Quarterly Financial Report for the quarter ended June 30, 2023 (unaudited)

1. Introduction

The Government of Canada uses financial information to support decision making, for policy development, for service delivery and for historical reference. These financial statements have been prepared to respond to these requirements. This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates (A). The QFR should be read in conjunction with the Main Estimates and the Federal Budget. They have been prepared by management as required by section 65.1 of the Financial Administration Act (R.S.C., 1985, c. F-11) and in the form and manner prescribed by the Treasury Board of Canada Secretariat. Although these statements have not been subject to an external audit or review, the National Research Council of Canada (NRC) attests that they are an accurate and true reflection of the financial position for the period ended June 30, 2023.

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 have an impact by advancing knowledge, applying leading-edge technologies, and working with other innovators to find creative, relevant and sustainable solutions to Canada's current and future economic, social and environmental challenges.

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
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 2023-24. 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. Highlights of fiscal quarter and fiscal year-to-date (YTD) results

This section highlights the items that contributed most significantly to the changes in budgetary authorities for the current fiscal year and to the actual expenditures for the quarter that ended on June 30, 2023 compared with the previous fiscal year. This section should be read in conjunction with the NRC's tables entitled Statement of Authorities and Departmental budgetary expenditures by Standard Object found on the last 2 pages of this report.

2.1 Authorities and expenditures

The following graph provides a comparison of the budgetary authorities and expenditures as of June 30, 2023 and those as of June 30, 2022.

Comparison of Budgetary Authorities and Expenditures
As of June 30, 2023 and June 30, 2022
(in millions of dollars)

	FY 2023-24	FY 2022-23
Authorities	$1,715.5	$1,563.8
Expenditures - Quarter 1	$279.5 (16.3% of Authorities)	$261.5 (16.7% of Authorities)

As shown in the graph above, the NRC's expenditures totalled $279.5M during the first quarter of 2023-24 which represents an increase of $18.0M over the first quarter of 2022-23. Refer to 2.3 Significant changes to budgetary expenditures for additional details.

2.2 Significant changes to authorities

As of June 30, 2023, the authorities were $1,715.5M, representing an increase of $151.7M (10%) in comparison to the 2022-23 authorities of the same period.

The increase of $151.7M in authorities is mainly explained by the following items:

An increase of $71.7M in new funding for the modernization of the National Research Council facilities to support economic growth and government priorities as presented in the Fall Economic Statement 2022
An increase of $40.6M to the NRC's statutory revenue carry-forward
An increase of $25.2M in new funding for the Platform for the Decarbonization of the Construction Sector
An increase of $10.4M for the International Astronomical Observatories Program, as a result of funding reprofile for the Thirty Meter Telescope
An increase of $7.3M in funding for IRAP Youth Employment Skills Strategy
An increase of $6.1M in reprofiled funding associated to the temporary IRAP funding received through Budget 2021
An increase of $4.6M for the revitalization of the Canadian Photonics Fabrication Centre; offset by
A decrease of $5.3M in funding for the Collaboration Science, Technology and Innovation Program
A decrease of $7.0M in funding of the NRC's response to COVID-19

The following table summarizes the significant changes to NRC authorities:

Significant Changes to Authorities (unaudited)
For the year ending March 31, 2024 - As of June 30, 2023
(in millions of dollars)
	Vote 1 Operating	Vote 5 Capital	Vote 10 Grants & Contributions	Statutory Revenues	Contributions to EBP	Total
Authorities – Total available for use for the year ending March 31, 2023 - As of June 30, 2022						1,563.8
Modernizing National Research Council Facilities	22.4	48.1			1.2	71.7
Statutory Revenue Carryforward Adjustment				40.6		40.6
Platform to Decarbonize the Construction Sector at Scale	19.6	2.0	2.0		1.6	25.2
International Astronomical Observatories Program			10.4			10.4
IRAP Youth Employment Skills Strategy	0.6		6.8		(0.1)	7.3
IRAP Budget 2021 Funding			6.1			6.1
Canadian Photonics Fabrication Centre	0.5	4.0			0.1	4.6
Other	0.3	0.6	(2.9)		0.1	(1.9)
Collaboration Science, Technology and Innovation Program			(5.3)			(5.3)
COVID-19 Response Funding			(7.0)			(7.0)
Total increase (decrease) in authorities in comparison to prior year	43.4	54.7	10.1	40.6	2.9	151.7
Authorities – Total available for use for the year ending March 31, 2024 - As of June 30, 2023						1,715.5

2.3 Significant changes to budgetary expenditures

This section should be read in conjunction with the NRC's tables entitled Statement of Authorities and Departmental budgetary expenditures by Standard Object both located at the end of this report.

