Quarterly Financial Report for the Quarter Ended September 30, 2012

Management statement for the quarter ending September 30, 2012

Introduction

This quarterly 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 report should be read in conjunction with the Main Estimates and Supplementary Estimates as well as Canada's Economic Action Plan 2012 (Budget 2012) for fiscal year 2012-13.

The Transportation Safety Board's (TSB) sole objective is to advance transportation safety. This mandate is fulfilled by conducting independent investigations into selected transportation occurrences. The purpose of these investigations is to identify the causes and contributing factors and the safety deficiencies evidenced by an occurrence. The TSB then reports publicly and makes recommendations to improve safety and reduce or eliminate risks to people, property and the environment.

The quarterly report has not been subject to an external audit or review.

Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the TSB's spending authorities granted by Parliament and those used by the department. Authorities include amounts granted through the Main Estimates and Supplementary Estimates, as well as transfers from Treasury Board central votes that are approved by the end of the quarter. 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 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 TSB uses the full accrual method of accounting to prepare and present its departmental financial statements that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

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 the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

Highlights of fiscal quarter and fiscal year to date results

Statement of authorities

The TSB received $30,054,000 in funding through the 2012–13 Main Estimates ($26,479,000 for operating expenditures and $3,575,000 for employee benefit plans). During the second quarter of 2012-13, the TSB's total authorities increased by $1,525,000 to $31,579,000. This increase in funding is primarily due to the Operating Budget Carry Forward of unused 2011-12 funds of $1,334,000. The remaining funds were received from Treasury Board Secretariat to offset certain recoverable personnel expenses (e.g. maternity allowance, severance pay).

Budget 2012 calls upon the TSB to reduce its operating expenditures by $1,283,000 by 2014-15, a net reduction of approximately 4.3% of its budget provided through Main Estimates. This reduction will be made on a progressive basis as follows:

Budget 2012 reductions
Fiscal year Cumulative reduction
2012-13 $719,000
2013-14 $846,000
2014-15 and on-going $1,283,000

A year over year comparison of TSB's authorized funding for the 2nd quarter presents a decrease of $151,000 between 2012-13 and 2011-12. This decrease is primarily explained by collective agreements that have expired in 2011–12 for which a new agreement has not been signed. The funding for terminable allowances in these collective agreements is not included in the Main Estimates but should be received at a future date through Supplementary Estimates. Once the impact of Budget 2012 is included (reduction of $719,000), the TSB's funding for 2012-13 is lower than 2011-12 by $870,000.

Statement of departmental budgetary expenditures

The department's year-to-date spending at the end of the 2nd quarter is $194,000 higher than spending for the 2nd quarter in the previous year. The increase is due mainly to salaries, as a result of the ratification of collective agreements. Other variances, such as the increase in professional and special services, are explained by fluctuations in the timing of spending between quarters of the year.

At the end of the second quarter, the TSB has spent 52% of its available authorities for personnel. This spending exceeds 50% of available authorities at mid-year due to the fact that funding for certain personnel expenses incurred to date (e.g. terminable allowances, maternity allowances) has not yet been received. The TSB expects to receive this funding later in the fiscal year.

As illustrated in Figure 1, the TSB has spent approximately 48% of its authorities at the end of the second quarter. This spending pattern is consistent with planned spending and with previous years as the TSB's spending is generally distributed equally throughout the year given that the department's most significant expense is salaries.

Figure 1 — Second quarter expenditures compared to annual authorities
Second quarter expenditures for 2012-2013 are 14.9 million dollars of 30.9 million dollars in annual authorities, whereas in 2011-2012, second quarter expenditures reached 14.7 million dollars of 31.7 million dollars in annual authorities

Risks and uncertainties

The TSB maintains a corporate risk profile which identifies and assesses high-level risks that could affect the achievement of the department's objectives and priorities. Certain risks could have financial impacts should they materialize, for example risks related to the security of data and information. Strategies have been developed and measures are in place to minimize their likelihood. For example, the TSB is modernizing its information management tools and practices.

The TSB is funded through annual appropriations. As a result, its operations are impacted by any changes in funding approved through Parliament. As a departmental corporation, it has authority to spend revenues received during the year although such revenues are minimal; on average less than 1% of the department's funding requirements.

