Office of Infrastructure of Canada
Quarterly Financial Report for the quarter ended June 30, 2018

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 as well as Budget 2018.

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 2018-19 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 2018-19 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).

During the first quarter of 2018-19, 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 2017-18 to 2018-19 and in actual expenditures as of June 30, 2017 and June 30, 2018.

Authorities

Graph 1: Comparison of Authorities Available as of June 30, 2017 and June 30, 2018.

Text description of Graph 1

As shown in the Statement of Authorities, INFC's total authorities available for 2018-19 are $6.151 billion as of the end of Quarter 1 (Q1) and represent a $861 million decrease compared to the same quarter in the prior year. This decrease is summarized in the table below:

Table 1: Year-to-date change in total authorities as of June 30, 2018

Total authorities as of June 30, 2018	Increase/(Decrease) versus Prior Year-to-date (000's)	% Change versus prior year
Operating Expenditures	(27,015)	(21.3%)
Capital Expenditures	237,289	45.3%
Contributions (Voted and Statutory)	(1,072,296)	(16.9%)
Contributions to Employee Benefit Plans	1,676	27.4%

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

• Operating Expenditures – the decrease is a result of lower authority levels in 2018-19 related to contingencies for the New Champlain Bridge Corridor project.
• Capital Expenditures – the increase is related to the New Champlain Bridge Corridor project to cover a larger milestone payment in fiscal year 2018-19 (milestone of $700 million).
• Contributions (Voted and Statutory) – contribution funding has decreased as INFC moved funding to the years in which it expects to make payments. This new funding profile was announced as part of Budget 2018.
• Contributions to Employee Benefit Plans – the increase in number of employees is a result of new programs such as the Disaster Mitigation and Adaptation Fund and the Investing in Canada Infrastructure Program.

Expenditure Analysis

Expenditures at the end of Q1 were $238.1 million, compared to $92.4 million reported in the same period of 2017-18, representing a decrease of 158% between Q1 of the two years. The source of the relative increase is demonstrated in the tables, graphs and analysis below.

Graph 2: Comparison of Total Expenditures as of June 30, 2017 and June 30, 2018

Text description of Graph 2

Table 2: Change in year-to-date expenditures as of June 30, 2018

Year-to-date expenditures	Increase/(Decrease) Versus Prior Year-to-date (000's)	% Change versus prior year
Operating Expenditures	6,312	64.9%
Capital Expenditures	13,535	749.9%
Contributions (Voted and Statutory)	125,427	158.1%
Contributions to Employee Benefit Plans	419	27.4%

The sources of significant year-over-year changes are summarized as follows:

• Operating and Capital Expenditures – details provided later in report, by standard object.
• Contributions (Voted and Statutory) – details by program below.
• Contributions to Employee Benefit Plans – increase in the number of employees.

Graph 3: Comparison of Authorities Used for Contributions as of June 30, 2017 and June 30, 2018

Text description of Graph 3

Significant changes in year-to-date contribution expenditures between June 2018 and June 2017 were as follows:

Table 3: Change in year-to-date expenditures by contribution program as of June 30, 2018

Program Fund	Increase/(Decrease) versus Prior Year-to-date (000's)	% Change versus prior year
Clean Water and Wastewater Fund (CWWF)	32,811	1,434.0%
New Building Canada Fund-Provincial-Territorial Infrastructure Component-National and Regional Projects (NBCF-PTIC-NRP)	26,392	224.1%
Public Transit Infrastructure Fund (PTIF)	21,748	9,414.7%
Capacity Building for Climate Change Challenges Fund (CBCCCF)*	21,466	-
Asset Management Fund (AMF)*	17,635	-
Net change in expenditures of other contributions programs not specifically listed above	5,375	-

* No expenditures were made as of Q1 2017-18 for CBCCCF and AMF

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

• CWWF and PTIF – as projects within these programs progress, there is an increase in claims submitted for payments compared to Q1 of last year.
• NBCF-PTIC-NRP – the increase relates to a relative increase in claims as more projects are approved and claims are received.
• AMF and CBCCCF – payments are made based on a detailed schedule in the contribution agreement; payments are expected to be higher in 2018-19 than 2017-18.

