Quarterly Financial Report for the quarter ended June 30, 2016

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1. Introduction

This Quarterly Financial Report (QFR) should be read in conjunction with the Main Estimates, and Supplementary 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 Treasury Board Accounting Standard 1.3. It has not been subject to an external audit or review.

1.1 Authority and mandate

Public Works and Government Services Canada (PWGSC) 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. The Department's vision is to excel in government operations, and our strategic outcome and mission is to deliver high-quality, central programs and services that ensure sound stewardship on behalf of Canadians and meet the program needs of federal institutions.

The Department, founded in 1841, was instrumental in the building of our nation's canals, roads and bridges, the Houses of Parliament, post offices and federal buildings across the country. Today, PWGSC has evolved into a sophisticated operational arm of government that employs over 12,500 permanent employees working in locations across Canada and headquartered in the National Capital Area. PWGSC:

Further details on PWGSC's authority, mandate and programs may be found in the Archived—2016–17 Report on Plans and Priorities.

1.2 Basis of presentation

The authority of Parliament is required before monies can be spent by the government. This authority is granted in the form of legislation, which sets out annual limits.

This quarterly report has been prepared by management using an expenditure basis of accounting also known as modified cash accounting, and a special purpose financial reporting framework designed to present financial information on the authorities provided by Parliament. The accompanying Statement of Authorities compares PWGSC's spending authorities granted by Parliament (consistent with those in the Main Estimates) to the amounts spent by the Department.

PWGSC uses the accrual method of accounting to prepare and present its annual Archived—Consolidated Departmental Financial Statements (DFS) that are published in the Departmental Performance Report. The main difference between the QFR and the DFS is the timing of when revenues and expenses are recognized. The QFR reports revenues only when the money is received and expenses only when the money is paid out. The DFS reports revenues when they are earned and expenses when they are incurred. In the latter case, revenues are recorded even if cash has not been received and expenses are incurred even if cash has not yet been paid out.

1.3 Public Works and Government Services Canada's financial structure

PWGSC 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).

PWGSC'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, PWGSC's authorities available for use increased by $280.3 million (2015–16: $2,942.2 million; 2016–17: $3,222.5 million) as reflected in the 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
Real property program integrity 255.1 22.7 0 277.8
Federal infrastructure 25.9 61.9 0 87.8
Grande-Allée Armoury in Québec City 0.3 33.4 0 33.7
Employee benefit plans adjustment 0 0 2.3 2.3
Whole-of-Government web buy (5.0) 0 0 (5.0)
Thirty meter telescope (10.0) 0 0 (10.0)
Federal Contaminated Sites Action Plan - Phase II (23.5) 0 0 (23.5)
Space efficiencies generated by other federal organizations (24.7) 0 0 (24.7)
Deficit reduction action plan (47.9) 0 0 (47.9)
Other (7.5) (2.7) 0 (10.2)
Cumulative variance in authorities available for use 162.7 115.3 2.3 280.3

Groupings can change between quarters due to materiality of initiatives.
Amounts may not balance with other public documents due to rounding.

The net increase of $280.3 million from the first quarter of 2015–16 can be explained by:

Real property program integrity – increase of $277.8 million

Over the years, the Real Property program budget has been redirected to cover operating costs (i.e. rent and utilities), rather than necessary maintenance and repairs. The Real Property Program Integrity initiative addresses this situation, but also implements large scale recapitalization projects, such as engineering assets (i.e. Alexandra Bridge and Timiskaming Dam).

Federal infrastructure—increase of $87.8 million

As announced in Budget 2015, PWGSC has undertaken the construction and repair of new and existing federal infrastructure across Canada, including various federal buildings and assets. In addition, Budget 2016 invests more than $120 billion in infrastructure over 10 years. This New Infrastructure Plan, implemented in two phases, starts in 2016–17 and incorporates measures for PWGSC to revitalize federal public infrastructure across Canada.

Grande-Allée Armoury in Québec city—increase of $33.7 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's a significant federal crown heritage building. The reconstruction is now well underway and it's expected that occupation of this new multi-purpose building will begin in the summer of 2017.

Employee benefit plans adjustment—increase of $2.3 million

This adjustment reflects the increase of the Employee Benefit Plan (EBP) rate from 16.8% in 2015–16 to 17.2% in 2016–17, as directed by the Treasury Board Secretariat.

Whole-of-government web buy—decrease of $5.0 million

As part of the Whole-of-government Web Buy initiative, PWGSC coordinated web publishing on major issues and events (e.g.: health and safety recalls; major government announcements) on behalf of federal organizations. This three year pilot project ended in 2015–16.

