This quarterly financial report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes ACOA’s spending authorities, the Operating Budget Carry Forward granted by Parliament, and authorities used by the Agency consistent with the Main Estimates for the 2012-2013 fiscal year. As part of the parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. 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 Budget 2012 could not be reflected in the 2012-2013 Main Estimates.
In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by the Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.
This quarterly financial report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the total authorities available for use.
Authorities available for use are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory authority for specific purposes. The authority of Parliament is required before moneys can be spent by the government.
When Parliament is dissolved for the purposes of a general election, Section 30 of the FAA 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.
As part of the departmental performance reporting process, the Agency prepares its annual departmental financial statements on a full accrual basis in accordance with Treasury Board accounting policies. However, the total authorities available for use voted by Parliament remain on an expenditure basis of accounting.
ACOA manages its expenditures under two votes:
- Vote 1 – Net operating expenditures includes the Agency’s authorities related to personnel costs (e.g. salaries) and operating and maintenance expenditures (e.g. travel).
- Vote 5 – Grants and contributions includes all authorities related to transfer payments.
ACOA also has portfolio responsibility for the Enterprise Cape Breton Corporation (ECBC), and as a result, Vote 10 – Payments to Enterprise Cape Breton Corporation is also reported under ACOA in the Main Estimates. However, since ECBC prepares its own quarterly financial statements, the Vote 10 – Payments to the Enterprise Cape Breton Corporation is not included in the financial figures or the analysis of the Agency’s Quarterly Financial Report.
ACOA also incurs costs under Statutory Authorities, which represent payments made under legislation approved previously by Parliament and which are not part of the annual appropriation bills. They include items such as the employer’s share of the employee benefits plan.
The following section highlights significant changes to fiscal quarter results as of September 30, 2012. Explanations focus primarily on variances greater than 5% as this is considered the threshold at which variances start to have a material impact on the interpretation of results.
For Vote 1 – Net operating expenditures, the total authorities available for use increased by $4.7 million during the second quarter, from $74.3 million to $79.0 million. This increase is a result of transfers from the Treasury Board Secretariat: $1.0 million for reimbursement of paylist requirements (paylist requirements include severance pay, vacation credits payable upon termination of employment, and parental benefits) and $3.7 million from the operating budget carry forward.
For the fiscal year ending March 31, 2013, total authorities for use decreased compared to the previous fiscal year. Total authorities for 2012-2013 are $79.0 million compared to $86.6 million for 2011-2012, which represents a decrease of $7.6 million, or 8.8%. The decrease of $7.6 million is attributable to a decrease of $5.4 million resulting from Budget 2011 strategic review, a decrease of $3.0 million due to a transfer to Shared Services Canada, a decrease of $0.6 million from the operating budget carry forward, a decrease of $0.1 million under the Canada Strategic Infrastructure Fund, offset by an increase of $1.0 million for reimbursement of paylist requirements, and an increase of $0.5 million for the Building Canada Fund – Communities Component.
Year-to-date net operating expenditures used at the end of the second quarter decreased by $7.0 million, or 17.6%, from $39.5 million last fiscal year to $32.6 million in the current fiscal year. This decrease of $7.0 million is attributable to strategic review savings and to the transfer of some IT expenses to Shared Services Canada.
For Vote 1 – Net operating expenditures, Graph 1 illustrates the total authorities available for use for the year as well as the amount used year-to-date at the end of the second quarter.
Graph 1: Comparison of Net Budgetary Authorities and Expenditures for Vote 1 as of September 30, 2011-2012 and 2012-2013.
(in thousands of dollars)
For Vote 5 – Grants and contributions, the total authorities available for use for the year ending March 31, 2013, decreased by $1.6 million (from $226.8 million to $225.2 million) compared to the previous fiscal year. This decrease represents a change of approximately 1.0%, and although it is less than the 5% materiality threshold, it is nevertheless explained below:
- reduction in Official Languages Action Plan initiatives ($1.9 million); and
- reduction from savings identified as a result of the Agency’s strategic review ($4.7 million).
- Offset by an increase of $5.0 million resulting from a transfer to ACOA in support of community economic development priorities in New Brunswick for projects such as the establishment of multifunctional facilities and new recreational infrastructures.
Year-to-date grants and contributions used at the end of the second quarter decreased from $59.9 million last fiscal year to $56.5 million this fiscal year. This represents a decrease of $3.4 million, or 5.7%. This change reflects the expiration of the Recreational Infrastructure Canada Program and differences in the timing of payments under several programs, mostly under the Business Development Program and the Innovative Communities Fund.
