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Quarterly Financial Report for the quarter ended June 30, 2020

By Canada Economic Development for Quebec Regions

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About this publication

Publication author : Canada Economic Development for Quebec Regions

Publish date : August 24, 2020

Summary :

Financial report of the Agency on its spending trends for the 1st quarter of 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 operations, staff and programs
  5. 5. Approval of senior officers
  6. 6. Appendices

1. Introduction

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

This report should be read in conjunction with the 2020–2021 Main Estimates and the 2020–2021 Departmental Plan.

This report has not been subject to an external audit or review.

1.1 Authority, mandate and programs

The mission of the Economic Development Agency of Canada for the Regions of Quebec (CED) is to promote the long-term economic development of the regions of Quebec with particular emphasis on those areas with slow economic growth or inadequate productive employment opportunities. CED carries out its mandate in accordance with the provisions of the Economic Development Agency of Canada for the Regions of Quebec Act, 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 in promoting economic development of the regions and of small and medium-sized enterprises (SMEs). To fulfil its core responsibility, which is to develop Quebec’s economy, CED supports business start-up and performance. It helps businesses become more innovative, productive and competitive. It supports community engagement efforts in Quebec’s regions and helps to attract investment that will enhance the prosperity of the Quebec and Canadian economies.

CED contributes to the economic vitality of all Quebec regions by leveraging their regional competitive advantages. It supports the transition and diversification of communities that remain dependent on a small number of industries or have been affected by an economic shock, such as the Lac Mégantic rail disaster.

CED has three programs to support its core responsibility:

For further information about CED’s authority, mandate and programs, see 2020–2021 Main Estimates and the 2020–2021 Departmental Plan.

1.2 Basis of Presentation

This quarterly report was prepared by CED using an expenditure basis of accounting. The accompanying Statement of Authorities includes CED’s spending authorities granted by Parliament and those used by CED, consistent with the 2020–2021 Main Estimates. This quarterly report was 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.

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, which form part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

1.3 Financial structure of Canada Economic Development for Quebec Regions (CED)

CED manages its expenditures under two annual votes:

Expenses under statutory budgetary authorities, for which payments are made under an act 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 and transfer payments under the Public Health Events of National Concern Payments Act.

Exceptionally this year, CED is using a temporary statutory appropriation to administer its Regional Relief and Recovery Fund (RRRF) for the COVID-19 pandemic.

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

This section presents a variety of financial information as at June 30, 2020, including the authorities available for the year and expenditures incurred during the first quarter, as compared with the previous fiscal year.

In the explanations of variances, changes of less than 5% are considered to have a minimal impact on the interpretation of the results.

Detailed financial information is provided in sections 2.1 and 2.2, and in the tables in the Appendices.

Note: On April 20, 2020, because of the exceptional situation caused by the COVID-19 pandemic, the House of Commons adopted a motion to amend Standing Order 81 for the 2020 calendar year, allowing the House to continue considering the 2020–2021 Main Estimates until December 2020. Full supply is therefore expected in December 2020.

In these circumstances, comparisons with the previous fiscal year are not representative.

2.1 Authorities analysis

At the end of the first quarter, i.e., at June 30, 2020, CED’s annual authorities totalled $447.4 M. On June 30, 2019, they were $319.2 M.

The variance of $128.2 M (40.2%) is due to the following changes:

The chart below shows the annual budgetary appropriation authorities as at June 30, 2020, compared with the previous fiscal year.

Annual budgetary appropriation authorities as at June 30, fiscal year 2020–2021 compared with 2019–2020

Annual budgetary appropriation authorities as at June 30, fiscal year 2020–2021 compared with 2019–2020

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, 2020, including a comparison as at June 30, 2019.

As at June 30, 2020, annual authorities under Vote 1 – Net Operating Expenditures, Vote 5– Grants and Contributions, and Budgetary Statutory Authorities, totalled $31.3M ($39.4M in 2019-2020), $333.0M ($274.9M in 2019–2020) and $83.1M ($4.9M in 2019-2020), respectively.

Vote 1 authorities (Net Operating Expenditures)

Compared with 2019–2020, authorities decreased by $8.1M. As previously noted, only 75% of the appropriations in the 2020–2021 Main Estimates had been allocated as at June 30, 2020. The remaining supply is expected to be received by December 2020.

Vote 5 authorities (Grants and Contributions)

Although CED received only 75% of the authorities in the 2020–2021 Main Estimates ($191.7M instead of $255.6M), there is an increase of $58.1M as at June 30, 2020, compared with June 30, 2019.

