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Quarterly Financial Report for the quarter ended December 31, 2019

By Canada Economic Development for Quebec Regions

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About this publication

Publication author : Canada Economic Development for Quebec Regions

Publish date : February 28, 2020

Summary :

Financial report of the Agency on its spending trends for the 3rd quarter of 2019-2020.

Table of Contents

  1. 1. Introduction
  2. 2. Highlights of fiscal quarter and fiscal year to date (ytd) results
  3. 3. Risks and Uncertainties
  4. 4. Significant changes in relation to operations, personnel and programs
  5. 5. Approval of senior officials
  6. 6. Appendices

1. Introduction

This quarterly financial report has been prepared by Canada Economic Development for Quebec Regions (CED) as required under section 65.1 of the Financial Administration Act and in the form and manner prescribed by Treasury Board.

This report should be read in conjunction with the 2019–2020 Main Estimates and the 2019-2020 Departmental Plan. These documents provide a brief description of CED’s mandate and programs.

This document has not been audited by an external auditor or reviewed.

1.1 Authority, mandate and programs

CED’s mission is to promote long-term economic development in Quebec’s regions with particular emphasis on areas with low economic growth or without enough productive employment opportunities. CED carries out its mandate in accordance with the provisions of the Act to establish the Economic Development Agency of Canada for the Regions of Quebec, which came into force on October 5, 2005. CED is also committed to promoting cooperation and a complementary relationship with Quebec and its communities.

CED is a key federal player in Quebec for the promotion of economic development in the regions and among small and medium-sized enterprises (SMEs). To achieve its core responsibility, which consists in developing the Quebec economy, CED fosters business start-ups and performance. It helps them become more innovative, productive and competitive. It supports communities’ engagement efforts in Quebec’s regions and helps to attract investment that will increase the prosperity of the Quebec and Canadian economies.

CED contributes to the economic vitality of all of Quebec’s regions by leveraging their competitive regional advantages. It supports the transition and diversification of communities that remain dependent on a limited number of sectors or that have been affected by an economic shock, such as the closure of the chrysotile mines or the Lac Mégantic tragedy.

CED has three programs to support its core responsibility:

Additional information on the Agency’s authority, mandate and programs can be found in the 2019–2020 Main Estimates and the 2019–2020 Departmental Plan.

1.2 Basis of presentation

This quarterly report has been prepared by CED using an expenditure basis of accounting. The accompanying Statement of Authorities includes CED’s spending authorities granted by Parliament and used by CED, in a manner consistent with the Main Estimates for the 2019-2020 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.

Prior authority from Parliament is required before funds can be spent by the Government. Authorities available for use are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

CED uses the full accrual method of accounting to prepare and present its annual financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

1.3 Canada Economic Development for Quebec Regions financial structure

CED manages its expenditures under two annual votes:

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 the employer’s benefit plan.

2. Highlights of fiscal quarter and fiscal year to date (ytd) results

This section provides a variety of financial information for the current fiscal year up to December 31, 2019, including the authorities available for the year and expenditures incurred during the third quarter, as compared with the previous fiscal year and the previous quarter. The explanation of variances in the amounts are based on the premise that discrepancies of less than 5% have a minimal impact on the interpretation of the results.

The details of this financial information are provided in sections 2.1 and 2.2, and in the tables in the Appendix.

2.1 Authorities analysis

At the end of the third quarter, as at December 31, 2019, CED’s annual authorities totalled $322.3M. They were $295.0M as at December 31, 2018.

The variance of $27.3M (9.3%) is due to the following changes:

The following graph illustrates the annual budgetary authorities by appropriation as at September 30, 2019, and as at December 31, 2019, compared with the previous fiscal year.

Annual budgetary authorities by appropriation as at September 30 and as at December 31, in fiscal year 2019–2020, compared with 2018–2019

Annual budgetary authorities by appropriation as at September 30 and as at December 31, in fiscal year 2019–2020, compared with 2018–2019

Graph 1 - Long description

Analysis of annual budgetary appropriation authorities: subdivided into three sections, this graph provides an overview of net available budgetary authorities (Vote 1 – Net Operating Expenditures; Vote 5 – Grants and Contributions; and Budgetary Statutory Authorities) as at June 30, 2019, and as at September 30, 2019, including a comparison as at June 30, 2018, and as at September 30, 2018.

