Archived — Federal Economic Development Agency for Southern Ontario — Quarterly Financial Report — Quarter ended December 31, 2013

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Statement Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs

  1. Introduction
  2. Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results
  3. Risks and Uncertainties
  4. Significant Changes in Relation to Operations, Personnel and Programs
  5. Budget 2012 Implementation

1. Introduction

This quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates A, as well as Canada's Economic Action Plan 2012 (Budget 2012). It reflects results in relation to this funding. 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 Accounting Standard 1.3. It has not been subject to an external audit or review.

Authority, Mandate & Program Activities

The Federal Economic Development Agency for Southern Ontario (FedDev Ontario) was created to support the competitiveness, innovation and diversification of southern Ontario's economy: by delivering strategic investments to businesses, not-for-profit organizations and communities; establishing and strengthening collaborative partnerships with key economic stakeholders; and representing the region's interests at the national level.

Further details on FedDev Ontario's authorities, mandate and program activities can be found in the Report on Plans and Priorities, Part II of the Main Estimates, and Supplementary Estimates.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the Agency's spending authorities granted by Parliament and those used by the Agency consistent with the Main and Supplementary Estimates for the 2013–14 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.

The Agency uses the full accrual method of accounting to prepare and present its annual financial statements that are part of the Agency's performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on, or before March 1, preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result, the measures announced in the Budget 2012 could not be reflected in the 2012–13 Main Estimates.

In fiscal year 2012–13, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. Additional funding was sought by FedDev Ontario through the 2012–13 Supplementary Estimates (A) and (B). The Agency received this additional authority net of the planned savings and other amounts transferred by Treasury Board authority to a frozen allotment.

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

The third quarter of 2013–14 proved to be an important period within FedDev Ontario's lifecycle as a result of the Agency receiving approval for its new programming: the Southern Ontario Prosperity Initiatives (SOPI), the Advanced Manufacturing Fund (AMF) and the Eastern Ontario Development Program (EODP). Funding for these programs is not available until April 1, 2014.

With respect to overall expenditures during the third quarter of 2013–14, FedDev Ontario spent $45.7 million, which is $17.2 million (or 60.4 percent) higher than what was spent during the same time period in 2012–13. This can be attributed to increases in spending on grants and contributions, salary, and professional services, offset by decreases in spending on machinery and equipment, transportation and communications, and repair and maintenance.

At the end of third quarter 2013–14, FedDev Ontario has spent $96.5 million year-to-date (or 39.3 percent of its available authorities) as compared to $71.3 million year-to-date (or 27.2 percent of its available authorities) in 2012–13. This increase is mainly due to an increased volume of contribution claims received due to their targeted completion date of March 31, 2014, which aligns with the end of the Agency's first mandate. Increased salary costs are also a factor in the increased spending year-to-date.

2.1 Authorities Analysis

Planned departmental spending in fiscal year 2013–14 totals $245.5 million, a $16.9 million decrease over that available at the close of the third quarter in 2012–13. This comprises of a $17.2 million decrease in program authorities, offset by a $0.3 million increase in operating authorities.

The $17.2 million decrease in program authorities comes as a result of Budget 2012 implementation, as well as the fact that a $23 million one-time top-up was provided for the Southern Ontario Development Program (SODP) in 2012–13. Partially offsetting these decreases is a $19.8 million re-profile of funds from fiscal year 2012–13 for the Community Infrastructure Improvement Fund (CIIF).

The $0.3 million increase in operating authorities comes as a result of a budget transfer from Industry Canada for the operations of Canada Business Ontario ($1.6 million increase), offset by Budget 2012 reductions ($1.3 million decrease).

As in the previous year, 2013–14 planned spending on program authorities represents over 85 percent of the Agency's total authorities.

Total authorities available for use for the year ending March 31, 2014 compared to total authorities available for use for the year ending March 31, 2013 (in millions of dollars)
Bar graph of : Total authorities available for use for the year ending March 31, 2014 compared to total authorities available for use for the year ending March 31, 2013 (in millions of dollars)
Description of Figure
Total authorities available for use for the year ending March 31, 2014 compared to total authorities available for use for the year ending March 31, 2013 (in millions of dollars)
  Fiscal Year
(in millions of dollars)
2013–14 2012–13
Operating Spending Authorities 30.8 30.5
Program Spending Authorities 214.7 231.9

2.2 Expenditure Analysis

Statement of Authorities
Used During the Quarter

In the third quarter of the 2013–14 fiscal year, total budgetary expenditures were $45.7 million compared to $28.5 million reported in the same period of 2012–13. This represents a year-over-year increase of $17.2 million (or 60 percent).