Thirty meter telescope—decrease of $10.0 million

The Thirty Meter Telescope (TMT) is an international project that will build one of the world's largest and most advanced astronomical observatories in Hawaii. As part of Budget 2015, the Government of Canada committed to provide $243.5M over 10 years to support Canada's participation in the construction and commissioning of the TMT. Reduction of PWGSC's funding for the contribution to the TMT began in the fourth quarter of last fiscal year.

Federal Contaminated Sites Action Plan - Phase II—decrease of $23.5 million

Led by the Federal Contaminated Sites Action Plan Secretariat, residing at Environment Canada, the program is lowering environmental and human health risks, benefiting local communities, and reducing the burden of future environmental liability for all Canadians. Phase II of this initiative was completed in 2015–16, while preparations are underway to seek funding for Phase III of the program.

Space efficiencies generated by other federal organizations—decrease of $24.7 million

PWGSC exceptionally transferred funding to other federal organizations as a result of a reduction in their accommodation requirements. Five locations, owned or leased by PWGSC, were vacated by Communications Security Establishment Canada. In addition, the Canada Revenue Agency returned 42,369 m2 of office space.

Deficit reduction action plan—decrease of $47.9 million

In accordance with Budget 2012, PWGSC achieved additional savings in 2016–17 through the space standards modernization and space recapture initiatives. PWGSC continues to work with departments to optimize surplus space in a manner that ensures best value to Canadians, while also introducing a more modern workplace (Workplace 2.0).

Other—decrease of $10.2 million

This net decrease of $10.2 million is the result of funding variances in miscellaneous projects and activities.

2.2 Significant changes to year-to-date net expenditures

As presented in the Table 2—Departmental budgetary expenditures by standard object (unaudited), the total net budgetary expenditures have increased by $272.3 million when compared to the same quarter of the previous year (2015–16: $869.8 million; 2016–17: $1,142.1).

Overall, total spending at the end of the first quarter represents 35% of annual planned expenditures for 2016–17, which compares to the first quarter of 2015–16 at 30%.

The proportion of actual expenditures in comparison to planned expenditures is consistent with the previous year.

Year over year variances in net budgetary expenditures (presented by standard object)
(in millions of dollars)
Standard Object 2016–17  Year to date used at quarter end 2015–16  Year to date used at quarter end Year over year variance
Transfer payments 367.9 253.9 114.0
Rentals 358.9 296.9 62.0
Personnel 280.4 274.8 5.6
Repair and maintenance 163.7 100.3 63.4
Professional and special services 162.8 185.6 (22.8)
Acquisition of land, buildings and works 36.4 28.1 8.3
Acquisition of machinery and equipment 14.1 6.7 7.4
Other expenditures 120.3 130.8 (10.5)
Revenues netted against expenditures (362.4) (407.3) 44.9
Total net budgetary expenditures 1,142.1 869.8 272.3

The net increase of $272.3 million is mainly attributable to:

Transfer payments—increase of $114.0 million
Rentals—increase of $62.0 million
Personnel—increase of $5.6 million
Repair and maintenance—increase of $63.4 million
Professional and special services—decrease of $22.8 million
Acquisition of land, buildings and works—increase of $8.3 million
Acquisition of machinery and equipment—increase of $7.4 million
Other expenditures—decrease of $10.5 million
Revenues netted against expenditures—decrease of $44.9 million

3. Risks and uncertainties

PWGSC 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 PWGSC is carried out in accordance with the TBS Framework for the Management of Risk, the Management Accountability Framework and the PWGSC Policy on Integrated Risk Management.

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

In February, the department introduced a new pay system as part of the pay transformation initiative. The implementation was a major undertaking and a significant amount of planning went into preparing for the implementation. As with any major Information Technology (IT) system, we expected to see some challenges, and early on, we were able to address the majority of issues as they arose. However, the volume of issues being detected and pay problems reported quickly outstripped our capacity to respond. We are working with all of the departments and agencies to fix this and doubling our efforts to prevent new problems from happening. Experience gained with the implementation of the new pay system will be applied to future projects. The total cost of resolving these issues is not yet determinable

4. Significant changes to operations, personnel and programs

Effective as of April 11, 2016, the Prime Minister appointed Marie Lemay as the new Deputy Minister of PWGSC. In addition, as of July 18, 2016, the Deputy Minister appointed Marty Muldoon as the new Chief Financial Officer of PWGSC.

