Quarterly Financial Report for the quarter ended December 31, 2017
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:
- for the most part, PSPC delivers its services on a cost-recovery basis, generating revenues via revolving-fund ("the Funds") organizations and programs within the operating vote. These organizations and programs are mainly designed to provide services to other government organizations, and are expected to recover the cost of their operations through revenues. However, the costs incurred by the Funds are usually disbursed prior to invoicing the client, which generally occurs upon completion of a project or after services are rendered, and thus revenues may be collected in a subsequent quarter
- PSPC manages a variety of real property projects that progress through phases from planning to funding and from procurement to construction. Historical trends have shown that expenditures against these projects are not incurred evenly throughout the year; thus, quarter-to-quarter fluctuations are normal. Such projects include the Alaska Highway, in British Columbia and Yukon, and the new Champlain Bridge in Montréal, Quebec
- PILT issued by PSPC are funded through a statutory vote and paid on behalf of other participating federal departments. Payments are subsequently recovered from the participating departments and are recorded as statutory grants in the Public Accounts of Canada. Timing fluctuations can occur between the payments and the recoveries
- PSPC also manages seized property for the Government of Canada pursuant to the Seized Property Management Act. The financial management of this activity is undertaken through the non-budgetary Seized Property Working Capital Account. Charged to this account are expenditures and advances made to maintain and manage any seized or restrained property. PSPC recovers its costs from this account once the property owner loses the right to the property and it is disposed of
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:
|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|
|Federal Contaminated Sites Action Plan – Phases II and III||30.1||0||0||30.1|
|Capital Vote Implementation||45.6||(45.6)||0||0|
|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)|
|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.
|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|
|Professional and special services||1,032.3||978||54.3|
|Other subsidies and payments||416.9||381.3||35.6|
|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:
- Personnel—increase of $132.6 million
- Increase mainly due to higher salary expenditures resulting from retroactive salary payments and increases in pay rates of various collective agreements
- Increase also partly due to additional resources hired to support the stabilization of pay operations
- Professional and special services—increase of $54.3 million
- Increase in the professional, architectural, engineering and consulting services to continue with the rehabilitation of the Parliamentary Precinct, in order to preserve these heritage assets and national symbols for years to come
- Other subsidies and payments—increase of $35.6 million
- The increase is mainly due to timing differences between when a payment is issued and when the cost is recovered from other government departments
- Rentals—increase of $24.1 million
- Year-over-year timing difference between when the billing is issued and when the revenue is recovered from clients
- Transfer payments—decrease of $37.2 million
- There is no overall change in payment in lieu of taxes (PILT), the variance is simply a timing difference between when a PILT payment is issued and when the cost is recovered from other government
- Other expenditures—increase of $5.1 million
- Net increase in other expenditure categories not listed above is the result of a number of small increases in activity across a range of projects
- Revenues netted against expenditures—increase of $10.2 million
- Increase is mainly attributable to increased business volume associated with Budget 2016 federal infrastructure projects across Canada, on behalf of other government departments
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:
- PSPC's dependency on clients' expenditures: more than half of PSPC's financial and human resources are tied directly to cost-recovered services and activities. In a context of reduced expenditures on the part of client departments and agencies, there is a risk that PSPC could face unpredictable and reduced business volumes and associated reduced resources. In response to this risk, PSPC continually adjusts to fluctuations in operational demands while maintaining the quality of its services. This includes sustaining rigorous management of revenues, expenditures, forecasting and commitment monitoring, and working closely with other departments through the client service network to identify changing requirements and their impacts on the department
- PSPC's ability to undertake and deliver complex, transformational and interdepartmental major projects and procurements: there are inherent risks in PSPC undertaking and delivering complex, transformational and interdepartmental major projects and procurements on time, within the approved budget and according to scope, which could ultimately have an impact on the department's service strategy. In order to address these risks, PSPC has implemented disciplined investment and project management processes; established service agreements and service standards with clear identification of responsibilities; ensured sound contract management; engaged early with client departments and other stakeholders; and developed the departmental Integrated Investment Plan (IIP)
- PSPC's potential fraud risk exposure: Fraud risk has been identified as a key risk in the Departmental Plan for the year ending March 31, 2018. PSPC is undertaking a departmental fraud risk assessment, in addition to the fraud risk responses already in place, such as the Integrity Regime and Fairness Monitoring on procurement contracts
- as previously outlined in last year's Quarterly Financial Reports, the department implemented a new pay system as part of the Pay Transformation Initiative. The implementation was a major undertaking that experienced challenges. During the quarter, the Office of the Auditor General tabled their fall report, which includes a chapter on public service pay. The report identifies a number of recommendations, which the department has accepted and is already implementing. The department has taken many actions and continues to lead a significant effort to address and resolve pay issues. Progress is continuing as we work closely with departments, collective bargaining agents and stakeholders
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:
- Les Linklater was named the Associate Deputy Minister responsible for the government’s approach to stabilizing Pay operations
- Danielle May-Cuconato was appointed as Assistant Deputy Minister of the Pay Stabilization Project. She leads the overall coordination of the work of the HR-to-Pay Integrated team, with a focus on policy, planning and engagement. She also works closely with the Pay Administration Branch, as well as with the Office of the Chief Human Resources Officer at the Treasury Board of Canada Secretariat
- pay operations and systems functions were consolidated under Marc Lemieux, Assistant Deputy Minister, Pay Administration Branch. This allows for a greater integration of pay functions, providing clearer accountabilities and full support for the integrated team's work
Original signed by:
Marie Lemay, P.Eng., ing.
Public Services and Procurement Canada
February 27, 2018
Marty Muldoon, CPA, CMA, MBA
Chief Financial Officer
Public Services and Procurement Canada
February 12, 2018
|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|
|Gross operating expenditures||3,517,707||775,831||2,381,232||3,354,199||786,062||2,302,620|
|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
|Translation Bureau Revolving Fund|
|Optional Services Revolving Fund|
|Total of all Revolving Funds|
|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|
|Seized Property Working Capital Account||0||0||0||0||(9,156)||(22,928)|
|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|
|Repair and maintenance||1,195,409||331,169||754,567||1,209,966||319,985||752,015|
|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|
|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)|
|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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