Quarterly Financial Report
For the quarter ended June 30, 2012
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 as well as Canada's Economic Action Plan 2012 (Budget 2012).

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 2012-13 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 Infrastructure Canada consistent with the Main Estimates for the 2012-13 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.

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.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new FY. 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 the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

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

This section highlights the significant items that contributed to the change in resources available for use from FY 2011-12 to FY 2012-13 and in actual expenditures from the first quarter ended June 30, 2011 to the first quarter ended June 30, 2012.

During FY 2011-12, management was reviewing various options to transition from its focus on delivering the Economic Action Plan (EAP) to a returned focus on core longer-term programming including the Building Canada Plan and other sunsetting programs. The Department will also continue to deliver $2B annually through the permanent Gas Tax Fund. While continuing to implement these programs with sound management and accountability, in FY 2012-13 Infrastructure Canada is working with provinces, territories, the Federation of Canadian Municipalities, and other stakeholders to develop a long-term plan for public infrastructure that extends beyond the expiry of the Building Canada Plan in 2014.

Significant Changes on the Statement of Authorities table

As can be seen in Figure 1, in the current year, Infrastructure Canada has $5.1B in Total Authorities at Quarter 1 (Q1), compared to $4.9B at Q1 in the prior year, representing a total increase of approximately 4.6%, or $224M. This increase can be explained primarily by a net increase of $219M to Contributions' authorities (Vote 45), which included the following adjustments:

• A net increase of $611.5M based on a projected cash flow increase in the Building Canada Fund (including a reduction of $4.5M in Strategic Review savings);
• A net increase of $49.1M for the Municipal Rural Infrastructure Fund;
• A net increase of $31.7M for the Canada Strategic Infrastructure Fund;
• A net decrease of $349M for the Green Infrastructure Fund;
• A net decrease of $114M for the Provincial-Territorial Infrastructure Base Fund; and
• A net decrease of $9.9M for the Border Infrastructure Fund.

Although there is a net increase of $4.9M (8.9%) in Operating authorities (Vote 40) in Q1 of 2012-13, Infrastructure Canada will likely show an overall decrease in Operating authorities on a full-year basis (i.e. including Supplementary Estimates), in line with the end of the EAP programs.

The Department has used 22.4% of its Total Authorities in the current FY, compared to 19.5% at the same point in the prior FY. This change is mostly related to an increase in the use of Contributions' authorities (increase of $196K) partially offset by a decrease in the use of Operating authorities (decrease of $1.2M).

Significant Changes to the Departmental budgetary expenditures by Standard Object table

There are significant variances between several of the FY 2012-13 and FY 2011-12 'Planned expenditures by standard object' within the Operating vote:

• Personnel ($202K increase);
• Transportation and communication ($231K increase);
• Information ($5.2M decrease);
• Professional and special services ($1.7M increase);
• Rentals ($1.5M increase);
• Repair and maintenance ($140K decrease);
• Utilities, materials, and supplies ($33K decrease);
• Acquisition of machinery and equipment ($2.0M decrease); and
• Other subsidies and payments ($8.6M increase).

'Planned expenditures by standard object' for FY 2012-13 were based on historical averages. In the future, these will be adjusted to remove anomalies or changes in program costs.

Although 'Planned expenditures' for Rentals in the current FY have increased by 76% over the prior FY, the amount expended during Q1 has increased by only 24%. This is due to the timing of payments for accommodations and will be aligned by the end of the FY.

There are some standard objects where the 'Planned expenditures' have increased in FY 2012-13, but the amounts expended during Q1 have actually decreased when compared to the prior year:

• Personnel: during the prior FY, Infrastructure Canada was closing out its programs under the EAP and had more temporary employees on strength than is expected in the current FY. The expenditures for Personnel in Q1 of the current FY are slightly higher (26%) than one-quarter of the 'Planned expenditures,' but the full-year expenditures are expected to fall within the planned amount.
• Transportation and communications and Professional and special services: during Q1, the amounts expended in these standard objects were lower than the prior FY due largely to cost-saving measures implemented within the department. In addition, the creation of Shared Services Canada (SSC) had an impact on the amounts expended in these standard objects because SSC now incurs telecommunications costs and information technology special services costs on behalf of Infrastructure Canada.

Risks and Uncertainties

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.

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 and that re-profiling of unused funds may not occur.