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 2018-19 increased by $145.7 million, compared with the same quarter last year. The largest single factor was an increase in transfer payments as explained 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, 2018

Changes to Expenditures by Standard Object	Increase/(Decrease) versus Prior Year-to-date (000's)	% Change versus prior year
Transfer payments	125,427	158.1%
Acquisition of land, buildings and works*	14,741	-
Professional and special services	2,575	88.0%
Personnel	2,517	26.8%
Rentals	210	368.4%
Transportation and communications	101	58.0%
Other subsidies and payments	79	164.6%
Acquisition of machinery and equipment	25	500.0%
Repair and maintenance	8	2.5%
Information	7	5.6%
Utilities, materials and supplies	3	16.7%

* No expenditures were made as of Q1 2017-18 for acquisition of land, buildings and works

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

• Transfer payments – details were previously discussed.
• Acquisition of land, buildings and works – increase is due to a payment made to Signature on the St. Lawrence Group as part of additional construction measures.
• Professional and special services – increase is primarily due to a timing difference in the payment of professional services related to a multi-year service agreement with Shared Services Canada (previous year's payment was done in Q4).
• Personnel – increase in number of employees.
• Rentals – increase is due to an increase in licensing fees for software..

Overall, INFC has spent 3.9% of its current Total Authorities as of June 30, 2018, compared to 1.3% 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. PT governments then 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 structured in such a way that funding flows from the Department based on requests for reimbursements. It is important to note that federal spending is not an accurate measure of when the economic activity created by infrastructure spending occurs. When projects are approved, work begins and economic activity is generated by provinces, territories (PT) and municipalities, which are responsible for implementing projects and incurring costs. Infrastructure Canada makes the federal contribution only when requested by partners.

There are a variety of reasons that can affect the timing of requests for reimbursements, which can contribute to a variance between planned spending and actual spending. Some projects, once approved, move quickly into the construction phase while others have longer lead times for planning, and local approval processes (e.g. zoning and permitting). Regardless of how long planning takes or how soon ground can break, eligible costs can be submitted for reimbursement throughout the life of the project.

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; however, in response to the needs of its project partners, INFC reprofiles its authorities as needed so that the funding committed to specific projects continues to be available in future years when needed.

Over the last two and a half years 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

Infrastructure Canada continues to grow and evolve. Since last year, various changes have taken place within the department, including:

• The creation and addition of:
• The Horizontal Results and Reporting, the Sectoral Policy, and the Data and Research divisions within the Policy Branch;
• The Investment, Partnerships and Innovation Branch, which includes activities related to the Toronto Waterfront Revitalization Initiative and the P3 Canada Fund;
• The re-organization and expansion of the Corporate Services Branch;
• The responsibility of implementing the following new programs:
• The Smart Cities Challenge; and
• The Disaster Mitigation and Adaptation Fund.

Approval by Senior Officials

Approved by:

Ottawa, Canada.

Quarterly Financial Report
For the quarter ended June 30, 2018
Statement of Authorities (unaudited)
Fiscal year 2018-19

(in thousands of dollars)

	Total available for use for the year ending March 31, 2019	Used during the quarter ended June 30, 2018	Year to date used at quarter-end
Vote 1 – Operating expenditures	99,902	16,035	16,035
Vote 5 – Capital expenditures	760,949	15,340	15,340
Vote 10 – Contributions	3,111,504	204,754	204,754
Budgetary Statutory Authorities	N/A	N/A	N/A
(S) – Contributions to employee benefit plans	7,782	1,946	1,946
(S) – Gas Tax Fund	2,170,596	-	-
(S) – Minister salary and car allowance	86	21	21
Total Budgetary authorities	6,150,819	238,096	238,096
Non-budgetary authorities	-	-	-
Total authorities	6,150,819	238,096	238,096

Statement of Authorities (unaudited) (continued)
Fiscal year 2017-18

(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

Quarterly Financial Report
For the quarter ended June 30, 2018
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2018-19

(in thousands of dollars)

	Planned expenditures for the year ending March 31, 2019	Expended during the quarter ended June 30, 2018	Year to date used at quarter-end
Expenditures:
Personnel	59,067	11,922	11,922
Transportation and communications	1,463	275	275
Information	758	133	133
Professional and special services	92,837	5,500	5,500
Rentals	3,557	267	267
Repair and maintenance	7,834	326	326
Utilities, materials and supplies	268	21	21
Acquisition of land, buildings and works	700,000	14,741	14,741
Acquisition of machinery and equipment	2,935	30	30
Transfer payments	5,282,100	204,754	204,754
Public debt charges	-	-	-
Other subsidies and payments	-	127	127
Total net budgetary expenditures	6,150,819	238,096	238,096

Departmental budgetary expenditures by Standard Object (unaudited)(continued)
Fiscal year 2017-18

(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