Aboriginal Affairs and Northern Development Canada - Quarterly Financial Report - For the quarter ended December 31, 2014

Table of contents

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 2014-2015 as well as Canada's Economic Action Plan 2014 (Budget 2014). 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:

  • Improve social well-being and economic prosperity;
  • Develop healthier, more sustainable communities; and
  • Participate more fully in Canada's political, social and economic development – to the benefit of all Canadians.

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, and Compensation Adjustments for the 2014-2015 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.

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. billion in budgetary authorities of which $8.4 billion requires approval by Parliament; referred to as voted amounts. The remaining $181.8 million represents statutory authorities that do not require additional approval and are provided for information purposes.

Voted amounts totalling $8.4 billion are split between Operating Expenditures, Capital Expenditures and Grants and Contributions as follows:

  • Operating Expenditures represents approximately $1.4 billion (16.7 percent) - this includes $519.4 million (6.2 percent) for the Settlement Allotment (Independent Assessment Process and Alternative Dispute Resolution) and $147.8 million (1.8 percent) for the assessment, management and remediation of federal contaminated sites.
  • Capital represents approximately $46.4 million (0.6 percent)
  • Grants and Contributions represent approximately $6.9 billion (82.8 percent)

More detailed information about AANDC's financial structure, including information about the fiscal cycle, cost drivers, expenditure trends, etc. can be found online in the 2014-15 Financial Overview - July 2014 .

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 31, 2014. The explanation of variances considers that changes under five percent 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 April 1 to December 31, 2014. Total year-to-date authorities available for use in the third quarter of 2014-2015 were $8,641.0 million compared to $8,792.7 million for the same quarter of the prior year, representing a decrease in Departmental Authorities of $151.7 million. The total 2014-2015 year-to-date authority decrease of $151.7 million over 2014-2015 can be explained as follows:

Program Year Over Year Increase / (Decrease) in Authorities Available For Use ($ millions)
Budgetary Non- Budgetary Total
Vote 1 Operating Vote 5 Capital Vote 10 Grants and Contributions Statutory - Operating Statutory – Grants and Contributions
a. Increase in funding to meet increased demand for ongoing Indian and Inuit programs which reflects a 2% allowance for inflation and population growth and provides access to basic services such as education, housing, community infrastructure (water and sewage systems), and social support services 0.3 102.6 102.9
b. Funding for Operation Return Home: Manitoba Interlake Flood Remediation and Settlement 40.6 40.6
c. Increase in funding pursuant to funding approved in Economic Action Plan 2012 to support the construction and/or renovation of schools on reserves 33.0 33.0
d. Increase in funding for the construction of the Canadian High Arctic Research Station and the implementation of the associated Science and Technology Program 6.5 20.7 1.1 0.4 28.7
e. Increase in funding for the renewal of Gas Tax Funding 26.7 26.7
f. Increase in funding for the assessment, management and remediation of federal contaminated sites (12.3) decrease 19.3 7.0
g. Internal reallocation of resources for the implementation of a common definition for the capital expenditures vote in 2014-2015 (12.8) decrease 12.8 0.0 decrease
h. Other various initiatives (net) * (13.2) decrease (0.2) decrease 8.9 (2.5) decrease (5.0) decrease (12.0) decrease
i. Reform and Refocus of the Income Assistance Program (16.2) decrease (16.2) decrease
j. Decrease in funding for the Indian Residential Schools Settlement Agreement including funding for awards to claimants resulting from the Independent Assessment Process and Alternative Dispute Resolution, funding for the administration and research required to support the federal government's obligations under the agreement as well as funding related to the Indian Residential Schools Truth and Reconciliation Commission (31.2) decrease (5.9) decrease (0.1) decrease (37.2) decrease
k. Decrease in funding for out-of-court settlements (60.0) decrease (60.0) decrease
l. Decrease in funding reflecting the savings identified as part of the Economic Action Plan 2012 Spending Review (30.8) decrease (69.7) decrease (4.9) decrease (105.4) decrease
m. Net decrease in the cash flow for the negotiation, settlement and implementation of specific and comprehensive claims (primarily for specific claims settlements) 5.0 (6.0) decrease (160.7) decrease 1.9 (159.8) decrease
3rd Qtr : Total increase / (decrease) to Departmental Authorities (148.5) decrease 27.3 (47.0) decrease (7.1) decrease 23.6 0.0 (151.7) decrease
*e.g. Other – year over year increases in funding, as of December 31, 2014, for various initiatives include the facilitation of Aboriginal Participation in West Coast Energy Development and First Nations Land and Management Regime; and decreases in funding for Maa-nulth First Nation and Urban Aboriginal Strategy.
  • As shown in the table above, the $151.7 million year over year decrease in total authorities, as of December 31, 2014, is primarily attributed to the decrease of $148.5 million in Operating expenditures authority and $47 million in Grants and Contributions authority. This decrease is partially offset by the increase of $27.3 million in Capital expenditures authority and $23.6 million in Statutory Grants and Contributions authority.
  • The $148.5 million decrease in Operating expenditures authority is primarily due to a decrease of funding for out-of-court settlements ($60M), the Indian Residential Schools Settlement Agreement and related funding for the Indian Residential Schools Truth and Reconciliation Commission ($31.2M) and the savings identified as part of the Budget 2012 Spending Review ($30.8M).
  • The $47 million decrease in Grants and Contributions authority is primarily due to a decrease of funding for the savings identified as part of the Budget 2012 Spending Review ($69.7M) and claims activities ($160.7M), This decrease is partially offset by an increase in funding for ongoing Indian and Inuit programs providing access to basic services ($102.6M), Operation Return Home ($40.6M), initiatives to support the construction and/or renovation of schools on reserves ($33M) and the assessment, management and remediation of federal contaminated sites ($19.3M).
  • The $27.3 million increase in Capital expenditures authority is primarily due to an increase in funding for the Canadian High Arctic Research Station ($20.7M) and internal reallocation of resources from Operating expenditures authority to Capital expenditures authority to align with Federal government accounting and reporting requirements in 2014-2015 ($12.8M). This increase is partially offset by a decrease in funding for claims activities ($6M).
  • The $23.5 million increase in Statutory Grants and Contributions authority is primarily due to an increase of Gas Tax Funding ($26.7M). This increase is partially offset by a decrease in statutory contribution funding for Indspire to support post-secondary education for First Nations; this funding was received as voted Grants and Contributions authority in 2014-2015 ($5M).

