ARCHIVED - Quarterly Financial Report - Quarter ending September 30, 2011

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

A)   Introduction

The Government of Canada uses financial information to support decision making, for policy development, for service delivery and for historical reference.  These financial statements have been prepared to respond to these requirements.  These statements should be read in conjunction with the Main Estimates for fiscal year 2011-2012.  They have been prepared by management as required by section 65.1 of the Financial Administrative Act and in the form and manner prescribed by the Treasury Board.  Although these statements have not been subject to an external audit or review, NRC attests that they are an accurate and true reflection of the financial position as at September 30, 2011.

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

NRC Mandate

The National Research Council Canada (NRC) exists under the National Research Council Act and is a Departmental corporation named in Schedule II of the Financial Administration Act. The mission of NRC is to work with clients and partners to provide strategic research, scientific and technical services to develop and deploy solutions to meet Canada's current and future industrial and societal needs.

Under the National Research Council Act, NRC is responsible for:

• Undertaking, assisting or promoting scientific and industrial research in fields of importance to Canada;
• Providing vital scientific and technological services to the research and industrial communities;
• Investigating standards and methods of measurement;
• Working on the standardization and certification of scientific and technical apparatus and instruments and materials used or usable by Canadian industry;
• Operating and administering any astronomical observatories established or maintained by the Government of Canada;
• Establishing, operating and maintaining a national science library; and
• Publishing and selling or otherwise distributing such scientific and technical information as the Council deems necessary.

To learn more about NRC’s legislative framework, visit the National Research Council Canada’s Web site.

This quarterly financial 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; and
• has not been subject to an external audit or review. 

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting.  The accompanying Statement of Authorities includes the Department’s spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates and Supplementary Estimates (as applicable) for the 2011-2012 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 for 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 authorities (pursuant to paragraph 5(1) (e) of the National Research Council Act, the NRC has authority to expend revenues it has received through the conduct of its operations).

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 fiscal year in which it is issued.

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

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

This section highlights the significant items which contributed to the changes to resources available for the year and actual expenditures for the quarter ended September 30, 2011 and fiscal year to date.

Authorities Analysis

Comparison of Budgetary Authorities and Expenditures as of September 30, 2010 and September 30, 2011 (in millions $)

There has been no change from the first quarter in the Budgetary Authorities. 

An analysis of the authorities used year-to-date during fiscal year 2011-12 reveals that there was a decline of approximately $61.6 million when compared to the same period in the previous fiscal year of which $42.6 million occurred in the second quarter.  The most significant changes are explained in the following areas:

• Operating authorities declined by $11.2 million year to date of which $4.1 was in the second quarter. The decline was due to the one time retroactive salary payments made last year, cost containment and the implementation of a new strategy. 
• Capital vote authorities declined by $6.1 million for the year to date of which $3.0 million was in this quarter.  This is primarily due to the implementation of a new Project Management Framework in support of the implementation of NRC’s Investment Plan.  This new framework has slightly delayed the flow of capital expenditures, as the processes are in their initial stages of implementation.
• The Grants & Contributions vote authorities used declined by $46.0 million year to date which includes a second quarter decline of $34.4 million.  This is directly attributable to the sun-setting of funds received under Canada’s Economic Action Plan (EAP) and from the Federal Development Agency for Southern Ontario (FedDev).  However, as a percentage of budget, the year to date spending has increased to 46% from 35% for last year and has remained comparable for the second quarter with 24% this year and 25% for last year.
• Revenue authorities declined by just $1.0 million for the year to date with $2.4 million decline in this quarter due to the timing of payments.
• Statutory EBP increased by $2.7 million year to date with a $1.3 million increase in the second quarter.  EBP expenditures are based on the estimated salary expenditures as listed in the Main Estimates and are adjusted at year end based on actual salary expended.  

Budgetary Expenditures by Standard Object

Total planned expenditures have decreased by approximately $61.6 million year to date with a decrease of approximately $42.6 million in the second quarter.  The key changes are in transfer payments and personnel standard objects.  The transfer payment decline ($46.0 million year to date and $34.4 million in the second quarter) is attributable to the sun-setting of funds received for EAP and FedDev.  During the second quarter of 2011-12, the NRC has continued to take budgetary measures to meet the Budget 2010 operating freeze.  In addition, NRC has taken the final reduction from the 2008 Strategic Review which included the 2010-11 severance payments resulting in lower year to date expenditures.  Therefore, personnel expenditures decreased by $8.7 million year to date with a $4.9 million decrease in the second quarter. 

C)   Risks and Uncertainties

The NRC is in the process of updating its corporate risk profile for fiscal year 2012-13 planning.  Based on consultations and analysis to date, certain factors have been recognized as driving its most significant risks. These factors include:

• Broader federal government directions and the impacts of decisions related to such initiatives as the Federal R&D Review, Deficit Reduction Action Plan (DRAP), and Shared Services Canada;
• The complexity, scope, and timeframe for changes being planned and implemented as NRC transitions to a program-based research and technology organization;
• The significant change arising from the implementation of the new financial management system compared to how NRC has operated in the past in relation to such aspects as basis of accounting, resource allocation and financial coding;
• The phased timing for completion of the definition of NRC programs – it is anticipated that up to approximately 40% will be defined by April 1, 2012; 70% by April 1, 2013, and 100% by April 1, 2014;
• Anticipated growing levels of industry involvement and partnerships in programs in light of ongoing uncertainties in the global economic situation in the immediate future.

