Office of Infrastructure of Canada
Quarterly Financial Report for the quarter ended June 30, 2019

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 2019.

The key to building Canada for the 21st 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 2019-20 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 2019-20 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 2019-20, 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 2018-19 to 2019-20 and in actual expenditures as of June 30, 2018 and June 30, 2019.

Authorities

Graph 1: Comparison of Authorities Available as of June 30, 2019 and June 30, 2018

Text description of Graph 1

As shown in the Statement of Authorities, INFC’s total authorities available for 2019-20 are $10.8 billion as of the end of Quarter 1 (Q1) and represent a $4.65 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, 2019

Authorities	Increase/(Decrease) vs. Prior Year-to-date (000’s)	% Change vs. prior year
Operating Expenditures	8,040	8.0%
Capital Expenditures	316,107	41.5%
Contributions (Voted and Statutory)	4,322,594	81.8%
Contributions to Employee Benefit Plans	(895)	(11.5)%

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

• Operating Expenditures – the increase is as a result of the Samuel De Champlain Bridge Corridor project entering into the Operating, Maintenance and Rehabilitation (OMR) phase of the project and the resulting operating expenses that will be paid to the private partner.
• Capital Expenditures – the increase is related to expected milestone payments in fiscal year 2019-20 for the Samuel De Champlain Bridge Corridor project.
• Contributions (Voted and Statutory) – Voted contribution funding has increased in certain programs namely Major Infrastructure Component, Investing in Canada Infrastructure Program, National Regional Projects and Public Transit Infrastructure Fund. The increase is also due to the one-time additional statutory funding announced as part of Budget 2019 for the Gas Tax Fund and the Municipal Asset Management Program.
• Contributions to Employee Benefit Plans – Given the reduction in the salary envelope, expenditures for the contributions to Employee Benefit Plans, which are based on approved reference levels, are trending lower at present.

Expenditure Analysis

Graph 2: Comparison of Total Expenditures as of June 30, 2019 and June 30, 2018

Text description of Graph 2

Expenditures at the end of Q1 were $312.6 million, compared to $238.1 million reported in the same period of 2018-19, representing an increase of 31.3% between Q1 of the two years. The source of the relative increase is demonstrated in the tables, graphs and analysis below.

Table 2: Change in year-to-date expenditures as of June 30, 2019

Year-to-date expenditures	Increase/(Decrease) vs. Prior Year-to-date (000’s)	% Change vs. prior year
Operating Expenditures	2,099	13.1%
Capital Expenditures	(13,366)	(87.1)%
Contributions (Voted and Statutory)	86,006	42.0%
Contributions to Employee Benefit Plans	(224)	(11.5)%

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 – Given the reduction in the salary envelope, expenditures for the contributions to Employee Benefit Plans, which are based on approved reference levels, are trending lower at present.

Graph 3: Comparison of Authorities used for Contributions as of June 30, 2019 and June 30, 2018

Text description of Graph 3

Significant changes in year-to-date contribution expenditures between June 2019 and June 2018 were as follows:

Table 3: Change in year-to-date expenditures by contribution program as of June 30, 2019

Program Fund	Increase/(Decrease) vs. Prior Year-to-date (000’s)	% Change vs. prior year
Building Canada Fund-Major Infrastructure Component (BCF-MIC)	64,973	131.4%
P3 Canada Fund (P3CF)*	48,582	N/A
Clean Water Wastewater Fund (CWWF)	27,385	78.0%
Green Infrastructure Fund (GIF)*	5,033	N/A
Community, Culture, & Recreation Stream (CCRIS)*	700	N/A
New Building Canada Fund-National Infrastructure Component (NBCF-NIC)	364	1160.1%
Building Canada Fund-Communities Component (BCF-CC)	(2,793)	(61.2)%
New Building Canada Fund-Provincial-Territorial Infrastructure Component-Small Communities Fund (NBCF-PTIC-SCF)	(3,862)	(23.6)%
New Building Canada Fund-Provincial-Territorial Infrastructure Component-National and Regional Projects (NBCF-PTIC-NRP)	(8,194)	(21.5)%
Capacity Building for Climate Change Challenges Fund (CBCCCF)	(13,769)	(64.1)%
Public Transit Infrastructure Fund (PTIF)	(14,778)	(67.2)%
Asset Management Fund (AMF)	(17,635)	(100)%

