Quarterly Financial Report
For the quarter ended September 30, 2011
Statement outlining results, risks and significant changes in operations, personnel and program

Introduction

This quarterly report 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. This quarterly report should be read in conjunction with the Main Estimates, Supplementary Estimates and the Quarterly Financial Report for the quarter ended June 30, 2011.

Infrastructure Canada's raison d'être is to lead the Government of Canada's efforts in addressing Canada's public infrastructure challenges. Strong, modern, world-class public infrastructure is a key factor in achieving the Government of Canada's priorities of a stronger economy, a cleaner environment and more prosperous, safer communities.

Further information on Infrastructure Canada's mandate, responsibilities, and programs can be found in the Infrastructure Canada 2011-12 Main Estimates.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the Infrastructure Canada spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates for the 2011-12 fiscal year (FY). 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.

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 FY in which it is issued.

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

It should be noted that this quarterly report has not been subject to an external audit or review.

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

During 2010-11, the second year of the Economic Action Plan implementation, Infrastructure Canada shifted primary efforts from reviewing and approving projects and committing funds, to focusing on oversight and delivery of project funding. In the current year (FY 2011-12), Infrastructure Canada had $4.9B in authorities at Quarter 2 (Q2), compared to $8.1B in Q2 in the prior year (FY 2010-11), representing a decrease of approximately 39.5%. The overall decrease can be explained primarily by the net decrease in the Main Estimates of $3.2B in contribution funds, due to the planned completion of programs related to Canada's Economic Action Plan. On December 2, 2010, the deadline for projects funded by the Infrastructure Stimulus Fund and the Building Canada Fund-Communities Component Top-Up, two of the programs under the Economic Action Plan, was extended from March 31, 2011 to October 31, 2011. Because of the timing of this announcement, it was not possible for funding to be included in the 2011-12 Main Estimates. As a result, the 2011-12 funding requirements for these two programs will be requested through the 2011-12 Supplementary Estimates (B) process, which should be approved in December and will have an impact on Q3.

As can be seen in Figure 1, the Department has spent 43.7% of its authorities in the current FY, compared to 26.9% at the same point in the prior FY. There is a slightly higher rate of transfer payments' spending occurring in the first half of the current FY, compared to last FY where the majority of transfer payments' spending occurred in the latter half of the year. This variance can be explained mainly by an increase in submitted and paid claims for projects completed under the Economic Action Plan which is set to end on October 31^st, 2011.

Risks and Uncertainties

This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates, for which full supply was released on June 27, 2011.

In Budget 2010 - Leading the Way on Jobs and Growth, the Minister of Finance announced that the operating budgets of departments, as appropriated by Parliament, would be frozen at their 2010-11 levels for the years 2011-12 and 2012-13. Infrastructure Canada has no ongoing base level of funding for administration and operating costs. Its operating requirements have always been funded entirely from infrastructure programs and related administrative costs are confirmed by Treasury Board on an annual basis.

Without ongoing operating funding, it is challenging to predict how a budget freeze will affect Infrastructure Canada's operations. Management is reviewing various options to transition from the current focus of delivering the Economic Action Plan to a returned focus on longer-term programming including the Building Canada Fund, the Gas Tax Fund.

The majority of Infrastructure Canada's transfer payments are expected to occur in the latter part of the FY, however there is always some uncertainty when forecasting cash requirements to Parliament. While the department works continually with its partners to ensure that forecasts are as accurate as possible, and to re-profile Infrastructure Canada's funding to meet the needs of its partners, there remains a risk that actual transfer payment expenses will be less than forecast.

Consequently, within Q2 of the current year, the unique spending profile for contribution programs (see Highlights of Fiscal Quarter) will indicate lower than half of Infrastructure Canada's contributions' authorities as being spent at halfway through the FY. The department commits funds upon project approval; however, federal funding does not actually flow to recipients until they have submitted claims for costs incurred. It is important to note that the department's cash flows almost always lag behind the actual rate of construction of the projects it funds. This is a key risk-management approach for the department, one that ensures that it only pays for work that has already been undertaken. In many cases, recipients choose to wait until completion of the project before submitting a claim. Upon receiving completed claims, the department pays within 30 days.

Infrastructure Canada is taking steps to minimize the size of future contribution funding lapses and improve its expenditure forecasting over the long-term. This issue has been raised with provincial/territorial Ministers and Deputy Ministers, and Infrastructure Canada's federal delivery partners. Particular emphasis is being placed on ensuring that:

• Forecasted expenditures submitted by partners better reflect the real cash flow needs of their infrastructure projects; and
• Claims are submitted as quickly as possible by partners for the costs they have incurred.