Quarterly spending is composed of $36.3 million on programs and $9.3 million on operating expenditures. Quarterly spending in grants and contributions has increased $15.9 million (or 78 percent) year-over-year, while quarterly operating spending has increased $1.2 million (or 15 percent) year-over-year. The increase in program spending is mainly a result of an increase in the volume of contribution claims received due to the targeted completion of projects by March 31, 2014. The increase in quarterly operating expenditures is mainly due to higher salary costs and increased professional services costs, offset by reductions in spending in the areas of repair and maintenance, the purchase of machinery and equipment, and transportation and communications.

Year-to-Date Analysis

On a year-to-date basis, as of the end of the third quarter of fiscal year 2013–14, total budgetary expenditures were $96.5 million, compared to $71.3 million at the end of the same period for 2012–13. This represents a year-over-year increase of $25.2 million (or 35 percent). This increase can be attributed to an increase in spending in grants and contributions, salary, and professional services, which is somewhat offset by reductions in spending in transportation and communications, repair and maintenance, the purchase of machinery and equipment, and rental costs.

Statement of Departmental Budgetary Expenditures by Standard Object

The following provides additional analysis of key variances at the Standard Object level.

Used During the Quarter

The transfer payment spending (or program spending) of $36.3 million in the third quarter of 2013–14 is composed of $24.5 million in claims paid on projects under the Southern Ontario Advantage (SOA) initiatives; $5.0 million in claims paid on projects under CIIF; and $6.8 million in claims paid for projects under remaining programs delivered by FedDev Ontario (such as: Community Futures Program, Eastern Ontario Development Program). The growth in year-over-year expenditures is mainly due to an increase in claims volumes for the SOA initiatives and CIIF, given that projects are targeted to be completed by March 31, 2014.

There is a year-over-year increase in quarterly spending related to personnel costs ($1.0 million or 19 percent). This can be attributed to the absorption of Canada Business Ontario into FedDev Ontario's operations, as well as salary adjustments and pay rate increases resulting from collective bargaining agreements.

There is a year-over-year increase in quarterly spending related to professional services ($1.9 million or 255 percent), and this is primarily due to a change in coding related to the billing of the Memorandum of Understanding (MOU) with Industry Canada for information technology services. In 2012–13, this charge was recorded under the repair and maintenance Standard Object, which has seen a corresponding decrease in spending ($1.6 million or 97 percent). In addition, the remaining $0.3 million variance is attributed to expenditures related to the absorption of Canada Business Ontario.

There is a year-over-year increase to quarterly expenditures related to rentals ($22,000 or 122 percent). This variance is attributed to new rental MOUs with Industry Canada related to photocopying services for the Agency, as a result of better pricing that was obtained through Industry Canada for photocopying services. Also affecting rental costs, is the acquisition of additional space in the Agency's Toronto office.

Quarterly purchases of machinery and equipment have declined year-over-year ($92,000 or 91 percent). This is mainly due to the completion of Budget 2012-related office consolidations.

Quarterly transportation and communications expenditures have decreased by $50,000 (or 16 percent) year-over-year. This is mainly attributable to reduced relocation costs.

Quarterly spending on information services has decreased year-over-year ($40,000 or 53 percent), and this is mainly attributable to the lifecycle stage of the Agency's current programming, which has reduced the number of announcements being made. The announcements related to the launch of new programming will not likely have an effect on spending in this area until the fourth quarter of 2013–14 or future fiscal years.

Year-to-Date Analysis

The $23.5 million (or 46 percent) increase in grants and contributions spending year-over-year can be attributed to an increase in claim volumes for the SOA initiatives and CIIF given that projects are targeted to be completed by March 31, 2014.

The $2.1 million (or 13 percent) increase in salary costs can be attributed to the absorption of Canada Business Ontario into operations as well as salary adjustments and pay rate increases resulting from collective bargaining agreements.