As at September 30, 2019, annual authorities under Vote 1 – Net Operating Expenditures, Vote 5 – Grants and Contributions, and Budgetary Statutory Authorities, totalled $41.2M ($38.6M in 2018–2019); $274.9M ($233.4M in 2018–2019); and $4.9M ($4.5M in 2018–2019), respectively.

As at June 30, 2019, annual authorities under Vote 1 – Net Operating Expenditures, Vote 5 – Grants and Contributions, and Budgetary Statutory Authorities, totalled $39.5M ($38.6M in 2018–2019); $274.9M ($233.4M in 2018–2019); and $4.9M ($4.5M in 2018–2019), respectively.

Vote 1 authorities (Net Operating Expenditures)

As at December 31, 2019, annual authorities available for Vote 1 totalled $42.5M, compared with $40.4M as at December 31, 2018. The variance of $2.1M (5.2%) is primarily due to:

Vote 5 expenditures (Grants and Contributions)

As at December 31, 2019, the annual authorities available for Vote 5 increased to $274.9M. As at December 31, 2018, that amount was $249.9M. Annual authorities for the current fiscal year increased by $25.0M (10.0%). This variance is due to numerous factors, among the most important being the 2019–2020 granting of funds for temporary initiatives, such as the Steel and Aluminum Initiative and the Canadian Experiences Fund (tourism) initiative. In addition, in 2019–2020, client reimbursements of repayable contributions that were subsequently reinvested in the annual authorities were higher than in 2018–2019.

Budgetary Statutory Authorities

Budgetary Statutory Authorities in 2019–2020 increased by $0.2M year-over-year. This increase can be attributed, among other things, to the increase in salary authorities.

2.2 Expenditure analysis

CED’s total expenditures recorded during the third quarter of 2019–2020 totalled $79.5M, compared with $66.7M for the same period a year earlier. This represents a net increase of $12.8M (19.2%) year-over-year. The variance can be broken down as follows:

The following graph illustrates third quarter 2019–2020 expenditures by budgetary appropriation, and year-to-date expenditures, compared with the previous fiscal year.

Third-quarter and year-to-date expenditures as at December 31 by budgetary appropriation, fiscal year 2019-2020, compared with 2018–2019

Third-quarter and year-to-date expenditures as at December 31 by budgetary appropriation, fiscal year 2019-2020, compared with 2018–2019
Due to rounding, figures may not add up to totals shown.

Graph 2 - Long description

Analysis of second-quarter expenditures and presentation of year-to-date expenditures by budgetary appropriation as at September 30, fiscal year 2019–2020, compared with 20182019: subdivided into three sections, namely Vote 1 – Net Operating Expenditures, Vote 5 – Grants and Contributions, and Budgetary Statutory Authorities. This graph shows expenditures incurred during the second quarter of 2019–2020, as well as year-to-date expenditures as at September 30, 2019, and includes a comparison with fiscal year 2018–2019.

In the second quarter of 2019–2019, expenditures under Vote 1 (Net Operating Expenditures), Vote 5 (Grants and Contributions), and Budgetary Statutory Authorities, amounted to $8.4M ($8.6M in 2018–2019); $54.6M ($35.4M in 2018–2019); and $0.8M ($1.1M in 2018–2019), respectively.

Year-to-date expenditures as at September 30, 2019, under Vote 1 (Net Operating Expenditures), Vote 5 (Grants and Contributions), and Budgetary Statutory Authorities, totalled $16.8M ($16.8M in 2018–2019); $71.0M ($60.7M in 2018–2019); and $2.0M ($2.3M in 2018–2019), respectively.

Vote 1 expenditures (Net Operating Expenditures)

Net Operating Expenditures for the third quarters of 2019–2020 and 2018–2019 were $10.9M and $9.2M, respectively. The $1.7M (18.5%) variance is mainly due to the payment of retroactive salary expenses following the signing of the employees’ collective agreements.

