Quarterly Financial Report for the quarter ended June 30, 2018 (unaudited)

1.1 NRC Mandate

The NRC exists under the National Research Council Act (R.S.C., 1985, c. N-15) and is a Departmental corporation named in Schedule II of the Financial Administration Act (R.S.C., 1985, c. F-11). The mission of the NRC is to work with clients and partners to provide innovation support, strategic research, and scientific and technical services to develop and deploy solutions to meet Canada's current and future industrial and societal needs.

Under the National Research Council Act (R.S.C., 1985, c. N-15), the NRC is responsible for:

• Undertaking, assisting or promoting scientific and industrial research in fields of importance to Canada;
• Providing vital scientific and technological services to the research and industrial communities;
• Investigating standards and methods of measurement;
• Working on the standardization and certification of scientific and technical apparatus, instruments and materials used or usable by Canadian industry;
• Operating and administering any astronomical observatories established or maintained by the Government of Canada;
• Establishing, operating and maintaining a national science library; and
• Publishing and selling or otherwise distributing such scientific and technical information as the Council deems necessary.

Further details on the NRC's legislative framework, authority, mandate and program activities can be found in Part II of the Main Estimates and the Departmental Plan.

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 NRC's spending authorities granted by Parliament and those used by the NRC consistent with the Main Estimates for 2018-19, including the Budget 2018 items which were accessed through the Treasury Board Budget Implementation vote. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use for spending authorities.

The authority of Parliament is required before moneys can be spent by the Government of Canada. 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 (pursuant to paragraph 5(1)(e) of the National Research Council Act (R.S.C., 1985, c. N-15), the NRC has authority to expend revenues it has received through the conduct of its operations).

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act (R.S.C., 1985, c. F-11) authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government of Canada 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 NRC uses the full accrual method of accounting to prepare and present its annual departmental financial statements which are part of the Departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

2.1 Authorities and Expenditures

The following graph provides a comparison of the budgetary authorities and expenditures as of June 30, 2018 and those as of June 30, 2018.

Comparison of Budgetary Authorities and Expenditures
as of June 30, 2018 and June 30, 2017
(in millions of dollars)

As shown in the graph above, the NRC's expenditures totalled $195.1M during the first quarter of 2018-19 which represents a decrease of $13.8M over the first quarter of 2017-18. Lower expenditures are mainly attributable to the decrease of $20.1M in Grants and Contributions, offset by increases of $6.1M in combined in operating and statutory revenue expenditures and $1.0M in capital expenditures. Refer to 2.3 Significant Changes to Budgetary Expenditures for additional details.

2.3.1 Variances in Year-to-date Expenditures

As of June 30, 2018, year-to-date expenditures were $195.1M, representing a decrease of $13.8M (6.6%) in comparison to the 2017-18 expenditures of the same period. This decrease is mostly attributable to the following items:

• Transfer payments consisting of Grants & Contributions (G&C) expenditures decreased by $20.6M compared with the same period in the previous year. This change is principally attributable to decrease of contributions to Firms of $13.5M as well as a decrease of $12.5M to contributions to TRIUMF , offset by increases of $3.8M in contributions to the International Astronomical Observatories and $3.1M in contributions to Youth Employment Strategy.
• Combined operating expenditures and statutory revenue expenditure increased by $6.1M compared with the same period of the previous fiscal year. This change is mainly attributable to increases of $2.6M in acquisition of machinery and equipment, $2.1M in professional and special services as well as $0.9M in purchased repair and maintenance.
• Capital expenditures increased by $1.0M. The increase is mainly attributable to an increase of $1.5M of acquisition of machinery and equipment (special industry machinery, computer equipment as well as research equipment), $1.0M in professional fees, offset by a decrease of $1.7M in acquisition of land, buildings and works.