2012-2013 Quarterly Financial Report for the Quarter Ended September 30, 2012

Management Statement for the Quarter Ended September 30, 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 Estimates1, 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 Priorities1

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 Estimates1 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

Overview of changes in available permissions and expenses.

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.

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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 September 30, 2012.

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 $382.6 million and represents a decrease of $56.5 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 171 675 249 963 (78 288) -31%
Vote 30 - Capital expenditures 163 230 121 345 41 885 35%
Vote 35 - Grants and contributions 36 597 56 223 (19 626) -35%
Budgetary statutory authorities 11 050 11 509 ( 459) -4%
Total authorities 382 552 439 040 (56 487) -13%

The following factors are key in explaining the decrease of $78.3 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 $6.1 million budget decrease over the previous fiscal year represents the CSA’s vote that was transferred to the new Shared Services Canada organization.
  • 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 $41.9 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
  • A $1.0 million budget decrease over the previous fiscal year represents the CSA vote that was transferred to the new Shared Services Canada organization

The following factors are key in explaining the decrease of $19.6 million in Vote 35 - Grants and Contributions:

  • An $18.6 million budget decrease over the previous fiscal year for purposes of the Canada / European Space Agency (ESA) Cooperation Agreement was attributable to changes 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 September 30, 2012 are $114.2 and $65.8 million respectively and represent a decrease of $18.4 and $18.1 million compared to the same period for the previous year.

Expenditures by Vote

Expenditures and expenditure variations by vote for the quarter ended September 30 :
Expenditures (in thousands of dollars) Year To Date Expenditures Quarterly Expenditures
2012-13 2011-12 Variance 2012-13 2011-12 Variance
Vote 25 - Operating expenditures 66 009 88 677 (22 668) 37 912 54 033 (16 121)
Vote 30 - Capital expenditures 23 786 21 434 2 352 14 798 20 672 (5 874)
Vote 35 - Grants and contributions 18 885 16 725 2 160 10 327 6 298 4 029
Budgetary statutory authorities 5 532 5 751 ( 219) 2 774 2 876 ( 102)
Total budgetary expenditures 114 212 132 587 (18 375) 65 811 83 879 (18 068)

The decrease in the use of Vote 25 – Operating Expenditures, of $22.7 million for year to date expenditures and $16.1 million for quarterly expenditures over the same period in the previous fiscal year is mainly explained by the decrease in operating activities stemming from the administrative services review (i.e. the transfer of resources for the creation of Shared Services Canada) and by the implementation of the decisions announced in Budget 2012 relating to the Deficit Reduction Action Plan (DRAP). The end of funding from the Economic Action Plan announced in Budget 2009 also explains the year to date and quarterly decrease for 2012-2013.

The quarterly decrease of $5.9 million in the use of Vote 30 – Capital Expenditures is mainly due to the variations in payment schedules and in the project development lifecycle, which is an inherent characteristic of the Canadian Space Plan. Invoice payments relating to the development phase of the (RCM) as well as the acquisition of material with extended procurement lead time explains the 2012-2013 $2.4 million cumulative increase.

The increase of $2.2 and $4.0 million in year to date and quarterly expenditures for Vote 35 – Grants and Contributions is mainly attributable to the variations in payment schedules of ESA and the Class Grant and Contribution Program to Support Research, Awareness and Learning in Space Science and Technology.

Expenditures by Standard Object

Expenditures and expenditure variations by standard object for the quarter ended September 30:
Expenditures (in thousands of dollars) Year To Date Expenditures Quarterly Expenditures
2012-13 2011-12 Variance 2012-13 2011-12 Variance
Personnel 40 257 42 699 (2 442) 19 257 20 127 ( 870)
Transports and communications 1 847 3 069 (1 222) 979 1 718 (739)
Information 515 805 ( 290) 296 584 (288)
Professional and special service 34 249 60 628 (26 379) 22 374 49 258 (26 884)
Rental 936 914 22 591 475 116
Repair and maintenance 300 966 (666) 146 507 (361)
Utilities, materials and supplies 1 173 1 883 (710) 861 1 411 (550)
Acquisition of land, buildings and works 0 0 0 0 0 0
Acquisition of machinery and equipment 13 586 2 217 11 369 8 829 1 440 7 389
Transfer payments 18 885 16 725 2 160 10 327 6 298 4 029
Other subsidies and payments 2 464 2 681 (217) 2 151 2 061 90
Total budgetary expenditures 114 212 132 587 (18 375) 65 811 83 879 (18 068)

The $2.4 and $0.9 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 impact of the transfer in responsibilities stemming from the creation of Shared Services Canada is seen in the variance of $1.2 and $0.7 million in year to date and quarterly expenditures for the Transportation and communications standard object.

