Indigenous and Northern Affairs Canada - Quarterly Financial Report for the quarter ended December 31, 2017

Table of contents

1. Introduction

This quarterly financial report should be read in conjunction with the Main Estimates and Supplementary Estimates (A) and (B) 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) and (B) 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 as of the third quarter ended December 31, 2017.

As of the third quarter, the Department has budgetary authorities of $11.28 billion for 2017-2018. In the third quarter, budgetary authorities were $1.9 billion higher than last fiscal year as a result of Budget 2016, Budget 2017, an increase in funding for specific claims and the final settlement payment to the Crees of Eeyou Istchee. As per the Statement of Authorities tables (1a and 1b), the $1.9 billion increase in total authorities is attributed to the increase of $1.86 billion in Grants and Contributions, the increase of $45 million in Operating and Capital, and the decrease of $4.2 million for Statutory Transfer Payments.

The year over year increase of $1.86 billion in Grants and Contributions authority is primarily due to an increase in funding for Specific and Comprehensive claims ($815.7 million), Infrastructure projects ($397.5 million), Settlement payment to Crees of Eeyou Istchee ($200 million), Operation Return Home ($129.5 million), First Nations elementary and secondary education ($73.1 million), Land claims, treaty-related and self-government agreements ($68 million), Northern and Inuit Housing ($29.5 million), First Nations Child and Family Services Program ($26.9 million), and Federal contaminated sites ($23.4 million).

The year over year increase of $13.1 million in Operating authority (Operating Vote 1 and Capital Vote 5) is primarily due to the increase of funding for Operation Return Home ($45.1 million), Federal contaminated sites ($34.8 million), and Land claims, treaty-related and self-government agreements ($23.3 million). This is offset by a decrease in funding for items such as Indigenous Childhood Claims Litigation ($53 million), Indian Residential Schools Settlement Agreement ($27.6 million), Canadian High Arctic Research Station Construction ($13.3 million), and Métis Aboriginal rights and the management of Métis and non-status Indian litigation ($5 million).

Furthermore, the capital budget carry forward authority 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.

An $8.9 million decrease in Statutory authority (Operating and Grants & Contributions) is primarily due to the Employee Benefits Plan and Comprehensive Land Claim Settlements.

Departmental budgetary expenditures were $56 million lower than the same quarter in 2016-2017. As per the Departmental budgetary expenditures by Standard Object tables (2a and 2b), the decrease of $56 million for the quarter is mainly due to the decrease in Other Subsidies and Payments ($80 million, Standard Object 12), Transfer Payments ($56 million, Standard Object 10), and Acquisition of Land, Buildings and Works ($9.5 million, Standard Object 8). This is offset by the increase of Professional and Special Services ($75.5 million, Standard Object 4), and Personnel ($14.4 million, Standard Object 1). Overall, 59% of the total available budgetary authorities was expended in comparison to previous year's 67%.

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.

This year the Department is experiencing two unique risks. First, there are 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.

Second, as a result of the recent announcement of November 30, 2017, to create Indigenous Services Canada (ISC) and integrate the First Nations and Inuit Health Branch from Health Canada, the organization must manage resources across two distinct financial systems. Any information related to the First Nations and Inuit Health Branch, is now managed and reported through ISC.

This report excludes FNIHB financial information, whose quarterly financial reporting requirements will be fulfilled through the Department of Health Canada.

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, of the $1.67 billion received from Budget 2016, over 60% has been allocated to First Nation infrastructure programs. In order to strengthen controls in this area, quarterly monitoring of the departmental audit "Follow-up audit on Infrastructure On-Reserves" continues to take place. The Infrastructure focused project audit regime has been launched in the third quarter, a first time endeavor for the infrastructure programming. As the program is aligning to the Government of Canada new approach, the principles of the comprehensive risk assessment are being used in planning. In addition, the department has committed to a national recipient monitoring framework, inclusive of program-focused oversight and monitoring activities. In this initiative, the Capital Facilities and Maintenance Program (CFMP) and the Education & Social Development Programs and Partnerships (ESDPP), 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 variety of approaches are used to confirm that recipients have met planned program outcomes and results and that the funds were used for the intended purposes. In addition, the ability to conduct audits of recipients, under the terms of their funding agreements; provides a further opportunity to ensure that First Nations have appropriate management, financial and administrative controls in place.

To minimize financial risk as a result of the creation of ISC, staff within the Chief Financial, Results and Delivery Officer Sector are working closely with all stakeholders and monitoring the financial situation on a regular basis. Financial resources are currently being managed as one entity until fiscal year-end. Year-end reporting will be separated between the two entities, with FNIHB expenditures reported under ISC, from November 30 until year-end.

