Quarterly Financial Report for the quarter ended June 30, 2015
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) for fiscal year 2015-2016. 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) for the 2015-2016 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 $8.6 billion in budgetary authorities of which $8.4 billion requires approval by Parliament; referred to as voted amounts. The remaining $146.3 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 $1.3 billion (16.0%), this includes $365.2 million (27.1% of Operating Expenditures) for the Settlement Allotment (Independent Assessment Process and Alternative Dispute Resolution) and $105.2 million (7.8% of Operating Expenditures) for the assessment, management and remediation of federal contaminated sites.
- Capital represents approximately $40.4 million (0.5%)
- Grants and Contributions represent approximately $7.0 billion (83.5%)
More detailed information about AANDC's financial structure, including information about the fiscal cycle, cost drivers, expenditure trends, etc. can be found online on the Financial Overview page.
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 June 30th, 2015. The explanation of variances considers that changes under 5% would have minimal impact on interpretation of results.
2.1 Statement of Authorities (Table 1)
The Quarterly Financial Report reflects the year over year change in authorities for the period April 1st to June 30th, 2015. Total year-to-date authorities available for use in the first quarter of 2015-2016 were $8,649.9 million compared to $8,440.6 million for the same quarter of the prior year, representing an increase in Departmental authorities of $209.3 million. The total 2015-2016 year-to-date authority increase of $209.3 million over 2014-2015 can be explained as follows:
|Program||Year Over Year Increase / (Decrease) in Authorities Available For Use ($ millions)|
|* e.g. Other – year over year net increase in funding, as of June 30, 2015, for various initiatives include Self-Government agreements, Nutrition North Canada Program; and net decrease in funding for federal contaminates sites and Métis Aboriginal rights and the management of Métis and non-status Indian litigation.|
|a. Net increase in the cash flow for the negotiation, settlement and implementation of specific and comprehensive claims (primarily for the settlement of litigation filed in 2006 by an Inuit organization against Canada)||253.0||18.8||-||(30.0)||241.8|
|b. 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||104.6||104.9|
|c. Increase in funding to support the repair and construction of on-reserve schools||50.0||50.0|
|d. Increase in funding for the construction of the Canadian High Arctic Research Station and the implementation of the associated Science and Technology Program||10.6||25.9||12.7||0.7||49.9|
|e. Increase in funding for Operation Return Home: Manitoba Interlake Flood Remediation and Settlement||40.6||40.6|
|f. Increase in funding to advance a comprehensive and sustainable approach to Emergency Management on reserve||32.3||32.3|
|g. Increase in funding for the facilitation of Aboriginal participation in West Coast energy development||17.3||17.3|
|h. Increase in funding from the new Building Canada Fund to support investments through the First Nations Infrastructure Fund||15.0||15.0|
|i. Increase in funding for the Consolidated Urban Aboriginal Strategy||0.9||12.4||0.1||13.4|
|j. Other various initiatives (net) *||(18.2)||(1.8)||18.9||1.5||0.4|
|k. Decrease in funding to meet the Government of Canada`s obligations under the Northwest Territories Land and Resources Devolution Agreement||(27.9)||(7.1)||(3.0)||(38.0)|
|l. Decrease in funding primarily reflecting the sunset of targeted funding for initiatives to improve First Nations Education||(133.4)||(133.4)|
|m. 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||(180.6)||(4.3)||(184.9)|
|1st Qtr : Total increase / (decrease) to Departmental Authorities||38.1||24.1||182.1||(5.0)||(30.0)||-||209.3|
- As shown in the table above, the $209.3 million year over year net increase in total authorities is primarily attributed to the increase of $38.1 million in Operating expenditures authority and $182.1 million in Grants and Contributions authority. This increase is partially offset by the decrease of $30 million in Statutory Grants and Contributions authority which is primarily due to the sunset of statutory funding for the Nisga’a Nation and the Labrador Inuit.