Authorities totalled $333.0M this year, compared with $274.9M last year. The reasons for the $58.1M increase are as follows:

Statutory budgetary authorities

Statutory budgetary authorities were $4.9M for the first quarter of 2019–2020 and $83.1M for the first quarter of 2020–2021. This is an increase of $78.2M for the 2020–20121 fiscal year. The reasons for the increase are as follows:

2.2 Analysis of expenditures

CED expenditures in the first quarter of 2020–2021 totalled $83.3M, compared with $26.0M for the same period last year. This is a net increase of $57.3M (220.4%) compared with the previous fiscal year.

This increase can be broken down as follows:

The following graph illustrates expenditures in the first quarter of 2020-2021 by budgetary appropriation, in comparison with the previous fiscal year.

First-quarter expenditures by budgetary appropriation, 2020–2021 and 2019–2020

First-quarter expenditures by budgetary appropriation, 2020–2021 and 2019–2020

Graph 2 - Long description

Analysis of first quarter expenditures and presentation of year-to-date expenditures by budgetary appropriation as at June 30, fiscal year 2020–2021, compared with 20192020: 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 first quarter of 2020–2021 and includes a comparison with fiscal year 2019-2020.

In the first quarter of 2020–2021, expenditures under Vote 1 (Net Operating Expenditures), Vote 5 (Grants and Contributions), and Budgetary Statutory Authorities, amounted to $8.5M ($8.4M in 2019–2020), $20.2M ($16.4M in 2019–2020) and $54.6M ($1.2M in 2019–2020), respectively.

Vote 1 expenditures (Net Operating Expenditures)

Net operating expenditures for the first quarter of 2020–2021 and the first quarter of 2019–2020 were $8.5M and $8.4M, respectively.

The $0.1M (1.2%) variance is considered insignificant.

(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)

In the first quarter of 2020–2021, CED spent $20.2M on grants and contributions (voted funding). This is an increase of $3.8M (23.2%) over the first quarter of 2019–2020, including $8.2M for the Community Futures Program (CFP) alone. CFP agreements were renewed in the first quarter of 2019–2020. Since the agreements were not in force, payments did not begin until the second quarter of 2019–2020.

In addition, a total of $4.3M was disbursed under the RRRF-CFP (voted funding).

To offset this increase, a decrease in expenditures was noted in the Quebec Economic Development Program (-$4.3M) and the Regional Economic Growth through Innovation program (-$4.4M), since the Regional Relief and Recovery Fund (RRRF) for the COVID-19 pandemic and other initiatives supporting economic recovery were given priority.

Expenditures under statutory budgetary authorities

Compared with the first quarter of 2019–2020, expenditures increased by $53.4M in the first quarter of 2020–2021. The reasons for the increase are as follows:

(For further details on these expenditures, see the table entitled “Departmental budgetary expenditures by standard object” in Appendix 6.2.)

3. Risks and Uncertainties

CED ensures that it has an overall view of the changing factors that influence its environment and activities. It incorporates these factors into its decision-making processes so that it can adjust to new challenges and take advantage of new opportunities. The inclusion of risk management in corporate planning allows CED to implement appropriate risk management strategies in a timely manner to achieve its results.

During the period covered by this report, Quebec introduced extraordinary lockdown measures and faced a major economic slowdown caused by the COVID-19 pandemic.

Prior to March 2020, CED had been focusing on issues related to labour shortages, trade and productivity for business support. Now, the impact of COVID-19 is at the epicentre of the organization’s risks and uncertainties, and the key issues are the financial health of Quebec companies, during and after the crisis, and the impact on the global economy.

In response to these concerns, CED has implemented various measures to support its clients, including:

CED will continue to closely monitor changes in the regional economic context and the intervention strategies of the main players. The regional watch will be maintained, notably for the development of targeted or temporary initiatives in response to issues specific to the regions.

Over the next few years, Quebec employers will continue to face several challenges with respect to employee recruiting and retention (retirements, labour shortages, need for specialized IT skills, change and project management, etc.). However, the current global health crisis is forcing the human resource sector to quickly adjust, and is creating new challenges such as telework, new employee integration and training, workforce mobilization and mental health. These challenges will require the appropriate management of knowledge and knowledge transfer, as well as a strong capacity for adjustment and innovation. These factors will have a significant impact on individuals.

Internally, CED remains at risk of experiencing difficulties recruiting staff for routine functions and for certain specialized skill profiles. The current context is also creating a risk in terms of its ability to deliver its regular programs, given the prioritization of new programs introduced in response to COVID-19.