The priority risks to be managed in the new fiscal year will be confirmed by the Senior Executive Committee in December 2011 and available in the next reporting period.

In the meantime, the NRC is continuing to address the issues raised from the previous corporate risk profile (focusing on outcomes and impacts; defining and managing change; and building leadership, engagement and highly qualified personnel) aided by its operational plan to transition to the new program-based structure. Risk management initiatives defined in the previous report are ongoing, and more recently included:

• Common Services Review to streamline and re-structure corporate services with consideration of requirements for the future organization (effective in the interim from August 31, 2011 until March 31, 2012);
• All managers’ meeting in July 2011 to update them on NRC’s revised research portfolio structure and changes to common services;
• Creation of a centralized hiring support function;
• Work in progress for the development of an employee engagement plan and internal communications plan;
• Needs assessment and scoping of training modules to support development of core business skills related to: project management; financial management; client service and change leadership.

D)    Significant changes in relation to operations, personnel and programs

The Government of Canada created a new organization, Shared Services Canada, to consolidate IT resources across 44 departments and agencies.  Shared Services Canada (SSC) was launched to transform Information Technology services across the federal government, and obtain better value for money through significant economies of scale.  Resources and personnel relating to email, data centres and networks along with associated internal services will be consolidated through Shared Services Canada.  During this past quarter the NRC has identified I.T. staff to be transferred to SSC and is working on identifying support and capital resources, equipment, and contracts to be assigned to SSC.    

As indicated in the June 2011 Quarterly Report, the NRC is in the process of implementing a new strategy.  NRC will be moving towards a program-based management model for all activities. Programs and projects will be managed collaboratively and horizontally across scientific disciplines.  The framework for this new strategy was approved in the second quarter.  NRC has now begun the second phase which involves defining the portfolios and programs.

Approved by:

John R. McDougall, P.Eng.
President
National Research Council Canada
Ottawa
Date: 24 November 2011

Michel Piché, M.P.A., CMA, CIA
Vice-President, Corporate Management, & Chief Financial Officer
National Research Council Canada
Ottawa
Date: 24 November 2011

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National Research Council Canada
Departmental Quarterly Financial Report
For the quarter ended September 30, 2011

Statement of Authorities (unaudited)
($000's)

	Fiscal Year 2011-2012			Fiscal Year 2010-2011
	Total available for use for the year ending March 31, 2012 *	Used during the quarter ended September 30, 2011	Year to date used at end of quarter	Total available for use for the year ending March 31, 2011*	Used during the quarter ended September 30, 2010	Year to date used at end of quarter
Vote 60 - Net Operating expenditures	387,340	100,520	195,346	413,532	104,631	206,547
Vote 65 - Capital expenditures	41,305	1,836	2,604	51,554	4,825	8,711
Vote 70 - Grants & contributions	139,650	34,409	64,911	290,854	68,809	110,902
Statutory revenue**	123,047	14,951	25,737	123,145	17,378	26,707
Statutory EBP	50,954	12,738	25,477	45,582	11,395	22,791
Total Budgetary authorities	742,296	164,454	314,075	924,666	207,038	375,657
Non-Budgetary authorities	–	–	–	–	–	–
Total Authorities	742,296	164,454	314,075	924,666	207,038	375,657

* Includes only Authorities available for use and granted by Parliament at quarter-end.

** Includes Statutory Revenue available for use pursuant to paragraph 5(1)(e) of the National Research Council Act.

Note: Totals may not add due to rounding.

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National Research Council Canada
Departmental Quarterly Financial Report
For the quarter ended September 30, 2011

Departmental budgetary expenditures by Standard Object (unaudited)
($000's)

	Fiscal Year 2011-2012			Fiscal Year 2010-2011
Expenditures:	Planned expenditures for the year ending	Expended during the quarter ended September 30, 2011	Year to date used at end of quarter	Planned expenditures for the year ending	Expended during the quarter ended September 30, 2010	Year to date used at end of quarter
Personnel	366,270	95,053	193,720	374,674	100,002	202,450
Transportation & communications	22,779	3,424	6,535	27,020	4,145	7,783
Information	3,018	404	665	4,236	398	923
Professional & special services	52,062	7,994	12,709	47,914	8,973	14,534
Rentals	4,276	994	1,687	4,080	895	1,644
Repair & maintenance	17,385	2,739	5,465	16,491	2,813	5,174
Utilities, materials & supplies	69,944	11,512	18,208	75,586	11,818	21,049
Acquisition of land, buildings & works	–	–	–	–	–	–
Acquisition of machinery & equipment	48,676	666	950	68,310	1,715	1,988
Transfer payments	139,650	34,409	64,911	290,854	68,809	110,902
Public debt charges	–	–	–	–	–	–
Other subsidies & payments	18,236	7,258	9,225	15,501	7,471	9,211
Total budgetary expenditures	742,296	164,454	314,075	924,666	207,038	375,657

Note: Totals may not add due to rounding.