Quarterly Financial Report
For the quarter ended December 31, 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, Supplementary Estimates, previous Quarterly Financial Reports for 2012-13, 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 Authorities Available for Use from FY 2011-12 to FY 2012-13 and in actual expenditures from the quarter ended December 31, 2011 to the quarter ended December 31, 2012.

In FY 2012-13 Infrastructure Canada is working with provinces, territories, the Federation of Canadian Municipalities, and other stakeholders to advance a future long-term plan for public infrastructure that extends beyond the expiry of the Building Canada Plan.  During FY 2011-12, management transitioned from a focus on delivering the Economic Action Plan (EAP) to a focus on core longer-term programming including the permanent Gas Tax Fund and the Building Canada Plan.

Figure 1: Expenditures Compared to Annual Authorities (as at December 31^st, 2012)

Significant Changes on the Statement of Authorities table

As can be seen in Figure 1, in the current year, Infrastructure Canada has $5.3B in Total Authorities Available for Use at Quarter 3 (Q3), compared to $6.1B at Q3 in the prior year, representing a total decrease of approximately $744M. This decrease can be explained primarily by a decrease of $736M to Contributions Authorities (Vote 45 and Statutory Contributions Authorities) Available for Use, as detailed in the Infrastructure Canada Infrastructure Canada 2012-13 Main Estimates, 2012-13 Supplementary Estimates 'B' and Infrastructure Canada's previous Quarterly Financial Reports for FY 2012-13.

There is also a decrease of $8.5M in Operating Authorities (Vote 40) Available for Use in Q3 of FY 2012-13 when compared to Q3 of FY 2011-12. In addition to a $4.3M transfer to Shared Services Canada (SSC) during Q3, the Department forecasted a lower requirement for Operating Authorities for FY 2012-13, in line with the conclusion of the EAP programs.

As at Q3, the Department has used 48.9% ($2.6B) of its Total Authorities Available for Use in the current FY, compared to 51.8% ($3.1B) at the same point in the prior FY. This change is mainly related to a 2.8% decrease in the use of Contributions Authorities Available for Use in the current FY.

This decrease can be partly attributed to the completion of programs under the EAP including:

• Building Canada Fund – Communities Component Top-Up ($95.7M was spent by Q3 of FY 2011-12. The 'Top-Up' portion of this program is now complete so no expenses will be incurred in FY 2012-13)
• Infrastructure Stimulus Fund ($139M was spent by Q3 of FY 2011-12. This program is now complete so no expenses will be incurred in FY 2012-13)
• Provincial/Territorial Base Infrastructure Program – Accelerated ($40.6M was spent by Q3 of FY 2011-12. The 'Accelerated' portion of this program is now complete so no expenses will be incurred in FY 2012-13)

The year-to-year variance in use of the Department's Contributions Authorities Available for Use is also due to the following variances:

• A decrease of $125M in expenditures under the Gas Tax Fund can be explained primarily by the fact that during FY 2011-12, additional payments were made to a province because of the late acceptance of the province's FY 2010-11 Annual Expenditure Report.
• A decrease of $124M in expenditures under the Building Canada Fund – Major Infrastructure Fund is due to the implementation of a new forecasting methodology by the Department and by its Federal Delivery Partners (FDPs), resulting in the Department advancing less funds to the FDPs than the prior FY.
• A cumulative decrease of $94M in expenditures under sunsetting programs (Canada Strategic Infrastructure Fund, Municipal Rural Infrastructure Fund, and the Border Infrastructure Fund) is also due to the new forecasting methodology and the Department advancing less funds to FDPs than the prior FY.

Year-to-Date Expenditures under the Green Infrastructure Fund (GIF) totaled $4.9M in FY 2012-13 and these expenditures are reflected in the Department's Contributions Authorities and in the Department's Statutory Authority for GIF. This represents 3.1% of the Total Authorities Available for GIF ($156M). As of Q3 in FY 2011-12, the Year-to-Date Expenditures under this program were $9.5M. As with all major infrastructure projects, projects funded under the GIF take time to plan, design and implement. The payment of federal contributions under the program is made based on claims submitted by project recipients in respect of costs once they have actually been incurred. As a result, expenditures under the program relate to the pace of actual project development and construction and responds to the cash-flow requirements of individual recipients in respect of their projects.

