2012-2013 Quarterly Financial Report for the Quarter Ended December 31, 2012
Management Statement for the Quarter Ended December 31, 2012
1. Introduction
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. This quarterly financial report should be read in conjunction with the Main EstimatesFootnote1, Supplementary Estimates A and B, the previous quarterly reports for the current year, as well as with Canada's Economic Action Plan 2012 (Budget 2012).
1.2 Mandate and Program Activities
The mandate of the Canadian Space Agency (CSA) is to promote the peaceful use and development of space, to advance the knowledge of space through science and to ensure that space science and technology provide social and economic benefits for Canadians.
More information is available on the CSA's mandate and Program Activities in the Report on Plans and PrioritiesFootnote1
1.3 Basis of Presentation
This quarterly financial report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the CSA's spending authorities granted by Parliament and those used by the CSA, consistent with the Main Estimates and Supplementary Estimates voted to date for the 2012-2013 fiscal year. This quarterly financial 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.
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 are not reflected in the 2012-2013 Main Estimates.
For fiscal year 2012-2013, frozen allotments have been established by CT authority in departmental votes to prohibit the spending of funds already identified as saving measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by CT, and reflected in the subsequent Main Estimates tabled in Parliament.
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 purposes.
The CSA uses the full accrual method of accounting to prepare and present its annual financial statements, which are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis, that is, a partial accrual method of accounting. Expenditure basis accounting thus includes disbursements, but also some expenditures incurred for salaries and salary allowances.
This quarterly financial report has not been subject to an external audit. However, it has been reviewed by the members of the Audit Committee, who are satisfied with its presentation and content.
2. Highlights of the Quarterly Financial Results
This section highlights the significant factors that contributed to the changes to the authorities available for the fiscal year, as well as to the year to date and actual expenditures for the quarter ended December 31, 2012.
The following graph provides an overview of variations in available authorities and expenditures. Additional details on these variations are provided in sections 2.1 and 2.2 as well as in the appended annexes.
| 2012-2013 | 2011-2012 | Variations | |
|---|---|---|---|
| Authorities | 386.0 | 439.0 | -53.0 -12% |
| Year to date expenditures April to December | 179.5 | 221.5 | -42.0 -19% |
| Expended during the quarter ended December 31 | 65.3 | 88.9 | -23.6 -27% |
Totals may not add due to rounding.
2.1 Significant Changes in Authorities (Total Vote Available for Use) between fiscal 2011-2012 and 2012-2013
The total vote available for use by the CSA for the year ending March 31, 2013 is $386.0 million and represents a decrease of $53.0 million over the same period for the previous year. The most significant changes are as follows:
| Authorities (in thousands of dollars) | 2012-13 | 2011-12 | Variance | % |
|---|---|---|---|---|
| Vote 25 - Operating expenditures | 175 000 | 250 654 | (75 572) | -30% |
| Vote 30 - Capital expenditures | 162 228 | 118 663 | 43 565 | 37% |
| Vote 35 - Grants and contributions | 37 599 | 58 159 | (20 560) | -35% |
| Budgetary statutory authorities | 11 050 | 11 520 | (470) | -4% |
| Total budgetary authorities | 385 959 | 438 996 | (53 037) | -12% |
The following factors are key in explaining the decrease of $75.6 million in Vote 25 - Operating Expenditures:
- A $55.0 million decrease in the budget allocated to the Economic Action Plan initiatives announced in Budget 2009, whose funding ended in 2011-2012
- A $3.5 million budget decrease over the previous fiscal year represents the CSA's vote transferred to the new SSC organization (SSC)
- The residual variance consists of multiple variations inherent to the management of the Canadian Space Program (CSP) resources. They result from the fact that the budgetary needs by vote are not linear from one year to another requiring budget transfers between votes or reprofiling of funds in another fiscal year
The following factors are key in explaining the increase of $43.6 million in Vote 30 - Capital Expenditures:
- A $36.2 million budget increase over the previous fiscal year as a result of additional budgets allocated over five years under Budget 2010 to continue the development of the Radarsat Constellation Mission (RCM)
- A $3.5 million budget increase in the development project portfolio resulting from the reprofiling of funds from unused risk envelopes from 2011-2012 to 2012-2013 and delays in certain tasks
The following factors are key in explaining the decrease of $20.6 million in Vote 35 - Grants and Contributions:
- An $18.6 million budget decrease over the previous fiscal year for purposes of the Canada / ESA (ESA) Cooperation Agreement was attributable to the evolution in ESA's implementation of various programs in which Canada participates
2.2 Significant Changes in Year to Date and Quarterly Expenditures (Votes Used)
Year to date and quarterly expenditures for the quarter ended December 31, 2012 are respectively $179.5 and $65.3 million and represent a decrease of $42.0 and $23.6 million compared to the same period for the previous year.
