Archived — Quarterly Financial Report — Quarter ended December 31, 2014
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Statement Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs
- Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results
- Risks and Uncertainties
- Significant Changes in Relation to Operations, Personnel and Programs
- Budget 2012 Implementation
- Final Remarks
- Statement of Authorities (unaudited)
- Table 1: Departmental Budgetary Expenditures by Standard Object (unaudited)
This quarterly report should be read in conjunction with the 2014–15 Main Estimates, 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. This quarterly report 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.
Basis of Presentation
This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes FedDev Ontario's spending authorities granted by Parliament and those used by FedDev Ontario—consistent with the Main Estimates for the 2014–15 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.
FedDev Ontario uses the full accrual method of accounting to prepare and present its annual financial statements that are part of its 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
On April 1, 2014, FedDev Ontario began the first year of its second five-year mandate (as announced in Budget 2013). At the end of the third quarter of 2014–15, FedDev Ontario spent $43.9 million (or 26.2 percent of its available authorities) as compared to $96.5 million (or 39.3 percent of its available authorities) for the same period in 2013–14. The decrease in spending was fully anticipated as a new programming suite was introduced on April 1, 2014 to better respond to the economic needs and interests of southern Ontario. The new programming suite has required a period of ramping up associated with the nature of our new programing which targets large, multi-partnered and complex projects that require extensive preliminary work as part of the application process.
Extensive outreach and promotion has proven successful as FedDev Ontario has received and is processing applications for consideration, which will be reflected in the increased rate of expenditures over subsequent quarters. As an example, program spending increased 103 percent between the second and third quarter of 2014–15 and 43 projects have been announced since April 1, 2014.
2.1 Authorities Analysis
Planned departmental spending in fiscal year 2014–15 totals $167.7 million, a $77.8 million decrease over that available at the close of the third quarter in the 2013–14 fiscal year. This comprises a $0.5 million decrease in operating authorities and a $77.3 million decrease in program authorities.
The $0.5 million decrease in operating authorities is the net result of continued implementation of Budget 2012 budget reductions which is partially offset by additional funding provided to deliver the Economic Development Initiative.
The $77.3 million decrease in program authorities is the result of the end of the Community Infrastructure Improvement Fund ($44.6 million) and a break in the grant to the Corporation of the City of Brantford ($1.5 million), and is partially offset by increased authorities for the support of the revitalization of Massey Hall ($1.8 million) and the Economic Development Initiative ($1.0 million). Also reducing the available authorities for transfer payments is the decision to reallocate funding to future years for the Advanced Manufacturing Fund ($34 million). The reprofiling of funding under this program was sought to better correspond to client needs.
As in 2013–14, planned spending on program authorities (grants and contributions) represents over 80 percent of FedDev Ontario's total authorities. The remaining 20 percent is used to fund internal support services, such as communications, policy development, finance and human resources. This funding is also used to support FedDev Ontario's efforts as a convener and champion within southern Ontario.
2.2 Expenditure Analysis
Statement of Authorities
Used During the Quarter
In the third quarter of the 2014–15 fiscal year, total budgetary expenditures were $19.8 million compared to $45.5 million reported in the same period of 2013–14. This represents a year-over-year decrease of $25.7 million (or 56 percent).
Quarterly spending includes $11.7 million on programs and $8.1 million on operating expenditures. Spending on operating costs has decreased slightly compared to $9.1 million for the same period in 2013–14. Spending on transfer payments of $11.6 million has increased significantly over the first quarter of 2014–15 and decreased compared to $36.3 million spent in the third quarter of 2013–14. As indicated earlier, the decrease in program expenditures is primarily due to the early stages in the lifecycle of program spending in the first year of FedDev Ontario's renewed mandate.
On a year-to-date basis, as of the end of the third quarter of fiscal year 2014–15, total budgetary expenditures were $43.9 million compared to $96.5 million at the end of the same period for 2013–14. This represents a year-over-year decrease of $52.6 million (or 54.5 percent). This decrease can be attributed to the anticipated decrease in spending for grants and contributions due to the launch of new programing as of April 1, 2014 and the sunsetting of the Community Infrastructure Improvement Fund.
