ARCHIVED - AANDC - Quarterly Financial Report - For the quarter ended December 31, 2013

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1. Introduction

This quarterly financial report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. It should be read in conjunction with the Main Estimates and Supplementary Estimates (A) and (B) for fiscal year 2013-14 as well as Canada's Economic Action Plan 2013 (Budget 2013). For purposes of both the Main and Supplementary Estimates, the Department is referred to as Indian Affairs and Northern Development.

The quarterly financial report has not been subject to an external audit or review.

1.1 Authority, Mandate and Program Activities

Aboriginal Affairs and Northern Development Canada (AANDC) supports Aboriginal people (First Nations, Inuit and Métis) and Northerners in their efforts to:

Further details on AANDC's authority, mandate and program activities can be found in Part II of the Main Estimates and the Report on Plans and Priorities.

1.2 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting and a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities. The accompanying Statement of Authorities includes AANDC's spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates and Supplementary Estimates (A) and (B) as well as the Operating Budget Carry Forward, the Capital Budget Carry Forward, Reimbursement of Paylist Requirements and Compensation Adjustments for the 2013-2014 fiscal year.

The authority of Parliament is required before monies 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.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-2013 Main Estimates. In fiscal year 2012-2013, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. Additional funding was sought by AANDC through the 2012-2013 Supplementary Estimates (B). The department received this additional authority net of the planned savings or other amounts transferred by Treasury Board authority to a frozen allotment. In 2013-2014, the changes to departmental authorities were reflected in the 2013-2014 Main Estimates tabled in Parliament.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

1.3 AANDC's Financial Structure

The parliamentary vote structure of AANDC is made up of $8.7 billion in budgetary authorities of which $8.6 billion requires approval by Parliament; referred to as voted amounts. The remaining $165.3 million represents statutory authorities that do not require additional approval and are provided for information purposes.

Voted amounts totalling $8.6 billion are split between Operating Expenditures, Capital Expenditures and Grants and Contributions as follows:

More detailed information about AANDC's financial structure, including information about the fiscal cycle, cost drivers, expenditure trends, etc. can be found online.

 

2. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

This section highlights the significant items that contributed to the net increase or decrease in resources available for the year and actual expenditures for the quarter ended December 31st, 2013. The explanation of variances considers that changes under 5% would have minimal impact on interpretation of results.

2.1 Statement of Authorities (Table 1) – Budgetary & Non-Budgetary

The Quarterly Financial Report reflects the year over year change in authorities for the period from April 1st to December 31st, 2013. Total year-to-date authorities available for use in the third quarter of 2013-14 were $8,792.7 million compared to $8,516.1 million for the same quarter of the prior year, representing an increase in Departmental Authorities of $276.6 million. The total 2013-14 year-to-date authority increase of $276.6 million over 2012-13 can be explained as follows:

Program Increase / (Decrease) in Authorities Available For Use
($ millions)
Operating * Capital Grants and Contributions * Non-Budgetary Total

* Includes statutory authorities

** e.g. Decrease in funding for a new approach to K-12 education for First Nations and Mi'kmaq Education, and increase in funding for Urban Aboriginal Strategy.

Note: Figures may not add due to rounding

a. Net increase in the cash flow for the negotiation, settlement and implementation of specific and comprehensive claims (primarily for the settlement of the Coldwater-Narrows Specific Claim and Justice at Last – Canada's Action Plan on Accelerating the Resolution of Specific Claims) 4.7 (9.9) 138.2 (8.3) 124.7
b. Funding to meet increased demand for ongoing Indian and Inuit programs providing access to basic services such as education and social support services 0.3 no value 100.6 no value 100.8
c. Funding for the development of systems and supports to ensure readiness for First Nation education legislation and to support the construction and/or renovation of schools on reserves no value no value 70.0 no value 70.0
d. Funding for out-of-court settlements 61.0 no value no value no value 61.0
e. Funding for the assessment, management and remediation of federal contaminated sites 58.0 no value (2.1) no value 55.9
f. Other various initiatives (net) ** (7.4) 6.1 (4.4) no value (5.8)
g. Better alignment of the on-reserve Income Assistance Program with provincial systems through improved compliance with program requirements and work with First Nations to encourage those who can work to access the training they require to participate in the labour market no value no value (19.8) no value (19.8)
h. Decrease in funding profile for the Indian Residential Schools Settlement Agreement including funding for awards to claimants resulting from the Independent Assessment Process and Alternative Dispute Resolution as well as funding for the administration and research required to support the federal government's obligations under the agreement (14.8) no value (10.3) no value (25.0)
i. Savings identified as part of the Budget 2012 Spending Review (11.6) no value (19.7) no value (31.3)
j. Sunset of funding for First Nations Infrastructure Fund no value no value (53.8) no value (53.8)
3rd Qtr
Total increase / (decrease) to Departmental Authorities
90.1 (3.8) 198.6 (8.3) 276.6