2.3.1 Variances in year-to-date expenditures

As of June 30, 2023, year-to-date expenditures were $279.5M, representing an increase of $18.0M in comparison to the 2022-23 expenditures of the same period. This increase is mostly attributable to the following items:

Increase of $13.3M in combined operating and statutory expenditures compared with the same period of the previous fiscal year. This change is in part attributable to costs related to the modernization of the NRC facilities and the platform to decarbonize the construction sector
Increase of $2.4M in grants and contributions expenditures compared with the same period in the previous year, mostly due to BMC contributions
Increase of $1.6M in capital expenditures compared with the same period of the previous fiscal year, mainly due to the CPFC facility renewal

3. Risks and uncertainties

In the first quarter of 2023-24, issues and risks of primary concern to the NRC included: continued geopolitical conflict and tension, cyber-attacks, inflation and supply chain disruptions, and the implications of the NRC's Industrial Research Assistance Program (NRC IRAP) transitioning to the new Canada Innovation Corporation (CIC). The potential escalation of geopolitical conflict kept the risk of cyber-attacks, supply chain disruptions and inflated costs elevated. In response, the NRC continued to monitor whether international developments would affect collaborative research relationships and to develop new research security measures. NRC IRAP's transition to the CIC is a complex undertaking, posing a risk to smooth business operations and client relationships during the anticipated 24-month transition period. The NRC has put in place a transition team to mitigate the risk. This team is led by a Vice-President, who reports directly to the President, and includes a core team to lead all aspects of the IRAP transition, in close collaboration with the CIC.

4. Significant changes in relation to operations, personnel and programs

In February, the Government of Canada announced that NRC IRAP will be integrated into the new CIC, including the transfer of all IRAP employees. The transition will take place over the next 24 months, during which IRAP will remain part of the NRC and IRAP business will continue as usual. Every effort is being made to ensure continuity of program delivery for clients and operational stability for staff.

Emily Harrison has been appointed to Vice-President of Special Initiatives, NRC IRAP Transition and will lead the first phase of the transition. During Emily's assignment, Amy Campbell, who is currently Director of Labour Relations and Compensation, will assume the role of Vice-President of Human Resources.

Like most federal organizations, the NRC shifted the majority of its employees to work remotely early in the pandemic. While NRC researchers have been back in the labs for some time, as of March 31, the NRC implemented a common hybrid work model for all its employees.

With the construction of the Biologics Manufacturing Centre facility complete and the drug establishment licence issued, the NRC has fulfilled its leadership role in this area. On April 1, a new independent not-for-profit corporation, Biologics Manufacturing Centre (BMC) Inc., assumed responsibility for the operations of the facility built for Canada.

Legislative amendments to the National Research Council Act received royal assent in June 2023. These amendments provide procurement and IT-related flexibilities to improve the NRC's ability to work at the speed of our partners. Additional steps are needed for the changes to come into force, other than the powers to create the Procurement Oversight Board, which were in force upon royal assent. The Procurement Oversight Board will be responsible for approving the NRC's procurement oversight framework and approving proposals for large-scale or complex procurement.

Approved by senior officials

Approved by:

Dale MacMillan
A/President

Johanne Diotte
A/Vice-President, Corporate Services and Chief Financial Officer

Ottawa, Canada

5. Statement of authorities (unaudited)

For the quarter ended June 30, 2023

Fiscal Year 2023-24 (in thousands of dollars)
	Total available for use for the year ending March 31, 2024^{Table 2 note 1}	Used during the quarter ended June 30, 2023	Year to date used at quarter-end
Vote 1 - Operating expenditures	537,914	125,064	125,064
Vote 5 - Capital expenditures	105,785	11,495	11,495
Vote 10 - Grants and contributions	651,152	92,538	92,538
Statutory revenue^{Table 2 note 2}	349,044	32,519	32,519
Statutory EBP	71,579	17,895	17,895
Total Budgetary authorities	1,715,474	279,511	279,511

Fiscal Year 2022-23 (in thousands of dollars)
	Total available for use for the year ending March 31, 2023^{Table 2 note 1}	Used during the quarter ended June 30, 2022	Year to date used at quarter-end
Vote 1 - Operating expenditures	494,507	114,645	114,645
Vote 5 - Capital expenditures	51,085	9,868	9,868
Vote 10 - Grants and contributions	641,080	90,145	90,145
Statutory revenue **	308,433	29,622	29,622
Statutory EBP	68,716	17,178	17,178
Total Budgetary authorities	1,563,821	261,458	261,458

Table note 1

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

Return to first table note 1 referrer

Table note 2

Includes Statutory Revenue available for use in future years pursuant to paragraph 5(1)(e) of the National Research Council Act (R.S.C., 1985, c. N-15).

Return to first table note 2 referrer

6. Departmental budgetary expenditures by standard object (unaudited)