To mitigate this risk, innovative talent recruitment and retention strategies are being implemented. CED is being proactive and is currently identifying at-risk positions, particularly those related to our digital strategy. The use of employment equity groups and the development of employee versatility are being promoted. Finally, CED is supporting its employees and managers to facilitate the adoption and buy-in of the new tools and skills required in this exceptional context and for a return to a new normal.

Some technology solutions are reaching the end of their useful life, particularly those related to financial management. There is thus a risk related to the integrity of available data. To mitigate this risk, CED has undertaken a project to replace its financial system with the enterprise solution (GCfm) selected by the Office of the Comptroller General. In the meantime, the status of critical technological solutions is being constantly monitored. Controls and specific processes have been put in place and follow-up is being done to ensure that the integrity of financial information is maintained.

Finally, CED manages its resources according to a well-defined framework of responsibilities, policies and procedures, including an appropriate budgeting and reporting system and other controls, which allow the organization to manage its activities within the limits of available resources and parliamentary authorities. CED regularly monitors the progress and effectiveness of their implementation by means of various budget and activity review processes, and by analyzing expenditures and budget forecasts by organizational unit on a monthly basis. Financial risks are largely mitigated 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 operations, staff and programs

Because of the exceptional situation created by the COVID-19 pandemic, in the first quarter of 2020–2021, only 9/12 of the appropriations in the 2020–2021 Main Estimates were received. Full supply is expected in December 2020.

The Government of Canada established the Regional Relief and Recovery Fund (RRRF), a one year, one-time, targeted initiative with a total envelope of $223.6 million for CED, in response to the COVID-19 pandemic.

This initiative is broken down as follows:

Also in connection with the pandemic, the scheduled repayments from our clients’ repayable contributions were deferred for a period of six months. Collection of repayments is expected to resume on October 1, 2020.

Jean-Philippe Brassard has been Acting Vice-President of Operations since May 18, 2020. A process is under way and is expected to conclude in the next quarter.

5. Approval of senior officers

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

Approved by:

Original signed by
_____________________________________
Manon Brassard
Deputy Minister/President

Montréal, Canada
August 11, 2020

Original signed by
__________________________________
Thierry Cadieux
Acting Chief Financial Officer

Montréal, Canada
August 11, 2020

6. Appendices

6.1 Statement of Authorities (unaudited)

Fiscal year 2020-2021 ($000’s)
Total available for use for the year ending March 31, 2021* Used during the quarter ended June 30, 2020 Year-to-date used at quarter-end
Vote 1 – Net Operating Expenditures 31,326 8,464 8,464
Vote 5 – Grants and Contributions 333,011 20,250 20,250
Total Budgetary Statutory Authorities 83,122 54,584 54,584
Total authorities 447,459 83,298 83,298
Fiscal year 2019–2020 ($000’s)
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 – Net Operating Expenditures 39,452 8,413 8,413
Vote 5 – Grants and Contributions 274,903 16,417 16,417
Total Budgetary Statutory Authorities 4,877 1,213 1,213
Total authorities 319,232 26,043 26,043

* Includes only authorities available for use for the year and granted by Parliament at quarter end.

6.2 Departmental budgetary expenditures by standard object (unaudited)

Fiscal year 2020–2021 ($000’s)
Planned expenditures for the year ending March 31, 2021* Expenditures during the quarter ended June 30, 2020 Year to date used at quarter-end
Expenditures:
Staff* 30,718 8,839 8,839
Transport and communication 509 10 10
Information 151 7 7
Professional and special services 4,107 342 342
Leasing 314 309 309
Repair and maintenance services 14 1 1
Public utilities, materials and supplies 133 3 3
Acquisition of land, buildings and works 0 0 0
Acquisition of equipment and tools 498 81 81
Transfer payments** 411,011 73,619 73,619
Other grants and payments 4 87 87
Total net budgetary expenditures 447,459 83,298 83,298

* Includes employee benefit plans (EBPs)

** Includes statutory and voted appropriations

Fiscal year 2019-2020 ($000’s)
Planned expenditures for the year ending March 31, 2020* Expenditures during the quarter ended June 30, 2019 Year to date used at quarter-end
Expenditures:
Staff* 36,682 8,559 8,559
Transport and communication 910 232 232
Information 308 37 37
Professional and special services 4,768 286 286
Leasing 571 298 298
Repair and maintenance services 22 7 7
Public utilities, materials and supplies 237 16 16
Acquisition of land, buildings and works 0 0 0
Acquisition of equipment and tools 827 20 20
Transfer payments 274,903 16,418 16,418
Other grants and payments 4 170 170
Total net budgetary expenditures 319,232 26,043 26,043

* Includes employee benefit plans (EBPs)

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