Quarterly Financial Report for the quarter ended June 30th, 2017

Table of contents

1. Introduction

This quarterly financial report should be read in conjunction with the Main Estimates and Supplementary Estimates (A) for fiscal year 2017-2018. It 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. For the 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

Indigenous and Northern Affairs Canada (INAC) supports Indigenous peoples (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 INAC's authority, mandate and program activities can be found in Part II of the Main Estimates and the Departmental Plans.

1.2 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the department's spending authorities granted by Parliament, and those used by the department consistent with the Main Estimates and Supplementary Estimates (A) for the 2017-2018 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.

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, 2017.

The Department is estimating budgetary expenditures of $10.8 billion in 2017-18. In the first quarter, budgetary authorities were $2.1 billion higher while the departmental budgetary expenditures were $113 million higher than the same period in 2016-2017. The increase in budgetary authorities and budgetary expenditures is mostly attributed the additional amount of funds related to Budget 2016 that the Department has received.

As per the Statement of Authorities tables (1a and 1b), the $2.1 billion increase in total authorities is attributed to the increase of $2 billion in Grants and Contributions, the increase of $39 million in Operating and Capital, and the decrease of $5.5 million for Statutory and Non-Budgetary Items.

As per the Departmental budgetary expenditures by Standard Object tables (2a and 2b), the increase of $113 million is mainly due to Transfer Payments ($109.4 million, Standard Object 10), Personnel ($5.7 million, Standard Object 1), Other Subsidies and Payments ($5.2 million, Standard Object 12) while offset by the decrease of Professional and Special Services ($4.2 million, Standard Object 4) and the decrease in Acquisition of Land, Buildings and Works ($2.1 million, Standard Object 8). Overall, 19% of the total available budgetary authorities was expended in the first quarter which is comparable to previous year's first quarter with 22%.

The year over year increase of $2 billion in Grants and Contributions authority is primarily due to an increase in funding for Infrastructure projects ($397.5 million), Federal contaminated sites ($23.4 million), Specific and Comprehensive claims ($835.5 million), First Nations elementary and secondary education ($317.3 million), First Nations Child and Family Services Program ($97.3 million), Operation Return Home Manitoba Interlake Flood ($174.7 million), Nutrition North Canada ($30.7 million), First Nations and Inuit Youth Employment Strategy ($36.7 million), and funding to support engagement with Indigenous peoples ($20 million). This is offset by the decrease of authorities for the pro-active reconciliation and management of Métis Aboriginal rights and the management of Métis and non-status Indian litigation ($11 million), the Urban Aboriginal Strategy ($23.7 million), and the First Nations Land Management Regime ($1.8 million).

The year over year increase of $39 million in Operating authority (Operating Vote 1 and Capital Vote 5) is primarily due to the increase of funding for Federal contaminated sites ($33.6 million), and Indian Residential Schools Settlement Agreement ($29.5 million). This is offset by items such as the decrease in funding for Specific and Comprehensive claims ($19 million), Canadian High Arctic Research Station ($13.3 million), and pro-active reconciliation and management of Métis Aboriginal rights and the management of Métis and non-status Indian litigation ($5 million).

A $5.5 million decrease in Statutory and Non budgetary items is primarily related to the Specific and Comprehensive claims.

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.

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 INAC'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 funds 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 areas of risk.

The Department is experiencing ongoing issues related to the Phoenix Pay System. As collective agreements are being signed throughout the year, the number of issues might continue to increase this year. The Department is continuously working internally and with external stakeholders to resolve these issues.

3.2 Risk Mitigating Strategies

Corporate and financial risk mitigation activities, 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 managing its budget 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. Budget and expenditure trends are monitored regularly, including a review and challenge function, through the Financial Status Report.

Budget 2016 announced $8.4 billion over five years to improve the socio-economic conditions of Indigenous peoples and their communities. In 2017-18 INAC has received $1.67 billion from Budget 2016 and over 60% of these funds are for First Nations infrastructure programming. In order to strengthen controls in this area, a comprehensive risk assessment was undertaken for the Capital Facilities and Maintenance Program (CFMP) and recommendations were approved for implementation. Consequently, a quarterly monitoring of mitigating actions is planned. Similarly, quarterly monitoring of the departmental audit "Follow-up audit on Infrastructure on Reserves" was undertaken in 2016-17 and focuses on requirements for key management controls within available program resources. Planning is now underway on the infrastructure-focused project audit regime – an initiative linked to the Department's integrated audit approach. Other major components of Budget 2016 funding include Elementary and Secondary Education as well as the Child and Family Services Program.

The Department has completed year one implementation of a two-year fraud risk mitigation plan; implementation of year two of the plan is underway.

