Quarterly Financial Report for the quarter ended September 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 September 30th, 2017.

The Department is estimating budgetary expenditures of $10.8 billion in 2017-2018. In the second quarter, budgetary authorities were $2.1 billion higher while the departmental budgetary expenditures were $237 million higher than the same period in 2016-2017. The increase in budgetary authorities and budgetary expenditures is mostly attributed to the additional amount of funds related to Budget 2016 that the Department has received.  Furthermore, total authorities include the operating budget carry forward of $24.9 million as well as the capital budget carry forward of $7.8 million.

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 $42 million in Operating and Capital, and the decrease of $5.6 million for Statutory and Non-Budgetary Items.

As per the Departmental budgetary expenditures by Standard Object tables (2a and 2b), the increase of $236.7 million is mainly due to Transfer Payments ($287.3 million, Standard Object 10) and Personnel ($29.4 million, Standard Object 1), while offset by the decrease of Professional and Special Services ($50.2 million, Standard Object 4), Other Subsidies and Payments ($27.8 million, Standard Object 12), and Acquisition of Land, Buildings and Works ($6.2 million, Standard Object 8). Overall, 39% of the total available budgetary authorities was expended in comparison to previous year's second quarter with 44%.  

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 $42 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), Indian Residential Schools Settlement Agreement ($29.5 million), additional investments in First Nations elementary and secondary education ($2.8 million) , construction of public infrastructure on reserve ($2.3 million), expansion of the Nutrition North Canada program ($1.4 million), Youth Employment Strategy ($1.8 million) and other miscellaneous adjustments ($4.5 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).

Furthermore, the capital budget carry forward is $7.5 million higher than in 2016-2017 mainly due to the Canadian High Arctic Research Station, whereas the operating budget carry forward is $4.5 million lower than in 2016-2017 due to a lower authorities ceiling.

A $5.6 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 also includes a risk section of each of its Performance Information Profiles.  

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 2017-2018 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, the results of the comprehensive risk assessment undertaken for the Capital Facilities and Management Program (CFMP) are being discussed in the context of emerging program priorities and planning for 2018-2019. In addition, quarterly monitoring of the departmental audit "Follow-up audit on Infrastructure On-Reserves" was undertaken, where progress has been shown. The Infrastructure focused project audit regime is scheduled for launch in Q3, a first time endeavor for the infrastructure programming. In addition, the department has committed to a national recipient monitoring framework, inclusive of program-focused compliance activities.  In this initiative, the CFMP and the Education & Social Development Programs and Partnerships, which is another major component of Budget 2016, are working together with the Chief Finances, Results and Delivery Officer, to choose the most appropriate priorities, approaches, and requirements, consolidating monitoring results across all programs in the department to identify where capacity development of indigenous communities is required for continuous improvement.

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 second 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: December 1, 2017

City: Gatineau (Canada)

Original signed by_______________________

Paul J. Thoppil, CPA, CA

Chief Finances, Results and Delivery Officer

Date: November 27, 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 September 30, 2017 Year to date used at quarter-end
Vote 1 - Operating expenditures 937,054 205,272 346,759
Vote 5 - Capital expenditures 52,290 7,128 7,723
Vote 10 - Grants and contributions 9,665,783 1,914,940 3,789,465
(S) Budgetary statutory authorities - Operating Expenditures:
Contributions to employee benefit plans 57,401 14,168 28,336
Minister of Indigenous and Northern Affairs – Salary and motor car allowance 84 21 42
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 - 407 1,025
(S) Budgetary statutory authorities - Transfer Payments:
Grants to Aboriginal organizations designated to receive claim settlement payments pursuant to Comprehensive Land Claim Settlement Acts 62,089 24,718 39,282
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 (283) 2,627
Contributions in connection with First Nations infrastructure 28,067 2,542 2,690
Total Budgetary Authorities 10,809,115 2,168,913 4,217,950
Non-Budgetary Authorities:
Loans to native claimants 25,903 8,752 10,396
Loans to First Nations in British Columbia for the purpose of supporting their participation in the British Columbia Treaty Commission Process 30,400 6,573 6,573
Total Non-Budgetary Authorities 56,303 15,325 16,969
Total Authorities 10,865,418 2,184,237 4,234,919

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 September 30, 2016 Year to date used at quarter-end
Vote 1 - Net Operating expenditures 892,358 250,792 387,952
Vote 5 - Capital expenditures 55,026 12,221 14,811
Vote 10 - Grants and contributions 7,634,597 1,629,761 3,388,147
(S) Budgetary statutory authorities - Operating Expenditures:
Contributions to employee benefit plans 59,151 13,182 26,364
Minister of Indigenous and Northern Affairs – Salary and motor car allowance 84 14 21
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 - 357 1,085
(S) Budgetary statutory authorities - Transfer Payments:
Grants to Aboriginal organizations designated to receive claim settlement payments pursuant to Comprehensive Land Claim Settlement Acts 66,317 23,339 44,390
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 (339) 2,423
Contributions in connection with First Nations infrastructure 28,067 1,893 2,472
Total Budgetary Authorities 8,741,559 1,931,220 3,867,665
Non-Budgetary Authorities:
Loans to native claimants 25,903 8,240 9,277
Loans to First Nations in British Columbia for the purpose of supporting their participation in the British Columbia Treaty Commission Process 30,400 7,547 7,547
Total Non-Budgetary Authorities 56,303 15,787 16,824
Total Authorities 8,797,862 1,947,007 3,884,489

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

Fiscal year 2017-2018
(in thousands of dollars)
Planned expenditures for the year ending March 31, 2018 Used during the quarter ended September 30, 2017 Year to date used at quarter-end
Expenditures:
1 Personnel 425,696 132,667 241,374
2 Transportation and communications 30,003 4,860 8,940
3 Information 10,064 2,149 2,419
4 Professional and special services 354,892 41,906 52,509
5 Rentals 18,291 4,922 6,444
6 Purchased repair and maintenance 1,904 171 300
7 Utilities, materials and supplies 3,837 750 1,076
8 Acquisition of land, buildings and works 46,288 5,651 5,675
9 Acquisition of machinery and equipment 4,885 1,713 1,822
10 Transfer payments 9,757,339 1,941,917 3,834,064
11 Public debt charges - - -
12 Other subsidies and payments 156,626 32,207 63,328
Total gross budgetary expenditures 10,809,825 2,168,913 4,217,950
Less Revenues netted against expenditures:
Internal Services -710 - -
Total Revenues netted against expenditures -710 - -
Total net budgetary expenditures 10,809,115 2,168,913 4,217,950

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 September 30, 2016 Year to date used at quarter-end
Expenditures:
1 Personnel 397,908 103,276 206,301
2 Transportation and communications 57,683 4,809 8,963
3 Information 25,713 1,439 2,015
4 Professional and special services 249,380 92,057 106,816
5 Rentals 31,909 2,061 4,360
6 Purchased repair and maintenance 7,154 346 418
7 Utilities, materials and supplies 8,625 675 1,045
8 Acquisition of land, buildings and works 51,307 11,804 13,972
9 Acquisition of machinery and equipment 2,905 593 900
10 Transfer payments 7,730,381 1,654,654 3,437,432
11 Public debt charges - - -
12 Other subsidies and payments 179,304 60,022 85,959
Total gross budgetary expenditures 8,742,269 1,931,736 3,868,181
Less Revenues netted against expenditures:
Internal Services -710 -516 -516
Total Revenues netted against expenditures -710 -516 -516
Total net budgetary expenditures 8,741,559 1,931,220 3,867,665
Date modified: