Office of Infrastructure of Canada
Quarterly Financial Report for the quarter ended June 30, 2017

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

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. This quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates (A), as well as Budget 2017.

The key to building Canada for the 21^st century is a strategic and collaborative long-term infrastructure plan that builds economically vibrant, strategically planned, sustainable and inclusive communities. Infrastructure Canada (INFC) works closely with all orders of government and other partners to enable investments in social, green, public transit and other core public infrastructure, as well as trade and transportation infrastructure.

Further information on INFC's mandate, responsibilities, and programs can be found in INFC's 2017-18 Main Estimates.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes INFC's spending authorities granted by Parliament and those used by INFC consistent with the Main Estimates and Supplementary Estimates for the 2017-18 fiscal year (FY). 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 monies 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.

INFC 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.

In the past, INFC has worked in collaboration with other federal departments and agencies to deliver some of its transfer payment programs (collectively known as federal delivery partners). For certain programs, funding flows as advances to a federal delivery partner, who in turn manages claims from ultimate recipients on behalf of INFC.

During the first quarter of 2017-18, the only federal delivery partner for certain sunsetting programs was Transport Canada.

It should be noted that this quarterly report has not been subject to an external audit or review.

Highlights of Fiscal Quarter and Fiscal Year-to-Date Results

This section highlights the significant items that contributed to the change in resources available for use from 2016-17 to 2017-18 and in actual expenditures as of June 30, 2016 and June 30, 2017.

Authorities

Graph 1: Comparison of Authorities Available as of June 30, 2016 and June 30, 2017.

Text description of Graph 1

As shown in the Statement of Authorities, INFC's total authorities available for 2017-18 are $7.012 billion as of the end of Quarter 1 (Q1) and represent a $1.743 billion increase compared to the same quarter in the prior year. This increase is summarized in the table below:

Table 1: Year-to-date change in total authorities as of June 30, 2017

Total authorities as of June 30, 2017	Increase/(Decrease) versus Prior Year-to-date (000's)	% Change versus prior year
Contributions (Voted and Statutory)	1,286,511	25.4%
Capital Expenditures	454,969	662.3%
Operating Expenditures	2,186	1.8%
Minister's Salary and Car Allowance	0.9	1.1%
Contributions to Employee Benefit Plans	(675)	(10%)

The source of the year-over-year change is summarized as follows:

• Contributions (both Voted and Statutory) – the increase is due to an increase in authority levels for existing programs.
• Capital – the increase is primarily related to authority levels for the New Champlain Bridge Corridor project.
• Statutory Contributions to Employee Benefit Plans (EBP) – the decrease is related to a decrease in the number of employees.

Expenditure Analysis

Expenditures at the end of Q1 were $92.4 million, compared to $171.0 million reported in the same period of 2016-17, representing a decrease of 46% between the two years. The source of the relative decrease is demonstrated in the tables, graphs and analysis below.

Graph 2: Comparison of Total Expenditures as of June 30, 2016 and June 30, 2017

Text description of Graph 2

Table 2: Change in year-to-date expenditures as of June 30, 2017

Year-to-date expenditures	Increase/(Decrease) Versus Prior Year-to-date (000's)	% Change versus prior year
Capital Expenditures	832	85.5%
Contributions to Employee Benefit Plans	58	3.9%
Minister's Salary and Car Allowance	14	202.1%
Operating Expenditures	(1,288)	(11.6%)
Contributions (Voted and Statutory)	(78,281)	(49.7%)

Capital
The increase is related to the capitalization of certain costs related to the New Champlain Bridge Corridor, compared to last year.

Operating Expenditures
Further details are provided later in this report, by standard object.

Transfer Payments – Contributions
Year-to-date Contributions (Voted and Statutory) expenditures as of the end of Q1 have decreased in comparison to last year.

Graph 3: Comparison of Authorities Used for Contributions as of June 30, 2016 and June 30, 2017

Text description of Graph 3

Significant changes in year-to-date contribution expenditures between June 2017 and June 2016 were as follows:

Table 3: Change in year-to-date expenditures by contribution program as of June 30, 2017

