Quarterly Financial Report of Transport Canada (Unaudited) - For the quarter ended December 31, 2015

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Table of Contents

Statement outlining results, risks and significant changes in operations, personnel and program

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 Accounting Standard 1.3. The quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates (A) and (B).

This quarterly report has not been subject to an external audit or review.

1.1 Authority, Mandate and Program Activities

A summary description of Transport Canada's program activities is presented in Part II of the Main Estimates.

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 Transport Canada'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 2015-2016 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 moneys 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.

Transport Canada 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.

2. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

2.1 Statement of Authorities

Transport Canada's total authorities available for use decreased by approximately $97 million, from $1,869 million as of December 31, 2014 to $1,772 million as of December 31, 2015, as summarized below:

Table 1: Significant changes in Authorities (in thousands of dollars):
Authorities 2015-2016 2014-2015 Variance
Vote 1 – Operating expenditures 642,866 598,270 44,596
Vote 5 – Capital expenditures 187,157 229,800 (42,643)
Vote 10 – Grants and contributions 667,887 778,475 (110,588)
Budgetary statutory authorities 273,663 262,296 11,367
Total Authorities 1,771,573 1,868,841 (97,268)

The Statement of Authorities attached at the end illustrates the total authorities available for use, the authorities used for the quarter and the year-to-date authorities used for the current fiscal year as well as the comparative figures for the previous year. The major year-to-year changes for the quarter ended December 31, 2015 are explained below.

2.1.1 Vote 1 – Operating expenditures (increase of $45M)

Planned operating authorities increased by $45 million from 2014-2015 to 2015-2016 mostly explained by the following factors:

  • Increase in planned spending of $75 million for an out-of-court settlement.
  • Offset by decrease in planned spending of:
    • $13 million as a result of the difference in funding received for the Operating Budget Carry Forward compared to fiscal year 2014-2015; and
    • $13 million in funding for import duties related to the replacement of the MV Princess of Acadia vessel purchased in the third quarter of 2014-2015.
2.1.2 Vote 5 – Capital expenditures (decrease of $43M)

Capital expenditures authorities decreased by $43 million from 2014-2015 to 2015-2016, largely explained by the following factors:

  • Decrease in planned spending of:
    • $63 million as a result of 2014-2015 one time funding received for the replacement of the MV Princess of Acadia vessel; and
    • $42 million for the Gordie Howe International Bridge project mostly as a result of a transfer of funds to the Windsor-Detroit Bridge Authority to deliver a new publicly-owned bridge at this crucial border crossing.
  • Offset by an increase in planned spending of:
    • $58 million to upgrade several federally-owned airports, to retrofit an ecoTECHNOLOGY vehicles facility in Ottawa and for infrastructure funding for the Northern Aerial Surveillance Pilot Project using Unmanned Aerial Vehicles; and
    • $6 million in new funding from Budget 2014 for the Ferry Services Program to support the continued operations of three ferry services in Eastern Canada.
2.1.3 Vote 10 – Grants and contributions (decrease of $111M)

Grants and contributions authorities decreased by $111 million from 2014-2015 to 2015-2016, largely explained by the following factors:

  • Decrease in planned spending of:
    • $95 million for the Asia Pacific Gateways and Corridors Transportation Infrastructure Fund, as the program approaches its maturity date;
    • $15 million for the one time transfer to Canada Border Services Agency for the renewal of the Cornwall border facilities and related infrastructure;
    • $7 million for the Outaouais Road Development Agreement as a result of the completion of the Highway 5, Phase 2 project;
    • $7 million for Contributions to Support the Clean Transportation Initiatives as it approaches its maturity; and
    • $6 million in sun-setting funding for the Oshawa Harbour Port Consolidation project.
  • Offset by an increase in planned spending due to new funding from Budget 2014 of:
    • $13 million for the Gateways and Border Crossings Fund;
    • $5 million for the Oceans Networks Canada – Smart Oceans Contribution Program; and
    • $4 million for the Contribution Program for the Centre of Excellence for Marine Transportation of Oil and Liquefied Natural Gas in Vancouver.
2.1.4 Budgetary statutory authorities (increase of $11M)

The budgetary statutory authorities increased by $11 million mainly as a result of an increase of $8 million in capital and operating requirements associated with the St. Lawrence Seaway and an increase of $3 million for the department's Employee Benefit Plan.

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The statement of Departmental Budgetary Expenditures by Standard Object attached at the end illustrates the annual planned expenditures, the expenditures for the quarter and the year-to-date expenditures for the current fiscal year as well as the comparative figures for the previous year. Overall, the year-to-date expenditures at the end of the third quarter of 2015-2016 represent 51% of the annual planned expenditures, compared to 46% in 2014-2015.

Historically, most spending on high-dollar value, major infrastructure grants and contribution programs occurs in the fourth quarter. This is due to the fact that the majority of recipients submit their claims for reimbursement in the last quarter following the summer and fall construction period.

