Quarterly Financial Report of Transport Canada (Unaudited) for the quarter ended September 30th, 2017

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 Directive on Accounting Standards, GC 4400 Departmental Quarterly Financial Report, which as of April 1, 2017 has replaced the now-rescinded Treasury Board Accounting Standard (TBAS) 1.3 - Departmental and Agency Quarterly Financial Report.

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

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) 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.

Transport Canada 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

2.1 Statement of Authorities

Transport Canada's total authorities available for use decreased by approximately $16 million, from $1,420 million as of September 30, 2016 to $1,404 million as of September 30, 2017, as summarized below:

Table 1: Significant changes in Authorities (in thousands of dollars):

Authorities

2017-2018 Footnote *

2016-2017 Footnote *

Variance

Vote 1 – Net operating expenditures

661,843

573,878

87,965

Vote 5 – Capital expenditures

160,353

149,908

10,445

Vote 10 - Grants and contributions – Gateways and corridors

113,975

258,354

(144,379)

Vote 15 - Grants and contributions – Transportation infrastructure

185,062

122,252

62,810

Vote 20 - Grants and contributions – Other

47,124

46,690

434

Budgetary statutory authorities

235,164

268,937

(33,773)

Total Authorities

1,403,521

1,420,019

(16,498)

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 September 30, 2017 are explained below.

2.1.1 Vote 1 – Operating expenditures (increase of $88M)

Planned operating authorities increased by $88 million from 2016-2017 to 2017-2018 mostly explained by the following factors:

  • Increase in planned spending of:
    • $41 million in funding for the Oceans Protection Plan;
    • $35 million for the Safety of Railways and Transportation of Dangerous Goods; and
    • $31 million for the divestiture phase of the Port Asset Transfer Program.
  • Offset by a decrease in planned spending of:
    • $15 million for the Ferry Services Contribution Program, as additional funds were provided in 2016-2017 for the disposal of the MV Princess of Acadia; and
    • $4 million as a result of Budget 2016 reductions to travel, professional services, and advertising.

2.1.2 Vote 5 – Capital expenditures (increase of $10M)

Capital expenditures authorities increased by $10 million from 2016-2017 to 2017-2018, largely explained by the following factors:

  • An increase in planned spending of:
    • $14 million due to a higher Capital Budget Carry Forward (CBCF) when compared to the prior year.
    • $7 million for the divestiture phase of the Port Asset Transfer Program.
  • Offset by a decrease in planned spending of:
    • $12 million for the Ferry Services Contribution Program, as additional funds were received in 2016-2017 for terminal and vessel equipment upgrades.

2.1.3 Votes 10, 15 and 20 – Grants and contributions (decrease of $81M)

Grants and contributions (G&C) authorities as a whole decreased by $81 million from 2016-2017 to 2017-2018, largely explained by the following factors:

  • A decrease in planned spending for G&C Vote 10 – Gateways and corridors:
    • $140 million for the Gateways and Border Crossings Fund as the program approaches its maturity date; and
    • $4 million for the Asia Pacific Gateway and Corridor Initiative.
  • An increase in planned spending for G&C Vote 15 - Transportation infrastructure:
    • $74 million increase for the divestiture phase of the Port Asset Transfer Program;
    • $8 million increase for the Highway 5 project under the Outaouais Road Agreement Program; and
    • $19 million decrease for the Ferry Services Contribution Program.

2.1.4 Budgetary statutory authorities (decrease of $34M)

The budgetary statutory authorities decreased by $34 million mainly attributable to a decrease in capital and operating requirements associated with the St. Lawrence Seaway Management Corporation (SLSMC). The SLSMC is responsible for managing and operating the Seaway, as well as the maintenance, repairs, acquisition and replacement of government-owned Navigation Seaway Assets. Transport Canada is responsible for funding any SLSMC financial requirements net of revenues. The decrease in planned spending is explained by the reduced funding provided by Transport Canada for the SLSMC's Modernization Project as it nears completion.

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 second quarter of 2017-2018 represent 33% of the annual planned expenditures, compared to 32% in 2016-2017.

Historically, most spending on high-dollar value, major infrastructure grants and contributions 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. For some categories of operating expenditures, the year-to-date actuals represent a small fraction of the planned expenditures, which is consistent with prior years and other federal government departments. This is mainly due to a timing difference between the date when the goods or services were obtained and when the invoices were received. In addition, there is also a ramp up of operational activities in the last two quarters once the mid-year internal budget reallocations are completed.