- The year over year net increase of $38.1 million in Operating expenditures authority is primarily due to an increase of funding for claims related activities and settlement of litigation ($253.0M). This increase is partially offset by the decrease in funding for the Indian Residential Schools Settlement Agreement and related funding for the Indian Residential Schools Truth and Reconciliation Commission ($180.6M), Northwest Territories Land and Resources Devolution Agreement ($27.9M), the assessment, management and remediation of federal contaminated sites ($10.7M).
- The year over year net increase of $182.1 million in Grants and Contributions authority is primarily due to an increase in funding for ongoing Indian and Inuit programs providing access to basic services ($104.6M), the renovation and construction of schools on reserve across the country ($50M), Operation Return Home ($40.6M) and Emergency Management on reserve ($32.3M), claim activities ($18.8M) and West Coast energy development ($17.3M). This increase is partially offset by the decrease in funding primarily reflecting the sunset of targeted funding for initiatives to improve First Nation Education ($133.4M). Funding has been renewed and will be accessed in future Estimates.
2.2 Statement of Departmental Budgetary Expenditures by Standard Object (Table 2)
Highlights of Fiscal Quarter ended June 30, 2015
The Department is estimating budgetary expenditures of $8.6 billion in 2015-2016. In the first quarter, 22% of total available budgetary authorities were expended for which departmental expenditures were $54 million higher than the same period in 2014-2015. As indicated in table one, the increase in expenditure activity can be attributed mainly to an increase of $62 million in Operating expenditures, $14 million in Grant and contribution expenditures, and offset by reduced spending in statutory grants for claims related activities.
Increased spending in the first quarter of 2015-2016 is largely attributed to Other subsidies and payments (standard object 12) where a net increase of $48.6 million in 2015-2016 is related to the payment of an out-of-court settlement.
Professional and special services (standard object 4) saw an increase of $7.0 million in 2015-2016 primarily due to contracts related to boundary survey work in the northern mining districts, and timing of issuing contracts in 2014-15 with the transition to a new financial management system.
Increased spending of $2.6 million in Acquisition of land, building and works (standard object 8) is directly related to the construction of the Canadian High Arctic Research Station.
Transportation and Communications (standard object 2) saw an increase of $2.5 million in 2015-2016 which is a result of the timing of payments in 2014-2015 with the transition the new government-wide travel system.
Reduced spending in 2015-2016 in Transfer payments (standard object 10) of $7.7 million is mainly related to the timing of Specific Claims settlement payments.
Personnel (standard object 1) saw a reduction by $1.2 million in 2015-2016 which is primarily related to the reduction of salary costs and the associated Employee Benefits package.
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 approximately $7 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 are monitored by senior management on a semi-annual 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 regularly, including a review and challenge function, through the 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 first quarter of fiscal year 2015-16 include:
- Paula Isaak was appointed as Assistant Deputy Minister, Education and Social Development Programs and Partnerships, effective May 26, 2015.
- A new, world-class science and technology research organization which is known as Polar Knowledge Canada was established June 1, 2015, to which AANDC transferred its Canadian High Arctic Research Station’s Science and Technology program.
