Office of Infrastructure of Canada
Quarterly Financial Report for the quarter ended September 30, 2018

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

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 Budget 2018.

The key to building Canada for the 21^st century is a strategic and collaborative long-term infrastructure plan that builds economically vibrant, strategically planned, sustainable and inclusive communities. Infrastructure Canada (INFC) works closely with all orders of government and other partners to enable investments in social, green, public transit and other core public infrastructure, as well as trade and transportation infrastructure.

Further information on INFC's mandate, responsibilities, and programs can be found in INFC's 2018-19 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 INFC's spending authorities granted by Parliament and those used by INFC consistent with the Main Estimates and Supplementary Estimates for the 2018-19 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 monies 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.

INFC 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.

In the past, INFC has worked in collaboration with other federal departments and agencies to deliver some of its transfer payment programs (collectively known as federal delivery partners).

During the second quarter of 2018-19, the only federal delivery partner for certain sunsetting programs was Transport Canada.

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 Results

This section highlights the significant items that contributed to the change in resources available for use from 2017-18 to 2018-19 and in actual expenditures as of September 30, 2017 and September 30, 2018.

Authorities

Graph 1: Comparison of Authorities Available as of September 30, 2017 and September 30, 2018.

Text description of Graph 1

As shown in the Statement of Authorities, INFC's total authorities available for 2018-19 are $6.160 billion as of the end of Quarter 2 (Q2) and represent a $881 million decrease compared to the same quarter in the prior year. This decrease is summarized in the table below:

Table 1: Year-to-date change in total authorities as of September 30, 2018

Authorities	Increase/(Decrease) vs. Prior Year-to-date (000's)	% Change vs. prior year
Operating Expenditures	(29,056)	(21.9%)
Capital Expenditures	218,756	39.9%
Contributions (Voted and Statutory)	(1,072,796)	(16.9%)
Contributions to Employee Benefit Plans	1,676	27.4%

The sources of significant year-over-year changes are summarized as follows:

• Operating Expenditures – the decrease is a result of lower authority levels in 2018-2019 related to contingencies for the New Champlain Bridge Corridor project.
• Capital Expenditures – the increase is related to the New Champlain Bridge Corridor project to cover a larger milestone payment in fiscal year 2018-2019 ($700 million).
• Contributions (Voted and Statutory) – contribution funding has decreased as INFC moved funding to the years in which it expects to make payments. This new funding profile was announced as part of Budget 2018.
• Contributions to Employee Benefit Plans – the increase in number of employees is a result of new programs such as the Disaster Mitigation and Adaptation Fund and the Investing in Canada Infrastructure Program.

Expenditure Analysis

Expenditures at the end of Q2 were $1.714 billion, compared to $1.330 billion reported in the same period of 2017-18, representing an increase of 28.9% between Q2 of the two years. The source of the relative increase is demonstrated in the tables, graphs and analysis below.

Graph 2: Comparison of Total Expenditures as of September 30, 2017 and September 30, 2018.

Text description of Graph 2

Table 2: Change in year-to-date expenditures as of September 30, 2018

Authority	Increase/(Decrease) vs. Prior Year-to-date (000's)	% Change vs. prior year
Operating Expenditures	6,933	20.3%
Capital Expenditures	55,846	980.0%
Contributions (Voted and Statutory)	320,131	24.9%
Contributions to Employee Benefit Plans	838	27.4%

The sources of significant year-over-year changes are summarized as follows:

• Operating and Capital Expenditures– details provided later in report, by standard object.
• Contributions (Voted and Statutory)– details by program below.
• Contributions to Employee Benefit Plans– increase in the number of employees.

Graph 3: Comparison of Authorities Used for Contributions as of September 30, 2017 and September 30, 2018.

Text description of Graph 3

Significant changes in year-to-date contribution expenditures between September 2017 and September 2018 were as follows:

Table 3: Change in year-to-date expenditures by contribution program as of September 30, 2018

Program Fund	Increase/(Decrease) vs. Prior Year-to-date (000's)	% Change vs. prior year
New Building Canada Fund-Provincial-Territorial Infrastructure Component-National and Regional Projects (NBCF-PTIC-NRP)	89,780	245.3%
Clean Water Wastewater Fund (CWWF)	87,217	454.4%
Public Transit Infrastructure Fund (PTIF)	79,237	3,676.4%
Green Infrastructure Fund (GIF)	21,598	347.4%
P3 Canada Fund (P3CF)*	13,473	N/A
Capacity Building for Climate Change Challenges Fund (CBCCCF)	12,140	130.2%
Asset Management Fund (AMF)	11,841	204.4%
Building Canada Fund-Communities Component (BCF-CC)*	11,124	N/A
Net change in expenditures of other contributions programs not specifically listed above	(6,279)	-

