Federal Economic Development Agency for Southern Ontario – Quarterly Financial Report — Quarter ended June 30, 2012

Statement outlining results, risks, and significant changes in operations, personnel, and programs

For the quarter ended June 30, 2012

1. Introduction

This quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates A, as well as Canada's Economic Action Plan 2012 (Budget 2012). It reflects results in relation to this funding. It has been prepared by management as required under section 65.1 of the Financial Administration Act and in the form and manner prescribed by Treasury Board Accounting Standard 1.3. It has not been subject to an external audit or review.

Authority, Mandate & Program Activities

FedDev Ontario was created to support the competitiveness, innovation, and diversification of southern Ontario's economy by delivering strategic investments to businesses, non-profit organizations, and communities; establishing and strengthening collaborative partnerships with key economic stakeholders; and representing the region's interests at the national level.

Further details on FedDev Ontario's authorities, mandate, and program activities can be found in the Report on Plans and Priorities, Part II of the Main Estimates, and Supplementary Estimates A.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the Agency's spending authorities granted by Parliament and those used by the Agency consistent with the Main Estimates and Supplementary Estimates A for the 2012–13 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.

The authority of Parliament is required before moneys 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.

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

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012.

As a result, the measures announced in Budget 2012 could not be reflected in the 2012–13 Main Estimates.

In fiscal year 2012–13, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

2. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

Planned departmental spending is concentrated in grants and contributions. These account for more than 85 percent of total planned spending. This planned spending pattern is expected to continue, when compared to fiscal year 2011–12. The most significant year-over-year change is due to the overall decrease in funding related to the Recreational Infrastructure Canada (RInC) program, which was part of the Canada's Economic Action Plan (EAP) 2009 (Budget 2009) programming for which some projects were extended into the 2011–12 fiscal year.

Graph 1: Total authorities available for use for the year ending March 31, 2013 compared to total authorities available for use for the year ending March 31, 2012
(in millions of dollars)

[Description of Graph 1]

2.1 Authorities Analysis

The Statement of Authorities table reflects a significant decline in funding available for use, to $223.8 million in 2012–13 from $267.4 million in 2011–12. Grants and contributions account for the majority of the decrease in funding, and this is due to the conclusion of funding for the EAP initiatives, namely, the RInC program and select projects under the Community Adjustment Fund (CAF), which had been extended to October 31, 2011, and other changes in authorities, resulting in a net decrease (e.g., decrease to the Economic Development Initiative (EDI)—Official Languages, and the end of the funding profile for the Brantford-Greenwich Brownfield Remediation Project).

Operating authorities have decreased to $29.9 million (2 percent) from $30.3 million. This is mainly due to the wrap-up of the RInC extensions, for which additional operating authorities were provided ($1.7 million reduction from last year), and the transfer of operating authorities ($0.9 million) to Shared Services Canada, which is offset by other increases to authorities (e.g., increase of $1.6 million for the administration of the Building Canada Fund – Communities Component (BCF-CC) on behalf of Infrastructure Canada and $0.4 million more to support the operations of the Ontario Federal Council (OFC)). Note that the operating funds related to BCF-CC and the OFC were not part of the Agency's 2011–12 Main Estimates. Operating funds in support of these were transferred through Supplementary Estimates B and consequently were not included in the Agency's first quarter report for 2011–12.

2.2 Expenditure Analysis

Planned Expenditures for the Year

Table 1, "Departmental Budgetary Expenditures by Standard Object," reflects a decline in overall planned expenditures for the current fiscal year ($43.5 million) when compared with the year prior. Transfer payments and professional services are the areas with the largest declines, $46.3 million (or 10 percent) and $0.6 million (or 54 percent), respectively, which are offset by a planned net increase in other Standard Objects related to the Agency's operations.

Statement of Departmental Budgetary Expenditures by Standard Object

The following provides additional analysis of key variances at the Standard Object level.

The Agency's expenditures by Standard Object for the quarter and YTD reflect a decline of $0.4 million (3 percent) in expenditures relative to fiscal year 2011–12. The most significant year-over-year variances are in transfer payments, professional and special services, personnel, and transportation and communications.

The 10 percent decrease in transfer payment expenditures is mainly due to the conclusion of the RInC program extension. The variances in personnel (14 percent increase), professional and special services (54 percent decrease), and transportation and communications (25 percent decrease) are attributed to the Agency establishing a more stable work force at its Kitchener headquarters, resulting in a reduction in the need for professional services and transportation and communications to support its operations. Also contributing to the decline in these costs is the transfer of telecommunications expenses to Shared Services Canada.

The $111,000 increase for rentals is attributed to remaining lease obligations related to space used in support of EAP. The increase in costs for information services can be attributed to a more consistent flow of announcements, which has come as a result of the maturity of the Agency's Southern Ontario Advantage suite of initiatives.

3. Risks and Uncertainties

FedDev Ontario's Corporate Risk Profile has identified financial management, program administration, and reporting on the results and performance of its programs as areas of risk. This is mainly attributed to it being a new agency within the federal government, having been launched in August 2009. Over the last two fiscal years, one of FedDev Ontario's management objectives has been to stabilize and improve its internal practices and procedures. These efforts are ongoing. Specific measures to mitigate financial management and program administration risks include the implementation of additional policies and improved procedures and controls, as well as the provision of training and tools to its employees. The latter includes the launch of a new management reporting system to support improved financial budgeting, forecasting, and reporting and the introduction of an impact assessment tool to improve the effectiveness of project selection. Measures being undertaken to mitigate risks associated with performance reporting include a comprehensive evaluation plan and research agenda.

4. Significant Changes in Operations, Personnel, and Programs

The Agency announced an organizational restructuring in January 2012, which merged two program delivery branches and also created a new sector focused on policy, partnerships, and performance management.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented to refocus government and programs, make it easier for Canadians and business to deal with their government, and modernize and reduce the back office.

FedDev Ontario will achieve Budget 2012 savings of $22.1 million by fiscal year 2014–15 through a series of measures to improve operating efficiency, while maintaining effectiveness of programs, including: the implementation of environmentally friendly practices that will reduce paper usage and travel costs, as well as the consolidation of offices and internal services to eliminate duplication and reduce operating costs.

In the first year of implementation, FedDev Ontario will achieve savings of approximately $10.4 million. Savings will increase to $21.3 million in 2013–14 and will result in ongoing savings of $22.1 million by 2014–15.

As the results of Budget 2012 were not reflected in the 2012-13 Main Estimates, none of the variances in the Agency's authorities are related to Budget 2012 as of this time.

Expenditures in the first quarter of 2012–13 are only slightly less than for the same period from last year. Budget 2012-related initiatives have had an effect on operating expenditures in the area of acquisition of machinery and equipment, where expenditures have increased as a result of the project to make the Agency's operations more environmentally friendly by purchasing high-efficiency printers and tablets to reduce paper use and operating costs in the long run.

The balance of 2012–13 Budget 2012 savings will be reflected later in the fiscal year.

In addition, a reorganization of the Agency's Communications Branch on June 1, 2012, reduced the number of its teams, to streamline operations.

There was no incremental funding provided to FedDev Ontario to complete the above work, which has already occurred.

Approved by:

FedDev Ontario
Quarterly Financial Report
For the quarter ended June 30, 2012