The Department's Use of Operating Authorities as at Q3 has also decreased in the current FY (57.8% used/$31.1M), compared to the same point in the prior FY (63.3% used/$39M). This decrease is mainly due to cost-saving measures implemented in the department as well as a reduction in expenditures related to SSC which is now incurring expenses that Infrastructure Canada incurred in the prior FY. These decreases are described further in the following section.

Significant Changes to the Departmental budgetary expenditures by Standard Object table

There are significant variances between several of the FY 2011-12 and FY 2012-13 Planned Expenditures by Standard Object. Planned Expenditures by Standard Object for FY 2012-13 were based on historical spending. In the future, these will be adjusted to consider spending trends and to remove anomalies or changes in program costs.

When comparing the amounts expended as at Q3 in FY 2012-13 to Q3 in FY 2011-12, there are significant variances in the following standard objects:

• Personnel ($1.7M decrease);
• Transportation and communication ($243K decrease);
• Information ($36K decrease)
• Professional and special services ($6.4M decrease);
• Rentals ($885K increase);
• Repair and maintenance ($445K decrease);
• Utilities, materials, and supplies ($24K decrease);
• Acquisition of machinery and equipment ($254K decrease);
• Transfer payments ($528M decrease); and
• Other subsidies and payments ($172K decrease).

The decrease of $528M in Transfer payments is described in the Significant Changes on the Statement of Authorities table section of this report.

Despite the decrease of $1.7M from last year in the year-to-date amount expended on Personnel, the Department has used 78% of its FY 2012-13 planned amount on Personnel at three-quarters through the FY. Full-year expenditures on Personnel are expected to be within the planned amount.

Most of the decreases in amounts expended by standard object relate to cost-saving measures implemented by the Department and to the creation of SSC.

Cost-saving measures affected the decrease in Professional and special services, as the Department has reduced its spending on information technology (IT) consultants (reduction of $5.1M) and training (reduction of $354K). Transportation and communication spending has decreased, as a result of the Department reducing spending on travel (reduction of $37K) and telecommunications services (reduction of $201K). Information spending has also decreased, as the Department reduced its spending on publishing (reduction of $22K) and other communications professional services.

The creation of SSC also had an impact on the amounts expended on Professional and special services (reduction of $309K), Transportation and communication (reduction of $51K), and Acquisition of machinery and equipment (reduction of $212K). SSC now incurs telecommunications costs and other IT costs on behalf of Infrastructure Canada, which affected these standard objects.

The decreases noted above were offset by an increase of $885K in the Year-to-Date amount expended under Rentals. This increase is mainly caused by an adjustment to the Government-wide financial coding for IT software maintenance. In FY 2011-12, IT software maintenance was coded to Repair and Maintenance, but in the current FY, these costs are coded to Rentals.

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 continuously with its partners to ensure that contribution 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, resulting in lapses of funds. It should be noted that while Infrastructure Canada's Total Authorities at Q3 were $5.3B, the Department is forecasting expenditures of $4.2B for FY 2012-13. Therefore, the Department is expecting to lapse approximately $1.1B, which it will seek to reprofile to future years to match the cash flow requirements of its partners. Funding lapses can occur for a number of reasons: for example, the Department's partners may encounter delays in getting their projects underway or built, or may be late in submitting claims to the federal government for work that has already been completed.

To respond to this risk, Infrastructure Canada has raised the issue with provincial/territorial ministers and deputy ministers, and the Department'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.

Despite these efforts, funding lapses under contribution programs will never be eliminated due to the complex nature of infrastructure projects. The realities of construction projects include challenges like the time it takes to plan and implement infrastructure projects, severe weather, and shortages or delays in the receipt of professional services or materials.

Significant Changes in Relation to Operations, Personnel and Programs

Louis Lévesque was appointed Deputy Minister of Transport, Infrastructure and Communities on November 12, 2012.

SSC is providing IT infrastructure services to the Department, in accordance with their mandate to streamline and reduce duplication in the government's IT services. A transfer of $4.3M of the Department's operating authorities was made to SSC through Supplementary Estimates 'B'.

Budget 2012 Implementation

Measures announced in Budget 2012 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.

Infrastructure Canada continues to take steps to carefully and thoughtfully exercise budgetary restraint.

