Quarterly Financial Report — For the Quarter Ended December 31, 2018

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

1. Introduction

This quarterly 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. This report should be read in conjunction with the 2018–19 Main Estimates. This quarterly report has not been subject to an external audit or review.

1.1 Authority, Mandate and Program Activities

The Federal Economic Development Agency for Southern Ontario (FedDev Ontario) is mandated to "strengthen southern Ontario's economic capacity for innovation, entrepreneurship and collaboration; and promote the development of a strong and diversified southern Ontario economy."

Further details on FedDev Ontario's authorities, mandate and program activities can be found in Part II of the Main Estimates and FedDev Ontario's Departmental Plan for 2018–19.

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 FedDev Ontario's spending authorities granted by Parliament and those used by FedDev Ontario—consistent with the Main Estimates for the 2018–19 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.

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.

1.3 FedDev Ontario's Financial Structure

FedDev Ontario manages its expenditures under two votes:

• Vote 1 – Net operating expenditures include the Agency's authorities related to personnel costs, operation and maintenance expenditures; and
• Vote 5 – Grants and contributions include all authorities related to transfer payments.

Expenses under budgetary statutory authorities, for which payments are made under a law previously approved by Parliament and which are not part of the annual appropriations bills, include items such as employer's portion of the employee benefit plan.

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 authorities available for the year and actual expenditures for the quarter ended December 31, 2018.

2.1 Authorities Analysis

As of this quarter, the total authorities available for use and planned expenditures decreased to $242.6 million for fiscal year 2018–19, compared to $271.4 million for fiscal year 2017–18, as illustrated in the "Statement of Authorities" table. The net decrease of $28.8 million (or 11 percent) relates to:

• $1.2 million increase in Vote 1 (Operating Authorities);
• $30.2 million decrease in Vote 5 (Grants and Contributions Authorities); and
• $0.2 million increase in Statutory Authorities.

Vote 1 – Operating Authorities

Total Vote 1 Operating Authorities available for use for the year ending March 31, 2019 amount to $27.6 million, compared to $26.5 million for fiscal year 2017–18, representing a net increase of $1.2 million (or 5 percent) as a result of an increase in operating budget to support the delivery of the Women's Entrepreneurship Strategy and economic growth in communities under Regional Economic Growth through Innovation.

Vote 5 – Grants and Contributions

Total Vote 5 Grants and Contributions Authorities available for use for the year ending March 31, 2019 amount to $212.0 million, compared to $242.2 million for fiscal year 2017–18. The net decrease of $30.2 million (or 12 percent) in funding is primarily the result of:

• A decrease of $68.8 million with the sunset of the Canada 150 Community Infrastructure Program;
• A decrease of $11.9 million in funding for Advanced Manufacturing Fund due to a previous year reallocation;
• An increase of $5.9 million for the Women's Entrepreneurship Strategy;
• An increase of $21.9 million for Regional Economic Growth through Innovation; and
• A net increase of $23.0 million for the renewal of base funding.

2.2 Expenditure Analysis

Year-to-date expenditures as of December 31, 2018, totaled $110.3 million, a decrease of $27.8 million (20 percent) compared to $138.1 million at the same point in 2017. The variance is primarily related to a decrease in transfer payment expenditures and a decrease in net operating expenditures.

Budgetary expenditures in the third quarter of 2018–19 totaled $40.5 million, compared to $53.2 million for the same period in 2017–18, as illustrated in the "Departmental Budgetary Expenditures by Standard Object" tables. The net decrease of $12.7 million (24 percent) primarily relates to:

• $0.5 million increase in Vote 1 (Operating) expenditures; and
• $13.2 million decrease in Vote 5 (Grants and Contributions) expenditures.

Vote 1 (Operating Expenditures)

Third quarter expenditures for operating increased by $0.5 million (or 8 percent) compared to the same period in the previous fiscal year, primarily as a result of the timing of invoicing for the Agency's Memorandum of Understanding with the Department of Innovation, Science and Economic Development for Information Technology Services.

Expenditures in other standard objects did not see significant fluctuations.

Vote 5 (Grants and Contributions)

Spending on transfer payments in the third quarter decreased $13.2 million (or 28 percent) over the previous year, primarily due to the sun setting of the Canada 150 Community Infrastructure Program.

(For additional information on expenditures, see the Departmental Budgetary Expenditures by Standard Object table in the Appendix.)

3. Risks and Uncertainties

FedDev Ontario maintains a governance structure for oversight of financial management and a strong system of internal controls and well-defined framework of accountabilities, policies and procedures, including its Framework on Internal Control over Financial Reporting. The Agency mitigates financial risk through monitoring the impact of fluctuations in cash flows for multi-year projects and reallocation of funding to priority initiatives as needed.

FedDev Ontario also completes an annual risk assessment exercise and maintains a service level agreement with the Office of the Comptroller General for the delivery of internal audit services to provide independent advice on risk management, control and governance processes.

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

On December 10, 2018, Colette Downie was appointed as Vice-President, Business Innovation and Economic Development, and on October 29, 2018, Raquel Fragoso joined the Agency as Acting/Director General, Human Resources.

Statement of Authorities (unaudited) ^{Table note 1}

	Fiscal Year 2019-20				Fiscal Year 2018-19
(in thousands of dollars)	Total available for use for the year ending March 31, 2020Table note 2	Used during the quarter ended June 30, 2019	Year to date used at quarter-end		Total available for use for the year ending March 31, 2019Table note 2	Used during the quarter ended June 30, 2018	Year to date used at quarter-end
Vote 1–Net Operating Expenditures	29,351	6,130	6,130		25,158	5,349	5,350
Vote 5–Grants and Contributions	228,565	22,108	22,108		159,188	34,026	34,026
Budgetary statutory authorities:	3,566	883	883		2,789	697	697
Total authorities	261,482	29,121	29,121		187,135	40,072	40,073

Departmental budgetary expenditures by Standard Object (unaudited)

(in thousands of dollars)	Fiscal Year 2018—19			Fiscal Year 2017—18
	Planned expenditures for the year ending March 31, 2019 Table note 1	Used during the quarter ended December 31, 2018	Year to date used at quarter-end	Planned expenditures for the year ending March 31, 2018 Table note 1	Used during the quarter ended December 31, 2017	Year to date used at quarter-end
Expenditures:
Personnel Table note 2	23,788	5,960	16,830	22,392	5,631	18,140
Transportation and communications	813	171	457	766	220	617
Information	329	113	221	414	66	106
Professional and special services	5,023	666	2,273	5,077	588	1,499
Rentals	135	21	73	167	16	50
Repair and maintenance	166	5	13	168	6	28
Utilities, materials and supplies	106	17	38	107	16	42
Acquisition of land, buildings and works	-	-	-	-	-	-
Acquisition of machinery and equipment	169	104	124	54	21	57
Transfer payments	212,009	33,407	90,254	242,199	46,624	117,581
Other subsidies and payments	71	8	18	92	(1)	3
Total budgetary expenditures	242,609	40,472	110,301	271,436	53,187	138,123