Program Fund	Increase/(Decrease) versus Prior Year-to-date (000's)	% Change versus prior year
New Building Canada Fund Provincial-Territorial Infrastructure Component National and Regional Projects (NBCF-PTIC-NRP)	11,900	2,384.8%
New Building Canada Fund Provincial-Territorial Infrastructure Component Small Communities Fund (NBCF-PTIC-SCF)	5,787	96.6%
Clean Water and Wastewater Fund (CWWF)	2,288	-
Canada Strategic Infrastructure Fund (CSIF)	262	281.7%
Public Transit Infrastructure Fund (PTIF)	231	-
Green Infrastructure Fund	(2,848)	(74.1%)
Building Canada Fund - Communities Component (BCF-CC)	(12,049)	(100%)
Inuvik to Tuktoyaktuk Highway Fund	(33,000)	(83.9%)
Building Canada Fund - Major Infrastructure Component (BCF-MIC)	(50,852)	(53.1%)

The source of the year-over-year changes is summarized as follows:

• NBCF-PTIC-SCF and NBCF-PTIC-NRP - the increases relate to a relative increase in claims as more projects are approved and claims are received.
• CWWF and PTIF - There were no expenditures in Q1 of the previous year for these programs as the agreements were still under negotiation at that time.
• CSIF - this is an older program where overall claims are diminishing as projects are completed. The increase during the first quarter is due to claims being higher compared to the same period last year.
• GIF and BCF-CC – these are older programs where overall claims are diminishing as projects are completed.
• Inuvik to Tuktoyaktuk Highway Fund - the decrease is related to advancing progress of the project. Payments for the project are milestone based.
• BCF-MIC - This is an older program. The primary reason for the reduction is overall claims being lower compared to the same period last year.

Departmental Budgetary Expenditures by Standard Object

The planned Departmental Budgetary Expenditures by Standard Object are set out in the table at the end of this report. Aggregate year-to-date expenditures in 2017-18 decreased by $78.7 million, compared with the same quarter last year. The largest single factor was a reduction in Transfer Payments as explained in table 3 above.

A breakdown of variances in year-to-date spending by standard object is below:

Table 4: Change in year-to-date expenditures by standard object as of June 30, 2017

Changes to Expenditures by Standard Object	Increase/(Decrease) versus Prior Year-to-date (000's)	% Change versus prior year
Transportation and Communications	69	65.6%
Other Subsidies and Payments	52	-
Repair and Maintenance	48	17.9%
Information	39	44.7%
Utilities, materials and supplies	(4)	(19%)
Personnel	(18)	(0.2%)
Professional Services and Special Services	(27)	(0.9%)
Acquisition of land, buildings and works	(42)	(100%)
Acquisition of Machinery and Equipment	(168)	(97%)
Rentals	(332)	(85.3%)
Transfer Payments	(78,281)	(49.7%)

The source of the year-over-year change is summarized as follows:

• Transportation and Communications - increase is related to an increase in travel by Minister's Office and by the Canada Infrastructure Bank Transition Office.
• Other Subsidies and Payments – increase is related to PILT (Payments In Lieu of Taxes) for land related to the New Champlain Bridge Corridor project
• Acquisition of land, buildings and works – decrease is related to land acquisition that occurred last year.
• Acquisition of Machinery and Equipment – decrease is related to the lifecycle replacement of informatics equipment that occurred last year.
• Rentals – decrease in office building rentals is due to the timing, as well as a decrease in software licensing.
• Transfer payment - details were previously discussed.

Overall, INFC has spent 1.3% of its current Total Authorities as of June 30, 2017, compared with 3.2% at the end of Q1 of the previous fiscal year.

Risks and Uncertainties

In most cases, INFC funds projects via a Contribution Agreement or Integrated Bilateral Agreement between Canada and a Provincial/Territorial (PT) government. Those PT governments enter into their own agreements with municipalities, who are ultimately responsible for project management and construction of the infrastructure.

Most of INFC's programs are designed to flow federal funds to PTs after they have submitted their claims for actual costs incurred by a project. Only once INFC receives a claim can the funding flow to the PT in order to pay the federal share. It should be noted that the pace of the claims submitted to INFC does not match the economic activity on a project as spending can happen long before claims are received. For this reason, INFC relies on PTs and other partners to submit claims in a timely manner.

There are a variety of reasons that can explain the timing of claims being submitted, which in turn contribute to a variance between planned spending and actual spending profile. There is often a time lag between when the project was approved or announced to the actual start date of construction as infrastructure projects typically require a significant amount of upfront planning, design and procurement. Even after construction has started, sometimes project delays due to factors beyond the control of funding recipients such as, inclement weather or weather events, may delay the submission of claims. In other cases, partners may not have an immediate need or urgency to submit claims due to the financial planning within their own jurisdictions. In general, INFC encourages PTs to submit claims in a timely manner to ensure the flow of funding as planned. Parliamentary authority to spend typically expires at the end of the fiscal year. When claims are not submitted as expected in a given fiscal year as planned, INFC seeks to reprofile the authorities so that the funding committed to specific projects continues to be available in future years.