The major year-to-year variances as at September 30, 2017 are as follows:

Planned Expenditures

  • The 2017-2018 increases in planned expenditures for the following Standard Objects when compared to 2016-2017 are mainly as a result of the increases in funding for the Ocean Protection Plan, the Safety of Railways and Transportation of Dangerous Goods, the Port Asset Transfer Program. The major increases are the following:
    • Personnel: $38 million
    • Transportation and communications: $18 million
    • Rentals: $6 million
    • Repair and Maintenance: $9 million
    • Utilities, materials and supplies: $7 million
    • Acquisitions of machinery and equipment: $21 million
  • Professional and special services

    The planned expenditures related to Professional and special services for 2017-2018 decreased by approximately $9 million compared to the 2016-2017 planned expenditures. The decrease is a result of a reduction in planned spending based on previous years' actual expenditures.

  • Acquisition of land, building and works

    The planned expenditures related to the Acquisition of land, building and works for 2017-2018 decreased by $5 million is mainly as a result of the decrease in funding for the Ferry Services Program offset by an increase in the Capital Budget Carry Forward which is allocated to various projects.

  • Transfer payments

    The planned expenditures related to Transfer payments for 2017-2018 decreased by approximately $81 million when compared to the planned expenditures for 2016-2017. The causes of the variances are explained in section 2.1.3.

  • Other subsidies and payments

    The planned expenditures related to Other subsidies and payments for 2017-2018 decreased by approximately $31 million when compared to the planned expenditures for 2016-2017. The causes of the variances are explained in section 2.1.4.

  • Vote netted revenues

    The planned revenues related to Vote netted revenues for 2017-2018 decreased by approximately $9 million when compared to the planned revenues for 2016-2017. The variance is mainly due to a decrease in the anticipated level of technical services provided by the Aircraft Services Directorate at Transport Canada to the Canadian Coast Guard (CCG) due to completion of the CCG's helicopter fleet renewal project in 2016-17. Technical services include inspections, aircraft maintenance and modification, component overhaul, quality assurance, logistic support and the commissioning of the helicopters.

Year-to-Date Expenditures

  • The year-to-date expenditures related to Personnel at September 30, 2017 increased by approximately $35 million compared to the 2016-2017. This increase is attributable to retroactive salaries and wages paid to employees for earnings related to previous and current fiscal years following the ratification and signing of new collective agreements.
  • The year-to-date expenditures related to Acquisition of land, buildings and works at September 30, 2017 increased by approximately $7 million when compared to the 2016-2017. This increase is mainly attributed to expenditures related to construction in Wabush Newfoundland and Labrador of a new parallel taxiway and apron expansion, a redevelopment of the westside parking and air terminal building access road and a construction of new water pressure booster station & reservoir.
  • The year-to-date expenditures related to Transfer payments at September 30, 2017 decreased by approximately $15 million when compared to the 2016-2017. This decrease is largely attributed to contributions through the Port Asset Transfer Program as a result of the transfer of the Cornwall Port Facility to the City of Cornwall completed in 2016-17, a reduction in the Ferry Services Contribution Program with Northumberland Ferries Ltd and the C.T.M.A. Ferry, and a decrease in the operating and capital assistance payments related to Regional Remote Rail – Tshieutin Railway and Port of Trois-Rivieres Multipurpose Terminal.
  • The year-to-date expenditures related to Other subsidies and payments at September 30, 2017 decreased by approximately $20 million when compared to the 2016-2017. This decrease is mainly due to a lower cash flow requirement to the St. Lawrence Seaway Management Corporation.

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 2017-18 Departmental Plan.

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.

Transport Canada implemented the Phoenix pay system on April 7, 2016 as part of the Government of Canada pay transformation initiative. Since its implementation, the new pay system has experienced issues, which Public Services and Procurement Canada is working to resolve as quickly as possible. To mitigate the impact on its employees, Transport Canada has issued emergency salary advances to employees not receiving their basic pay. The pay issues and the workload associated with the signing of new collective agreements have also resulted in a backlog of compensation transactions, most notably acting pay transactions. The impact on the year-to-date expenditures reflected in the Quarterly Financial Report is not material. Transport Canada will deal with these matters on an expedited basis when the required updates to the Phoenix pay system are implemented.

As described in section 4 below, Transport Canada is currently implementing major initiatives that have risks associated with inter-departmental coordination, cooperation and performance, as well as with the outcome of consultations with key transportation stakeholders and indigenous groups. The Department's Transformation Plan is also designed to improve the Department's financial sustainability and regulatory environment for the future. There are risks and uncertainties associated with implementing needed legislative changes, introducing new cost recovery initiatives and realizing planned savings from identified efficiency opportunities. The recruitment of a significant number of qualified resources within a short time frame could also be a challenge for the department in delivering on its planned activities.