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

Highlights of Fiscal Quarter ended December 31, 2014

The Department is estimating budgetary expenditures of $8.6 billion in 2014-2015. In the third quarter, 20.4% of total available authorities were expended for which departmental expenditures were $376.8 million lower than the same period in 2013-2014. Year-to-date expenditures account for 59% of the total available authorities. As indicated in table one, the decrease in expenditure activity can be attributed mainly to a decrease of $316.8 million in Grant and contribution expenditures, $65 million in Operating expenditures, and offset by an increase of $2 million in Capital expenditures.

Reduced spending in the third quarter of 2014-2015 is largely attributed to a decrease in Transfer payments (standard object 10) of $312.4 million which is mainly related to payment of specific claim settlements.

Other subsidies and payments (standard object 12) were reduced by $62.2 million in 2014-2015 which is related to the payment of an out-of-court settlement in 2013-2014.

Personnel (standard object 1) saw a reduction by $22.8 million in 2014-2015 which is primarily related to funds transfered to the Northwest Territories as part of Northwest Territories Devolution on April 1, 2014, and increased payments in 2013-2014 relating to severance pay and retroactive salary payments.

Professional and special services (standard object 4) saw an increase by $18.3 million in 2014-2015 primarily due to contracts related to the construction of the Canadian High Arctic Research Station and activities undertaken through the Federal Contaminated Sites Action Plan.

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

Year-to-date departmental spending at December 31, 2014 resulted in a net decrease of $494 million varied from one quarter to the other. The first quarter had a decrease in spending of $16.6 million, a decrease of $100.5 million in the second quarter and a decrease of $377 million in the third quarter. The reduction in year-to-date departmental spending is mainly due to payment of specific claims and legal settlements as well as the Devolution of the Northwest Territories.