Over the last 18 months the department has been in a state of transformation. The introduction of new programs and responsibilities has resulted in structural changes to better support the delivery of new business lines, as well as required the department to move to more specialized skills and experience necessary for key positions. INFC is working to ensure it attracts and retains employees with the skill sets and experience necessary to fulfil the department's evolving mandate.

Significant Changes in Relation to Operations, Personnel and Programs

There have been a series of organizational changes over the last number of months.

Notably, since December 2016 the following changes have occurred:

• The creation of:
• The Canada Infrastructure Bank Transition Office, and
• The Smart Cities Challenge.
• The Policy and Communication Branch was realigned into:
• The Communications Branch, and
• The Policy & Results Branch.

The Policy & Results Branch has also been given new responsibilities to undertake essential research and analysis to improve infrastructure-related data. This will support better information on the state and performance of core public infrastructure assets for all levels of government and lead to informed decision making on future infrastructure investments.

Approval by Senior Officials

Approved by:

Signed at Ottawa, Canada.

Quarterly Financial Report
For the quarter ended June 30, 2017
Statement of Authorities (unaudited)
Fiscal year 2017-2018

(in thousands of dollars)

	Total available for use for the year ending March 31, 2018	Used during the quarter ended June 30, 2017	Year to date used at quarter-end
Vote 1 – Operating expenditures	126,917	9,723	9,723
Vote 5 – Capital expenditures	523,660	1,805	1,805
Vote 10 – Contributions	4,282,963	79,327	79,327
Budgetary Statutory Authorities	N/A	N/A	N/A
(S) – Contributions to employee benefit plans	6,106	1,527	1,527
(S) – Gas Tax Fund	2,071,933	-	-
(S) – Minister salary and car allowance	84	21	21
Total Budgetary authorities	7,011,663	92,403	92,403
Non-budgetary authorities	-	-	-
Total authorities	7,011,663	92,403	92,403

Statement of Authorities (unaudited) (continued)
Fiscal year 2016-2017

(in thousands of dollars)

	Total available for use for the year ending March 31, 2017	Used during the quarter ended June 30, 2016	Year to date used at quarter-end
Vote 1 – Operating expenditures	124,731	11,011	11,011
Vote 5 – Capital expenditures	68,691	973	973
Vote 10 – Contributions	2,996,452	157,608	157,608
Budgetary Statutory Authorities	N/A	N/A	N/A
(S) – Contributions to employee benefit plans	6,781	1,469	1,469
(S) – Gas Tax Fund	2,071,933	-	-
(S) – Minister salary and car allowance	84	7	7
Total Budgetary authorities	5,268,672	171,068	171,068
Non-budgetary authorities	-	-	-
Total authorities	5,268,672	171,068	171,068

Quarterly Financial Report
For the quarter ended June 30, 2017
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2017-2018

(in thousands of dollars)

	Planned expenditures for the year ending March 31, 2018	Expended during the quarter ended June 30, 2017	Year to date used at quarter-end
Expenditures:
Personnel	45,084	9,405	9,405
Transportation and communications	1,160	174	174
Information	555	126	126
Professional and special services	601,340	2,925	2,925
Rentals	3,499	57	57
Repair and maintenance	1,997	318	318
Utilities, materials and supplies	402	18	18
Acquisition of land, buildings and works	-	-	-
Acquisition of machinery and equipment	2,564	5	5
Transfer payments	6,354,896	79,327	79,327
Public debt charges	-	-	-
Other subsidies and payments	166	48	48
Total net budgetary expenditures	7,011,663	92,403	92,403

Departmental budgetary expenditures by Standard Object (unaudited) (continued)
Fiscal year 2016-2017

(in thousands of dollars)

	Planned expenditures for the year ending March 31, 2017	Expended during the quarter ended June 30, 2016	Year to date used at quarter-end
Expenditures:
Personnel	45,553	9,423	9,423
Transportation and communications	851	105	105
Information	433	87	87
Professional and special services	106,839	2,952	2,952
Rentals	2,701	390	390
Repair and maintenance	115	270	270
Utilities, materials and supplies	252	22	22
Acquisition of land, buildings and works	42,178	42	42
Acquisition of machinery and equipment	1,161	173	173
Transfer payments	5,068,385	157,608	157,608
Public debt charges	-	-	-
Other subsidies and payments	204	-4	-4
Total net budgetary expenditures	5,268,672	171,068	171,068