* No expenditures were made as of Q2 2017-18

The sources of significant year-over-year changes are summarized as follows:

• NBCF-PTIC-NRP – the increase relates to a relative increase in claims as more projects are approved and claims are received.
• CWWF and PTIF – as projects within these programs progress, there is an increase in claims submitted for payments compared to Q2 of last year.
• GIF – two of the projects have started to submit claims in 2018-2019 and another two projects are in the final years, therefore there are more claim payments in the current fiscal compared to last year at Q2.
• P3CF – reflects milestone payments on projects following the dissolution of PPP Canada in March 2018.
• CBCCCF and AMF – payments are made based on a detailed schedule in the contribution agreement; payments are expected to be higher in 2018-2019 than 2017-202018.
• BCF-CC – Quebec is the only remaining province that has projects under this program and has started submitting claims for this fiscal year by Q2.

Departmental Budgetary Expenditures by Standard Object

The planned Departmental Budgetary Expenditures by Standard Object are set out in the table at the end of this report. Aggregate year-to-date expenditures in 2018-19 increased by $383.7 million, compared with the same quarter last year. The largest single factor was an increase in transfer payments as explained above.

A breakdown of variances in year-to-date spending by standard object is below:

Table 4: Change in year-to-date expenditures by standard object as of September 30, 2018

Changes to Expenditures by Standard Object	Increase/(Decrease) vs. Prior Year-to-date (000's)	% Change vs. prior year
Transfer payments	320,131	24.9%
Acquisition of land, buildings and works	56,483	29,572.3%
Personnel	3,923	17.7%
Professional and special services	2,975	16.4%
Other subsidies and payments	282	282.0%
Transportation and communications	157	44.2%
Information	76	38.4%
Acquisition of machinery and equipment	47	213.6%
Utilities, materials and supplies	2	5.1%
Repair and maintenance	(28)	(3.3)%
Rentals	(301)	(37.8)%

The sources of significant year-over-year changes are summarized as follows:

• Transfer payments – details were previously discussed.
• Acquisition of land, buildings and works – increase is due to payments made to Signature on the St. Lawrence Group as part of additional construction measures.
• Personnel – increase in number of employees.
• Professional and special services – increase is primarily due to a timing difference in the payment of professional services related to a multi-year service agreement with Shared Services Canada (previous year's payment was done in Q4).
• Other subsidies and payments – increase is primarily due to a $250,000 payment made to Namgis First Nation as per the loan agreement inherited from PPP Canada Inc. upon its dissolution.
• Rentals – decrease is mainly due to reduced office rental charges from Public Services and Procurement Canada.

Overall, INFC has spent 27.8% of its current Total Authorities as of September 30, 2018, compared to 18.9% at the end of Q2 of the previous fiscal year.

Risks and Uncertainties

In most cases, INFC funds projects via a Contribution Agreement or Integrated Bilateral Agreement between Canada and a Provincial/Territorial (PT) government. PT governments then enter into their own agreements with municipalities, who are ultimately responsible for project management and construction of the infrastructure. 

Most of INFC's programs are structured in such a way that funding flows from the Department based on requests for reimbursements. It is important to note that federal spending is not an accurate measure of when the economic activity created by infrastructure spending occurs. When projects are approved, work begins and economic activity is generated by provinces, territories (PT) and municipalities, which are responsible for implementing projects and incurring costs. Infrastructure Canada makes the federal contribution only when requested by partners.

There are a variety of reasons that can affect the timing of requests for reimbursements, which can contribute to a variance between planned spending and actual spending. Some projects, once approved, move quickly into the construction phase while others have longer lead times for planning, and local approval processes (e.g. zoning and permitting). Regardless of how long planning takes or how soon ground can break, eligible costs can be submitted for reimbursement throughout the life of the project.

INFC encourages PTs to submit claims in a timely manner to ensure the flow of funding as planned. Parliamentary authority to spend typically expires at the end of the fiscal year; however, in response to the needs of its project partners, INFC reprofiles its authorities as needed so that the funding committed to specific projects continues to be available in future years when needed.

Over the last two and a half years the Department has been in a state of transformation. The introduction of new programs and responsibilities has resulted in structural changes to better support the delivery of new business lines, as well as required the department to move to more specialized skills and experience necessary for key positions. INFC is working to ensure it attracts and retains employees with the skill sets and experience necessary to fulfil the department's evolving mandate.