On a year-to-date basis, Net Operating Expenditures as at December 31, 2019, amounted to $27.7M, compared with $26.0M as at December 31, 2018. The $1.7M (6.5%) variance is also due to retroactive salary expenses paid to employees.

(For further details on these expenditures, see the table entitled Departmental Budgetary Expenditures by Standard Object in Appendix 6.2.)

Vote 5 expenditures (Grants and Contributions)

During the third quarter of 2019–2020, CED spent $67.4M on grants and contributions. This is up $11.0M (19.5%), compared with the third quarter of 2018–2019.

On a year-to-date basis, grants and contributions expenditures as at December 31, 2019, amounted to $138.4M, compared with $117.1M as at December 31, 2018. The variance between the two fiscal years is $21.3M (18.2%).

Given that authorities are higher this year because of the increase in the number of temporary initiatives, total spending is up in all programs. Examples include the Steel and Aluminum Initiative, which aims to support SMEs in this sector, as well as the Canadian Experiences Fund (tourism), aimed at attracting tourists to areas outside major urban centres and during non-summer months, and facilitating access to capital as well as addressing labour shortages. It should be noted that spending was higher this year on the Women Entrepreneurship Strategy and the Regional Economic Growth through Innovation Program, with most spending beginning in the fourth quarter in 2018–2019.

(For further details on these expenditures, see the table entitled Departmental Budgetary Expenditures by Standard Object in Appendix 6.2.)

3. Risks and Uncertainties

To achieve its outcomes, CED needs to have an overview of the changing factors that have a marked impact on its environment and activities. It integrates these factors into its decision-making processes. Thus, integrating risk management into departmental planning allows CED to implement risk management strategies to achieve its outcomes.

Since CED has a mandate to promote economic development, its principal external risk is linked to its ability to adapt the delivery of its mandate in a changing the economic environment. Many external factors are likely to have an impact on the delivery of the organization’s mandate, including labour shortages hindering SME growth and productivity, and trade disputes and their repercussions for Canadian exports. There is therefore a risk concerning CED’s ability to adequately support the development of Quebec businesses and the regions because of changing economic circumstances.

To mitigate this risk, for example, CED will continue to closely monitor the changes in the regional economic development conditions in Quebec and the intervention strategies of the key stakeholders. Concretely, we will analyze the impact of the changes likely to affect our capacity to support the development of businesses and the growth of all the regions of Quebec. We will maintain the capacity required to scan and analyze the regions for the development and implementation of specific or temporary initiatives enabling us to respond to region-specific issues. Lastly, an external communications strategy could be updated to reflect the adjustments to CED’s priorities and to its programs, if applicable.

Considering that some of our technological solutions are coming to the end of their useful life, particularly those related to financial management, there is a risk related to the integrity of the available data. In the medium term, CED intends to mitigate this risk by rolling out new technological solutions that will make it possible to ensure the integrity of data and, at the same time, increase its client and financial management capacities. In the meantime, ongoing monitoring of the status of our critical technological solutions is ensured. We have implemented controls, specific processes, and monitoring mechanisms to maintain the integrity of our financial information.

In the coming years, Quebec employers will be faced with several challenges with respect to recruiting and retaining employees (eg, retirements, labour shortages, needs for specialized skills in information technology, change management and project management, etc). These challenges will require proper knowledge management and transfer while dealing with increased pressures on resources.

CED, which will also be affected by these conditions, risks not being able to recruit employees for certain regular functions or profiles of specialized skills that are critical to the changes in our services. To mitigate this risk, we are currently implementing innovative recruitment and talent retention strategies, such as campus recruitment. An inventory of at-risk positions will allow us to be proactive in the maintenance of our capacity and the identification of new professional profiles, related to our digital strategy in particular. Recourse to employment equity groups and the development of employees’ versatility will be promoted so as to address these needs. Lastly, we will coach our employees to facilitate the adoption and ownership of our new tools and new required skills.