Expenditures by Vote
Expenditures and expenditure variations by vote for the quarter ended December 31 :
| Expenditures (in thousands of dollars) | Year to date | Quaterly | ||||
|---|---|---|---|---|---|---|
| 2012-13 | 2011-12 | Variance | 2012-13 | 2011-12 | Variance | |
| Vote 25 - Operating expenditures | 105 222 | 142 100 | (36 878) | 39 213 | 53 423 | (14 210) |
| Vote 30 - Capital expenditures | 46 579 | 39 857 | 6 722 | 22 793 | 18 423 | 4 370 |
| Vote 35 - Grants and contributions | 19 372 | 30 891 | (11 519) | 487 | 14 166 | (13 679) |
| Budgetary statutory authorities | 8 291 | 8 636 | (345) | 2 759 | 2 885 | (126) |
| Total budgetary expenditures | 179 464 | 221 484 | (42 020) | 65 252 | 88 897 | (23 645) |
The decrease in the use of Vote 25 – Operating Expenditures, of $36.9 million for year to date expenditures and $14.2 million for quarterly expenditures over the same period in the previous fiscal year is mainly explained by the end of funding from the Economic Action Plan announced in Budget 2009. The reduction of operating activities stemming from the implementation of the decisions announced in Budget 2012 relating to the Deficit Reduction Action Plan (DRAP) also explains the year to date and quarterly decrease for 2012-2013.
The increase in the use of Vote 30 – Capital Expenditures of $6.7 million year to date expenditures and $4.4 million quarterly expenditures over the same period in the previous year is mainly due to invoice payments relating to the development phase of the (RCM) project as well as the acquisition of material with extended procurement lead time. The variation in payment schedules and in the project development lifecycle, which is an inherent characteristic of the Canadian Space Plan also explains the year to date and quarterly increase for 2012-0213.
The decrease in the use of Vote 35 – Grants and Contributions of $11.5 million in year to date expenditures and $13.7 quarterly expenditures over the same period in the previous is mainly attributable to the variations in ESA payment schedules. The variations in the Class Grant and Contribution Program to Support Research, Awareness and Learning in Space Science and Technology payment schedules also explains the year to date and quarterly decrease for 2012- 2013.
Expenditures by Standard Object
Expenditures and expenditure variations by standard object for the quarter ended December 31:
| Expenditures (in thousands of dollars) | Year to date | Quaterly | ||||
|---|---|---|---|---|---|---|
| 2012-13 | 2011-12 | Variance | 2012-13 | 2011-12 | Variance | |
| Personnel | 58 402 | 62 447 | (4 045) | 18 145 | 19 748 | (1 603) |
| Transports and communications | 3 054 | 4 375 | (1 321) | 1 207 | 1 306 | (99) |
| Information | 1 055 | 1 030 | 25 | 540 | 225 | 315 |
| Professional and special service | 62 522 | 110 359 | (47 837) | 28 273 | 49 731 | 21 458 |
| Rental | 2 546 | 1 358 | 1 1188 | 1 610 | 444 | 1 166 |
| Repair and maintenance | 1 185 | 1 442 | (257) | 885 | 476 | 409 |
| Utilities, materials and supplies | 2 109 | 2 802 | (693) | 936 | 919 | 17 |
| Acquisition of land, buildings and works | 0 | 0 | 0 | 0 | 0 | 0 |
| Acquisition of machinery and equipment | 26 736 | 3 638 | 23 098 | 13 150 | 1 421 | 11 729 |
| Transfer payments | 19 372 | 30 891 | (11 519) | 487 | 14 166 | (13 679) |
| Other subsidies and payments | 2 483 | 3 142 | (659) | 19 | 461 | (442) |
| Total budgetary expenditures | 179 464 | 221 484 | (42 020) | 65 252 | 88 897 | (23 645) |
The decrease of $4.0 and $1.6 million year to date and quarterly expenditure decrease for the Personnel standard object is mainly owing to workforce reductions arising from recent government-wide reviews and the pay disbursement schedule.