2.2 Statement of Departmental Budgetary Expenditures by Standard Object (Table 2)

Highlights of Fiscal Quarter ended December 31, 2013

Departmental spending in the third quarter of 2013-14 was $10.7 million higher than the same period in 2012-13. This net increase of 0.5% can be attributed mainly to an increase of $30.5 million in professional and special services (standard object 4) and an increase of $9.8 million in personnel (standard object 1). These increases were offset by decreases of $12.4 million in other subsidies and payments (standard object 12), $11.3M in transfer payments (standard object 10), $4.9M in acquisition of land, buildings and works (standard object 8) and $1.3M in transportation and communications (standard object 2).

The increase of $30.5 million in professional and special services are a result of timing differences for Department of Justice billings and their related payments for litigation services provided to the department.

The increase of $9.8 million in personnel is primarily due to the payroll schedule in which there was one more pay in the month of December compared to the previous fiscal year.

The decrease of $12.4M in other subsidies and payments is related to the timing of the payment of claimant awards primarily related to the Indian Residential School Settlement.

The decrease of $11.3M in transfer payments is largely a result of the timing of specific claims settlement payments.

Highlights of Fiscal Year-to-Date (YTD) Results

Year-to-date departmental spending at December 31, 2013 resulted in a net increase of $10.6M varied from one quarter to the other. The first quarter had a decrease in spending of $51.5M, an increase of $51.4M in the second quarter and an increase of $10.7M in the third quarter. The variances are mainly as a result of timing differences related to both Department of Justice billings and legal settlement and specific claims payments.

Year-to-Date Comparison of Budgetary Authorities and Expenditures as of December 31, 2013
($ millions)
Chart
Note: 2013-14 Q2 – No change in authorities
Figures may not add due to rounding
View text version of this graph

This image is of a bar graph of the year-to-date comparison of budgetary authorities and expenditures as of the end of December 31st, 2013. The graph plots the authorities and expenditures by quarter arriving at a year to date total for the fiscal years 2012-13 and 2013-14.

The 2012-13 data shows the Q3 authorities equaling the Main Estimates and the Supplementary Estimates A and B authorities arriving at the total authority at the end of Q3 of $8,437M. The 2013-2014 data shows the Q3 authorities equaling the Main Estimates and the Supplementary Estimates A and B authorities arriving at the total authority at the end of Q3 of $8,772M.

The net difference in comparing the budgetary authorities at the end of Q3 each fiscal year is an increase of $285M from 2012-13 to 2013-14.

The second column of each section of the graph pertains to expenditures. The 2012-13 data shows the Q1 expenditures of $1,883M and the Q2 expenditures of $1,554M and the Q3 expenditures of $2,120 arriving at a total of $5,558M. The 2013-14 data shows the Q1 expenditures of $1,831M and the Q2 expenditures of $1,606M and the Q3 expenditures of $2,131M arriving at a total of $5,568M. The net difference in comparing the expenditures at the end of Q3 each fiscal year is $10M from 2012-13 to 2013-14.

 

3. Risks and Uncertainties

3.1 Risks and Uncertainties

Risk management and risk-based decision-making have become a critical component in the way the Department prioritizes and conducts its business.  In September 2013, the Department completed an assessment of its top risks.  The process involved a documentation review of existing risk profiles at the program, region and sector levels followed by consultation sessions on each of the nine corporate risk areas.  The risk leads were actively involved, summarizing and presenting their assigned risk(s) to their colleagues on the Senior Team Management Team for discussion, then voting.  The results of the corporate risk assessment are one of many critical inputs into the Department's annual priority setting exercise.