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
Spending on transfer payments (or program spending) was $11.6 million in the third quarter of 2014–15, compared to $36.3 million in the same quarter of 2013–14. The decrease in year-over-year expenditures is primarily due to the early stages in the lifecycle of new programming associated with the launch of FedDev Ontario's renewed mandate as of April 1, 2014. Recipients are also now in the process of initiating project activities and seeking reimbursement of expenditures.
Personnel-related expenditures totaled $5.3 million; representing a decrease of $0.8 million (or 13 percent) year-over-year which is a result of a time lag between unexpected departures and the staffing actions to fill the vacant positions combined with previous year salary adjustments resulting from collective bargaining agreements.
The following Standard Objects have relatively low expenditures so small variances in the dollar value of spending will result in large percentage variances, which should normalize during the annual cycle.
There is a year-over-year decrease in expenditures related to rentals ($24,000 or 60 percent) and increase in expenditures related to the acquisition of machinery and equipment ($81,000 or 900 percent). These variances are mainly related to the timing of equipment acquisitions within each year and changes to the timing of the billing cycle for ongoing rental requirements.
Transportation and communications expenditures are consistent with previous year and have decreased by $1,000 (or 0.4 percent).
Repair and maintenance costs have increased by $54,000 (or 120 percent), which is largely related to charges for information technology Memoranda of Understanding and the development of new information systems.
Information-related expenditures have increased by $47,000 (130.5 percent) and professional and special services have decreased by $357,000 (13.5 percent). These variances relate primarily to the in-year timing of expenses and billing of Memoranda of Understanding.
The $51.3 million (or 69 percent) decrease in grants and contributions spending year-over-year can be attributed to the fact that FedDev Ontario introduced a new suite of programming and that applications are currently being submitted, reviewed and approved. This process requires time to allow potential clients to secure partners and funding and to fully develop their project ideas. Once completed contracts are negotiated, eligible activities are initiated and expenditures are reimbursed. Expenditures related to transfer payments are expected to continue increasing in future quarters.
The $1.7 million (or 9.7 percent) decrease in salary costs can be attributed to previous year salary adjustments resulting from collective bargaining agreements, combined with current year departures.
The $91,000 (or 82 percent) increase in repair and maintenance costs can be attributed to billing for services related to the FedDev Ontario's information systems.
There is a year-over-year increase in spending in the area of transportation and communications ($28,000 or 5.1 percent) and a decrease in spending on professional and special services ($293,000 or 8.9 percent). These variances can be partially attributed to early timing of current year relocation costs and the billing cycle of contracts.. Expenditures on machinery and equipment have decreased ($9,000 or 8 percent), which is primarily the result of the timing of purchases for Information Technology equipment asset lifecycle management. The increased expenditures for other subsidies and payments ($662,000) are a result of the transition to payment in arrears.
3. Risks and Uncertainties
April 1, 2014 marked the beginning of FedDev Ontario's second mandate with the launch and delivery of a new programming suite (the Southern Ontario Prosperity Initiatives) and the Advanced Manufacturing Fund; as well as the renewal of two programs (the Eastern Ontario Development Program and the Economic Development Initiative); as well as the delivery of ongoing programs, such as the Community Futures Program. FedDev Ontario is exposed to the increased risk that it will not be able to expend its full program authorities during this fiscal year (2014–15) due to the natural lifecycle of projects in the first year.
FedDev Ontario's expenditure rate is dependent on the number of applications it receives. The low-level expenditure rate during this period reflects the impact that the launch and streamlined application process has had on submissions. Another factor to help explain the low rate of programmatic expenditures is that the new programming targets large, multi-partnered and complex projects that require extensive preliminary work as part of the application process. FedDev Ontario has put in place a number of active measures to promote its renewed programming, including having met with over 900 organizations since January 2014. These measures have been successful based on the high demand of applications received and the 43 projects that have been announced since April 1, 2015.
4. Significant Changes in Relation to Operations, Personnel and Programs
On April 1, 2014, FedDev Ontario began its second five-year mandate and officially launched its new suite of programming, including the four initiatives that make up the Southern Ontario Prosperity Initiatives (Investing in Business Innovation, Investing in Business Growth and Prosperity, Investing in Commercialization Partnerships and Investing in Regional Diversification) and the new Advanced Manufacturing Fund for all of Ontario. FedDev Ontario also renewed two programs for five years: the Eastern Ontario Development Program and the Economic Development Initiative.
