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Quarterly Financial Report for the quarter ended September 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 : November 27, 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 results
  3. 3. Risks and Uncertainties
  4. 4. Significant changes in operations, staff 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 by section 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 document has not been subject to an external audit or review.

1.1 Authority, mandate and programs

The mission of Canada Economic Development for Quebec Regions (CED) is to promote the long-term economic development of Quebec regions, with particular emphasis on those areas with weak 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 co-operation and a complementary relationship with Quebec and its communities.

CED is a key federal player in Quebec in terms of promoting the economic development of the regions and small and medium-sized enterprises (SMEs). To fulfil its core responsibility, which is to develop Quebec’s economy, CED supports the start-up and performance of businesses. It helps them to become more innovative, productive and competitive. It supports efforts to engage the various Quebec regions and attract investments that will help boost the economic well-being of Quebec and Canada.

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

The following three CED programs support its core responsibility:

Additional information on CED's authorities, mandate and programs is available in the 2020-2021 Main Estimates and the 2020-2021 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 those used by CED, consistent with the 2020–2021 Main Estimates. 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.

Parliamentary pre-authorization is required before funds can be spent by the government. Authorities available for use are given through appropriation acts in the form of annually approved limits, or through legislation in the form of statutory spending authorities for specific purposes.

When Parliament is dissolved for the purposes of holding 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 form part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis of accounting.

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

There are two annual appropriations for CED’s expenditures management:

Expenses under statutory budgetary authorities, for which payments are made under an act previously approved by Parliament and which do not form part of the annual appropriations bills, include items such as the employer’s portion of the employee benefit plan, as well as 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 results

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

The explanation of variances is 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.

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, thereby allowing the House to continue considering the 2020–2021 Main Estimates until December 2020.  Full appropriations are 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 second quarter, i.e. as at September 30, 2020, CED’s annual authorities totalled $454.1 million. They stood at $321.0 million as at September 30, 2019.

The variance of $133.1 million (41.5%) is due to the following changes:

The following chart shows the annual budgetary authorities by vote as at June 30, 2020 and September 30, 2020, compared with the previous fiscal year.

Annual budgetary appropriation authorities as at June 30 and as at September 30, fiscal year 2020 2021, compared with 2019–2020
Annual budgetary appropriation authorities as at June 30 and as at September 30, fiscal year 2020-2021, compared with 2019–2020:
Text version:

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

As at September 30, 2020, annual authorities under Vote 1 – Net Operating Expenditures, Vote 5 – Grants and Contributions, and Budgetary Statutory Authorities, totalled $32.9M ($41.2M in 2019–2020); $323.9M ($274.9M in 2019–2020); and $97.3M ($4.9M in 2019–2020), respectively.

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 ($39.5M 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)

Authorities as at September 30, 2020 are $32.9 million compared with $41.2 million at the same date the previous year.  Authorities have thus fallen by $8.3 million this year. As previously noted, only 75% of the appropriations in the 2020–2021 Main Estimates had been allocated as at September 30, 2020.  The remaining appropriations are expected to be received by December 2020.

Vote 5 authorities (Grants and Contributions)

Although CED had received only 75% of the authorities in the 2020–2021 Main Estimates ($191.7 million instead of $255.6 million), there is still an increase of $49.0 million as at September 30, 2020, compared with September 30, 2019.

Authorities totalled $323.9 million this year, compared with $274.9 million at September 30 last year. The reasons for the $49.0 million (17.8%) increase are as follows:

Statutory budgetary authorities

Budgetary statutory authorities were $4.9 million in the second quarter of 2019–2020, compared with $97.3 million for the second quarter of 2020–2021. This represents an increase of $92.4 million for fiscal year 2020–2021. The variance stems from the receipt of funds in the form of statutory appropriations for transfer payments under the Public Health Events of National Concern Payment Act, in response to the COVID-19 pandemic. The breakdown is as follows:

Excluding the new initiatives noted above, authorities for the employee benefit plan remained relatively stable at $4.9 million.

2.2 Analysis of expenditures

CED expenditures in the second quarter of 2020–2021 totalled $90.5 million, compared with $63.8 million for the same period last year. This represents a net increase of $26.7 million (41.8%) compared with the previous fiscal year.
This variance can be broken down as follows:

On a cumulative basis, total expenditures as at September 30, 2020, were $173.8 million, compared with $89.8 million for the same period a year earlier. This represents a net increase of $83.9 million (93.4%) this year. 

This variance can be broken down as follows:

* Totals may not match due to rounding

The following chart shows the expenses incurred during the second quarter of 2020-2021 by appropriation, as well as on a cumulative basis since the start of the year, with comparisons against the previous fiscal year.