The major year-to-year variances as at December 31, 2015 are as follows:

  • Personnel
    The year-to-date expenditures related to Personnel at December 31, 2015 increased by approximately $6 million when compared to the 2014-2015 third quarter year-to-date expenditures. This is largely attributed to an increase in the number of new employees throughout the Department, with the most significant increase in oversight activities within Marine Safety, Aviation Safety and Security, Rail Safety and Transportation of Dangerous Goods. The increase is partially offset by a decrease in severance pay cash-outs to staff that occurred during the second quarter of 2014-2015.

  • Professional and special services
    The planned expenditures related to Professional and special services for 2015-2016 decreased by approximately $16 million compared to the 2014-2015 planned expenditures. The decrease is largely attributed to a smaller Operating Budget Carry Forward when comparing to 2014-2015 as well as small decreases for various projects, such as project management for the Gordie Howe International Bridge, offset by increases in professional services for the Ports Assets Management and the Ferry Services Programs as a result of new funding from Budget 2014.

    The year-to-date expenditures related to Professional and special services at December 31, 2015 increased by approximately $7 million when compared to the 2014-2015 third quarter year-to-date expenditures. This is largely attributed to an increase in year-to-date expenditures for services related to the Port of Gaspé (Sandy Beach) ($4 million) remediation project, management consulting services related to the refit of the replacement vessel for the MV Princess of Acadia ($4 million), information technology consultants for various application and database development and maintenance services ($4 million) and increases in various other projects; partially offset by a decrease in spending for services related to the Victoria Harbor Rock Bay remediation project ($8 million).

  • Acquisitions of land, buildings and works
    The planned expenditures related to Acquisitions of land, buildings and works for 2015-2016 increased by approximately $34 million compared to the 2014-2015 planned expenditures. The increase is mainly due to an increase of $48 million in Infrastructure funding for the upgrade of several federally-owned airports and retrofit of ecoTECHNOLOGY vehicles facility. Offsets include a decrease of $10 million in funding for the Gordie Howe International Bridge project and decreases in various other projects.

  • Acquisitions of machinery and equipment
    The planned expenditures related to Acquisitions of machinery and equipment for 2015-2016 decreased by approximately $93 million compared to the 2014-2015. The decrease is mainly due to planned reductions of $32 million related to the Gordie Howe International Bridge project, $63 million one-time funding in 2014-2015 for the replacement of the MV Princess of Acadia vessel, and a change of $7 million in funding received for the Capital Budget Carry Forward compared to fiscal year 2014-2015; offset by an increase of $10 million in infrastructure funding for the Northern Aerial Surveillance Pilot Project using Unmanned Aerial Vehicles.

    The year-to-date expenditures related to Acquisitions of machinery and equipment at December 31, 2015 decreased by approximately $33 million when compared to the 2014-2015 third quarter year-to-date expenditures. The decrease is largely attributed to expenditures made in the third quarter of 2014-2015 for the replacement of the MV Princess of Acadia vessel ($40 million) offset by an increase in year-to-date expenditures for the acquisition of parts and accessories for aircraft ($5 million).

  • Transfer payments
    The planned expenditures related to Transfer payments for 2015-2016 decreased by approximately $110 million when compared to the planned expenditures for 2014-2015. The causes of the variances are largely explained in section 2.1.3.

  • Other subsidies and payments
    The planned expenditures related to Other subsidies and payments for 2015-2016 increased by approximately $83 million when compared to the planned expenditures for 2014-2015. The variance is mainly due to an increase of $75 million for an out-of court-settlement payment and $8 million in the annual statutory payments to the St. Lawrence Seaway Management Corporation as a result of increased asset renewal costs associated with its modernization program.

    The year-to-date expenditures related to Other subsidies and payments at December 31, 2015 increased by approximately $53 million when compared to the 2014-2015 third quarter year-to-date expenditures. The increase is mainly due to a $75 million out-of court-settlement payment and larger cashflow requirement to the St. Lawrence Seaway Corporation when compared to the same prior year period ($4 million); offset by decreases due to a one-time transition payment of $15 million made for implementing salary payment in arrears by the Government of Canada and a $11 million duty payment related to the replacement of the MV Princess of Acadia vessel all made last year.

  • Vote netted revenues
    The planned revenues related to vote netted revenues for 2015-2016 decreased by approximately $6 million when compared to the planned revenues for 2014-2015. The variance is due to a decrease in repayments for deferred airport rent which ended in December 2015 as well as other minor decreases in various revenue streams.

3. Risks and Uncertainties

Transport Canada maintains a Corporate Risk Profile which identifies and assesses high-level risks that could affect the achievement of the Department's objectives and priorities. The identification of risks and the development of risk responses contribute to making decisions related to setting departmental priorities, planning, allocating resources, developing policies, managing programs and reporting on performance. Additional information regarding the Department's key risk areas is presented in the Report on Plans and Priorities.

Certain risks could have financial impacts should they materialize, for example many factors affecting the timing of transfer payments lie outside the control of the Department and could require funds to be re-profiled to future years. To minimize these impacts, the Department continuously monitors its program funding and expenditures, including a monthly senior management review of plans and forecasts.

