Archived - Department of Finance Canada Quarterly Financial Report for the quarter ended December 31, 2022 (unaudited)

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 Directive on Accounting Standards, GC 4400 Departmental Quarterly Financial Reports. This Quarterly Financial Report should be read in conjunction with the 2022-23 Main Estimates and Supplementary Estimates of the Department of Finance Canada.

This Quarterly Financial Report has not been subject to an external audit or review.

1.1 Authority, Mandate and Program Activities

The Department of Finance Canada (the Department) helps the Government of Canada (the government) develop and implement strong and sustainable economic, fiscal, tax, social, security, international and financial sector policies and programs. It plays an important central agency role, working with other departments to ensure that the government's agenda is carried out and that ministers are supported with high-quality analysis and advice.

The Department's responsibilities include the following:

• Preparing the federal budget and the fall economic and fiscal update;
• Preparing the Annual Financial Report of the Government of Canada and the Public Accounts of Canada, in cooperation with the Treasury Board of Canada Secretariat and the Receiver General for Canada;
• Developing tax and tariff policy and legislation;
• Managing federal borrowing on financial markets;
• Designing and administering major transfers of federal funds to the provinces and territories;
• Developing financial sector policy and legislation; and
• Representing Canada in various international financial institutions and groups.

The description of the program activities for the Department can be found in Part II of the Main Estimates and the Departmental Plan.

1.2 Basis of Presentation

This Quarterly Financial 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 the Department's spending authorities granted by Parliament and those used by the Department, consistent with the Main Estimates and Supplementary Estimates for both fiscal years (2021-22 and 2022-23) as well as transfers from Treasury Board central votes that are approved by the end of the quarter.

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 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 Department of Finance Canada – Financial Structure

The department has three major categories of expenditure authority. These categories are:

• Voted budgetary authorities: Included in this category are the operational expenditures of the Department itself as well as authorized expenditures under grant and contribution programs. These expenditures must be specifically approved by Parliament through an appropriation act.
• Statutory budgetary authorities: Included in this category are expenditure authorities that are granted through an existing Act of Parliament. Further parliamentary approval is not required for expenditures related to statutory amounts and it is within the normal course of business that statutory expenditures may in some cases exceed planned spending estimates.
• Non-budgetary authorities: Included in this category are disbursements made by the Department that do not have a direct budgetary impact to the government. This includes the value of loans initially disbursed to Crown corporations participating in the Crown Borrowing Program.

2. Highlights of Fiscal Quarter Results

The following section highlights the financial results and provides explanations for the fiscal quarter ended December 31, 2022 as compared to the same period last year.

2.1 Statement of Authorities

As per Table 1 – Statement of Authorities (unaudited), the total authorities available for use increased by $4,914 million, as compared to the same quarter in 2021-22, from $112,265 million to $117,179 million.

The following table provides a detailed explanation of the significant changes in the authorities available for use:

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

As per Table 2 – Departmental budgetary expenditures by Standard Object (unaudited), the total net budgetary expenditures in the third quarter of 2022-23 increased by $2,579.4 million, as compared to the same quarter in 2021-22 largely due to the following:

• Expenditures related to Public debt charges increased by $1,964 million, primarily due to an increase in interest rates, Consumer Price Index adjustments on Real Return Bonds and an increase in the stock of debt of approximately $50 billion;
• Expenditures related to Transfer payments increased by $690.5 million, primarily due to legislated increases in major transfer payments to the provinces and territories ($924.1 million) and payment to the International Monetary Fund (IMF) Resilience and Sustainability Trust ($40.1 million). This increase is partially offset by recoveries for the Alternative Payments for Standing Programs ($287.9 million); and
• Expenditures related to Other subsidies and payments decreased by $71.3 million, primarily due to a decrease of $51 million in payments to the Canada Infrastructure Bank as a result of reduced needs versus last year and a loss of $20.9 million in foreign exchange on collateral deposits and sovereign loans.

2.3 Non-Budgetary Expenditures

Total net non-budgetary expenditures in the third quarter of 2022-23 increased by $3,101 million, as compared to the same quarter in 2021-22. This is largely due to an increase of $2,207 million in the value of loans disbursed to Crown corporations, resulting from an increase in their business requirements, $500 million in loan resources provided to the Government of Ukraine to help meet its urgent balance of payment needs and support its macroeconomic stability and $400 million for the IMF's Resilience and Sustainability Trust.

3. Risks and Uncertainties

The Department's Corporate Risk Profile provides a snapshot of the Department's key corporate risks. The Department's financial management framework supports strategic planning and allows for decisions on allocating resources to achieve the Department's objectives, mitigate risks and invest in people and tools in a fiscally prudent manner.

The Department monitors its operating environment to identify areas of most significant corporate risk and to reflect on progress made in implementing mitigation strategies. This allows the Department to continue to carry out its core responsibility for economic and fiscal policy, while managing corporate risks as they evolve in the current economic environment.

4. Significant Changes in Relation to Operations, Personnel and Programs

Joe Wild was appointed on November 14, 2022 as Senior Advisor to the Deputy Minister to work on the design and implementation of Indigenous equity participation in the Trans Mountain project.

Mark Perlman joined the Departmental Audit Committee (DAC), effective November 4, 2022, as an external member, for a four-year term. Kevin Dancey stepped down as DAC Chair and external member, effective December 18, 2022 with Linda Lizotte-Macpherson replacing him as DAC Chair, effective December 19, 2022.

5. Approval by Senior Officials

Approved by:

Michael Sabia, Deputy Minister
Ottawa, Canada
February 24, 2023 

Christopher Veilleux CPA, CMA, PMP
Chief Financial Officer
Ottawa, Canada
February 24, 2023