Second quarter and cumulative expenditures to September 30, by budgetary appropriation, fiscal year 2020-2021 compared with 2019-2020
Second-quarter expenditures by budgetary appropriation as at June 30 and as at September 30, fiscal year 2020-2021, compared with 2019–2020
Text version:

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

In the second quarter of 2020–2021, expenditures under Vote 1 (Net Operating Expenditures), Vote 5 (Grants and Contributions), and Budgetary Statutory Authorities, amounted to $9.3M ($8.4M in 2019–2020); $55.4M ($54.6M in 2019–2020); and $25.8M ($0.8M in 2019–2020), respectively.

Year-to-date expenditures as at September 30, 2020, under Vote 1 (Net Operating Expenditures), Vote 5 (Grants and Contributions), and Budgetary Statutory Authorities, totalled $17.7M ($16.9M in 2019–2020); $75.6M ($71.0M in 2019–2020); and $80.4M ($2.0M in 2019–2020), respectively.

Vote 1 expenditures (Net Operating Expenditures)

Net operating expenditures for the second quarter of 2020-2021 and the second quarter of 2019-2020 were $9.3 million and $8.4 million, respectively.

The variance of $0.9 million (10.7%) is mainly due to a $1.1 million increase in salary expenses this quarter.  This increase mainly stems from employee salaries that were revised following renewal of the collective agreements last year, as well as new hires made under the RRRF.

Cumulatively as at September 30, 2020, expenditures reached $17.7 million, compared with $16.8 million at the same date last year.  This represents a $0.9 million (5.3%) increase in expenditures.

(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 second quarter of 2020–2021, CED spent $55.4 million on grants and contributions (voted authorities). This represents an increase of $0.8 million (1.5%) compared with the second quarter of 2019-2020, when expenditures reached $54.6 million. Although this variance is considered immaterial, it is nevertheless made up of many elements, the main ones being the following.

We note a significant decrease in regular programming expenditures this quarter, in the amount of $18.3 million. This decrease is made up of a $13.4 million decrease in the Regional Economic Growth through Innovation (REGI) program and a $4.9 million decrease in the Quebec Economic Development Program (QEDP).There was also a $6.0 million decrease in the Community Futures Program (CFP) this quarter.  In fact, since the CFP agreements were renewed during the first quarter of 2019-2020, payments only began in the second quarter of 2019-2020. Exceptionally, these payments included expenditures for the first half of 2019-2020, which explains the variance between the two quarters. Also, during the second quarter 2019-2020, $4.0 million was spent on the Steel and Aluminum initiative; this initiative ended on March 31, 2020.

These decreases are offset by increases of $30.0 million in the RRRF program: $16.5 million for RRRF-REGI and $13.6 million for RRRF-CFP. Indeed, priority is given to files related to the Regional Relief and Recovery Fund (RRRF), in response to the COVID-19 pandemic, and other initiatives that support economic recovery.

Cumulatively, as at September 30, 2020, CED had spent $75.6 million on grants and contributions (voted authorities), compared with $71.0 million for the same period last year. This represents a net increase of $4.6 million (6.5%) in 2020-2021.  As previously stated, there was a significant decrease in expenditures on the regular programs ($27.3 million) and the Steel and Aluminum initiative ($4.0 million), which ended on March 31, 2020. However, this decrease is offset by increased expenditures this year on RRRF programs ($34.4 million). The difference of $3.1 million is made up of various minor variances in the other one-off initiatives and the CFP.

Expenditures under statutory budgetary authorities

Expenditures for the second quarter of 2020-2021 totalled $25.8 million, compared with $0.8 million for the same period last year. This represents an increase of $25.0 million. This increase is mainly due to transfer payments made under the Public Health Events of National Concern Payment Act. The details of this variance are as follows:

On a cumulative basis as at September 30, 2020, expenditures came to $80.4 million, compared with $2.0 million for the same period last year. This represents an increase in expenditures of $78.4 million. This variance can be broken down 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 adapt to new challenges and take advantage of new opportunities. As a result, the inclusion of risk management in departmental 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 due to the COVID-19 pandemic.

The consequences of COVID-19 remain at the epicentre of the organization's risks and uncertainties, particularly with respect to the duration and impact of the second wave. The financial solidity of Quebec companies, during and after the crisis, as well as the repercussions on the global economy, also remain at the heart of the issues. All these factors fuel the risk that companies, now more indebted and having exhausted their contingency funds, will be unable to invest themselves in order to continue their efforts on modernization and productivity gains, which are necessary for their survival and growth. Concerns about labour scarcity are resurfacing in some industrial sectors now in recovery mode.

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

Over the next few years, Quebec employers will continue to face a few challenges with respect to staff recruitment 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 resources sector to adapt quickly and is creating new challenges such as teleworking, integration and training of new staff, workforce mobilization and mental health. These challenges will require the appropriate knowledge management and knowledge transfer, as well as a substantial capacity for adjustment and innovation. These factors will have a significant impact on individuals.