Graph 2 illustrates the net budgetary authorities for Vote 5 – Grants and contributions, which represent the total authorities available for use for the year as well as the amount used year–to-date at the end of the second quarter.
Graph 2: Comparison of Net Budgetary Authorities and Expenditures for Vote 5 as of September 30, 2011-2012 and 2012-2013.
(in thousands of dollars)
D
Total budgetary statutory authorities available for use for the year ending March 31, 2013, have decreased by $0.9 million, or 10.3%, when compared to the previous fiscal year: from $8.8 million to $7.9 million. This difference is attributable to a decrease of $0.8 million from the savings identified as a result of the Agency’s strategic review and a decrease of $0.1 million resulting from a transfer to Shared Services Canada.
Year-to-date budgetary statutory authorities used at the end of the second quarter decreased by $0.4 million, or 9.0%, from $4.4 million last fiscal year to $4.0 million in the current fiscal year.
Graph 3 illustrates the net budgetary statutory authorities, which represent the total authorities available for use for the year as well as the amount used year-to-date at the end of the second quarter.
Graph 3: Comparison of Net Budgetary Authorities and Expenditures for Statutory Authorities as of September 30, 2011-2012 and 2012-2013.
(in thousands of dollars)
D
The Agency’s year-to-date budgetary expenditures by Standard Object at the end of the second quarter were $93.1 million, which reflects a decrease from the $103.9 million in overall expenditures at the end of the second quarter last fiscal year. This is a decrease of $10.8 million, or 10.4%. The decrease is due mainly to personnel expenditures and transfer payments. The decrease is attributable to strategic review savings and to the transfer of some IT expenses to Shared Services Canada.
ACOA does an annual scan to update its corporate risk profile. The key corporate risks identified do not have a direct impact on financial reporting. However, as is the case with other organizations, ACOA is managing the regular financial risks associated with running the organization and has implemented appropriate mitigation measures. The financial risks are mitigated in large part by the implementation of strong internal controls over financial reporting. This includes the periodic assessment of entry-level controls, general computer controls, and controls in ACOA’s key business processes, such as payments on grants and contribution, regular operating expenses and accounts receivable.
Furthermore, ACOA manages its budgetary and allocation processes through a well-defined framework supported by a series of automated financial controls. Periodic forecasts are required and analyses are done regularly to ensure that funds are properly managed.
ACOA is also addressing savings announced in Budget 2010 and Budget 2011. Budget 2010 announced that operating and salary budgets would be frozen at their 2010-2011 levels for fiscal years 2011-2012 and 2012-2013. A series of measures implemented in 2010-2011 continues to apply for the current fiscal year, for which caps on travel, hospitality, conference and salary expenditures have been readjusted to reflect and maintain savings to date.
In addition, ACOA has taken additional measures to efficiently address Budget 2011 reductions.
Budget 2011 identified savings of $15.2 million by 2014-2015, $10.8 million of which needs to materialize in 2012-2013. A careful and thorough review of the Agency’s activities allowed the Agency to identify ways to consolidate various functions, reduce the duplication of work and eliminate non-priority activities without impacting the Agency’s ability to deliver on its core programs.
There have been no significant changes in relation to operations, personnel and programs impacting the results of this quarter.
This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and businesses to deal with their government; and modernize and reduce the back office.
Consistent with Budget 2012 decisions, the Atlantic Canada Opportunities Agency will achieve Budget 2012 savings of $14.7 million by fiscal year 2014-2015 through a number of measures, namely:
- by reducing a number of positions in the areas of audit, communications, finance and administration, human resource services, policy, and program oversight and delivery;
- by restructuring workloads and functions to make the delivery of its programs and services more efficient; and
- by realigning grants and contributions to focus on projects with greater economic impact.
In the first year of implementation, ACOA will achieve savings of approximately $1.6 million. Savings will increase to $11.3 million in 2013-2014 and of $14.7 million by 2014-2015.
In an effort to mitigate potential financial risks and uncertainties, several of the measures identified above were taken in the first two quarters to ensure that savings of $1.6 million in 2012-2013 materialize. The impacts of Budget 2012 decisions for the second quarter of fiscal year 2012-2013 did not represent a significant financial impact. Progress and costs related to the implementation of these reduction measures are monitored closely, and reports are produced regularly to keep senior management informed.