The decrease of $26.4 and $26.9 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 and to the end of the funding from the Economic Action Plan announced in Budget 2009.

The increase of $11.4 and $7.4 million 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 $4.0 million increase in quarterly expenditures in the Transfer payment standard object is provided in the previous section for expenditures by vote under Vote 35 – Grants and Contributions.

The explanation for the decrease in year to date and quarterly expenditures for several standard objects, such as Information, Repair and maintenance, 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 implementation 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 turn 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 in international markets. In addition, space projects make use of innovative technology that is sometimes tested for the first time in harsh space conditions.

    These specific characteristics of the space sector create a risk of delays in the implementation of projects and therefore risks of postponements of the use of funds.

  • The year to date expenditures for the 2nd quarter of 2012-2013 represent 30 % of our authorities whereas 50 % of our fiscal year has passed. This situation is similar to that of the previous fiscal year and represents no concerns.
  • There are also risks arising from the Canada / ESA Cooperation Agreement, 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 ESA’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, activity plans, schedules and financial management strategies to adjust to changes 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 savings of $29.5 million by 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 September 30th, 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. Therefore, for the second quarter, the variances in the Agency's authorities are not related to Budget 2012.

At the end of the second quarter, the reduction to expenditures related to Budget 2012 are reflected in Vote 25 – Operating Expenditures and in several standard objects, such as Information, Repair and maintenance, 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
Steve MacLean, November 27, 2012


date

Steve MacLean
President Chief
Longueuil, Quebec

The original version was signed by
Marie-Claude Guérard, November 27, 2012


date

Marie-Claude Guérard, CGA
Financial Officer
Longueuil, Quebec

CSA
Quarterly Financial Report
For the quarter ended September 30, 2012
Statement of Authorities (unaudited)
Fiscal year 2012-2013 (in thousands of dollars)
Fiscal Year 2012-2013 Fiscal Year 2011-2012
Total available for use ** for the year ending March 31, 2013 * 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 * Used during the quarter ended December 31, 2011 Year to date used at quarter-end
Expenditures: $ $ $ $ $ $
Vote 25: Operating expenditures 171 675 37 912 66 009 249 963 54 033 88 677
Vote 30: Capital expenditures 163 230 14 798 23 786 121 345 20 672 21 434
Vote 35: Grants and contributions 36 597 10 327 18 885 56 223 6 298 16 725
Budgetary statutory authorities 11 050 2 774 5 532 11 509 2 876 5 751
Total authorities 382 552 65 811 114 212 439 040 83 879 132 587

(0) 

* Includes only Authorities available for use and granted by Parliament at quarter-end.

** Total available for use does not reflect measures announced in Budget 2012.

 The effective budgetary reductions for fiscal 2012-2013 will only be reflected in the 2013-2014 reference levels.

CSA
Quarterly Financial Report
For the quarter ended September 30, 2012
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2012-2013(in thousands of dollars)
Fiscal Year 2012-2013 Fiscal Year 2011-2012
Planned expenditures * for the year ending March 31, 2013 Expended during the quarter ended December 31, 2012 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2012 (2) Expended during the quarter ended December 31, 2011 (3) Year to date used at quarter-end (3)
Expenditures: $ $ $ $ $ $
Personnel 76 440 19 257 40 257 75 393 20 127 42 699
Transportation and communications 5 581 979 1 847 9 693 1 718 3 069
Information 1 140 296 515 2 495 584 805
Professional and special services 187 015 22 374 34 249 235 814 49 258 60 628
Rentals 1 522 591 936 2 208 475 914
Repair and maintenance 3 869 146 300 3 646 507 966
Utilities, materials and supplies 2 814 861 1 173 3 169 1 411 1 883
Acquisition of land, buildings and works 1 207 0 0 1 004 0 0
Acquisition of machinery and equipment 62 893 8 829 13 586 45 332 1 440 2 217
Transfer payments 36 597 10 327 18 885 56 223 6 298 16 725
Other subsidies and payments 3 474 2 151 2 464 4 063 2 061 2 681
Total budgetary expenditures 382 552 65 811 114 212 439 040 83 879 132 587

(0) 

* Planned expenditures do not reflect measures announces in Budget 2012.


1 The financial data presented as planned expenditures in the 2012-2013 Main Estimates and the 2012- 2013 Report on Plans and Priorities (RPP) for the current year may differ from the authorities available presented in the Quarterly Financial Report (QFR). The RPP data includes estimated adjustments to the Main Estimates for the entire year, whereas the QFR presents only the authorities granted to date through the Estimates process (i.e. the Main Estimates and the Supplementary Estimates).