4. Significant changes in relation to operations, personnel and programs

Transport Canada has started advancing the Oceans Protection Plan (OPP) and the Trade and Transportation Corridors Initiatives. These two initiatives, highlighted in previous quarterly financial reports, are part of the department's transformation agenda that will better anticipate and respond to the present and future demands of the transportation sector and support innovation, while ensuring that the department remains on a sustainable financial footing for the long term.

As part of its transformation agenda, Transport Canada will also be rolling out six modernization initiatives over the coming years, consisting of:

  • Modernizing outdated legislation and regulations;
  • Modernizing its oversight regimes;
  • Modernizing its cost-recovery regime;
  • Modernizing the marine and aviation safety regulatory frameworks;
  • Strengthening Canada's engagement with international partners;
  • Strengthening the economic competitiveness of Canada's aerospace sector.

Additional details on these initiatives are presented in the 2016-17 Departmental Results Report (PDF, 1.8 MB).

Original signed by

Michael Keenan,
Deputy Minister
Ottawa, Canada

November 27, 2017

Original signed by

André Lapointe,
Chief Financial Officer
Ottawa, Canada

November 21, 2017

Statement of Authorities (unaudited)

(in thousands of dollars)

Fiscal year 2017-2018

Fiscal year 2016-2017

Total available for use for the year ending March 31, 2018 Footnote *

Used during the quarter ended September 30, 2017

Year to date used at quarter-end

Total available for use for the year ending March 31, 2017 Footnote *

Used during the quarter ended September 30, 2016

Year to date used at quarter-end

Vote 1 - Operating expenditures

730,825

177,752

302 461

652,307

132,545

258,972

Vote 1 - Revenue credited to the vote

(68,982)

(20,158)

(30,670)

(78,429)

(20,083)

(32,242)

Vote 1 – Net operating expenditures

661,843

157,594

271,791

573,878

112,462

226,730

Vote 5 - Capital expenditures

160,353

18,073

21,981

149,908

11,135

15,358

Vote 10 - Grants and contributions – Gateways and corridors

113,975

9,616

11,692

258,354

8,632

14,057

Vote 15 - Grants and contributions – Transportation infrastructure

185,062

15,833

25,067

122,252

14,364

39,022

Vote 20 - Grants and contributions – Other

47,124

1,700

1,555

46,690

1,306

1,309

Budgetary statutory authorities







Contributions to employee benefit
plans

73,114

34,404

34,404

73,010

35,208

35,208

Minister of Transport – Salary and
motor car allowance

84

21

42

83

26

32

Payments to the Canadian National
Railway Company – Victoria
Bridge, Montreal

3,300

639

1,579

3,300

860

1,576

Northumberland Strait Crossing
Subsidy Payment

65,845

-

64,942

65,344

-

63,588

Refunds of amounts credited to
revenues in previous years

-

-

-

-

-

1

Payments in respect of St. Lawrence
Seaway Agreements

92,821

3,577

28,577

127,200

8,837

50,839

Total Budgetary statutory authorities

235,164

38,641

129,544

268,937

44,931

151,244


 

 

 

 

 

 

Total budgetary authorities

1,403,521

241,457

461,630

1,420,019

192,830

447,720

Departmental budgetary expenditures by Standard Object (unaudited)

(in thousands of dollars)

Fiscal year 2017-2018

Fiscal year 2016-2017

Planned expenditures for the year ending March 31, 2018

Expended during the quarter ended September 30, 2017

Year to date used at quarter-end

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:

 

 

 

 

 

 

Personnel

533,570

171,671

280,483

495,458

139,573

245,594

Transportation and communications

41,139

6,183

10,946

22,669

3,631

7,038

Information

3,902

611

792

3,437

391

623

Professional and special services

172,687

24,825

32,754

181,733

19,574

34,266

Rentals

13,108

3,335

4,275

6,920

3,476

4,591

Repair and maintenance

15,733

1,490

2,271

6,729

640

2,012

Utilities, materials and supplies

20,664

3,944

7,018

13,675

2,927

5,106

Acquisition of land, buildings and works

100,129

11,544

11,576

104,970

4,003

4,394

Acquisition of machinery and equipment

52,788

4,046

5,953

32,230

3,420

5,496

Transfer payments

415,306

27,788

104,835

495,940

25,162

119,552

Other subsidies and payments

103,477

6,178

31,397

134,687

10,116

51,290

Total gross budgetary expenditures

1,472,503

261,615

492,300

1,498,448

212,913

479,962

Less Revenues netted against expenditures:

 

 

 

 



Vote-netted revenues

(68,982)

(20,158)

(30,670)

(78,429)

(20,083)

(32,242)

Total Revenues netted against expenditures:

(68,982)

(20,158)

(30,670)

(78,429)

(20,083)

(32,242)


 

 

 

 

 

 

Total net budgetary expenditures

1,403,521

241,457

461,630

1,420,019

192,830

447,720

Date modified: