Quarterly Financial Report for the quarter ended September 30, 2017

Quarterly Financial Report for the quarter ended September 30, 2017 (PDF, 316KB)

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1. Introduction

This Quarterly Financial Report (QFR) should be read in conjunction with the Main Estimates and the Quarterly Financial Report for the quarter ended June 30, 2017. 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 composed 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 with the same quarter of the previous year, year-to-date PSPC's authorities available for use increased by $423.6 million ($3,795.3 million in the fiscal year ending March 31, 2018, compared with $3,371.7 million in the fiscal year ended March 31, 2017), 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)
Carry forward of unused funds from previous fiscal year (1.2) (47.0) 0 (48.2)
Other (3.1) (5.3) (5.9) (14.3)
Cumulative variance in authorities available for use 278.8 150.7 (5.9) 423.6

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 $423.6 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 continue to deliver on the rehabilitation of West Block, including the courtyard infill for the interim House of Commons, the construction of the Visitor Welcome Centre Phase 1, and the Government Conference Centre.
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 be taking 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 the 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 on April 1, 2018, for the department. 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.
Carry-forward of unused funds from previous fiscal year—decrease of $48.2 million
Treasury Board Secretariat allows departments to transfer a portion of unused funds from one fiscal year to the following year. In the fiscal year ending March 31, 2018, a carry-forward of $100.8 million was received in the second quarter. During the same quarter last year, PSPC had received $149.0 million in carry-forward. Amounts carried forward are primarily for projects that are continuing into the fiscal year ending March 31, 2018.
Other—decrease of $14.3 million
The total variance of $14.3 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 the previous year to 15.7% in the 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 $110.6 million when compared with the same quarter of the previous year ($1,754.6 million in the current fiscal year compared with $1,644.0 million in the previous fiscal year).

Overall, total spending at the end of the second quarter represents 46% of annual planned expenditures for this current fiscal year, compared with 49% for the second quarter of previous year.

Year-over-year variances in net budgetary expenditures (presented by standard object) (in millions of dollars)
Standard object September 30, 2017 Year-to-date used at quarter end June 30, 2016 Year-to-date used at quarter end Year-over-year variance
Personnel 654.3 572 82.3
Other subsidies and payments 290.2 255.7 34.5
Professional and special services 561.6 538 23.6
Transfer payments 120.1 163.4 (43.3)
Rentals 573.2 584.2 (11)
Other expenditures 676.9 703.8 (26.9)
Revenues netted against expenditures (1,121.7) (1,173.1) 51.4
Total net budgetary expenditures 1,754.6 1,644.0 110.6

The year-over-year net increase of $110.6 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 at 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 second quarter ended September 30, 2017.

Approved by:

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

Gatineau, Canada
November 24, 2017

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

Gatineau, Canada
November 10, 2017

Table 1—Statement of authorities (unaudited)

For the quarter ended September 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 September 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 September 30, 2016 Year-to-date used at quarter end
Vote 1
Gross operating expenditures 3,468,043 909,037 1,605,401 3,301,848 821,382 1,516,558
Vote-netted revenues (1,277,086) (390,617) (551,951) (1,389,612) (382,066) (566,395)
Net operating expenditures 2,190,957 518,420 1,053,450 1,912,236 439,316 950,163
Vote 5—Capital expenditures 1,485,948 258,345 398,240 1,335,216 307,511 401,060
Revolving fund authorities
Real Property Services Revolving Fund
Gross expenditures 2,066,201 365,782 586,699 2,004,837 290,295 570,088
Revenues (2,060,076) (355,997) (465,106) (2,002,237) (371,630) (497,061)
Net expenditures 6,125 9,785 121,593 2,600 (81,335) 73,027
Translation Bureau Revolving Fund
Gross expenditures 162,223 43,941 72,285 154,311 41,896 70,851
Revenues (158,266) (34,292) (63,240) (154,630) (35,831) (66,761)
Net expenditures 3,957 9,649 9,045 (319) 6,065 4,090
Optional Services Revolving Fund
Gross expenditures 145,343 27,242 39,585 178,229 25,717 34,525
Revenues (145,343) (27,487) (41,401) (178,229) (21,146) (42,867)
Net expenditures 0 (245) (1,816) 0 4,571 (8,342)
Total of all Revolving Funds
Gross expenditures 2,373,767 436,965 698,569 2,337,377 357,908 675,464
Revenues (2,363,685) (417,776) (569,747) (2,335,096) (428,607) (606,689)
Total Revolving Fund net expenditures 10,082 19,189 128,822 2,281 (70,699) 68,775
Other budgetary statutory authorities
Contributions to employee benefit plans 107,826 26,956 53,913 121,309 30,252 60,503
Minister of PSP salary and motor car allowance 85 23 43 84 35 42
Spending of proceeds from the disposal of surplus Crown assets 412 0 0 594 16 16
Payment in lieu of taxes to municipalities and other taxing authorities Footnote 2 0 (229,518) 120,126 0 (204,532) 163,409
Total other budgetary statutory authorities 108,323 (202,539) 174,082 121,987 (174,229) 223,970
Total budgetary authorities 3,795,310 593,415 1,754,594 3,371,720 501,899 1,643,968
Non-budgetary authority
Seized Property Working Capital Account 0 0 0 0 (6,715) (13,772)
Total authorities 3,795,310 593,415 1,754,594 3,371,720 495,184 1,630,196

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

For the quarter ended September 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 September 30, 2017 Year-to-date used at quarter end Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended September 30, 2016 Year-to-date used at quarter end
Expenditures
Professional and special services 2,046,784 377,266 561,572 1,903,309 375,261 538,039
Rentals 1,321,604 272,860 573,205 1,128,150 225,271 584,146
Repair and maintenance 1,195,409 257,995 423,398 1,206,585 268,346 432,030
Personnel 1,152,653 361,891 654,269 1,170,609 291,595 571,979
Other subsidies and payments 780,030 189,573 290,220 723,345 176,729 255,714
Acquisition of land, buildings and works 507,704 92,453 128,636 503,834 93,329 129,755
Utilities, materials and supplies 271,579 42,913 64,022 290,750 48,016 72,822
Transportation and communications 77,617 15,581 29,203 72,732 17,111 31,577
Acquisition of machinery and equipment 69,791 17,316 26,105 83,703 17,311 31,374
Information 12,910 3,477 5,536 13,411 4,135 6,207
Transfer payments Footnote 3 0 (229,518) 120,126 0 (204,532) 163,409
Total gross budgetary expenditures 7,436,081 1,401,807 2,876,292 7,096,428 1,312,572 2,817,052
Less revenues netted against expenditure
Revolving Funds revenues (2,363,684) (417,776) (569,747) (2,335,096) (428,607) (606,689)
Vote-netted revenues (1,277,087) (390,616) (551,951) (1,389,612) (382,066) (566,395)
Total revenues netted against expenditures (3,640,771) (808,392) (1,121,698) (3,724,708) (810,673) (1,173,084)
Total net budgetary expenditures 3,795,310 593,415 1,754,594 3,371,720 501,899 1,643,968
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