Federal Economic Development Agency for Southern Ontario — Quarterly Financial Report — Quarter ended December 31, 2012

• 1. Introduction
• 2. Highlights of fiscal quarter and fiscal year to date (YTD) results
• 3. Risks and Uncertainties
• 4. Significant changes in relation to operations, personnel and programs
• 5. Budget 2012 Implementation
• Statement of Authorities (unaudited)
• Departmental budgetary expenditures by Standard Object (unaudited)

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1. Introduction

This quarterly report should be read in conjunction with the Main Estimates, Supplementary Estimates A, and Supplementary Estimates B, 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 by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the 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 federal and 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, Supplementary Estimates A, and Supplementary Estimates B.

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, Supplementary Estimates A and Supplementary Estimates B 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 2012-2013, frozen allotments are 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.

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

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

2.1 Authorities Analysis

The Statement of Authorities table reflects a decline in funding available for use, to $262.4 million in 2012-13, compared to $276.8 million in 2011-12. Grants and contributions account for the majority of the decrease in funding. This is largely due to the conclusion of funding for the Canada's Economic Action Plan (EAP) initiatives, namely the Recreational Infrastructure Program (RInC) and select projects under the Community Adjustment Fund (CAF), which had been extended to October 31, 2011 and year-over-year decreases in authorized funding available for the Community Futures Program (CFP), the Economic Development Initiative — Official Languages (EDI), and the Brantford Greenwich Brownfields Remediation project. These decreases are partially offset by increased authorities for programs such as the Community Infrastructure Improvement Fund and the Eastern Ontario Development Program (EODP).

Operating authorities have decreased to $30.5 million (5 percent) from $32.2 million. Many factors contribute to this decrease including the wrap-up of EAP programming, additional transfers to Shared Services Canada for IT infrastructure support and telecommunications services, and the transfer of audit services to Treasury Board Secretariat. These decreases are partially offset by the recognition of operating carryforward funds.

2.2 Expenditure Analysis

Statement of Authorities

Used During the Quarter

In the third quarter of the 2012-13 fiscal year total budgetary expenditures were $28.5 million compared to $30.3 million reported in the same period of 2011-12, representing a year-over-year decrease of $1.8 million (or 6 percent). This decrease is attributable to a $1.2 million (or 6 percent) decrease in quarterly grants and contributions spending and a $0.6 million (or 7 percent) decrease in quarterly operating spending.

Year-to-Date Analysis

On a year-to-date basis, as of the end of the third quarter of fiscal year 2012-13 total budgetary expenditures were $71.3 million compared to $72.0 million at the end of the same period of fiscal year 2011-12, representing a year-over-year decrease of $0.7 million (or 1 percent). Most of this decrease can be attributed to grants and contributions, as they decreased by $1.1 million (or 2 percent) when compared to last year, mainly due to the wrap-up of the EAP programs. The decrease in grants and contributions spending is offset by a $0.4 million (or 2 percent) increase in operating spending.

Statement of Departmental Budgetary Expenditures by Standard Object

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

Used During the Quarter

The $1.2 million (or 6 percent) decrease in grants and contributions spending during the third-quarter of 2012-13 when compared to the same period in 2011-12 can be attributed to the wrap-up of EAP programming. In this quarter, FedDev Ontario saw a $7.4 million decrease in quarterly spending on EAP programs and a $6.2 million increase in spending on core programs, such as the Southern Ontario Development Program (SODP), the Eastern Ontario Development Program (EODP), the Community Futures Program (CFP), and the Economic Development Initiative (EDI).

The $0.6 million decrease in operating spending this quarter as compared to 2011-12 is mainly due to a reduction to and timing of payment of centrally-managed salary obligations, the transfer of telecommunications costs to Shared Services Canada, which is offset by increased spending in the combined standard objects of professional and special services and repair and maintenance, as well as in the acquisition of machinery and equipment.

Personnel-related expenditures this quarter are $0.7 million (or 11 percent) lower mainly due to timing differences in the payment of centrally-managed salary obligations and a lower number of staff on assignment from other government departments resulting from a stabilizing workforce.

Transportation and communications expenditures are $0.2 million (or 36 percent) lower as a result of the transfer of responsibility for telecommunications expenses to Shared Services Canada.

The Agency is showing increased spending of $0.3 million (or 13 percent) in the combined standard objects of professional and special services and repair and maintenance. Examining these standard objects on a combined basis is necessary at this time given that Receiver General has issued guidance to attribute IT Service costs received from other government departments to repair and maintenance as opposed to professional and special services. This increase can be attributed to improved contract management.

In addition, the Agency is showing expenditures of $79,000 more this quarter than last fiscal year due to investments in the acquisition of machinery and equipment to support the consolidation of office space and the implementation of more environmentally friendly office practices.

Year-to-Date Analysis

The Agency's expenditures by Standard Object for the year-to-date reflect a decrease of $0.7 million (1 percent) in expenditures relative to fiscal year 2011-12.

The $1.1 million (or 2 percent) decrease in grants and contributions spending can be attributed to the decrease in authorities year-over-year. However, spending on the Agency's continuing programs is up 48 percent over the same period last year, largely due to the maturity of the Southern Ontario Development Program (SODP) and the increase in funding for the Eastern Ontario Development Program (EODP).

The $0.4 million (2 percent) increase in operating spending year-to-date as compared to 2011-12 is mainly due to increased expenditures on personnel, the acquisition of machinery and equipment and rentals, which are offset by decreased spending in telecommunications and transportation.

Personnel expenditures this year-to-date are $0.4 million higher (or 3 percent) due to the Agency having established a more stable workforce and the reduced reliance on temporary help and other government departments.

