Office of Infrastructure of Canada
Quarterly Financial Report for the quarter ended December 31, 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 third 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 December 31, 2017 and December 31, 2018.

Authorities

Graph 1: Comparison of Authorities Available as of December 31, 2017 and December 31, 2018.

Text description of Graph 1

As shown in the Statement of Authorities, INFC's total authorities available for 2018-19 are $6.708 billion as of the end of Quarter 3 (Q3) and represent a $446 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 December 31, 2018

Authorities	Increase/(Decrease) vs. Prior Year-to-date (000's)	% Change vs. prior year
Operating Expenditures	(79,376)	(36.5%)
Capital Expenditures	448,150	77.8%
Contributions (Voted and Statutory)	(816,646)	(12.9%)
Contributions to Employee Benefit Plans	1,454	23.0%

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

• Operating Expenditures – the decrease is a result of lower authority levels in 2018-19 related to contingencies for the Samuel De Champlain Bridge Corridor project.
• Capital Expenditures – the increase is related to the Samuel De Champlain Bridge Corridor project to cover a larger milestone payment in fiscal year 2018-19 ($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 Q3 were $2.968 billion, compared to $2.371 billion reported in the same period of 2017-18, representing an increase of 25.2% between Q3 of the two years. The source of the relative increase is demonstrated in the tables, graphs and analysis below.

Graph 2: Comparison of Total Expenditure as of December 31, 2017 and December 31, 2018.

Text description of Graph 2

Table 2: Change in year-to-date expenditures as of December 31, 2018

Authority	Increase/(Decrease) vs. Prior Year-to-date (000's)	% Change vs. prior year
Operating Expenditures	7,798	15.1%
Capital Expenditures	89,298	768.3%
Contributions (Voted and Statutory)	499,180	21.7%
Contributions to Employee Benefit Plans	608	13.3%

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 (Voted and Statutory) as of December 31, 2017 and December 31, 2018.

Text description of Graph 3

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

Table 3: Change in year-to-date expenditures by contribution program as of December 31, 2018

Program Fund	Increase/(Decrease) vs. Prior Year-to-date (000's)	% Change vs. prior year
Public Transit Infrastructure Fund (PTIF)	261,415	1,372.9%
Clean Water Wastewater Fund (CWWF)	120,828	141.9%
New Building Canada Fund-Provincial-Territorial Infrastructure Component-National and Regional Projects (NBCF-PTIC-NRP)	111,090	101.4%
P3 Canada Fund (P3CF)*	66,405	N/A
Building Canada Fund-Communities Component (BCF-CC)*	28,852	N/A
Capacity Building for Climate Change Challenges Fund (CBCCCF)	12,140	130.2%
Asset Management Fund (AMF)	11,841	204.4%
Canada Strategic Infrastructure Fund (CSIF)	(34,160)	(95.1%)
Net change in expenditures of other contributions programs not specifically listed above	(79,231)	(3.89%)

* No expenditures were made as of Q3 2017-18

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

• PTIF and CWWF– as projects within these programs progress, there is an increase in claims submitted for payments compared to Q3 of last year.
• NBCF-PTIC-NRP – the increase relates to a relative increase in claims as more projects are approved and claims are received.
• P3CF – reflects milestone payments on projects following the dissolution of PPP Canada in March 2018.
• BCF-CC – Quebec is the only remaining province that has projects under this program and has started submitting claims for this fiscal year in Q2.
• CBCCCF and AMF – payments are made based on a detailed schedule in the contribution agreement; payments are expected to be higher in 2018-19 than 2017-18.
• CSIF – as the program is winding down, there are less claims being submitted compared to Q3 of last year.

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 $596.9 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 December 31, 2018

Changes to Expenditures by Standard Object	Increase/(Decrease) vs. Prior Year-to-date (000's)	% Change vs. prior year
Transfer payments	499,180	21.7%
Acquisition of land, buildings and works	86,650	31,169.1%
Professional and special services	7,296	25.9%
Personnel	4,386	12.5%
Transportation and communications	169	27.3%
Other subsidies and payments	159	140.7%
Information	57	20.6%
Utilities, materials and supplies	11	16.7%
Repair and maintenance	(55)	(4.2)%
Rentals	(453)	(38.0)%
Acquisition of machinery and equipment	(516)	(70.2)%

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 mainly due to payments made to Signature on the St. Lawrence Group as part of additional construction measures.
• 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).
• Personnel – increase in number of employees.
• 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.
• Acquisition of machinery and equipment – decrease mainly due to lower office furniture expenses compared to previous year.