To support its new suite of programming, FedDev Ontario implemented a new process for assessing proposals. The "Business Model Canvas" is a powerful, simple tool for understanding business models and determining the impacts of proposed projects, focusing on key client segments, value propositions, resources and risks. This new assessment tool is proving to be helpful in focusing on a project's value proposition and key risks.
During the third quarter Natasha Kay Brenders was appointed as Vice-President of Business Innovation and Community Development.
5. Budget 2012 Implementation
This section provides an overview of the savings measures announced in Budget 2012 that are being implemented in order to refocus government and programs, make it easier for Canadians and businesses to deal with 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 and Community Futures Program;
- 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.
While implementing the above, FedDev Ontario has supported other Government of Canada departments in achieving their savings targets, including:
- Implementing the new Workplace 2.0 standard in its headquarters in Kitchener–Waterloo as it consolidated 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 overall budget authorities were reduced by $21.3 million. This includes $20 million to program authorities and $1.3 million to operating authorities. FedDev Ontario continues to invest in the acquisition of machinery and equipment to support implementation of its Budget 2012 savings measures, including supporting the adoption of more environmentally-friendly office practices and seeking ways to benefit from the adoption of enterprise-wide information technology systems.
In 2014–15, FedDev Ontario had its funding renewed and authorities were granted to reflect the final implementation of Budget 2012 savings, including a final $0.6 million reduction in operating authorities.
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. FedDev Ontario was provided with a stable level of operating authorities when it was first established in 2009. Budgetary pressures resulting from factors outside of its direct control coupled with the factors identified in Section 3 could impact outcomes in 2014–15 and ongoing.
6. Final Remarks
FedDev Ontario continues to strive to respond to the economic challenges and opportunities that face southern Ontario. With respect to the Advanced Manufacturing Fund, FedDev Ontario is committed to spurring innovation and greater productivity within the manufacturing sector across Ontario. Developing and maintaining partnerships will be an important and efficient mechanism for FedDev Ontario to help achieve its outcomes.
Despite low transfer payment expenditures year-to-date, there is a persistent need for regionally-tailored measures. This is evident by the continued demand for support from the private sector, the not-for-profit sector and the other orders of government for the types of program services offered by FedDev Ontario.
Chief Financial Officer
Statement of Authorities (unaudited)
|Fiscal Year 2014–15
(in thousands of dollars)
|Fiscal Year 2013–14
(in thousands of dollars)
|Total available for use for the year ending Footnote 1||Used during the quarter ended||Year-to-date used at quarter-end||Total available for use for the year ending Footnote 1||Used during the quarter ended Footnote 2||Year-to-date used at quarter-endFootnote 2|
|Vote 50—Net Operating Expenditures||27,154||7,359||18,551||27,469||8,352||19,793|
|Vote 55—Grants and Contributions||137,432||11,662||22,995||214,718||36,336||74,318|
|Budgetary statutory authorities:|
|Employee benefit plans||3,093||773||2,320||3,323||787||2,362|
|Minister of State—car allowance||2||1||2||2||no data||no data|
|Total Budgetary authorities||167,681||19,795||43,868||245,512||45,475||96,473|
Table 1: Departmental Budgetary Expenditures by Standard Object (unaudited)
|Fiscal Year 2014–15
(in thousands of dollars)
|Fiscal Year 2013–14
(in thousands of dollars)
|Planned expenditures for the year ending Footnote 1||Used during the quarter ended||Year-to-date used at quarter-end||Planned expenditures for the year ending Footnote 1||Used during the quarter ended Footnote 3||Year-to-date used at quarter-end|
|Transportation and communications||847||259||581||1,153||260||553|
|Professional and special services||5,660||2,286||2,994||4,191||2,643||3,287|
|Repair and maintenance||131||99||202||89||45||111|
|Utilities, materials and supplies||74||19||46||97||19||48|
|Acquisition of land, buildings, and works||5||-||-||-||29||32|
|Acquisition of machinery and equipment||200||90||104||420||9||113|
|Other subsidies and payments||1,120||11||663||2,030||(7)||1|
|Total budgetary expenditures||167,681||19,795||43,868||245,512||45,475||96,473|
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