
Price and Volume Protection—increase of $75.1 million
This funding increase protects for inflation (price) and variation in the number of public servants requiring accommodations (volume). An annual reconciliation exercise will be performed to ensure PSPC is not over / under funded.
Engineering Assets Phase II and Budget 2016—increase of $68.5 million
Through the Engineering Assets initiatives, PSPC is rehabilitating major public infrastructure, reducing risks related to health and safety, and ensuring long-term stewardship of these assets. The funding received through Budget 2016 allows to focus on four projects, that is: the Alexandra Bridge ON, the Timiskaming Dam Complex QC, the Esquimalt Graving Dock BC and the Alaska Highway BC.
Energy Services Acquisition Project—increase of $68.4 million
In support of Government of Canada's commitment towards cleaner technologies, PSPC's Energy Services Acquisition Project will modernize the energy system serving federal buildings in the National Capital Region. This will be achieved by converting the existing heating infrastructure from steam to a more modern low temperature hot water technology; therefore reducing the environmental footprint.
Refit/fit-up—increase of $60.0 million
Part of PSPC's mandate includes the preparation of the space for occupancy to meet client departments' program requirements. This service can range from smaller refit projects, such as constructing a new boardroom, to larger full scale fit-ups where tenants are relocated in new space.
Federal Contaminated Sites Action Plan—Phase II and III – increase of $35.7 million
The Phase II and III of the Federal Contaminated Sites Action Plan (FCSAP) allow for the continuation of remediation activities at various contaminated sites to reduce associated liabilities, as well as mitigate human health and environmental risks. Through the FCSAP, PSPC supports skills development and employment of Canadians, while encouraging Canada's environmental industry to develop innovative and sustainable technologies. Major sites include the Esquimalt Graving Dock BC, the Alaska Highway BC and the Former Sambault Garbage Dump QC. In the fiscal year ended March 31, 2017, the funding for FCSAP was received later in the year.
Capital Vote Implementation—total variance of $0 million
PSPC must comply with the new Government of Canada Capital Vote definition which will come into effect April 1, 2018. Under this more elaborate definition, PSPC identified recurring operating costs currently funded by the Capital Vote and requested a vote transfer to the Operating Vote, as part of the current fiscal year Main Estimates. Work is ongoing to finalize this initiative.
Capital Leases—decrease of $7.5 million
PSPC's portfolio of real property assets is comprised of facilities owned by the Crown and leased from the private sector, some with special conditions such as options to purchase. This decrease is the result of implementing PSPC's long term capital lease investment strategy approved by Treasury Board in the fiscal year ended March 31, 2015.
Grande Allée Armoury—decrease of $14.0 million
After the 2008 fire which caused heavy damage, the Government of Canada announced the reconstruction of the Grande Allée Armoury in Québec City, as it is a significant federal Crown heritage building. Following the completion of the exterior work in summer 2017, minor work will continue on the interior in order to prepare it for occupancy.
Other—decrease of $14.2 million
The total variance of $14.2 million is the result of miscellaneous funding variances, mainly related to Real Property initiatives. The Statutory variance is mainly explained by the decrease of the Employee Benefit Plans rate from 17.2% in previous year to 15.7% in current year, as directed by the Treasury Board Secretariat.

2.2 Significant changes to year-to-date net expenditures

As presented in Table 2-Departmental budgetary expenditures by standard object (unaudited), year to date total net budgetary expenditures have increased by $19.1 million when compared to the same quarter of the previous year ($1,142.0 million in the previous fiscal year compared to $1,161.1 million in the current fiscal year).

Overall, total spending at the end of the first quarter represents 31% of annual planned expenditures for this current fiscal year, which compares to the first quarter of previous year at 35%.

Year over year variances in net budgetary expenditures (presented by standard object) (in millions of dollars)
Standard object June 30, 2017 Year to date used at quarter end June 30, 2016 Year to date used at quarter end Year over year variance
Other subsidies and payments 100.6 79 21.6
Professional and special services 184.3 162.8 21.5
Personnel 292.4 280.4 12.0
Rentals 300.3 358.9 (58.6)
Transfer payments 349.6 367.9 (18.3)
Other expenditures 247.2 255.4 (8.2)
Revenues netted against expenditures (313.3) (362.4) 49.1
Total net budgetary expenditures 1,161.1 1,142.0 19.1

The year over year net increase of $19.1 million is mainly attributable to:

3. Risks and uncertainties

PSPC integrates risk management principles into business planning, decision-making and organizational processes to minimize negative impacts and maximize opportunities across our diverse range of services and operations. Risk management in PSPC is carried out in accordance with the Treasury Board Secretariat (TBS) Framework for the Management of Risk, the Management Accountability Framework and the PSPC Policy on Integrated Risk Management.

The following key risks were identified as having a potential financial impact:

4. Significant changes to operations, personnel and programs

There were no significant changes to operations, personnel and programs in the first quarter ended June 30, 2017.