Environmental Risk and Legal Risk are highest for AANDC in this year's assessment, meaning that the Department has identified these risks as potential areas of concern and will proactively develop mitigation strategies to manage them.  Both of these risk areas have significant financial implications for the Department. The Department's legal and operating environments are complex and continually evolving.  AANDC is the lead department responsible for the negotiation and implementation of self-government and land claims agreements.  Comprehensive land claims agreements and self-government agreements are legally binding, and are given further legal effect through implementing legislation.  Many are also constitutionally protected under section 35 of the Constitution Act, 1982.  Supreme Court and other court rulings on Aboriginal and treaty rights have a major impact on AANDC's mandate and the way the Department works to fulfill the Crown's legal obligations. Canada's historic relationship with Aboriginal peoples and the ongoing refinement of constitutional concepts and questions add to the complexity of litigation, as well as expose the Government of Canada to landmark court decisions and significant financial liabilities.  In an environment of rising costs, the Department is responsible for the long term management of major contaminated sites north of 60 (in particular, the Giant and Faro mines). Regulatory gaps are an issue and the Department also has to consider its role as it supports First Nation communities south of 60, as they pursue economic development opportunities around resource extract and development.

3.2 Risk Mitigating Strategies

Corporate and financial risk mitigation activities are reflected in the departmental planning documents and are monitored by senior management on a quarterly basis and modified as required. Cost containment measures are monitored monthly and review and challenge function is done through the Financial Status Report. A number of practices and internal controls help to manage risk departmentally, including senior management governance and oversight as established through committees, existing policies and procedures that ensure an appropriate level of monitoring, review and reporting.

A number of mitigation strategies are in place to manage legal risks and related costs. AANDC and the Department of Justice has enhanced its strategic planning process to better align the allocation of resources and the setting of priorities within the context of legal risk-management. Other advancements in regard to litigation hold procedures are being implemented in conjunction with key stakeholders of other departments. AANDC has also developed litigation risk scales to facilitate consistent sophisticated categorization, measurement and description of non-legal risks stemming from litigation.

In response to the Environmental Risk, the Department is developing options to improve waste management on reserve. AANDC is also supporting reforms to environmental regulations/legislation (north and south of 60). The Contaminated Sites Program is working with Environment Canada to analyze the remaining contaminated sites south of 60 and develop a funding strategy. For the North, new governance structures and processes are being established for the larger contaminated sites.

 

4. Significant changes in relation to Operations, Personnel and Programs

Significant changes in relation to Operations, Personnel and Programs during the third quarter of fiscal year 2013-14 include:

 

5. Budget 2012 Implementation

This section provides an update of the savings measures announced in Budget 2012 that are being implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

Aboriginal Affairs and Northern Development Canada achieved savings of $24.4 million in the first year (2012-13). Savings increased to $55.1 million in 2013-14 and will result in ongoing savings of $160.6 million by 2014-15.

For the year-to-date ending December 31, 2013, Budget 2012 impacts on the Department's authorities as approved in the Main Estimates resulted in a reduction of $55.1 million.

There are no significant financial risks related to Budget 2012 savings for this quarterly financial report. AANDC continues to manage the implementation of Budget 2012 savings through its financial management and monitoring processes.

In the first, second and third quarters, the Department continued to focus on decreasing the costs of internal operations. Several internal operational changes continued to be implemented in order to deliver efficient, effective and accountable programs for Aboriginal people and Northerners.

AANDC's Implementation Committee, chaired by the Associate Deputy Minister and comprising the Assistant Deputy Ministers and direct reports to the Deputy Minister, continued to provide overall direction, coordination and oversight to all departmental deficit reduction savings implementation activities. The Workforce Management Board also continued to provide oversight on workforce management mechanisms and to ensure consistency and fairness in human resource decisions across the department.

 

6. Approval by Senior Officials

Approved, as required by the Treasury Board Policy on Financial Resource Management, Information and Reporting:

 

Michael Wernick
Deputy Minister

 

Pamela d'Eon
Acting / Chief Financial Officer

 

Statement of Authorities (unaudited) - Table 1

(thousands of dollars)

Vote Expenditure Fiscal year 2013-2014 Fiscal year 2012-2013
Total available for use for the year ending March 31, 2014 * Expended during the quarter ended December 31, 2013 Year to date used at quarter-end Total available for use for the year ending March 31, 2013 * Expended during the quarter ended December 31, 2012 Year to date used at quarter-end
Figures may not add due to rounding.