To respond to this risk, Infrastructure Canada is sharing appropriate tools, best practices, and checklists with Federal Delivery Partners to expedite claims processing. The department is also planning to incorporate a new clause into its contribution agreements, linking the requirement of Treasury Board approvals for re-profiling funds that have not been spent..

Significant Changes in Relation to Operations, Personnel and Programs

Shared Services Canada is now providing IT infrastructure services to the department, in accordance with their mandate to streamline and reduce duplication in the government's IT services.

Budget 2012 Implementation

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

Among the items outlined in Budget 2012 are measures under the deficit reduction action plan. While Infrastructure Canada was not one of the organizations formally part of this exercise, the department continues to take steps to carefully and thoughtfully exercise budgetary restraint in the years to come.

Budget 2012 reaffirmed the government's commitment to the development of the Long-term Infrastructure Plan, and this remains the department's top priority. Infrastructure Canada is working closely with its key stakeholders to take stock of previous accomplishments from infrastructure investments, look at lessons learned, and identify best practices. Budget 2012 did not provide any incremental funding to the department to deliver the Long-term Infrastructure Plan.

Approval by Senior Officials

Approved by:

Signed in Ottawa, Ontario, August 29, 2012

Quarterly Financial Report
For the quarter ended June 30, 2012
Statement of Authorities (unaudited)
Fiscal year 2012-2013

(in thousands of dollars)

	Total available for use for the year ending March 31, 2013 * note 1	Used during the quarter ended June 30, 2012	Year-to-date used at quarter-end
Vote 40 - Operating expenditures	55,006	9,653	9,653
Vote 45- Contributions	5,045,585	1,133,751	1,133,751
Budgetary Statutory Authorities
(S) - Contributions to employee benefit plans	4,973	1,243	1,243
(S) - Infrastructure Stimulus Fund	-	-	-
(S) - Provincial-Territorial Base Funding Program	-	-	-
(S) - Building Canada Fund Communities Component Top-Up	-	-	-
(S) - Green Infrastructure Fund	-	-	-
Total Budgetary authorities	5,105,563	1,144,647	1,144,647
Non-budgetary authorities
Total authorities	5,105,563	1,144,647	1,144,647

Statement of Authorities (unaudited) (continued)
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 June 30, 2011	Year to date used at quarter-end
Vote 40 - Operating expenditures	50,031	10,842	10,842
Vote 45- Contributions	4,693,333	937,189	937,189
Budgetary statutory authorities
(S) - Contributions to employee benefit programs	5,038	1,260	1,260
(S) - Infrastructure Stimulus Fund	-	-	-
(S) - Provincial - Territorial Infrastructure Base Funding Program	62,652	-	-
(S) - Building Canada Fund Communities Component Top-Up	-	-	-
(S) - Green Infrastructure Fund	70,118	267	267
Total Budgetary authorities	4,881,172	949,558	949,558
Non-budgetary authorities
Total authorities	4,881,172	949,558	949,558

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

Quarterly Financial Report
For the quarter ended June 30, 2012
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2012-2013

(in thousands of dollars)

	Planned expenditures for the year ending March 31, 2013	Expended during the quarter ended June 30, 2012	Year-to-date used at quarter-end
Expenditures:
Personnel	33,229	8,641	8,641
Transportation and communications	837	82	82
Information	657	64	64
Professional and special services	12,075	1,094	1,094
Rentals	3,388	998	998
Repair and maintenance	180	-	-
Utilities, materials and supplies	135	12	12
Acquisition of land, buildings and works	-	-	-
Acquisition of machinery and equipment	835	2	2
Transfer payments	5,045,585	1,133,751	1,133,751
Other subsidies and payments	8,642	3	3
Total net budgetary expenditures	5,105,563	1,144,647	1,144,647

Departmental budgetary expenditures by Standard Object (unaudited) (continued)
Fiscal year 2011-2012

(in thousands of dollars)

	Planned expenditures for the year ending March 31, 2012	Expended during the quarter ended June 30, 2011	Year to date used at quarter-end
Expenditures:
Personnel	33,027	9,202	9,202
Transportation and communications	606	186	186
Information	5,816	73	73
Professional and special services	10,389	1,792	1,792
Rentals	1,920	802	802
Repair and maintenance	320	16	16
Utilities, materials and supplies	168	16	16
Acquisition of land, buildings and works	-	-	-
Acquisition of machinery and equipment	2,798	12	12
Transfer payments	4,826,103	937,457	937,457
Other subsidies and payments	25	2	2
Total net budgetary expenditures	4,881,172	949,558	949,558