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 2017-2018 include:

5. Approval by Senior Officials

Approved, as required by the Treasury Board Policy on Financial Management:

Original signed by_______________________

Hélène Laurendeau

Deputy Minister

Date: August 31, 2017

City: Gatineau (Canada)

Original signed by_______________________

Paul J. Thoppil, CPA, CA

Chief Finances, Results and Delivery Officer

Date: August 31, 2017

City: Gatineau (Canada)

Table 1a: Statement of Authorities (unaudited)

Fiscal year 2017-2018
(in thousands of dollars)
Total available for use for the year ending March 31, 2018 Used during the quarter ended June 30, 2017 Year to date used at quarter-end
Vote 1 - Net Operating expenditures 912,175 141,487 141,487
Vote 5 - Capital expenditures 44,496 596 596
Vote 10 - Grants and contributions 9,665,783 1,874,524 1,874,524
Budgetary statutory authorities - Operating Expenditures:
Contributions to employee benefit plans 57,401 14,168 14,168
Minister of Indigenous and Northern Affairs – Salary and motor car allowance 84 21 21
Payments to comprehensive claim beneficiaries in compensation for resource royalties 2,931
Liabilities in respect of loan guarantees made to Indians for Housing and Economic Development 2,000
Grassy Narrows and Islington Bands Mercury Disability Board 15
Other 618 618
Budgetary statutory authorities - Transfer Payments:
Grants to Aboriginal organizations designated to receive claim settlement payments pursuant to Comprehensive Land Claim Settlement Acts 62,089 14,564 14,564
Grant to the Nunatsiavut Government for the implementation of the Labrador Inuit Land Claims Agreement pursuant to the Labrador Inuit Land Claims Agreement Act
Indian Annuities Treaty payments 1,400 2,910 2,910
Contributions in connection with First Nations infrastructure 28,067 148 148
Total Budgetary Authorities 10,776,441 2,049,037 2,049,037
Non-Budgetary Authorities:
Loans to native claimants 25,903 1,644 1,644
Loans to First Nations in British Columbia 30,400
Total Non-Budgetary Authorities 56,303 1,644 1,644
Total Authorities 10,832,744 2,050,681 2,050,681

Table 1b: Statement of Authorities (unaudited) (continued)

Fiscal year 2016-2017
(in thousands of dollars)
Total available for use for the year ending March 31, 2017 Used during the quarter ended June 30, 2016 Year to date used at quarter-end
Vote 1 - Net Operating expenditures 863,000 137,159 137,159
Vote 5 - Capital expenditures 54,698 2,590 2,590
Vote 10 - Grants and contributions 7,634,597 1,758,386 1,758,386
Budgetary statutory authorities - Operating Expenditures:
Contributions to employee benefit plans 59,151 13,182 13,182
Minister of Indigenous and Northern Affairs – Salary and motor car allowance 84 7 7
Payments to comprehensive claim beneficiaries in compensation for resource royalties 2,544
Liabilities in respect of loan guarantees made to Indians for Housing and Economic Development 2,000
Grassy Narrows and Islington Bands Mercury Disability Board 15
Other 728 728
Budgetary statutory authorities - Transfer Payments:
Grants to Aboriginal organizations designated to receive claim settlement payments pursuant to Comprehensive Land Claim Settlement Acts 66,317 21,051 21,051
Grant to the Nunatsiavut Government for the implementation of the Labrador Inuit Land Claims Agreement pursuant to theLabrador Inuit Land Claims Agreement Act
Indian Annuities Treaty payments 1,400 2,761 2,761
Contributions in connection with First Nations infrastructure 28,067 579 579
Total Budgetary Authorities 8,711,873 1,936,443 1,936,443
Non-Budgetary Authorities:
Loans to native claimants 25,903 1,037 1,037
Loans to First Nations in British Columbia 30,400
Total Non-Budgetary Authorities 56,303 1,037 1,037
Total Authorities 8,768,176 1,937,480 1,937,480

Table 2a: Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2017-20
18 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2018 Expended during the quarter ended June 30, 2017 Year to date used at quarter-end
Expenditures:
1 Personnel 425,696 108,707 108,707
2 Transportation and communications 28,221 4,081 4,081
3 Information 9,467 270 270
4 Professional and special services 333,819 10,603 10,603
5 Rentals 17,205 1,523 1,523
6 Purchased repair and maintenance 1,791 129 129
7 Utilities, materials and supplies 3,609 325 325
8 Acquisition of land, buildings and works 39,238 23 23
9 Acquisition of machinery and equipment 4,141 109 109
10 Transfer payments 9,757,339 1,892,147 1,892,147
11 Public debt charges
12 Other subsidies and payments 156,626 31,121 31,121
Total gross budgetary expenditures 10,777,151 2,049,037 2,049,037
Less Revenues netted against expenditures:
Internal Services -710
Total Revenues netted against expenditures -710    
Total net budgetary expenditures 10,776,441 2,049,037 2,049,037

Table 2b: Departmental budgetary expenditures by Standard Object (unaudited) (continued)

Fiscal year 2016-2017
(in thousands of dollars)
Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended June 30, 2016 Year to date used at quarter-end
Expenditures:
1 Personnel 397,908 103,025 103,025
2 Transportation and communications 53,232 4,154 4,154
3 Information 23,729 576 576
4 Professional and special services 230,137 14,759 14,759
5 Rentals 29,447 2,300 2,300
6 Purchased repair and maintenance 6,602 71 71
7 Utilities, materials and supplies 7,959 370 370
8 Acquisition of land, buildings and works 51,307 2,168 2,168
9 Acquisition of machinery and equipment 2,577 306 306
10 Transfer payments 7,730,381 1,782,777 1,782,777
11 Public debt charges
12 Other subsidies and payments 179,304 25,937 25,937
Total gross budgetary expenditures 8,712,583 1,936,443 1,936,443
Less Revenues netted against expenditures:
Internal Services -710
Total Revenues netted against expenditures -710
Total net budgetary expenditures 8,711,873 1,936,443 1,936,443
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