The decrease of $47.8 and $21.5 million in year to date and quarterly expenditures for the Professional and special services standard object is partly attributable to the payment schedule related to the (RCM) project as well as the end of the funding from the Economic Action Plan announced in Budget 2009.
The increase of $23.1 and $11.7 million of year to date and quarterly expenditures for the Acquisition of machinery and equipment standard object is attributable to the acquisition of material with extended procurement lead time for the (RCM) project.
The explanation for the $11.5 and $13.7 million decrease in year to date and quarterly expenditures for the Transfer payment standard object is provided in the previous section of expenditures by vote under Vote 35 – Grants and Contributions.
The explanation for the variations in year to date and quarterly expenditures for several standard objects, such as Transportation and communications, Repair and maintenance and Utilities, materials and supplies, is partly due to the implementation of the decisions announced in Budget 2012 relating to the Deficit Reduction Action Plan (DRAP).
3. Risks and Uncertainties
Characteristics specific to the implementation of the Canadian Space Plan: International cooperation is essential to the achievement of the CSA's programs, because partnerships with other space-faring nations make it possible to share technical expertise, knowledge and infrastructure. The CSA also relies on partnerships with Canadian businesses and universities to convert scientific and technological advances into innovative products and services. The domestic market is relatively small and the viability of Canada's space sector depends on its positioning on international markets. Furthermore, space projects make use of innovative technologies that will sometimes be tested for the first time in harsh space conditions.
These specific characteristics of the space sector create a risk of delays in the realization of projects and therefore risks of postponements of the use of funds.
The year to date expenditures for the 3rd quarter of 2012-2013 represents 46% of our authorities whereas 75% of our fiscal year has passed. This situation is similar to that of the previous fiscal year and represents no concerns.
From the Canada / ESA Cooperation Agreement also arises risks such as variations in amounts payable caused by changes in Gross National Product (GNP) statistics, the depreciation of the Canadian dollar against the euro (exchange rate), inflation and the enforcement of the CSA's industrial policy. These risks have an impact on both costs and cash flow profiles.
To mitigate these risks, the CSA regularly reviews its project portfolio, its activity plans, its schedules and financial management strategies to adjust to changes brought in the space programs of its key partners (National Aeronautics and Space Administration (NASA), the ESA and other space agencies).
In Budget 2010, it was announced that departments' salary and operations budgets would be frozen at 2010-2011 levels for fiscal 2011-2012 and 2012-2013. This reduces the flexibility that the CSA requires to adjust its financial strategies for the implementation of the Canadian Space Plan. In order to deal with these restrictions in 2011-2012 and 2012- 2013, the CSA carried out an efficiency review, reassigned budgets on the basis of priorities and implemented a salary ceiling.
4. Significant Changes in Relation to Operations, Personnel and Programs
During the 2nd quarter of 2011-2012, the Government of Canada established a new organization, SSC (SSC), in order to combine the information technology and telecommunications resources of 44 departments and agencies with the purpose of optimizing the use of resources by achieving significant economies of scale. The financial repercussions of this change are described in the table under section 2.1 – Significant Changes in Authorities and in appendixes 1 and 2.
5. Budget 2012 Implementation
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 business to deal with their government and, modernize and reduce the back office.
The CSA will achieve annual savings of $29.5 million starting fiscal year 2014-2015 through key measures that actively contribute to the Government's overarching plan to return to a balanced budget. Therefore, the CSA will increasingly focus its Programs and support in response to the growing demand for space-based solutions that serve the mandates and operations of Government departments and agencies.
In the first year of implementation, the CSA will achieve savings of approximately $7.9 million. Savings will increase to $24.7 million in 2013-2014 to reach ongoing saving of $29.5 million by 2014-2015. The related savings in progress will be reflected in Vote 25 – Operating Expenditures and Vote 35 – Grants and contributions.
