Quarterly Financial Report for the quarter ended December 31, 2017

Quarterly Financial Report for the quarter ended December 31, 2017 (PDF, 316KB)

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1. Introduction

This Quarterly Financial Report (QFR) should be read in conjunction with the Main Estimates, Supplementary Estimates and the previous Quarterly Financial Reports. 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 started operating 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 are 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 $405.8 million ($3,838.2 million in the fiscal year ending March 31, 2018, compared with $3,432.4 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 Program 0 68.4 0 68.4
Refit / Fit-up 0 60.0 0 60.0
Collective Agreements 51.3 0 0 51.3
Federal Contaminated Sites Action Plan – Phases II and III 30.1 0 0 30.1
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)
Federal Infrastructure – Budget 2015 and Budget 2016 (51.6) (32.1) 0 (83.7)
Other 0 14.9 (9.0) 5.9
Cumulative variance in authorities available for use 276.0 138.8 (9.0) 405.8

The year-to-date net increase of $405.8 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, the increase aligns with the project plans to continue delivering 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
As 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 neither over nor 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 focuses on 4 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 Program—increase of $68.4 million
In support of the Government of Canada's commitment towards cleaner technologies, PSPC's Energy Services Acquisition Program 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; thereby 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.
Collective Agreements—increase of $51.3 million
Funding is provided as a result of the implementation of collective agreements negotiated by the Treasury Board Secretariat (TBS) on behalf of Treasury Board. This additional funding covers both the retroactive and current portion of salary increases.
Federal Contaminated Sites Action Plan—Phases II and III—increase of $30.1 million
Phases 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 to 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 in the last quarter.
Capital Vote Implementation—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, as the project nears successful completion, minor work will continue on the interior in order to prepare it for occupancy by spring 2018.
Carry-forward of unused funds from previous fiscal year—decrease of $48.2 million
Departments to transfer a portion of unused funds from one fiscal year to the following year. A carry-forward of $100.8 million was received in the second quarter of this fiscal year. During the same quarter last year, PSPC 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.
Federal infrastructure (Budget 2015 and Budget 2016)—decrease of $83.7 million
Budget 2015 funding has come to term for the accelerated construction and repair of new and existing federal infrastructure across Canada resulting in a planned decrease. However, Budget 2016 continues to invest more than $120 billion in infrastructure over 10 years. This new infrastructure plan starts in the fiscal year beginning April 1, 2016 and incorporates measures for PSPC to revitalize federal public infrastructure across Canada.
Other—decrease of $5.9 million
The net increase of $5.9 million is the result of funding variances in miscellaneous projects and activities such as Real Property initiatives.

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 $204.3 million when compared with the same quarter of the previous year ($2,595.4 million in the current fiscal year compared with $2,391.1 million in the previous fiscal year).

Overall, total spending at the end of the third quarter represents 68% of annual planned expenditures for this current fiscal year, compared with 70% for the third quarter of the previous year.

Year-over-year variances in net budgetary expenditures (presented by standard object) (in millions of dollars)
Standard object December 31, 2017 Year-to-date used at quarter end December 31, 2016 Year-to-date used at quarter end Year-over-year variance
Personnel 993.5 860.9 132.6
Professional and special services 1,032.3 978 54.3
Other subsidies and payments 416.9 381.3 35.6
Rentals 878.7 854.6 24.1
Transfer payments 111.9 149.1 (37.2)
Other expenditures 1,286.10 1,281.0 5.1
Revenues netted against expenditures (2,124.0) (2,113.8) (10.2)
Total net budgetary expenditures 2,595.4 2,391.1 204.3

The year-over-year net increase of $204.3 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 PSPC's 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

On November 27, 2017, the Prime Minister appointed Michael Vandergrift as Associate Deputy Minister of PSPC. Additionally, the following organizational and governance changes have been put in place to strengthen our ability to resolve pay issues:

Original signed by:

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

Gatineau, Canada
February 27, 2018

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

Gatineau, Canada
February 12, 2018

Table 1—Statement of authorities (unaudited)