* No expenditures were made as of Q1 2018-19

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

• BCF-MIC – With significant projects underway in this program, there is an increase in claims being submitted in 2019-20.
• P3CF – There were no claims in Q1 2018-19 as no projects reached substantial completion in the first quarter.
• CWWF – As projects within this program progress, there is an increase in claims being submitted.
• GIF – There were no claims in Q1 2018-19, however with certain projects peaking, there were claims in Q1 of 2019-20.
• CCRIS – There were no claims in Q1 2018-19 as the program was just launched, claims are now being submitted in 2019-20.
• NBCF-NIC – Claims are higher in Q1 2019-20 compared to the same time period last fiscal.
• BCF-CC – Expenditures are decreasing as program is nearing completion.
• NBCF-PTIC-SCF and NRP– Claims are lower in Q1 2019-20 compared to the same time period last fiscal, but are expected to increase over the course of the year.
• CBCCCF - There have been fewer claims so far in Q1 2019-20 vs Q1 2018-19.
• PTIF - Claims are lower in Q1 2019-20 compared to the same time period last fiscal, but are expected to increase over the course of the year.
• AMF – No payments were made in Q1 2019-20.

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 2019-20 increased by $74.52 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, 2019

Changes to Expenditures by Standard Object	Increase/(Decrease) vs. Prior Year-to-date (000's)	% Change vs. prior year
Transfer payments	86,006	42.0%
Personnel	2,484	20.8%
Professional and special services	850	15.5%
Information	17	12.7%
Rentals	17	6.4%
Transportation and communications	8	3.1%
Repair and maintenance	4	1.2%
Utilities, materials and supplies	1	4.8%
Acquisition of machinery and equipment	(6)	(20.7)%
Other subsidies and payments	(125)	(99.1)%
Acquisition of land, buildings and works	(14,741)	(100)%

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

• Transfer payments– details were previously discussed.
• Personnel – increase in number of employees.
• Professional and special services – increase is primarily due to an increase in engineering costs related to the Samuel De Champlain bridge corridor project as compared with Q1 of 2018-19.
• Acquisition of land, buildings and works– No expenditures were made as of Q1 2019-20.

Overall, INFC has spent 2.9% of its current Total Authorities as of June 30, 2019, compared to 3.9% 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.

INFC has been working with provinces and territories on a new approach to transfer payments to better align federal investments with construction activity taking place. A pilot project is currently underway with three provinces under the Investing in Canada Infrastructure Program to test the effectiveness of this new approach in advance of broader implementation.

Over the last three 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 the last Quarterly Financial Report, the following significant changes have taken place within the department:

• The appointment of Minister Jordan as Minister of Rural Economic Development on January 14, 2019;
• The one-time additional statutory funding announced as part of Budget 2019 for the Gas Tax Fund and the Municipal Asset Management Program.

Approval by Senior Officials

Approved by:

Signed at Ottawa, Canada.

Office of Infrastructure Canada
Quarterly Financial Report
For the quarter ended June 30, 2019

Departmental budgetary expenditures by Standard Objects (unaudited)
(in thousands of dollars)

Fiscal year 2019-20

N/A	Planned expenditures for the year ending March 31, 2020	Expended during the quarter ended June 30, 2019	Year-to-date used at quarter-end
Expenditures:
Personnel	51,992	14,407	14,407
Transportation and communications	1,054	283	283
Information	546	150	150
Professional and special services	77,868	6,351	3,351
Rentals	2,562	284	284
Repair and maintenance	5,643	330	330
Utilities, materials and supplies	192	22	22
Acquisition of land, buildings and works	1,050,000	-	-
Acquisition of machinery and equipment	2,114	24	24
Transfer payments	9,604,694	290,760	290,760
Public debt charges	-	-	-
Other subsidies and payments	-	2	2
Total net budgetary expenditures	10,796,665	312,613	312,613

Departmental budgetary expenditures by Standard Objects (unaudited)
(in thousands of dollars)

Fiscal year 2018-19

N/A	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

Office of Infrastructure Canada
Quarterly Financial Report
For the quarter ended June 30, 2019

Statement of Authorities (unaudited)
(in thousands of dollars)

Fiscal Year 2019-20

N/A	Total available for use for the year ending March 31, 2020	Used during the quarter ended June 30, 2019	Year-to-date used at quarter-end
Vote 1 – Operating expenditures	107,938	18,134	18,134
Vote 5 – Capital expenditures	1,077,057	1,974	1,974
Vote 10 – Contributions	5,203,781	290,761	290,761
Budgetary Statutory Authorities	N/A	N/A	N/A
(S) – Contributions to employee benefit plans	6,887	1,722	1,722
(S) – Gas Tax Fund	4,340,912	–	–
(S) – Municipal Asset Management Program	60,000	–	–
(S) – Minister salary and car allowance	90	22	22
Total Budgetary Authorities	10,796,665	312,613	312,613
Non-budgetary authorities	–	–	–
Total authorities	10,796,665	312,613	312,613

Statement of Authorities (unaudited)
(in thousands of dollars)

Fiscal Year 2018-19

N/A	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) – Municipal Asset Management Program	–	–	–
(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