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 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, CIRNA

Date: March 19, 2018

City: Gatineau (Canada)

Original signed by_______________________

Jean-François Tremblay

Deputy Minister, ISC

Date: March 22, 2018

City: Gatineau (Canada)

Original signed by_______________________

Paul J. Thoppil, CPA, CA

Chief Finances, Results and Delivery Officer

Date: March 18, 2018

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 December 31, 2017 Year to date used at quarter-end
Vote 1 - Operating expenditures 1,057,915 252,529 599,287
Vote 5 - Capital expenditures 52,290 7,018 14,742
Vote 10 - Grants and contributions 10,015,871 2,091,512 5,880,976
Vote 7b - Debt forgiveness 526 - -
Vote 9b - Debt Write-off 100 - -
(S) Budgetary statutory authorities - Operating Expenditures:      
Contributions to employee benefit plans (EBP) 59,929 14,168 42,504
Minister of Aboriginal Affairs and and Northern Development – Salary and motor car allowance 84 42 85
Payments to comprehensive claim beneficiaries in compensation for resource royalties 2,931 1 674 1 674
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 - 2,596 3,621
(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 13,428 52,709
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 (9) 2,618
Contributions in connection with First Nations infrastructure 28,067 9,699 12,389
Total Budgetary Authorities 11,283,218 2,392,656 6,610,606
Non-Budgetary Authorities:      
Loans to native claimants 25,903 9,355 19,751
Loans to First Nations in British Columbia for the purpose of supporting their participation in the British Columbia Treaty Commission Process 30 400 4,661 11,234
Total Non-Budgetary Authorities 56,303 14,016 30,985
Total Authorities 11,339,521 2,406,672 6,641,590
Note: Pursuant to Order-in-Council P.C. 2017-1464 effective November 29, 2017, Indigenous Services Canada was created. It includes the Regional Operations Sector and the Education and Social Development Programs and Partnerships Sector, from the Department of Indian Affairs and Northern Development, and the First Nations and Inuit Health Branch from the Department of Health Canada. Final expenditures for fiscal year 2017-2018 between the former Department of Indian Affairs and Northern Development and Indigenous Services Canada will be determined at year-end.

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 December 31, 2016 Year to date used at quarter-end
Vote 1 - Operating expenditures 1,009,734 242,173 630,125
Vote 5 - Capital expenditures 55,426 14,320 29,131
Vote 10 - Grants and contributions 8,155,197 2,145,408 5,533,554
Vote 7b - Debt forgiveness - - -
Vote 9b - Debt Write-off - - -
(S) Budgetary statutory authorities - Operating Expenditures:
Contributions to employee benefit plans (EBP) 65,035 13,182 39,545
Minister of Aboriginal Affairs and Northern Development – Salary and motor car allowance 84 21 42
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 - 8,150 9,235
(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 13,428 57,817
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 36 2,459
Contributions in connection with First Nations infrastructure 28,067 11,895 14,367
Total Budgetary Authorities 9,385,819 2,448,613 6,316,276
Non-Budgetary Authorities:      
Loans to native claimants 25,903 3,769 13,047
Loans to First Nations in British Columbia for the purpose of supporting their participation in the British Columbia Treaty Commission Process 30,400 5 063 12 610
Total Non-Budgetary Authorities 56,303 8,832 25,657
Total Authorities 9,442,122 2,457,445 6,341,933

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 Expending during the quarter ended December 31, 2017 Year to date used at quarter-end
Expenditures:
1 Personnel 469,836 121,388 362,762
2 Transportation and communications 31,872 6,610 15,551
3 Information 10,691 971 3,390
4 Professional and special services 377,006 125,923 178,432
5 Rentals 19,431 4,654 11,098
6 Purchased repair and maintenance 2,022 273 573
7 Utilities, materials and supplies 4,076 687 1,762
8 Acquisition of land, buildings and works 46,288 3,787 9,461
9 Acquisition of machinery and equipment 4,885 878 2,699
10 Transfer payments 10,107,427 2,114,629 5,948,693
11 Public debt charges - - -
12 Other subsidies and payments 212,064 12,858 76,185
Total gross budgetary expenditures 11,285,598 2,392,656 6,610,606
Less Revenues netted against expenditures:      
Internal Services (2 380) - -
Total Revenues netted against expenditures (2 380) - -
Total net budgetary expenditures 11,283,218 2,392,656 6,610,606

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 December 31, 2016 Year to date used at quarter-end
Expenditures:      
1 Personnel 435,111 107,017 313,318
2 Transportation and communications 62,694 6,681 15,643
3 Information 27,947 1,463 3,479
4 Professional and special services 271,047 50,382 157,197
5 Rentals 34,682 4,252 8,613
6 Purchased repair and maintenance 7,776 261 678
7 Utilities, materials and supplies 9,374 822 1,868
8 Acquisition of land, buildings and works 51,308 13,313 27,285
9 Acquisition of machinery and equipment 3,305 1,045 1,945
10 Transfer payments 8,250,981 2,170,766 5,608,198
11 Public debt charges - - -
12 Other subsidies and payments 232,304 92,894 178,851
Total gross budgetary expenditures 9,386,529 2,448,897 6,317,075
Less Revenues netted against expenditures:      
Internal Services (710) (283) (800)
Total Revenues netted against expenditures (710) (283) (800)
Total net budgetary expenditures 9,385,819 2,448,614 6,316,275
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