Approval by Senior Officials

Approved by:

Signed in Ottawa, Canada, March 1, 2013

Quarterly Financial Report
For the quarter ended December 31, 2012
Statement of Authorities (unaudited)
Fiscal year 2012-2013
(in thousands of dollars)

	Total available for use for the year ending March 31, 20131	Used during the quarter ended December 31, 2012	Year-to-date used at quarter-end
Vote 40 - Operating expenditures	53,861	10,940	31,111
Vote 45 - Contributions	5,153,951	1,062,716	2,560,588
Budgetary Statutory Authorities
(S) - Contributions to employee benefit plans	4,973	1,243	3,730
(S) - Infrastructure Stimulus Fund	-	-	-
(S) - Provincial-Territorial Infrastructure Base Funding Program	-	-	-
(S) - Green Infrastructure Fund	99,418	2,607	3,419
Total Budgetary Authorities	5,312,203	1,077,506	2,598,848
Non-budgetary Authorities	-	-	-
Total Authorities	5,312,203	1,077,506	2,598,848

Statement of Authorities (unaudited) (continued)
Fiscal year 2011-2012
(in thousands of dollars)

	Total available for use for the year ending2 March 31, 20121	Used during the quarter ended December 31, 20113	Year to date used at quarter-end3
Vote 40 - Operating expenditures	62,350	14,180	39,472
Vote 45 - Contributions	5,674,454	958,129	3,042,063
Budgetary Statutory Authorities
(S) - Contributions to employee benefit programs	5,038	1,260	3,779
(S) - Infrastructure Stimulus Fund	92,042	-	-
(S) - Provincial-Territorial Infrastructure Base Funding Program	157,508	20,600	40,600
(S) - Green Infrastructure Fund	65,135	9,109	9,550
Total Budgetary Authorities	6,056,527	1,003,278	3,135,464
Non-budgetary Authorities	-	-	-
Total Authorities	6,056,527	1,003,278	3,135,464

^[1]Includes only Authorities available for use and granted by Parliament at quarter-end.

^[2]Pursuant to section 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, $1,600,155 is deemed to have been appropriated to Shared Services Canada Operating Expenditures' vote, which results in a reduction for the same amount in Infrastructure Canada, Vote 50, Appropriation Act No. 1 2011-2012.

^[3]Excludes an amount of $533,385 incurred on behalf of Shared Services Canada from the date of transfer of November 15 to December 31, 2011.

Quarterly Financial Report
For the quarter ended December 31, 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 December 31, 2012	Year-to-date used at quarter-end
Expenditures:
Personnel	33,510	8,818	26,121
Transportation and communications	533	113	377
Information	687	54	202
Professional and special services	10,443	1,765	4,651
Rentals	3,746	1,384	3,311
Repair and maintenance	254	-	2
Utilities, materials and supplies	145	20	48
Acquisition of land, buildings and works	-	-	-
Acquisition of machinery and equipment	873	33	42
Transfer payments	5,253,370	1,065,324	2,564,007
Other subsidies and payments	8,644	-4	87
Total net budgetary expenditures	5,312,203	1,077,507	2,598,484

Departmental budgetary expenditures by Standard Object (unaudited) (continued)
Fiscal year 2011-2012
(in thousands of dollars)

	Planned expenditures for the year ending March 31, 20124	Expended during the quarter ended December 31, 20115	Year to date used at quarter-end5
Expenditures:
Personnel	35,006	9,748	27,834
Transportation and communications	2,261	137	620
Information	5,999	88	238
Professional and special services	15,982	4,161	11,059
Rentals	2,383	815	2,426
Repair and maintenance	397	409	447
Utilities, materials and supplies	437	17	72
Acquisition of land, buildings and works	-	-	-
Acquisition of machinery and equipment	2,798	59	296
Transfer payments	5,989,139	987,838	3,092,213
Other subsidies and payments	2,125	6	259
Total net budgetary expenditures	6,056,527	1,003,278	3,135,464

^[4]Pursuant to section 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, $1,600,155 is deemed to have been appropriated to Shared Services Canada Operating Expenditures' vote, which results in a reduction for the same amount in Infrastructure Canada, Vote 50, Appropriation Act No. 1 2011-2012.

^[5]Excludes an amount of $533,385 incurred on behalf of Shared Services Canada from the date of transfer of November 15 to December 31, 2011.