Significant Changes in Relation to Operations, Personnel and Programs

• The appointment of Minister Champagne as Minister of Infrastructure and Communities on July 18, 2018;
• The creation and addition of:
• The Horizontal Results and Reporting, the Sectoral Policy, and the Data and Research divisions within the Policy Branch;
• The Investment, Partnerships and Innovation Branch, which includes activities related to the Toronto Waterfront Revitalization Initiative and the P3 Canada Fund;
• The re-organization and expansion of the Corporate Services Branch;
• The responsibility of implementing the following new programs:
• The Smart Cities Challenge; and
• The Disaster Mitigation and Adaptation Fund.

Infrastructure Canada continues to grow and evolve. Since last year, various changes have taken place within the department, including:

Approval by Senior Officials

Approved by:

Signed at Ottawa, Canada

Quarterly Financial Report
For the quarter ended September 30, 2018
Statement of Authorities (unaudited)
Fiscal year 2018-19

(in thousands of dollars)

	Total available for use for the year ending March 31, 2019	Used during the quarter ended September 30, 2018	Year to date used at quarter-end
Vote 1 – Operating expenditures	103,361	24,987	41,022
Vote 5 – Capital expenditures	766,979	46,205	61,545
Vote 10 – Contributions	3,111,504	317,281	522,035
Budgetary Statutory Authorities	N/A	N/A	N/A
(S) – Contributions to employee benefit plans	7,782	1,946	3,891
(S) – Gas Tax Fund	2,170,596	1,085,298	1,085,298
(S) – Minister salary and car allowance	86	21	43
Total Budgetary authorities	6,160,309	1,475,738	1,713,833
Non-budgetary authorities	-	-	-
Total authorities	6,160,309	1,475,738	1,713,833

Statement of Authorities (unaudited) (continued)
Fiscal year 2017-18

(in thousands of dollars)

	Total available for use for the year ending March 31, 2018	Used during the quarter ended September 30, 2017	Year to date used at quarter-end
Vote 1 – Operating expenditures	132,419	24,366	34,088
Vote 5 – Capital expenditures	548,223	3,893	5,698
Vote 10 – Contributions	4,282,963	171,909	251,236
Budgetary Statutory Authorities	N/A	N/A	N/A
(S) – Contributions to employee benefit plans	6,106	1,527	3,053
(S) – Gas Tax Fund	2,071,933	1,035,966	1,035,966
(S) – Minister salary and car allowance	84	21	42
Total Budgetary authorities	7,041,730	1,237,682	1,330,084
Non-budgetary authorities	-	-	-
Total authorities	7,041,730	1,237,682	1,330,084

Quarterly Financial Report
For the quarter ended September 30, 2018
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2018-19

(in thousands of dollars)

	Planned expenditures for the year ending March 31, 2019	Expended during the quarter ended September 30, 2018	Year to date used at quarter-end
Expenditures:
Personnel	59,067	14,230	26,152
Transportation and communications	1,463	237	512
Information	758	141	274
Professional and special services	102,327	15,589	21,088
Rentals	3,557	229	496
Repair and maintenance	7,834	482	808
Utilities, materials and supplies	269	23	44
Acquisition of land, buildings and works	700,000	41,933	56,674
Acquisition of machinery and equipment	2,935	39	69
Transfer payments	5,282,100	1,402,579	1,607,333
Public debt charges	-	-	-
Other subsidies and payments	-	256	382
Total net budgetary expenditures	6,160,309	1,475,738	1,713,833

Departmental budgetary expenditures by Standard Object (unaudited)(continued)
Fiscal year 2017-18

(in thousands of dollars)

	Planned expenditures for the year ending March 31, 2018	Expended during the quarter ended September 30, 2017	Year to date used at quarter-end
Expenditures:
Personnel	45,278	12,824	22,229
Transportation and communications	1,165	181	355
Information	558	72	198
Professional and special services	603,918	15,188	18,113
Rentals	3,514	740	797
Repair and maintenance	2,005	518	836
Utilities, materials and supplies	404	24	42
Acquisition of land, buildings and works	-	191	191
Acquisition of machinery and equipment	2,575	16	22
Transfer payments	6,382,146	1,207,875	1,287,202
Public debt charges	-	-	-
Other subsidies and payments	167	53	100
Total net budgetary expenditures	7,041,730	1,237,682	1,330,084