The $1.6 million (or 94 percent) increase in professional services costs is related to a change in coding for the IT MOU with Industry Canada, which has caused a corresponding decrease of $1.5 million (or 93 percent) in the repair and maintenance Standard Object.

The $55,000 (or 37 percent) decrease in information services costs is related to the life cycle stage of the Agency's current programming, and the fact that the launch of the Agency's new programming is still in the early stages.

The $67,000 (or 37 percent) decrease in spending related to the acquisition of machinery and equipment is related to the completion of Budget 2012-related office consolidations.

There were year-over-year decreases in spending in the areas of transportation and communications ($230,000 or 29 percent) and rentals ($149,000 or 65 percent). These decreases can be partially attributed to reduced relocation costs and reduced office leases.

3. Risks and Uncertainties

March 31, 2014, marks the end of FedDev Ontario's first mandate. The Southern Ontario Development Program (SODP), along with its seven SOA initiatives, and CIIF will sunset on March 31, 2014.

The Agency is handling a number of pressures in operating authorities:

  • Managing two programs with an end date of March 31, 2014;
  • Potential pressures to extend projects beyond 2014;
  • Continuing to deliver the CIIF program;
  • Preparing for the launch of new programs under its renewed mandate;
  • Integrating Canada Business Ontario into its operations; and
  • Executing Budget 2012 implementation measures.

The Agency is relying on its budget monitoring and forecasting regime to support the achievement of its priorities, as well as those of the Government of Canada, within its authorities.

Going forward, uncertainty remains over the timing of the consolidation of back office systems, including the cost to be borne by departments and agencies to support implementation and change management plans. The Agency continues to participate in Government of Canada community meetings to stay abreast of developments in this area and inform future plans.

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

On December 9, 2013, Susan Anzolin was named acting Chief Financial Officer for FedDev Ontario. This acting assignment will be effective until December 31, 2014.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented to: refocus government and programs; make it easier for Canadians and business to deal with their government; and modernize and reduce the back office.

In 2012–13, FedDev Ontario started to implement several measures to achieve its savings targets of $10.4 million in 2012–13, $21.3 million in 2013–14 and an ongoing $22.1 million by 2014–15. These include:

  • Reductions to the Southern Ontario Development Program (SODP) and Community Futures Program (CFP);
  • Integrating program delivery in one branch and consolidating office space;
  • Adopting environmentally-friendly office practices;
  • Transferring internal audit services to Treasury Board Secretariat; and
  • Collaborating with other regional development agencies (RDAs) to achieve savings and efficiencies across various internal services areas, such as: transferring internal audit services to the Office of the Comptroller General and work underway to identify a common financial system to support Grants and Contributions.

While implementing the above, FedDev Ontario has supported other Government of Canada departments and agencies in achieving their savings targets, including:

  • Implementing the new Workplace 2.0 standard at the Agency's Kitchener headquarters, by consolidating office space to support Public Works and Government Services Canada (PWGSC) in achieving its savings targets; and
  • Adopting Shared Services Canada's "Cost Effective Telephone Services" initiative, which has supported operational savings by reducing the number of telecommunications devices per person.

In 2013–14, FedDev Ontario's authorities have been reduced by $21.3 million. This includes $20.0 million to program authorities and $1.3 million to operating authorities. Through year-to-date to December 31, 2013, spending has been strong relative to its authorities; this is mainly due to an increase in volume of contribution claims received due to the targeted completion of projects by March 31, 2014. This completion deadline aligns with the end of the Agency's first mandate. Strong spending has also been seen in the area of salary, and this is due to salary adjustments resulting from collective agreements, as well as the integration of Canada Business Ontario into Agency operations.

Throughout 2013–14, FedDev Ontario plans to continue to invest in the acquisition of machinery and equipment to support the implementation of its Budget 2012 savings measures, including the adoption of more environmentally-friendly office practices (such as: the purchase of high-efficiency printers, the replacement of desktop computers with laptops and the elimination of landlines). The timing of these investments, however, will vary year-over-year and is a contributing factor to the quarterly spending variance seen during the third quarter for this Standard Object. Also contributing to the variance in quarterly spending in this Standard Object, is the fact that Workplace 2.0 implementation in the Kitchener office began to take place during the third quarter of 2012–13 and has since been completed. The rental Standard Object is 65 percent lower in 2013–14 when compared to 2012–13 at the end of the third quarter. As explained above, this is due to the Agency having consolidated its operations in 2012–13. Workplace 2.0 implementation during 2012–13 explains the 37 percent decrease in annual spending in 2013–14 on machinery and equipment year-over-year.

