Archived - Aboriginal Affairs and Northern Development Canada - Quarterly Financial Report - For the quarter ended December 31, 2014

1.1 Authority, Mandate and Program Activities

Aboriginal Affairs and Northern Development Canada (AANDC) supports Aboriginal people (First Nations, Inuit and Métis) and Northerners in their efforts to:

• Improve social well-being and economic prosperity;
• Develop healthier, more sustainable communities; and
• Participate more fully in Canada's political, social and economic development – to the benefit of all Canadians.

Further details on AANDC's authority, mandate and program activities can be found in Part II of the Main Estimates and the Report on Plans and Priorities.

1.2 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting and a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities. The accompanying Statement of Authorities includes AANDC's spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates and Supplementary Estimates (A) and (B) as well as the Operating Budget Carry Forward, the Capital Budget Carry Forward, and Compensation Adjustments for the 2014-2015 fiscal year.

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.

The Department 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.

1.3 AANDC's Financial Structure

The parliamentary vote structure of AANDC is made up of $8. billion in budgetary authorities of which $8.4 billion requires approval by Parliament; referred to as voted amounts. The remaining $181.8 million represents statutory authorities that do not require additional approval and are provided for information purposes.

Voted amounts totalling $8.4 billion are split between Operating Expenditures, Capital Expenditures and Grants and Contributions as follows:

• Operating Expenditures represents approximately $1.4 billion (16.7 percent) - this includes $519.4 million (6.2 percent) for the Settlement Allotment (Independent Assessment Process and Alternative Dispute Resolution) and $147.8 million (1.8 percent) for the assessment, management and remediation of federal contaminated sites.
• Capital represents approximately $46.4 million (0.6 percent)
• Grants and Contributions represent approximately $6.9 billion (82.8 percent)

More detailed information about AANDC's financial structure, including information about the fiscal cycle, cost drivers, expenditure trends, etc. can be found online in the 2014-15 Financial Overview - July 2014 .

2.1 Statement of Authorities (Table 1) – Budgetary & Non-Budgetary

The Quarterly Financial Report reflects the year over year change in authorities for the period April 1 to December 31, 2014. Total year-to-date authorities available for use in the third quarter of 2014-2015 were $8,641.0 million compared to $8,792.7 million for the same quarter of the prior year, representing a decrease in Departmental Authorities of $151.7 million. The total 2014-2015 year-to-date authority decrease of $151.7 million over 2014-2015 can be explained as follows:

• As shown in the table above, the $151.7 million year over year decrease in total authorities, as of December 31, 2014, is primarily attributed to the decrease of $148.5 million in Operating expenditures authority and $47 million in Grants and Contributions authority. This decrease is partially offset by the increase of $27.3 million in Capital expenditures authority and $23.6 million in Statutory Grants and Contributions authority.
• The $148.5 million decrease in Operating expenditures authority is primarily due to a decrease of funding for out-of-court settlements ($60M), the Indian Residential Schools Settlement Agreement and related funding for the Indian Residential Schools Truth and Reconciliation Commission ($31.2M) and the savings identified as part of the Budget 2012 Spending Review ($30.8M).
• The $47 million decrease in Grants and Contributions authority is primarily due to a decrease of funding for the savings identified as part of the Budget 2012 Spending Review ($69.7M) and claims activities ($160.7M), This decrease is partially offset by an increase in funding for ongoing Indian and Inuit programs providing access to basic services ($102.6M), Operation Return Home ($40.6M), initiatives to support the construction and/or renovation of schools on reserves ($33M) and the assessment, management and remediation of federal contaminated sites ($19.3M).
• The $27.3 million increase in Capital expenditures authority is primarily due to an increase in funding for the Canadian High Arctic Research Station ($20.7M) and internal reallocation of resources from Operating expenditures authority to Capital expenditures authority to align with Federal government accounting and reporting requirements in 2014-2015 ($12.8M). This increase is partially offset by a decrease in funding for claims activities ($6M).
• The $23.5 million increase in Statutory Grants and Contributions authority is primarily due to an increase of Gas Tax Funding ($26.7M). This increase is partially offset by a decrease in statutory contribution funding for Indspire to support post-secondary education for First Nations; this funding was received as voted Grants and Contributions authority in 2014-2015 ($5M).