Over the past year, Transport Canada has been proactively staffing to ensure effective delivery of its oversight mandate and has taken a risk-based approach to managing attrition by targeted overstaffing. To manage the resulting risk that the department could exceed its appropriated budget for 2015-2016, a number of temporary mitigation measures have been implemented, including:

  • A review of all discretionary spending, including travel;
  • A common approach to learning to limit training expenditures to mandatory or other specific operational requirements;
  • Establishing a Staffing Management Board to review all staffing actions, consider their impacts and ensure they remain within the department's salary envelope; and
  • Determining the possibility of a vote transfer to align resources with actual operating and capital requirements.

From now until the end of the fiscal year, the department will continue to review spending, align spending with priorities and adjust where necessary.

4. Significant Changes in Relation to Operations, Personnel and Programs

Pursuant to Order in Council P.C. 2015-1237, the Windsor-Detroit Bridge Authority was transferred from Transport Canada to Infrastructure Canada effective November 4, 2015. During the transition period, Transport Canada continues to reflect financial information related to the Windsor-Detroit Bridge Authority.

On November 4, 2015, the Prime Minister appointed the Honorable Marc Garneau as the new Minister of Transport.

There have been no other significant changes in relation to operations, personnel and program over the last quarter, except as described in section 2.1.

Approved by:

Original signed by

Jean-François Tremblay,
Deputy Minister
Ottawa, Canada

February 26, 2016

Original signed by

André Lapointe,
Chief Financial Officer
Ottawa, Canada

February 22, 2016

Statement of Authorities (Unaudited)

(in thousands of dollars) Fiscal year 2015-2016 Fiscal year 2014-2015
Total available for use for the year ending March 31, 2016 (1) Used during the quarter ended December 31, 2015 Year-to-date used at quarter-end Total available for use for the year ending March 31, 2015 (1) Used during the quarter ended December 31, 2014 Year-to-date used at quarter-end
Vote 1 – Operating expenditures 723,789 235,467 540,915 684,937 182,398 491,571
Vote 1 – Revenues credited to the vote (80,923) (20,920) (58,326) (86,667) (22,397) (61,008)
Vote 5 – Capital expenditures 187,157 38,269 56,860 229,800 61,897 78,704
Vote 10 – Grants and contributions 667,887 62,344 113,764 778,475 70,055 111,791
Budgetary statutory authorities
Contributions to employee benefit plans 71,192 17,798 53,394 69,130 22,836 51,381
Minister of Transport – Salary and motor car allowance 82 21 103 80 40 120
Refunds of amounts credited to revenues in previous years - - 7 - (10) -
Payments to the Canadian National Railway Company – Victoria Bridge, Montreal 3,300 - 1,041 3,300 1,015 1,458
Northumberland Strait Crossing Subsidy Payment 63,789 - 62,335 62,836 - 61,733
Payments in respect of St. Lawrence Seaway Agreements 135,300 71,673 128,351 126,950 73,897 124,583
Total authorities 1,771,573 404,652 898,444 1,868,841 389,731 860,333

(1) Includes only Authorities available for use and granted by Parliament at quarter end.

Departmental Budgetary Expenditures by Standard Object (Unaudited)

(in thousands of dollars) Fiscal year 2015-2016 Fiscal year 2014-2015
Planned expenditures for the year ending March 31, 2016 Expended during the quarter ended December 31, 2015 Year-to-date expended at quarter-end Planned expenditures for the year ending March 31, 2015 Expended during the quarter ended December 31, 2014 Year-to-date expended at quarter-end
Expenditures:
Personnel 495,038 133,445 399,934 495,759 133,239 393,878
Transportation and communications 29,687 6,730 21,473 30,949 9,193 21,531
Information 3,066 870 1,893 3,404 667 1,545
Professional and special services 156,869 32,564 78,497 173,033 39,838 71,673
Rentals 9,846 2,045 5,776 6,998 1,279 5,499
Repair and maintenance 14,145 2,625 5,550 17,538 3,940 7,705
Utilities, materials and supplies 18,208 3,608 11,243 17,045 4,166 11,447
Acquisition of land, buildings and works 129,470 21,014 27,099 95,379 11,665 24,196
Acquisition of machinery and equipment 42,454 11,738 21,870 135,082 49,744 55,167
Transfer payments 734,976 62,344 177,140 844,611 71,070 174,982
Other subsidies and payments 218,737 148,589 206,295 135,710 87,327 153,718
Total gross budgetary expenditures 1,852,496 425,572 956,770 1,955,508 412,128 921,341
Less revenues netted against expenditures:
Vote-netted revenues (80,923) (20,920) (58,326) (86,667) (22,397) (61,008)
Total Revenues netted against expenditures: (80,923) (20,920) (58,326) (86,667) (22,397) (61,008)
Total net budgetary expenditures 1,771,573 404,652 898,444 1,868,841 389,731 860,333
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