* Including only Authorities available for use and granted by Parliament at quarter-end.

1 Operating expenditures 1,548,475 385,156 893,162 1,464,755 354,929 835,401
5 Capital expenditures 19,166 1,437 2,886 22,973 5,948 6,763
10 Grants and contributions 6,989,503 1,699,524 4,535,880 6,785,068 1,707,855 4,571,199
(S) Budgetary Statutory Authorities - Operating Expenditures:
  Contributions to employee benefit plans 71,426 17,576 52,728 65,049 16,262 48,787
  Minister of Aboriginal Affairs and Northern Development – Salary and motor car allowance 79 25 61 78 20 58
  Payments to comprehensive claim beneficiaries in compensation for resource royalties 2,606 792 1,466 2,591 68 3,444
  Liabilities in respect of loan guarantees made to Indians for Housing and Economic Development 2,000 0 0 2,000 0 6
  Grassy Narrows and Islington Bands Mercury Disability Board 15 0 0 15 0 0
  Other 0 85 2,040 0 3,797 5,143
(S) Budgetary Statutory Authorities - Transfer Payments:
  Grants to Aboriginal organizations designated to receive claim settlement payments pursuant to Comprehensive Land Claim Settlement Acts 73,762 4,055 55,801 75,576 4,055 57,624
  Grant to the Nunatsiavut Government for the implementation of the Labrador Inuit Land Claims Agreement pursuant to the Labrador Inuit Land Claims Agreement Act 8,994 18,358 18,358 17,987 27,343 27,343
  Contributions to Indspire (Budget 2013) 5,000 3,994 3,994 0 0 0
  Indian Annuities Treaty payments 1,400 (113) 1,670 1,400 37 1,874
  Total Budgetary Authorities 8,722,427 2,130,889 5,568,046 8,437,491 2,120,313 5,557,641
  Non-Budgetary Authorities:
  Loans to native claimants 39,903 5,141 10,218 47,403 5,973 40,657
  Loans to First Nations in British Columbia for the purpose of supporting their participation in the British Columbia Treaty Commission Process 30,400 5,979 15,730 31,200 7,461 17,077
  Total Non-Budgetary Authorities 70,303 11,120 25,948 78,603 13,434 57,734
  Total Authorities 8,792,730 2,142,009 5,593,994 8,516,094 2,133,747 5,615,375

Departmental Budgetary Expenditures by Standard Object (unaudited) - Table 2

(thousands of dollars)

# Expenditures: Fiscal year 2013-2014 Fiscal year 2012-2013
Planned expenditures for the year ending March 31, 2014 Expended during the quarter ended December 31, 2013 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2013 Expended during the quarter ended December 31, 2012 Year to date used at quarter-end
Figures may not add due to rounding.
1 Personnel 490,315 131,237 373,710 482,155 121,409 361,588
2 Transportation and communications 46,299 6,379 15,709 60,359 7,742 19,709
3 Information 20,167 2,926 6,955 14,009 2,507 7,963
4 Professional and special services 392,094 87,463 147,297 352,633 56,933 110,331
5 Rentals 11,899 2,808 6,505 13,332 1,876 6,209
6 Purchased repair and maintenance 4,005 270 588 7,327 549 929
7 Utilities, materials and supplies 8,315 954 2,311 11,252 1,046 2,748
8 Acquisition of land, buildings and works 12,122 110 114 17,114 5,078 5,078
9 Acquisition of machinery and equipment 20,000 920 2,602 20,000 1,392 3,172
10 Transfer payments 7,078,660 1,725,818 4,613,144 6,880,031 1,737,205 4,653,668
12 Other subsidies and payments 639,301 172,147 399,254 580,040 184,576 386,246
  Total gross budgetary expenditures 8,723,177 2,131,032 5,568,189 8,438,253 2,120,313 5,557,641
Less: Revenues netted against expenditures: (750) (143) (143) (762) 0 0
  Total Revenues netted against expenditures (750) (143) (143) (762) 0 0
Total net budgetary expenditures 8,722,427 2,130,889 5,568,046 8,437,491 2,120,313 5,557,641
 
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