2.2 Statement of Departmental Budgetary Expenditures by Standard Object (Table 2)

Highlights of Fiscal Year-to-Date (YTD) Results

Year-to-date departmental spending at December 31, 2014 resulted in a net decrease of $494 million varied from one quarter to the other. The first quarter had a decrease in spending of $16.6 million, a decrease of $100.5 million in the second quarter and a decrease of $377 million in the third quarter. The reduction in year-to-date departmental spending is mainly due to payment of specific claims and legal settlements as well as the Devolution of the Northwest Territories.

Text description of Year-to-Date Comparison of Budgetary Authorities and Expenditures as of December 31, 2014

This image is of a bar graph of the year-to-date comparison of budgetary authorities and expenditures as of the end of December 31, 2014. The graph plots the authorities and expenditures by quarter arriving at a year to date total for the fiscal years 2013-2014 and 2014-2015.

The 2013-2014 data shows the Q3 authorities equaling the Main Estimates and the Supplementary Estimates A and B authorities arriving at the total authority at the end of Q3 of $8,772M. The 2014-2015 data shows the Q3 authorities equaling the Main Estimates and the Supplementary Estimates A and B authorities arriving at the total authority at the end of Q3 of $8,571 M.

The net difference in comparing the budgetary authorities at the end of Q3 each fiscal year is a decrease of $151M from 2013-2014 to 2014-2015.

The second column of each section of the graph pertains to expenditures. The 2013-2014 data shows the Q1 expenditures of $1,831M and the Q2 expenditures of $1,606M and the Q3 expenditures of $2,131M arriving at a total of $5,568M. The 2014-2015 data shows the Q1 expenditures of $1,815 M and the Q2 expenditures of $1,505M and the Q3 expenditures of $1,754M arriving at a total of $5,074M.

The net difference in comparing the expenditures at the end of Q3 each fiscal year is $494M from 2013-2014 to 2014-2015.

3.1 Risks and Uncertainties

Risk management and risk-based decision-making have become a critical component in the way the Department prioritizes and conducts its business. Resource allocation decisions are informed by risk and the Department's key corporate risks are discussed systematically by the senior management committee, which contributes to the better allocation of resources and ultimately better results.

In terms of financial risk, the Department is operating in an environment of fiscal restraint in which the ability to reallocate resources internally is reduced. The Department continues to monitor its risk exposure and take action as needed to mitigate the risk of not achieving anticipated outcomes or to deal with emerging pressures. Achievement of AANDC's strategic outcomes and delivery of programs is dependent on timely access to appropriate authorities and funding levels.

3.2 Risk Mitigating Strategies

Corporate and financial risk mitigation activities are reflected in the Department's Corporate Risk Profile and the Corporate Business Plan and are monitored by senior management on a quarterly basis and modified as required. A number of practices and internal controls help to manage risk departmentally, including senior management governance and oversight as established through committees, existing policies and procedures that ensure an appropriate level of monitoring, review and reporting.

The Department is addressing reduced flexibility to its budget as a result of expenditure restraint measures by aligning resources to needs and through rigorous monitoring against both financial and human resource targets. Management proactively and systematically manages and responds to risks to minimize adverse impacts and capitalize on opportunities. For example, cost containment measures and expenditure trends are monitored monthly, including a review and challenge function, through the monthly Financial Status Report.

In order to ensure effective controls, transparency and accountability, a risk-based approach is used to confirm that recipients have met planned program outcomes and results; that they are in compliance with funding agreements; and, that the funds were used to the intended purposes. In addition, the ability to conduct audits of recipients, under the terms of their funding agreements; provide a further opportunity to ensure that First Nations have appropriate management, financial and administrative controls in place.