However, funding lapses are unlikely to be completely eliminated due to the complex nature of infrastructure projects. In particular, such projects can encounter legitimate delays that are related to environmental assessments, public consultations, shortages in materials and labour, weather, etc.

Significant Changes in Relation to Operations, Personnel and Programs

Infrastructure Canada's Assistant Deputy Minister Program Operations Branch left the Department in August, 2011. This position is currently being filled by an Acting incumbent. A staffing strategy is in place to have someone in the position by December 2011.

Infrastructure Canada's Assistant Deputy Minister Corporate Services Branch and Chief Financial Officer was staffed on an indeterminate basis in September, 2011.

There have been no significant changes in relation to operations and programs in Q2.

Approval by Senior Officials

Approved by:

Signed in Ottawa, Canada, November 30, 2011

 

Quarterly Financial Report
For the quarter ended September 30, 2011
Statement of Authorities (unaudited)
Fiscal year 2011-2012
(in thousands of dollars)

	Total available for use for the year ending March 31, 2012 * note 1	Used during the quarter ended September 30, 2011	Year to date used at quarter-end
Vote 50 - Operating expenditures	50,031	14,450	25,292
Vote 55- Contributions	4,693,333	1,146,745	2,083,934
Budgetary statutory authorities
(S) - Contributions to employee benefit programs	5,038	1,259	2,519
(S) - Infrastructure Stimulus Fund	0	-	-
(S) - Provincial - Territorial Infrastructure Base Funding Program	62,652	20,000	20,000
(S) - Building Canada Fund Communities Component Top-Up		-	-
(S) - Green Infrastructure Fund	70,118	174	441
Total Budgetary authorities	4,881,172	1,182,628	2,132,186
Non-budgetary authorities
Total authorities	4,881,172	1,182,628	2,132,186

Statement of Authorities (unaudited) (continued)
Fiscal year 2010-2011
(in thousands of dollars)

	Total available for use for the year ending March 31, 2011* note 1	Used during the quarter ended September 30, 2010	Year to date used at quarter-end
Vote 50 - Operating expenditures	56,132	16,353	26,135
Vote 55- Contributions	6,562,620	266,007	1,535,175
Budgetary statutory authorities
(S) - Contributions to employee benefit programs	5,156	1,289	2,578
(S) - Infrastructure Stimulus Fund	874,499	522,770	544,296
(S) - Provincial - Territorial Infrastructure Base Funding Program	240,000	17,000	27,350
(S) - Building Canada Fund Communities Component Top-Up	135,245	32,493	33,348
(S) - Green Infrastructure Fund	186,334	-	-
Total Budgetary authorities	8,059,986	855,912	2,168,882
Non-budgetary authorities
Total authorities	8,059,986	855,912	2,168,882

*Includes only Authorities approved for use by Parliament at quarter-end.

Quarterly Financial Report
For the quarter ended September 30, 2011
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2011-2012
(in thousands of dollars)

	Planned expenditures for the year ending** note 2 March 31, 2012	Expended during the quarter ended September 30, 2011	Year to date used at quarter-end
Expenditures:
Personnel	33,027	8,884	18,086
Transportation and communications	606	298	484
Information	5,816	77	150
Professional and special services	10,389	5,106	6,898
Rentals	1,920	809	1,611
Repair and maintenance	320	22	38
Utilities, materials and supplies	168	39	55
Acquisition of land, buildings and works	-	-	-
Acquisition of machinery and equipment	2,798	225	237
Transfer payments	4,826,103	1,166,917	2,104,374
Other subsidies and payments	25	251	253
Total gross budgetary expenditures	4,881,172	1,182,628	2,132,186
Total net budgetary expenditures	4,881,172	1,182,628	2,132,186

Departmental budgetary expenditures by Standard Object (unaudited) (continued)
Fiscal year 2010-2011
(in thousands of dollars)

	Planned expenditures for the year ending** note 2 March 31, 2011	Expended during the quarter ended September 30, 2010	Year to date used at quarter-end
Expenditures:
Personnel	35,488	9,159	17,237
Transportation and communications	3,500	230	319
Information	1,007	318	453
Professional and special services	15,366	3,689	5,577
Rentals	2,799	327	538
Repair and maintenance	500	1,810	1,812
Utilities, materials and supplies	542	54	67
Acquisition of land, buildings and works	-	-	-
Acquisition of machinery and equipment	2,085	1,865	2,514
Transfer payments	7,998,698	838,270	2,140,169
Other subsidies and payments	-	190	196
Total gross budgetary expenditures	8,059,985	855,912	2,168,882
Total net budgetary expenditures	8,059,985	855,912	2,168,882

**Includes only Authorities approved for use by Parliament at quarter-end.