Approved by:

Marie Lemay, P.Eng., ing.
Deputy Minister
Public Services and Procurement Canada

Gatineau, Canada
August 25, 2017

Marty Muldoon, CPA, CMA, MBA
Chief Financial Officer
Public Services and Procurement Canada

Gatineau, Canada
August 11, 2017

Table 1—Statement of authorities (unaudited)

For the quarter ended June 30, 2017 (in thousands of dollars)
Fiscal year ending March 31, 2018 Fiscal year ending March 31, 2017
Total available for use for the year ending March 31, 2018 Used during the quarter ended
June 30, 2017
Year to date used at quarter end Total available for use for the year ending
March 31, 2017
Used during the quarter ended
June 30, 2016
Year to date used at quarter end
Vote 1
Gross operating expenditures 3,411,248 696,364 696,364 3,243,865 695,176 695,176
Vote-netted revenues (1,277,087) (161,335) (161,335) (1,389,612) (184,329) (184,329)
Net operating expenditures 2,134,161 535,029 535,029 1,854,253 510,847 510,847
Vote 5—Capital expenditures 1,441,928 139,895 139,895 1,244,140 93,549 93,549
Revolving fund authorities
Real Property Services Revolving Fund
Gross expenditures 2,066,201 220,917 220,917 2,004,837 279,793 279,793
Revenues (2,060,076) (109,109) (109,109) (2,002,237) (125,431) (125,431)
Net expenditures 6,125 111,808 111,808 2,600 154,362 154,362
Translation Bureau Revolving Fund
Gross expenditures 162,223 28,344 28,344 154,311 28,955 28,955
Revenues (158,266) (28,948) (28,948) (154,630) (30,930) (30,930)
Net expenditures 3,957 (604) (604) (319) (1,975) (1,975)
Optional Services Revolving Fund
Gross expenditures 145,343 12,343 12,343 178,229 8,808 8,808
Revenues (145,343) (13,914) (13,914) (178,229) (21,721) (21,721)
Net expenditures 0 (1,571) (1,571) 0 (12,913) (12,913)
Total of all Revolving Funds
Gross expenditures 2,373,767 261,604 261,604 2,337,377 317,556 317,556
Revenues (2,363,685) (151,971) (151,971) (2,335,096) (178,082) (178,082)
Total Revolving Fund net expenditures 10,082 109,633 109,633 2,281 139,474 139,474
Other budgetary statutory authorities
Contributions to employee benefit plans 107,826 26,957 26,957 121,309 30,251 30,251
Minister of PSP salary and motor car allowance 84 21 21 84 7 7
Refunds of amounts credited to revenues in previous years 0 0 0 0 0 0
Spending of proceeds from the disposal of surplus Crown assets 363 0 0 429 0 0
Collection agency fees 0 0 0 0 0 0
Payment in lieu of taxes to municipalities and other taxing authorities Footnote 2 0 349,644 349,644 0 367,940 367,940
Total other budgetary statutory authorities 108,273 376,622 376,622 121,822 398,198 398,198
Total budgetary authorities 3,694,444 1,161,179 1,161,179 3,222,496 1,142,068 1,142,068
Non-budgetary authority
Seized Property Working Capital Account 0 0 0 0 (7,057) (7,057)
Total authorities 3,694,444 1,161,179 1,161,179 3,222,496 1,135,011 1,135,011

Table 2—Departmental budgetary expenditures by standard object (unaudited)

For the quarter ended June 30, 2017 (in thousands of dollars)
Fiscal year ending March 31, 2018 Fiscal year ending March 31, 2017
Planned expenditures for the year ending March 31, 2018 Expended during the quarter ended
June 30, 2017
Year to date used at quarter end Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended
June 30, 2016
Year to date used at quarter end
Expenditures
Professional and special services 2,014,064 184,306 184,306 1,852,587 162,778 162,778
Personnel 1,143,796 292,378 292,378 1,160,423 280,384 280,384
Repair and maintenance 1,177,927 165,403 165,403 1,183,948 163,684 163,684
Rentals 1,311,390 300,345 300,345 1,118,809 358,875 358,875
Other subsidies and payments 773,990 100,647 100,647 717,247 78,985 78,985
Acquisition of land, buildings and works 487,371 36,183 36,183 471,057 36,426 36,426
Utilities, materials and supplies 269,432 21,109 21,109 288,112 24,806 24,806
Transportation and communications 76,736 13,622 13,622 71,607 14,466 14,466
Acquisition of machinery and equipment 67,778 8,789 8,789 70,244 14,063 14,063
Information 12,731 2,059 2,059 13,170 2,072 2,072
Transfer payments Footnote 3 0 349,644 349,644 0 367,940 367,940
Total gross budgetary expenditures 7,335,215 1,474,485 1,474,485 6,947,204 1,504,479 1,504,479
Less revenues netted against expenditure
Revolving Funds revenues (2,363,684) (151,971) (151,971) (2,335,096) (178,082) (178,082)
Vote-netted revenues (1,277,087) (161,335) (161,335) (1,389,612) (184,329) (184,329)
Total revenues netted against expenditures (3,640,771) (313,306) (313,306) (3,724,708) (362,411) (362,411)
Total net budgetary expenditures 3,694,444 1,161,179 1,161,179 3,222,496 1,142,068 1,142,068
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