Text description of Year-to-Date Comparison of Budgetary Authorities and Expenditures as of December 31, 2014

This image is of a bar graph of the year-to-date comparison of budgetary authorities and expenditures as of the end of December 31, 2014. The graph plots the authorities and expenditures by quarter arriving at a year to date total for the fiscal years 2013-2014 and 2014-2015.

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 2014-2015 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 $8,571 M.

The net difference in comparing the budgetary authorities at the end of Q3 each fiscal year is a decrease of $151M from 2013-2014 to 2014-2015.

The second column of each section of the graph pertains to expenditures. The 2013-2014 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 2014-2015 data shows the Q1 expenditures of $1,815 M and the Q2 expenditures of $1,505M and the Q3 expenditures of $1,754M arriving at a total of $5,074M.

The net difference in comparing the expenditures at the end of Q3 each fiscal year is $494M from 2013-2014 to 2014-2015.

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. Resource allocation decisions are informed by risk and the Department's key corporate risks are discussed systematically by the senior management committee, which contributes to the better allocation of resources and ultimately better results.

In terms of financial risk, the Department is operating in an environment of fiscal restraint in which the ability to reallocate resources internally is reduced. The Department continues to monitor its risk exposure and take action as needed to mitigate the risk of not achieving anticipated outcomes or to deal with emerging pressures. Achievement of AANDC's strategic outcomes and delivery of programs is dependent on timely access to appropriate authorities and funding levels.

In terms of transfer payment program and transfer payment recipient risk, the Department transfers over $6 billion dollars to recipients each year, while balancing program and recipient risks to deliver on its mandate. The Department undertakes risk assessments on new, existing and reformed programs as well as an annual General Assessment of each recipient to identify certain areas at risk as history has substantiated a link between risk level and default prevention.

3.2 Risk Mitigating Strategies

Corporate and financial risk mitigation activities are reflected in the Department's Corporate Risk Profile and the Corporate Business Plan and are monitored by senior management on a quarterly basis and modified as required. 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.

The Department is addressing reduced flexibility to its budget as a result of expenditure restraint measures by aligning resources to needs and through rigorous monitoring against both financial and human resource targets. Management proactively and systematically manages and responds to risks to minimize adverse impacts and capitalize on opportunities. For example, cost containment measures and expenditure trends are monitored monthly, including a review and challenge function, through the monthly Financial Status Report.

In order to ensure effective controls, transparency and accountability, a risk-based approach is used to confirm that recipients have met planned program outcomes and results; that they are in compliance with funding agreements; and, that the funds were used to the intended purposes. In addition, the ability to conduct audits of recipients, under the terms of their funding agreements; provide a further opportunity to ensure that First Nations have appropriate management, financial and administrative controls in place.

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 2014-2015 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 (2012-2013). Savings increased to $55.1 million in 2013-2014 and resulted in ongoing savings of $160.6 million commencing in 2014-2015.

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 third quarter, the Department finalized the implementation of all outstanding Budget 2012 saving measures.

6. Approval by Senior Officials

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


‹original signed by›
__________________________
Colleen Swords
Deputy Minister

Date: February 19, 2015

City: Gatineau
‹original signed by›
__________________________
Paul J. Thoppil, C.A.
Chief Financial Officer

Date: February 17, 2015

City: Gatineau

Statement of Authorities (unaudited) - Table 1

(thousands of dollars)