For the quarter ended December 31st, 2012, the impact of Budget 2012 on the CSA's authorities is nil as the results of Budget 2012 were not reflected in the 2012-2013 Main Estimates and in the Supplementary Estimates. Therefore, for the third quarter, the variances in the Agency's authorities are not related to Budget 2012.
At the end of the third quarter, the reduction to expenditures related to Budget 2012 are reflected in Vote 25 – Operating Expenditures and in several standard objects, such as Transportation and Communications, Repair and maintenance and Utilities, materials and supplies. Other savings related to Budget 2012 will be reflected later in the fiscal year in Vote 25 – Operating Expenditures and Vote 35 – Grants and contributions.
There are no financial risks or uncertainties related to these savings.
Approval by Senior Officials
Approved by,
The original version was signed by
Gilles Leclerc, Acting President, Longueuil, Quebec, February 21, 2013
The original version was signed by
Marie-Claude Guérard, CGA Chief Financial Officer, Longueuil, Quebec, February 21, 2013
Appendix 1
| Authorities | Fiscal Year 2012-2013 | Fiscal Year 2011-2012 | ||||
|---|---|---|---|---|---|---|
| Total available for use for the year ending March 31, 2013 Footnote 2, Footnote 3 $ |
Used during the quarter ended December 31, 2012 $ |
Year to date used at quarter-end $ |
Total available for use for the year ending March 31, 2012 Footnote 2, Footnote 4 $ |
Used during the quarter ended December 31, 2011 Footnote 5 | Year to date used at quarter-end Footnote 5 $ |
|
| Vote 25: Operating expenditures | 175 082 | 39 213 | 105 222 | 250 654 | 53 423 | 142 100 |
| Vote 30: Capital expenditures | 162 228 | 22 793 | 46 579 | 118 663 | 18 423 | 39 857 |
| Vote 35: Grants and contributions | 37 599 | 487 | 19 372 | 58 159 | 14 166 | 30 891 |
| Budgetary statutory authorities | 11 050 | 2 759 | 8 291 | 11 520 | 2 885 | 8 636 |
| Total budgetary authorities | 385 959 | 65 252 | 179 464 | 438 996 | 88 897 | 221 484 |
One thousand dollar variances may occur due to rounding.
Appendix 2
| Expenditures: | Fiscal Year 2012-2013 | Fiscal Year 2011-2012 | ||||
|---|---|---|---|---|---|---|
| Planned expenditures for the year ending March 31, 2013 Footnote 6 $ |
Expended during the quarter ended December 31, 2012 $ |
Year to date used at quarter-end $ |
Planned expenditures for the year ending March 31, 2012 Footnote 7 $ |
Expended during the quarter ended December 31, 2011 Footnote 8 $ |
Year to date used at quarter-end Footnote 8 $ |
|
| Personnel | 79 846 | 18 145 | 58 402 | 77 414 | 19 748 | 62 447 |
| Transportation and communications | 5 541 | 1 207 | 3 054 | 9 119 | 1 306 | 4 375 |
| Information | 1 140 | 540 | 1 055 | 2 496 | 225 | 1 030 |
| Professional and special services | 186 054 | 28 273 | 62 522 | 233 877 | 49 731 | 110 359 |
| Rentals | 1 522 | 1 610 | 2 546 | 1 982 | 444 | 1 358 |
| Repair and maintenance | 3 869 | 885 | 1 185 | 3 522 | 476 | 1 442 |
| Utilities, materials and supplies | 2 814 | 936 | 2 109 | 3 169 | 919 | 2 802 |
| Acquisition of land, buildings and works | 1 207 | 0 | 0 | 1 004 | 0 | 0 |
| Acquisition of machinery and equipment | 62 893 | 13 150 | 26 736 | 44 192 | 1 421 | 3 638 |
| Transfer payments | 37 599 | 487 | 19 372 | 58 159 | 14 166 | 30 891 |
| Other subsidies and payments | 3 474 | 19 | 2 483 | 4 063 | 461 | 3 142 |
| Total budgetary expenditures | 385 959 | 65 252 | 179 464 | 438 996 | 88 897 | 221 484 |
One thousand dollar variances may occur due to rounding.