As FedDev Ontario continues to implement its Budget 2012 savings measures, it is imperative that it maintains a strong system of budgetary controls and a strong monitoring and forecasting regime. Budgetary pressures resulting from factors outside of its direct control, coupled with the factors identified in Section 3, could impact outcomes in 2013–14 and ongoing.

Approved by:

Space to insert signature
Karen Ellis 
President
Kitchener, Ontario, Canada
March 1, 2014

Space to insert signature
Susan Anzolin
A/Chief Financial Officer
Kitchener, Ontario, Canada
March 1, 2014

Statement of Authorities (unaudited)

FedDev Ontario
Quarterly Financial Report
For the quarter ended December 31, 2013

Statement of Authorities (unaudited)
  Fiscal Year 2013–14
(in thousands of dollars)
Fiscal Year 2012–13
(in thousands of dollars)
Total available for use for the year ending March 31, 2014 Footnote 1 Used during the quarter ended December 31, 2013 Year to date used at quarter-end Total available for use for the year ending March 31, 2013
Footnote 1  Footnote 2
Used during the quarter ended December 31, 2012 Year to date used at quarter-end
Vote 50—Net Operating Expenditures 27,469 8,540 19,793 27,171 7,324 18,011
Vote 55—Grants and Contributions 214,718 36,336 74,318 231,948 20,384 50,868
Budgetary statutory authorities:
Employee benefit plans 3,323 787 2,362 3,289 823 2,467
Minister of State - Car allowance 2          
Total Budgetary authorities 245,512 45,663 96,473 262,408 28,531 71,346
Non-budgetary authorities - - - - - -
Total authorities Footnote 3 245,512 45,663 96,473 262,408 28,531 71,346

Footnotes

Footnote 1

Includes approved estimates documents as at quarter end.

Return to footnote 1 referrer

Footnote 2

Total available for use did not reflect measures announced in Budget 2012.

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Footnote 3

Non-salary expenditures for the Ontario Federal Council are refunded at the end of each fiscal year through levies charged to other government departments. Therefore, all Ontario Federal Council-related non-salary expenditures are excluded from the financial statements.

Return to footnote 3 referrer

Table 1: Departmental budgetary expenditures by Standard Object (unaudited)

FedDev Ontario
Quarterly Financial Report
For the quarter ended December 31, 2013

Table 1: Departmental budgetary expenditures by Standard Object (unaudited)
  Fiscal Year 2013–14
(in thousands of dollars)
Fiscal Year 2012–13
(in thousands of dollars)
Planned expenditures for the year ending March 31, 2014 Footnote 4 Used during the quarter ended December 31, 2013 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2013
Footnote 4  Footnote 5
Used during the quarter ended December 31, 2012 Year to date used at quarter-end
Expenditures:
Personnel Footnote 6 22,290 6,253 17,838 21,975 5,247 15,735
Transportation and communications 1,153 260 553 1,150 310 783
Information 276 36 93 290 76 148
Professional and special services 4,191 2,643 3,287 5,293 745 1,698
Rentals 248 40 79 396 18 228
Repair and maintenance 89 45 111 49 1,636 1,646
Utilities, materials and supplies 97 19 48 121 29 70
Acquisition of land, buildings, and works - 29 32 - - -
Acquisition of machinery and equipment 420 9 113 314 101 180
Transfer payments 214,718 36,336 74,318 231,948 20,384 50,868
Other subsidies and payments 2,030 (7) 1 872 (15) (10)
Total budgetary expenditures Footnote 7 245,512 45,663 96,473 262,408 28,531 71,346

Footnotes

Footnote 4

Includes approved estimates documents as at quarter end.

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Footnote 5

Planned expenditures did not reflect measures announced in Budget 2012.

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Footnote 6

Includes employee benefit plan (EBP) expenses.

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Footnote 7

Non-salary expenditures for the Ontario Federal Council are refunded at the end of each fiscal year through levies charged to other government departments. Therefore, all Ontario Federal Council-related non-salary expenditures are excluded from the financial statements.

Return to footnote 7 referrer

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