Archived - Quarterly Financial Report for the quarter ended September 30th, 2017

1.1 Authority, Mandate and Program Activities

Indigenous and Northern Affairs Canada (INAC) supports Indigenous peoples (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 INAC's authority, mandate and program activities can be found in Part II of the Main Estimates and the Departmental Plans.

1.2 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. 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 (A) for the 2017-2018 fiscal year. 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 money 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.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

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.

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 INAC's strategic outcomes and delivery of programs is dependent on timely access to appropriate authorities and funding levels.

In terms of transfer payment program and transfer payment recipient risk, the Department transfers funds to recipients each year, while balancing program and recipient risks to deliver on its mandate. The Department undertakes risk assessments on new, existing and reformed programs as well as an annual General Assessment of each recipient to identify areas of risk. The Department also includes a risk section of each of its Performance Information Profiles.  

The Department is experiencing ongoing issues related to the Phoenix Pay System.  As collective agreements are being signed throughout the year, the number of issues might continue to increase this year.  The Department is continuously working internally and with external stakeholders to resolve these issues.

3.2 Risk Mitigating Strategies

Corporate and financial risk mitigation activities, reflected in the Department's Corporate Risk Profile, are monitored by senior management on a semi-annual 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 managing its budget 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. Budget and expenditure trends are monitored regularly, including a review and challenge function, through the Financial Status Report.

Budget 2016 announced $8.4 billion over five years to improve the socio-economic conditions of Indigenous peoples and their communities. In 2017-2018 INAC has received $1.67 billion from Budget 2016 and over 60% of these funds are for First Nations infrastructure programming. In order to strengthen controls in this area, the results of the comprehensive risk assessment undertaken for the Capital Facilities and Management Program (CFMP) are being discussed in the context of emerging program priorities and planning for 2018-2019. In addition, quarterly monitoring of the departmental audit "Follow-up audit on Infrastructure On-Reserves" was undertaken, where progress has been shown. The Infrastructure focused project audit regime is scheduled for launch in Q3, a first time endeavor for the infrastructure programming. In addition, the department has committed to a national recipient monitoring framework, inclusive of program-focused compliance activities.  In this initiative, the CFMP and the Education & Social Development Programs and Partnerships, which is another major component of Budget 2016, are working together with the Chief Finances, Results and Delivery Officer, to choose the most appropriate priorities, approaches, and requirements, consolidating monitoring results across all programs in the department to identify where capacity development of indigenous communities is required for continuous improvement.

The Department has completed year one implementation of a two-year fraud risk mitigation plan; implementation of year two of the plan is underway.

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.

Table 1a: Statement of Authorities (unaudited)

Table 1b: Statement of Authorities (unaudited) (continued)

Table 2a: Departmental budgetary expenditures by Standard Object (unaudited)

Table 2b: Departmental budgetary expenditures by Standard Object (unaudited) (continued)