CED manages its resources within a well-defined framework of responsibilities, policies and procedures, including an appropriate system of budgeting, reporting and other controls allowing it to manage its operations within the limits of available resources and Parliamentary authorities. It regularly monitors the progress and effectiveness of their implementation through a number of budgetary review processes and activities, together with expenditure analysis and budgetary estimates by organizational unit on a monthly basis. Financial risks are mitigated in large part by strong internal controls over financial reporting. CED conducts periodic assessments such as entity controls, general IT controls, and business process controls.

4. Significant changes in relation to operations, personnel and programs

Following the federal election and swearing-in ceremony on November 20, Mélanie Joly was appointed Minister of Economic Development and Official Languages, which the Canada Economic Development for Quebec Regions is part of. Ms. Joly is supported by Parliamentary Secretary to the Minister, Élisabeth Brière.

On April 1, 2019, CED introduced a new Program Inventory to better reflect its activities, namely Regional Innovation, Community Vitality and Targeted or Temporary Support.

In 2019–2020, CED received supplementary funding for temporary initiatives of one year or more:

Some major departmental and government-wide projects are under way that will help enhance the client experience, modernize methods, and create a stimulating work environment. These initiatives include the implementation of the digital strategy and the development of a new shared grant and contribution management platform.

5. Approval of senior officials

The purpose of this section is to provide the approval of senior officials, as required by the Policy on Financial Management, as follows:

Approved by:

_____________________________________
Manon Brassard
Deputy Minister

Montreal, Canada
February 29, 2020

_____________________________________
Guy Lepage
Chief Financial Officer

6. Appendices

6.1 Statement of authorities (unaudited)

Fiscal year 2019-2020 (in thousands of dollars)
Total available for use for the year ending March 31, 2020* Used during the quarter ended December 31, 2019 Year to date used at quarter-end
Vote 1 – Net Operating Expenditures 42,549 10,855 27,710
Vote 5 – Grants and Contributions 274,903 67,404 138,372
Total Budgetary Statutory Authorities 4,877 1,213 3,234
Total Authorities 322,329 79,472 169,316
Fiscal year 2018-2019 (in thousands of dollars)
Total available for use for the year ending March 31, 2019* Used during the quarter ended December 31, 2018 Year to date used at quarter-end
Vote 1 – Net Operating Expenditures 40,406 9,194 26,047
Vote 5 – Grants and Contributions 249,891 56,405 117,146
Total Budgetary Statutory Authorities 4,708 1,126 3,379
Total Authorities 295,005 66,725 146,572

* Includes only authorities available for use and granted by Parliament at quarter-end.
Due to rounding, figures may not add up to totals shown.

6.2 Departmental budgetary expenditures by statutory authority (unaudited)

Fiscal year 2019-2020 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2020* Expenditures during the quarter ended September 30, 2019 Year to date used at quarter-end
Expenditures:
Personnel* 38,924 10,1725 26,526
Transport and communication 910 237 645
Information 308 39 102
Professional and special services 5,623 1,363 2,586
Leasing 571 88 490
Repair and maintenance services 22 7 23
Utilities, materials and supplies 237 21 53
Acquisition of machinery and equipment 827 139 317
Transfer payments 274,903 67,404 138,372
Other subsidies and payments 4 2 202
Total net budgetary expenditures 322,329 79,472 169,316

* Includes employee benefit plans (EBPs)

Fiscal year 2018-2019 (in thousands of dollars)
Planned expenditures for the year ending March 31, 2019* Expended during the quarter ended December 31, 2018 Year to date used at quarter-end
Expenditures:
Personnel* 35,362 8,662 24,956
Transport and communication 1,095 259 631
Information 479 32 82
Professional and special services 5,162 1,074 2,683
Leasing 750 136 503
Repair and maintenance 39 6 18
Utilities, materials and supplies 221 42 107
Acquisition of machinery and equipment 1,986 56,405 117,146
Transfer payments 249,891 56,405 117,146
Other subsidies and payments 20 82 133
Total net budgetary expenditures 295,005 66,725 146,572

* Includes employee benefit plans (EBPs)

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