Expenditures on the acquisition of machinery and equipment this year-to-date have increased by $0.1 million (or 374 percent). These are investments in support of the consolidation of office space and the implementation of more environmentally friendly office practices, which will offer longer-term savings.

Rental expenditures have also increased by $0.1 million (or 138 percent). This is due to the Agency having to fulfill lease obligations in support of EAP.

The above increases are offset by a $0.2 million reduction (or 20 percent) to transportation and communications expenditures. This is attributed primarily to the transfer of telecommunications-related expenditures to Shared Services Canada.

Note that although there are material changes to the professional and special services and repair and maintenance standard objects these are related to a change in reporting of IT services received from other government departments. On a combined basis, there is no material difference in year-to-date spending.

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3. Risks and Uncertainties

FedDev Ontario's corporate risk profile has identified financial management, program administration and the 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 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 being undertaken to mitigate financial management and program administration risks include the implementation of additional policies and improved procedures and controls, and the provision of training and tools to its employees. The latter includes the continuing use of a recently implemented 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 relation to operations, personnel and programs

No significant changes in operations, personnel, or programs took place during the third quarter of fiscal year 2012-13.

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 office 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 annual savings of $22.1 million by 2014–15.

Budget 2012-related initiatives have had an effect on operating expenditures this quarter mainly in machinery and equipment and information technology. This is due to investments made to support integration of program delivery and more environmentally friendly office practices.

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

Approved by:

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FedDev Ontario
Quarterly Financial Report
For the quarter ended December 31, 2012

Statement of Authorities (unaudited)

(in thousands of dollars)	Fiscal Year 2012-13			Fiscal Year 2011-12
	Total available for use for the year ending March 31, 2013 Footnote 1, Footnote 2	Used during the quarter ended December 31, 2012	Year to date used at quarter-end	Total available for use for the year ending March 31, 2012 Footnote 1, Footnote 4	Used during the quarter ended December 31, 2011 Footnote 5	Year to date used at quarter-end
Footnotes Footnote 1 Includes approved estimates documents as at quarter end. (Return to first footnote 1 referrer) Footnote 2 Total available for use does not reflect measures announced in Budget 2012. (Return to footnote 2 referrer) Footnote 3 Non-salary expenditures for the Ontario Federal Council are refunded at the end of each fiscal year through levies charged to other government departments. Therefore, all Ontario Federal Council-related non-salary expenditures are excluded from the financial statements. (Return to footnote 3 referrer) Footnote 4 Pursuant to s. 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, $337,500 is deemed to have been appropriated to Shared Services Canada's operating vote, which results in a reduction for the same amount in FedDev Ontario's vote 50, Appropriation Act No. 1, 2011-2012. (Return to footnote 4 referrer) Footnote 5 Excludes an amount of $113 thousand incurred on behalf of Shared Services Canada from the date of transfer of November 15 to December 31, 2011. (Return to footnote 5 referrer)
Vote 50—Net Operating Expenditures	27,171	7,324	18,011	29,122	7,929	17,692
Vote 55—Grants and Contributions	231,948	20,384	50,868	244,567	21,644	51,967
Budgetary statutory authorities:
Employee benefit plans	3,289	823	2,467	3,113	778	2,335
Grants and contributions	-	-	-	-	-	-
Other	-	-	-	-	-	-
Total Budgetary authorities	262,408	28,531	71,346	276,802	30,351	71,994
Non-budgetary authorities	-	-	-	-	-	-
Total authorities Footnote 3	262,408	28,531	71,346	276,802	30,351	71,994

Table 1: Departmental budgetary expenditures by Standard Object (unaudited)

(in thousands of dollars)	Fiscal Year 2012-13			Fiscal Year 2011-12
	Planned expenditures for the year ending March 31, 2013 Footnote 6, Footnote 7	Used during the quarter ended December 31, 2012	Year to date used at quarter-end	Planned expenditures for the year ending March 31, 2012 Footnote 6, Footnote 10	Used during the quarter ended December 31, 2011 Footnote 11	Year to date used at quarter-end
Footnotes Footnote 6 Includes approved estimates documents as at quarter end. (Return to first footnote 6 referrer) Footnote 7 Planned expenditures do not reflect measures announced in Budget 2012. (Return to footnote 7 referrer) Footnote 8 Includes employee benefit plan (EBP) expenses. (Return to footnote 8 referrer) Footnote 9 Non-salary expenditures for the Ontario Federal Council are refunded at the end of each fiscal year through levies charged to other government departments. Therefore, all Ontario Federal Council-related non-salary expenditures are excluded from the financial statements. (Return to footnote 9 referrer) Footnote 10 Pursuant to s. 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, $337,500 is deemed to have been appropriated to Shared Services Canada's operating vote, which results in a reduction for the same amount in FedDev Ontario's vote 50, Appropriation Act No. 1, 2011-2012. (Return to footnote 10 referrer) Footnote 11 Excludes an amount of $113 thousand incurred on behalf of Shared Services Canada from the date of transfer of November 15 to December 31, 2011. (Return to footnote 11 referrer)
Expenditures:
Personnel Footnote 8	21,975	5,247	15,735	23,236	5,915	15,301
Transportation and communications	1,150	310	783	1,317	484	977
Information	290	76	148	193	59	102
Professional and special services	5,293	745	1,698	6,400	2,070	3,356
Rentals	396	18	228	181	70	96
Repair and maintenance	49	1,636	1,646	188	29	40
Utilities, materials and supplies	121	29	70	186	57	114
Acquisition of land, buildings, and works	-	-	-	-	-	-
Acquisition of machinery and equipment	314	101	180	332	22	38
Transfer payments	231,948	20,384	50,868	244,567	21,644	51,967
Other subsidies and payments	872	(15)	(10)	202	1	3
Total budgetary expenditures Footnote 9	262,408	28,531	71,346	276,802	30,351	71,994

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