Quarterly Financial Report for the quarter ended June 30th, 2020 (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of Canada uses financial information to support decision making, for policy development, for service delivery and for historical reference.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. The QFR should be read in conjunction with the Main Estimates, the Federal Budget (Budget 2016, Budget 2017, Budget 2018 and Budget 2019) as well as Canada’s COVID-19 Economic Response Plan. 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, 2020.

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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 2020-21 and Canada’s COVID-19 Economic Response Plan. 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, 2020 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, 2020 and those as of June 30, 2019.

Long description of the Comparison of Budgetary Authorities and Expenditures

(in millions of dollars)

	FY 2020-21	FY 2019-20
Authorities	$1,408.5	$1,316.6
Expenditures - Quarter 1	$381.6	$212.2

As shown in the graph above, the NRC’s expenditures totalled $381.6M during the first quarter of 2020–21 which represents an increase of $169.4M over the first quarter of 2019-20. Higher expenditures are attributable to increases of $172.5M in other statutory expenses mainly related to the Industrial Research Assistance Program – Innovative Assistance Program which is part of NRC’s COVID-19 response and an increase of $5.3M in combined operating and statutory respendable revenue expenditures, offset mainly by a decrease of $9.0M in the Industrial Research Assistance Program contributions to firms. Refer to 2.3 Significant changes to budgetary expenditures for additional details.

2.2 Significant changes to authorities

As of June 30, 2020, the authorities were $1,408.5M, representing an increase of $91.9M (7.0%) in comparison to the 2019 - 20 authorities of the same period.

The increase of $91.9M in authorities is mainly explained by the following items:

• Increase of $327.4M for the funding of the NRC’s response to COVID-19. NRC received $250.M for the Industrial Research Assistance Program – Innovative Assistance Program to help high-potential firms, support jobs and keep valuable intellectual property in Canada and $15.0M for the Youth Employment Strategy and Skills Program through the Public Health Events of National Concern Payment Act. NRC also received $15.0M to launch an NRC IRAP-Innovative Solutions Canada COVID initiative, $14.9M for the NRC Pandemic Response Challenge and $43.9M over two years ($32.5M in 2020-21 and $11.4M in 2021-22) for the re-engineering of the NRC Royalmount facility in Montréal into a Good Manufacturing Practice (GMP) scale-up facility for vaccine development and manufacturing.
• Increase of $20.5M in compensation allocation related to the signing of collective bargaining agreements;
• An increase of $5.6M for the Collaborative Science, Technology and Innovation Program due to the revised financial profile of the program resulting from the reprofile of the 2018-19 lapsed funding;
• An increase of $4.5M for the construction and commissioning of the International Thirty Meter Telescope due revised financial profile of the program; as well
• An increase of $3.5M to support TRIUMF, as announced in Budget 2019; offset by
• A decrease of $22.8M related to the statutory revenue carry-forward, and
• As at June 30th, 2020, only nine twelfth of NRC’s 2020-21 Main Estimates voted appropriations were released. Consequently, $243.1M ($113.7M in operating expenditures, $14.1M in capital expenditures and $115.3M in grants and contributions expenditures) have not been supplied due to amended House of Commons Standing Orders.

The following table summarizes the significant changes to NRC authorities:

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.

3. Risks and uncertainties

In the first quarter, the NRC continued to monitor the action plans set out in its refreshed Corporate Risk Profile. Going forward, the following three corporate risks will continue to be a main point of focus: collaboration management, financial stability, and protection of information assets. The impact of COVID-19 is being monitored as part of the corporate risk action plan progress tracking to determine effects on the current risks and identify potential new risks that may need to be managed throughout the remainder of the fiscal year. One evolving risk being tracked closely are revenue reductions. Moving to telework, and focusing capacity on COVID-19 related work combined with the sudden downturn in the economy will result in reduced revenue generating activity for NRC as the year progresses, which will likely result in NRC revenue shortfalls for the fiscal year.

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

As part of operating in the COVID environment, the NRC is focusing its efforts on three key priorities: protecting employees; protecting the health and safety of Canadians; and supporting the needs of clients. The following highlights operational and program changes in Q1.

• To protect the health and safety of employees, 83% of the NRC workforce was transitioned to telework by the end of the quarter, with the remaining 17% working on site full-time or intermittently to perform essential tasks such as client service and maintenance of research equipment and facilities. The NRC optimized telework capacity by investing in network licenses, virtual tools such as MS Teams and BBM Enterprise, and additional equipment, in order to help staff stay connected and engaged. The NRC also increased mental health and safety awareness by introducing webinars for supervisors on managing virtual teams, expanding the Wellness and Mental Health portal, providing ergonomic tips for home offices and routine tracking of potential cases of COVID-19. Supervisors and employees were also provided with online tools and resources for wellness strategies and support.
• In support of reducing the impact of COVID-19 and stimulating recovery in small businesses, the NRC received government funds to:
  • Received over 680 requests for assistance or advice.
  • Launched an NRC IRAP-Innovative Solutions Canada COVID initiative ($15.0M), and an NRC Pandemic Response Challenge Program ($14.9M) to challenge the market to solve COVID needs.
  • Re-engineer the NRC Royalmount facility in Montréal into a Good Manufacturing Practice (GMP) and scale-up facility for vaccine development and manufacturing ($43.9M over 2 years).
  • On April 17, 2020, the Prime Minister announced the NRC IRAP Innovation Assistance Program ($250M) to allow small and medium-sized Canadian businesses unable to secure funding under existing programs and subsidies to apply for financial assistance under this new program starting April 22. This support is enabling NRC IRAP to help more than 1,000 firms and maintain 10,000 jobs.
  • The NRC established agreements with various partners to develop COVID-19 vaccines and therapies (e.g. VBI Vaccines Inc.) and partner with other companies as they advance their vaccine candidates this year
  • To provide employment opportunities and skills development to students, recent graduates and post-doctoral fellows facing hardship due to COVID-19, increased funding of $15M was announced for NRC IRAP’s Youth Employment Program and an additional $7.5M for student and post-doctoral hires at the NRC.

As part of its ongoing business activities, the NRC took occupancy of the Mississauga advanced materials research facility on April 1, 2020. The facility will be a national centre for accelerated materials discovery and innovation, with a focus on collaborative development, scale-up and transition to industry of AI driven, smart (computer-enabled) automation, materials for clean energy, and “smart materials for smart objects”.

Approved by senior officials

Approved by:

Ottawa, Canada

5. Statement of Authorities (unaudited)

For the quarter ended June 30, 2020

6. Departmental budgetary expenditures by Standard Object (unaudited)

For the quarter ended June 30, 2020