Fiscal year 2014-2015 Fiscal year 2013-2014 Variances
Vote Total available for use for the year ending March 31, 2015* Used during the quarter ended
December 31, 2014
Year to date used at quarter-end Total available for use for the year ending March 31, 2014* Used during the quarter ended December 31, 2013 Year to date used at quarter-end Authority Qtr YTD
1 Operating expenditures 1,399,986 320,064 797,472 1,548,475 385,156 893,162 (148,489) (65,092) (95,690)
5 Capital expenditures 46,442 3,506 10,155 19,166 1,437 2,886 27,276 2,069 7,269
10 Grants and contributions 6,942,508 1,382,705 4,124,667 6,989,504 1,699,524 4,535,880 (46,996) (316,819) (411,213)
(S) Budgetary statutory authorities - Operating Expenditures
Contributions to employee benefit plans 64,373 15,324 45,973 71,426 17,576 52,728 (7,053) (2,252) (6,755)
Minister of Aboriginal Affairs and Northern Development – Salary and motor car allowance 80 20 60 79 25 61 1 (5) (1)
Payments to comprehensive claim beneficiaries in compensation for resource royalties 2,622 - 3,486 2,606 792 1,466 16 (792) 2,020
Liabilities in respect of loan guarantees made to Indians for Housing and Economic Development 2,000 - 10 2,000 - - 0 0 10
Grassy Narrows and Islington Bands Mercury Disability Board 15 - - 15 - - 0 0 0
Other - 1,687 6,061 - 85 2,040 0 1,602 4,021
(S) Budgetary statutory authorities - Transfer Payments:
Grants to Aboriginal organizations designated to receive claim settlement payments pursuant to Comprehensive Land Claim Settlement Acts 75,611 4,524 57,187 73,762 4,055 55,801 1,849 469 1,386
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 8,994 18,358 18,358 0 0 0
Contribution to Indspire - - - 5,000 3,994 3,994 (5,000) (3,994) (3,994)
Indian Annuities Treaty payments 1,400 (136) 2,228 1,400 (113) 1,670 0 (23) 588
Contributions in connection with First Nations infrastructure 26,731 8,009 8,467 - - - 26,731 8,009 8,467
Total Budgetary Authorities 8,570,762 1,754,061 5,074,124 8,722,427 2,130,889 5,568,046 (151,665) (376,828) (493,922)
Non-Budgetary Authorities
Loans to native claimants 39,903 4,977 11,376 39,903 5,141 10,218 0 (164) 1,158
Loans to First Nations in British Columbia for the purpose of supporting their participation in the British Columbia Treaty Commission Process 30,400 6,296 14,401 30,400 5,979 15,730 0 317 (1,329)
Total Non-Budgetary Authorities 70,303 11,273 25,777 70,303 11,120 25,948 0 153 (171)
Total Authorities 8,641,065 1,765,334 5,099,901 8,792,730 2,142,009 5,593,994 (151,665) (376,676) (494,093)
*Including only Authorities available for use and granted by Parliament at quarter-end.

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

(thousands of dollars)

  Fiscal year 2014-2015 Fiscal year 2013-2014 Variances
Planned expenditures for the year ending March 31, 2015 Expended during the quarter ended December 31, 2014 Year to date used at quarter-end 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 Qtr YTD
Expenditures:
1  Personnel 457,219 108,412 328,618 490,315 131,237 373,710 (33,096) (22,825) (45,092)
2  Transportation and communications 45,707 7,819 16,284 46,299 6,379 15,709 (592) 1,440 575
3  Information 21,985 3,562 6,789 20,167 2,926 6,955 1,818 636 (166)
4  Professional and special services 374,127 105,725 166,066 392,094 87,463 147,297 (17,967) 18,262 18,769
5  Rentals 20,805 3,456 6,735 11,899 2,808 6,505 8,906 648 230
6  Purchased repair and maintenance 3,926 501 957 4,005 270 588 (79) 231 369
7  Utilities, materials and supplies 9,514 799 1,776 8,315 954 2,311 1,199 (155) (535)
8  Acquisition of land, buildings and works 31,880 35 88 12,122 110 114 19,758 (75) (26)
9  Acquisition of machinery and equipment 12,156 352 813 20,000 920 2,602 (7,844) (568) (1,789)
10 Transfer payments 7,055,244 1,413,460 4,210,907 7,078,660 1,725,818 4,613,144 (23,416) (312,358) (402,237)
11 Public debt charges - - - - - - 0 0 0
12 Other subsidies and payments 538,909 109,940 335,091 639,301 172,147 399,254 (100,392) (62,207) (64,163)
Total gross budgetary expenditures 8,571,472 1,754,061 5,074,124 8,723,177 2,131,032 5,568,189 (151,705) (376,971) (494,065)
Less: Revenues netted against expenditures
Internal Services (710) - - (750) (143) (143) 40 143 143
Total Revenues netted against expenditures (710) - - (750) (143) (143) 40 143 143
Total net budgetary expenditures 8,570,762 1,754,061 5,074,124 8,722,427 2,130,889 5,568,046 (151,665) (376,828) (493,922)
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