Overall, INFC has spent 44.2% of its current Total Authorities as of December 31, 2018, compared to 33.1% at the end of Q3 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.

INFC has been working with provinces and territories on a new approach to transfer payments to better align federal investments with construction activity taking place. INFC recently launched a pilot project with three provinces under the Investing in Canada Infrastructure Program to test the effectiveness of this new approach in advance of broader implementation.

Over the last three 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

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

• 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 responsibility of implementing the following new programs:
• The Smart Cities Challenge; and
• The Disaster Mitigation and Adaptation Fund.

Approval by Senior Officials

Approved by:

Signed at Ottawa, Canada.

Quarterly Financial Report
For the quarter ended December 31, 2018
Statement of Authorities (unaudited)
Fiscal year 2018-2019

(in thousands of dollars)

	Total available for use for the year ending March 31, 2019	Used during the quarter ended December 31, 2018	Year to date used at quarter-end
Vote 1 – Operating expenditures	137,746	18,281	59,302
Vote 5 – Capital expenditures	1,024,502	39,375	100,920
Vote 10 – Contributions	3,367,654	637,786	1,159,821
Budgetary Statutory Authorities
(S) – Contributions to employee benefit plans	7,782	1,297	5,188
(S) – Gas Tax Fund	2,170,596	557,035	1,642,333
(S) – Minister salary and car allowance	86	21	64
Total Budgetary authorities	6,708,366	1,253,795	2,967,628
Non-budgetary authorities	-	-	-
Total authorities	6,708,366	1,253,795	2,967,628

Statement of Authorities (unaudited) (continued)
Fiscal year 2017-2018

(in thousands of dollars)

	Total available for use for the year ending March 31, 2018	Used during the quarter ended December 31, 2017	Year to date used at quarter-end
Vote 1 – Operating expenditures	217,124	17,416	51,504
Vote 5 – Capital expenditures	576,352	5,924	11,623
Vote 10 – Contributions	4,282,963	293,616	544,852
Budgetary Statutory Authorities
(S) – Contributions to employee benefit plans	6,328	1,526	4,580
(S) – Gas Tax Fund	2,071,933	722,156	1,758,122
(S) – Minister salary and car allowance	84	21	63
Total Budgetary authorities	7,154,784	1,040,659	2,370,744
Non-budgetary authorities	-	-	-
Total authorities	7,154,784	1,040,659	2,370,744

Quarterly Financial Report
For the quarter ended December 31, 2018
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2018-2019

(in thousands of dollars)

	Planned expenditures for the year ending March 31, 2019	Expended during the quarter ended December 31, 2018	Year to date used at quarter-end
Expenditures:
Personnel	59,067	13,224	39,376
Transportation and communications	1,463	276	788
Information	757	59	333
Professional and special services	102,327	14,388	35,476
Rentals	3,557	243	739
Repair and maintenance	7,834	458	1,266
Utilities, materials and supplies	268	33	77
Acquisition of land, buildings and works	928,757	30,254	86,928
Acquisition of machinery and equipment	2,935	150	219
Transfer payments	5,538,251	1,194,820	2,802,154
Public debt charges	-	-	-
Other subsidies and payments	63,150	(110)	272
Total net budgetary expenditures	6,708,366	1,253,795	2,967,628

Departmental budgetary expenditures by Standard Object (unaudited) (continued)
Fiscal year 2017-2018

(in thousands of dollars)

	Planned expenditures for the year ending March 31, 2018	Expended during the quarter ended December 31, 2017	Year to date used at quarter-end
Expenditures:
Personnel	55,117	12,762	34,990
Transportation and communications	3,325	264	619
Information	1,672	78	276
Professional and special services	678,761	10,067	28,180
Rentals	8,747	394	1,192
Repair and maintenance	9,061	485	1,321
Utilities, materials and supplies	799	24	66
Acquisition of land, buildings and works	-	87	278
Acquisition of machinery and equipment	4,386	713	735
Transfer payments	6,382,146	1,015,772	2,302,974
Public debt charges	-	-	-
Other subsidies and payments	10,770	13	113
Total net budgetary expenditures	7,154,784	1,040,659	2,370,744