5. Approval by Senior Officials
Approved, as required by the Treasury Board Policy on Financial Resource Management, Information and Reporting:
Original signed by
Acting Deputy Minister
Date: August 25, 2015
Original signed by
Paul J. Thoppil, CPA, CA
Chief Financial Officer
Date: August 17, 2015
|* Including only Authorities available for use and granted by Parliament at quarter-end.|
|Fiscal year 2015-2016||Fiscal year 2014-2015||Variances|
|Vote||Total available for use for the year ending March 31, 2016*||Used during the quarter ended June 30, 2015||Year to date used at quarter-end||Total available for use for the year ending March 31, 2015*||Used during the quarter ended June 30, 2014||Year to date used at quarter-end||Authority||Qtr||YTD|
|10||Grants and contributions||7,045,614||1,588,451||1,588,451||6,863,465||1,574,038||1,574,038||182,149||14,413||14,413|
|(S)||Budgetary statutory authorities - Operating Expenditures:|
|Contributions to employee benefit plans||58,826||14,678||14,678||63,838||15,324||15,324||(5,012)||(647)||(647)|
|Minister of Aboriginal Affairs and Northern Development – Salary and motor car allowance||82||21||21||80||0||0||2||21||21|
|Payments to comprehensive claim beneficiaries in compensation for resource royalties||2,638||0||0||2,622||718||718||16||(718)||(718)|
|Liabilities in respect of loan guarantees made to Indians for Housing and Economic Development||2,000||0||0||2,000||0||0||0||0||0|
|Grassy Narrows and Islington Bands Mercury Disability Board||15||0||0||15||0||0||0||0||0|
|(S)||Budgetary statutory authorities - Transfer Payments:|
|Grants to Aboriginal organizations designated to receive claim settlement payments pursuant to Comprehensive Land Claim Settlement Acts||54,589||9,691||9,691||75,611||32,082||32,082||(21,012)||(22,391)||(22,391)|
|Grant to the Nunatsiavut Government for the implementation of the Labrador Inuit Land Claims Agreement pursuant to the Labrador Inuit Land Claims Agreement Act||0||0||0||8,994||0||0||(8,994)||0||0|
|Indian Annuities Treaty payments||1,400||2,473||2,473||1,400||2,474||2,474||0||(1)||(1)|
|Contributions in connection with First Nations infrastructure||26,731||301||301||26,731||0||0||0||301||301|
|Total Budgetary Authorities||8,579,625||1,868,906||1,868,906||8,370,277||1,814,910||1,814,910||209,348||53,996||53,996|
|Loans to native claimants||39,903||3,370||3,370||39,903||2,803||2,803||0||566||566|
|Loans to First Nations in British Columbia||30,400||0||0||30,400||1,694||1,694||0||(1,694)||(1,694)|
|Total Non-Budgetary Authorities||70,303||3,370||3,370||70,303||4,497||4,497||0||(1,127)||(1,127)|
|Fiscal year 2015-2016||Fiscal year 2014-2015||Variances|
|Expenditures||Planned expenditures for the year ending March 31, 2016||Expended during the quarter ended June 30, 2015||Year to date used at quarter-end||Planned expenditures for the year ending March 31, 2015*||Expended during the quarter ended June 30, 2014||Year to date used at quarter-end||Planned||Qtr||YTD|
|2 Transportation and communications||27,032||4,040||4,040||37,869||1,523||1,523||(10,837)||2,517||2,517|
|4 Professional and special services||296,601||17,370||17,370||309,969||10,324||10,324||(13,368)||7,046||7,046|
|6 Purchased repair and maintenance||2,526||137||137||3,253||13||13||(727)||124||124|
|7 Utilities, materials and supplies||5,408||369||369||7,883||48||48||(2,475)||321||321|
|8 Acquisition of land, buildings and works||36,830||2,628||2,628||11,673||0||0||25,157||2,628||2,628|
|9 Acquisition of machinery and equipment||2,533||152||152||2,992||30||30||(459)||122||122|
|10 Transfer payments||7,128,334||1,600,916||1,600,916||6,976,200||1,608,594||1,608,594||152,134||(7,678)||(7,678)|
|11 Public debt charges||0||0||0||0||0||0||0||0||0|
|12 Other subsidies and payments||638,832||134,489||134,489||537,924||85,916||85,916||100,908||48,573||48,573|
|Total gross budgetary expenditures||8,580,335||1,868,906||1,868,906||8,370,987||1,814,910||1,814,910||209,348||53,996||53,996|
|Less: Revenues netted against expenditures|
|Total Revenues netted against expenditures||(710)||0||0||(710)||0||0||0||0||0|
|Total net budgetary expenditures||8,579,625||1,868,906||1,868,906||8,370,277||1,814,910||1,814,910||209,348||53,996||53,996|
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