Internally, CED remains at risk of having difficulties recruiting staff for routine functions and for certain specialized skill profiles. The current context also creates a risk for our ability to develop new initiatives, redirect our interventions and deliver regular programs in short time frames given the prioritization of new programs put in place 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, continuous monitoring of the status of critical technology solutions is ensured and vendor support is always in place and in effect until the transfer to the new financial solution. Controls, specific processes and monitoring have been put in place 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, comprising an appropriate budgeting and reporting system and other controls, which allow the organization to manage its activities within the limits of the 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 operational process controls.

4. Significant changes in operations, staff and programs

Because of the exceptional situation created by the COVID-19 pandemic, as at September 30, 2020, only 9/12 of the appropriations in the 2020–2021 Main Estimates had been received.  Full supply is expected in December 2020.

The Government of Canada has established the Regional Relief and Recovery Fund (RRRF), a one-year, one-off, targeted initiative with a total budget of $281.2 million for CED, in response to the COVID-19 pandemic.

This initiative is broken down as follows:

Also, two initiatives have been put in place to support targeted client groups following the pandemic:

Also in connection with the pandemic, the scheduled repayments from our clients’ repayable contributions were to have started on October 1, 2020. However, an extension of the moratorium was granted until January 1, 2021. This decision was made after September 30, 2020.

Finally, Marie-Claude Petit his holding the position of Vice-President of Operations since September 1, 2020.

5. Approval of senior officials

In this section, as required by the Policy on Financial Management, CED senior officials provide their approval as follows:

Approved by:

_____________________________________
Manon Brassard
Deputy Minister/President

Montréal, Canada
November 19, 2020

__________________________________
Guy Lepage
Chief Financial Officer

Montréal, Canada
November 19, 2020

6. Appendices

6.1 Statement of Authorities (unaudited)

Fiscal year 2020–2021 (in thousands of dollars)
Total available for use for the year ending March 31, 2021* Used during the quarter ended September 30, 2020 Year-to-date used at quarter-end
Vote 1 – Net operating expenditures 32,915 9,273 17,737
Vote 5 - Grants and contributions 323,869 55,365 75,616
Total budgetary statutory authorities 97,272 25,845 80,429
Total authorities 454,056 90,483 173,782
Fiscal year 2019–2020 (in thousands of dollars)
  Total available for use for the year ending March 31, 2020* Used during the quarter ended September 30, 2019 Year-to-date used at quarter-end
Vote 1 – Net operating expenditures 41,202 8,442 16,855
Vote 5 - Grants and contributions 274,903 54,551 70,969
Total budgetary statutory authorities 4,877 809 2,021
Total authorities 320,982 63,802 89,845
  • * Includes only authorities available for use for the fiscal year and granted by Parliament at quarter-end.
  • Due to rounding, figures may not add up to the totals shown.
  • 6.2 Departmental budgetary expenditures by standard object (unaudited)

    Fiscal year 2020–2021 (in thousands of dollars)
    Planned expenditures for the year ended March 31, 2021 Expenditures during the quarter ended September 30, 2020 Year-to-date used at quarter-end
    Expenditures:
    Personnel* 32,120 9,279 18,119
    Transport and communications 525 16 27
    Information 156 29 36
    Professional and special services 4,242 1,067 1,410
    Leasing 324 103 413
    Repairs and maintenance 14 3 4
    Utilities, materials and supplies 137 12 14
    Acquisition of land and buildings, and works 0 0 0
    Acquisition of machinery and equipment 515 1 81
    Transfer payments** 416,019 79,996 153,616
    Other grants and payments 4 (23)*** 62
    Total net budgetary expenditures 454,056 90,483 173,782
    • * Includes employee benefit plans (EBPs).
    • ** Includes statutory and voted authorities.
    • *** Will be regularized by March 31, 2021.
    Fiscal year 2019–2020 (in thousands of dollars)
    Planned expenditures for the year ended March 31, 2020* Expenditures during the quarter ended September 30, 2019 Year-to-date used at quarter-end
    Expenditures:
    Personnel* 37,577 7,795 16,354
    Transport and communications 910 176 408
    Information 308 26 63
    Professional and special services 5,623 937 1,223
    Leasing 571 104 402
    Repairs and maintenance 22 9 16
    Utilities, materials and supplies 237 16 32
    Acquisition of land and buildings, and works 0 0 0
    Acquisition of machinery and equipment 827 157 177
    Transfer payments 274,903 54,551 70,969
    Other grants and payments 4 31 201
    Total net budgetary expenditures 320,982 63,802 89,845
    • * Includes employee benefit plans (EBPs).
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