Approved by:

Marie Lemay, Professional Engineer
Deputy Minister
Public Works and Government Services Canada

Gatineau, Canada
August 29, 2016

Michel D'Amour, for
Marty Muldoon, Chartered Professional Accountant (CPA), Certified Management Accountants (CMA), Master of Business Administration (MBA)
Chief Financial Officer
Public Works and Government Services Canada

Gatineau, Canada
August 29, 2016

Table 1—Statement of authorities (unaudited)

For the quarter ended June 30, 2016 (in thousands of dollars)
  Fiscal year 2016–17 Fiscal year 2015–16
Total available for use for the year ending March 31, 2017
Footnote 1, Footnote 2
Used during the quarter ended June 30, 2016 Year to date used at quarter end Total available for use for the year ending March 31, 2016
Footnote 1, Footnote 2
Used during the quarter ended June 30, 2015 Year to date used at quarter end
Vote 1
Gross operating expenditures 3,243,865 695,176 695,176 3,046,662 681,731 681,731
Vote-netted revenues (1,389,612) (184,329) (184,329) (1,355,207) (250,560) (250,560)
Net operating expenditures 1,854,253 510,847 510,847 1,691,455 431,171 431,171
Vote 5 - Capital expenditures 1,244,140 93,549 93,549 1,128,864 92,278 92,278
Revolving fund authorities
Real Property Services Revolving Fund
Gross expenditures 2,004,837 279,793 279,793 1,633,087 184,436 184,436
Revenues (2,002,237) (125,431) (125,431) (1,628,287) (106,498) (106,498)
Net expenditures 2,600 154,362 154,362 4,800 77,938 77,938
Translation Bureau Revolving Fund
Gross expenditures 154,311 28,955 28,955 156,714 28,241 28,241
Revenues (154,630) (30,930) (30,930) (156,742) (30,576) (30,576)
Net expenditures (319) (1,975) (1,975) (28) (2,335) (2,335)
Optional Services Revolving Fund
Gross expenditures 178,229 8,808 8,808 168,623 7,343 7,343
Revenues (178,229) (21,721) (21,721) (168,623) (19,639) (19,639)
Net expenditures 0 (12,913) (12,913) 0 (12,296) (12,296)
Total of all Revolving Funds
Gross expenditures 2,337,377 317,556 317,556 1,958,424 220,020 220,020
Revenues (2,335,096) (178,082) (178,082) (1,953,652) (156,713) (156,713)
Total Revolving Fund net expenditures 2,281 139,474 139,474 4,772 63,307 63,307
Other budgetary statutory authorities
Contributions to employee benefit plans 121,309 30,251 30,251 116,553 29,138 29,138
Minister of PWGSC salary and motor car allowance 84 7 7 82 21 21
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 429 0 0 437 0 0
Collection agency fees 0 0 0 0 0 0
Payment in lieu of taxes to municipalities and other taxing authorities Footnote 2 0 367,940 367,940 0 253,914 253,914
Total other budgetary statutory authorities 121,822 398,198 398,198 117,072 283,073 283,073
Total budgetary authorities 3,222,496 1,142,068 1,142,068 2,942,163 869,829 869,829
Non-budgetary authority
Seized Property Working Capital Account 0 (7,057) (7,057) 0 (7,421) (7,421)
Total authorities 3,222,496 Footnote 3 1,135,011 1,135,011 2,942,163 Footnote 3 862,408 862,408

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

For the quarter ended June 30, 2016 (in thousands of dollars)
  Fiscal year 2016–17 Fiscal year 2015–16
Planned expenditures for the year ending March 31, 2017
Footnote 1, Footnote 2
Expended during the quarter ended June 30, 2016 Year to date used at quarter end Planned expenditures for the year ending March 31, 2016
Footnote 1, Footnote 2
Expended during the quarter ended June 30, 2015 Year to date used at quarter end
Professional and special services 1,852,587 162,778 162,778 1,621,851 185,588 185,588
Personnel 1,160,423 280,384 280,384 1,143,827 274,818 274,818
Repair and maintenance 1,183,948 163,684 163,684 991,932 100,339 100,339
Rentals 1,118,809 358,875 358,875 1,021,990 296,926 296,926
Other subsidies and payments 717,247 78,985 78,985 574,297 85,584 85,584
Acquisition of land, buildings and works 471,057 36,426 36,426 456,762 28,062 28,062
Utilities, materials and supplies 288,112 24,806 24,806 277,764 23,247 23,247
Transportation and communications 71,607 14,466 14,466 81,135 14,051 14,051
Acquisition of machinery and equipment 70,244 14,063 14,063 63,715 6,737 6,737
Information 13,170 2,072 2,072 17,749 7,836 7,836
Transfer payments Footnote 2 0 367,940 367,940 0 253,914 253,914
Total gross budgetary expenditures 6,947,204 1,504,479 1,504,479 6,251,022 1,277,102 1,277,102
Less revenues netted against expenditure
Revolving Funds revenues (2,335,096) (178,082) (178,082) (1,953,652) (156,713) (156,713)
Vote-netted revenues (1,389,612) (184,329) (184,329) (1,355,207) (250,560) (250,560)
Total revenues netted against expenditures (3,724,708) (362,411) (362,411) (3,308,859) (407,273) (407,273)
Total net budgetary expenditures 3,222,496 1,142,068 1,142,068Footnote 4 2,942,163 869,829 869,829Footnote 4
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