A continuous risk to TSB's financial situation is that expenditures are greatly influenced by the number and complexity of transportation occurrences. A significant transportation accident or a flurry of smaller size occurrences could significantly increase expenditures and result in resource pressures that could require the department to seek additional funding from Parliament.

The TSB has reduced flexibility in its operating budget as a result of the expenditure restraint measures announced in Budget 2012 and the cost containment measures due to the freeze on operating budgets set out in Budget 2010. The department is managing the implementation of these measures through rigorous monitoring of its financial and human resources.

Significant changes in relation to operations, personnel and programs

For the first two quarters of 2012-13, there have been no significant changes in relation to operations, personnel and programs over the last year.

Budget 2012 implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to achieve the necessary savings of $1,283,000 by 2014-15.

For fiscal year 2012-13, the reduction of $719,000 consists of a reduction in the TSB's operating vote of $619,000 and a reduction in the statutory authorities for employee benefit plans of $100,000. The TSB plans for addressing the 2012-13 cuts in funding are to reduce salaries by eliminating 5 vacant or soon to be vacant positions and to reduce spending on professional services and special services as well as transportation and communications. The Statement of Expenditures by Standard Object presents the planned Budget 2012 implementation impact by category of expenditure.

The TSB anticipates being able to accommodate the reductions in funding without impacting the number or quality of investigations or the timeliness of its safety communications. The TSB will need to adapt to some changes to internal business processes and internal service levels given that the majority of the reductions will be made to the internal services program.

Approval by senior officials

Approved by:

Wendy A. Tadros
Chair

Chantal Lemyre, CGA
Chief Financial Officer


Statement of authorities (unaudited)

Fiscal year 2012-13 (in thousands of dollars)
  Total available for use for the year ending March 31, 2013 Budget 2012 reduction in funding (frozen) 2012-13 funding available for TSB operations1 Expended during the quarter ended September 30, 2012 Year to date used at quarter-end
Vote 10 - Net operating expenditures 28,004 619 27,385 6,929 13,080
Statutory authorities - employee benefit plans 3,575 100 3,475 889 1,788
Total authorities 31,579 719 30,860 7,818 14,868


Fiscal year 2011-12 (in thousands of dollars)
  2011-12 funding available for TSB operations1 Expended during the quarter ended September 30, 2011 Year to date used at quarter-end
Vote 10 - Net operating expenditures 28,037 6,763 12,828
Statutory authorities - employee benefit plans 3,693 882 1,846
Total authorities 31,730 7,645 14,674
  1. Includes only authorities granted by Parliament at the end of the 2nd quarter.

Statement of expenditures by standard object (unaudited)

Fiscal year 2012-13 (in thousands of dollars)
  Planned expenditures for the year ending March 31, 2013 Budget 2012 reductions Revised planned expenditures for the year ending March 31, 2013 Expended during the quarter ended September 30, 2012 Year to date used at quarter-end
Expenditures:
Personnel 24,078 309 23,769 6,375 12,467
Transportation and communications 2,368 70 2,298 420 689
Information 181 0 181 49 52
Professional and special services 2,920 295 2,625 592 911
Rentals 215 0 215 20 200
Repair and maintenance 614 0 614 122 165
Utilities, materials and supplies 430 45 385 54 115
Acquisition of land, building and works 0 0 0 0 8
Acquisition of machinery and equipment 773 0 773 186 261
Total net budgetary expenditures 31,759 719 30,860 7,818 14,868


Fiscal year 2011-12 (in thousands of dollars)
  Planned expenditures for the year ending March 31, 2012 Expended during the quarter ended September 30, 2011 Year to date used at quarter-end
Expenditures:
Personnel 24,211 6,308 12,296
Transportation and communications 2,194 413 746
Information 162 62 66
Professional and special services 2,801 510 684
Rentals 252 5 150
Repair and maintenance 621 95 179
Utilities, materials and supplies 544 108 231
Acquisition of land, building and works 0 0 0
Acquisition of machinery and equipment 945 144 322
Total net budgetary expenditures 31,730 7,645 14,674