For the quarter ended December 31, 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 December 31, 2017 Year-to-date used at quarter end Total available for use for the year ending March 31, 2017 Used during the quarter ended December 31, 2016 Year-to-date used at quarter end
Vote 1
Gross operating expenditures 3,517,707 775,831 2,381,232 3,354,199 786,062 2,302,620
Vote-netted revenues (1,277,087) (342,185) (894,136) (1,389,612) (368,282) (934,677)
Net operating expenditures 2,240,620 433,646 1,487,096 1,964,587 417,780 1,367,943
Vote 5—Capital expenditures 1,478,973 373,558 771,798 1,340,216 300,768 701,828
Revolving fund authorities
Real Property Services Revolving Fund
Gross expenditures 2,066,201 534,020 1,120,719 2,004,837 461,502 1,031,590
Revenues (2,060,076) (534,923) (1,000,029) (2,002,237) (451,815) (948,876)
Net expenditures 6,125 (903) 120,690 2,600 9,687 82,714
Translation Bureau Revolving Fund
Gross expenditures 162,223 43,805 116,090 154,311 39,391 110,242
Revenues (158,266) (38,705) (101,945) (154,630) (40,961) (107,722)
Net expenditures 3,957 5,100 14,145 (319) (1,570) 2,520
Optional Services Revolving Fund
Gross expenditures 145,343 96,760 136,345 178,229 84,103 118,628
Revenues (145,343) (86,413) (127,814) (178,229) (79,610) (122,477)
Net expenditures 0 10,347 8,531 0 4,493 (3,849)
Total of all Revolving Funds
Gross expenditures 2,373,767 674,585 1,373,154 2,337,377 584,996 1,260,460
Revenues (2,363,685) (660,041) (1,229,788) (2,335,096) (572,386) (1,179,075)
Total Revolving Fund net expenditures 10,082 14,544 143,366 2,281 12,610 81,385
Other budgetary statutory authorities
Contributions to employee benefit plans 107,826 26,957 80,870 124,629 30,251 90,754
Minister of PSP salary and motor car allowance 84 20 63 83 21 63
Refunds of amounts credited to revenues in previous years 200 200 200 0 0 0
Spending of proceeds from the disposal of surplus Crown assets 455 124 124 612 6 22
Payment in lieu of taxes to municipalities and other taxing authorities Footnote 2 0 (8,254) 111,872 0 (14,315) 149,093
Total other budgetary statutory authorities 108,565 19,047 193,129 125,324 15,963 239,932
Total budgetary authorities 3,838,240 840,795 2,595,389 3,432,408 747,121 2,391,088
Non-budgetary authority
Seized Property Working Capital Account 0 0 0 0 (9,156) (22,928)
Total authorities 3,838,240 840,795 2,595,389 3,432,408 737,965 2,368,160
Table 2—Departmental budgetary expenditures by standard object (unaudited)

For the quarter ended December 31, 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 December 31, 2017 Year-to-date used at quarter end Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended December 31, 2016 Year-to-date used at quarter end
Professional and special services 2,039,679 470,734 1,032,306 1,935,426 439,966 978,005
Personnel 1,202,759 339,266 993,534 1,190,529 288,991 860,970
Repair and maintenance 1,195,409 331,169 754,567 1,209,966 319,985 752,015
Rentals 1,321,474 305,447 878,652 1,128,150 270,408 854,554
Other subsidies and payments 780,272 126,686 416,906 723,745 125,553 381,267
Acquisition of land, buildings and works 507,704 122,323 250,959 504,774 116,748 246,503
Utilities, materials and supplies 271,452 109,734 173,756 291,735 100,065 172,887
Transportation and communications 77,574 18,100 47,303 75,638 17,130 48,707
Acquisition of machinery and equipment 69,778 24,059 50,164 83,742 17,815 49,189
Information 12,910 3,758 9,294 13,411 5,443 11,650
Transfer payments Footnote 3 0 (8,254) 111,872 0 (14,315) 149,093
Total gross budgetary expenditures 7,479,011 1,843,022 4,719,313 7,157,116 1,687,789 4,504,840
Less revenues netted against expenditure
Revolving Funds revenues (2,363,684) (660,041) (1,229,788) (2,335,096) (572,386) (1,179,075)
Vote-netted revenues (1,277,087) (342,186) (894,136) (1,389,612) (368,282) (934,677)
Total revenues netted against expenditures (3,640,771) (1,002,227) (2,123,924) (3,724,708) (940,668) (2,113,752)
Total net budgetary expenditures 3,838,240 840,795 2,595,389 3,432,408 747,121 2,391,088
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