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Natural Sciences and Engineering Research Council of Canada Quarterly Financial Report for the quarter ended September 30, 2019

Statement outlining results, risks and significant changes in operations, personnel and programs

NSERC Quarterly Financial Report – 2nd Quarter, September 2019

Introduction
Highlights of fiscal quarter and fiscal year-to-date results
Risks and uncertainties
Significant changes related to operations, personnel and programs
Statement of authorities (unaudited)
Departmental budgetary expenditures by standard object (unaudited)

Introduction

This Quarterly Financial Report (QFR) has been prepared by management as required by section 65.1 of the Financial Administration Act (FAA), and in the form and manner prescribed by the Treasury Board. It should be read in conjunction with the 2019–20 Main Estimates. This report has not been subject to an external audit or review.

Authority, mandate and programs

The Natural Sciences and Engineering Research Council of Canada (NSERC) was established in 1978 by the Natural Sciences and Engineering Research Council Act, and is a departmental corporation named in Schedule II of the FAA. NSERC’s purpose is to help make Canada a country of discoverers and innovators for the benefit of all Canadians, by supporting postsecondary students and postdoctoral fellows in their advanced studies, promoting discovery by funding the research programs of academic researchers, and stimulating partnerships between academia and industry.

Further information on the NSERC mandate and program activities can be found in Part II of the Main Estimates.

Basis of presentation

Management prepared this quarterly report using an expenditure basis of accounting. The accompanying Statement of Authorities includes NSERC’s spending authorities granted by Parliament and those used by the agency, consistent with the Main Estimates for fiscal year 2019–20. 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 the Government of Canada can spend monies. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authorities for specific purposes.

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

Highlights of fiscal quarter and fiscal year-to-date results

This section highlights the significant items that contributed to the change in resources available for the fiscal year, as well as the actual year-to-date and quarterly expenditures compared with the previous fiscal year.

The following graph provides a comparison of budgetary authorities available for the full fiscal year and budgetary expenditures by quarter for fiscal year 2019–20 and fiscal year 2018–19.

comparison of budgetary authorities available for the full fiscal year and budgetary expenditures

Comparison of budgetary authorities and year-to-date expenditures

Significant changes to budgetary authorities

As of September 30, 2019, NSERC’s total available authorities for fiscal year 2019–20 amounted to $1,368.8 million. This represents an overall increase of $67.9 million (5.2%) from the comparative period of the previous year. Of the $67.9 million, $60.4 million relates to increases in NSERC’s grant and scholarship programs (Vote 5), $6.8 million relates to increases in operating expenditures (Vote 1) and $0.7 million relates to increases in budgetary statutory authorities (Employee Benefit Plan). The major changes in NSERC’s budgetary authorities between the current and previous fiscal years include:

an increase of $23.6 million from Budget 2018 for the Colleges and Community Innovation program suite;
an increase of $15.0 million from Budget 2018 for fundamental research;
an increase of $13.0 million from Budget 2018 for the Canada Research Chairs program;
an increase of $6.1 million from Budget 2019 for additional Canada Graduate Student awards and for coverage of the expanded duration of paid parental leave;
an increase of $4.0 million to fund the 2018 Centres of Excellence for Commercialization and Research competition;
an increase of $3.0 million from Budget 2018 for pilot programs intended to increase equity, diversity and inclusion in Canadian post-secondary research; and
an increase of $3.0 million for the DND Discovery supplements.

Significant changes to authorities used

Year-to-date spending
The following table provides a comparison of cumulative spending by vote for the current and previous fiscal years.

Year-to-date budgetary expenditures used at quarter-end (million of dollars)	2019-20	2018-19	Variance
Vote 1 - Operating expenditures
Personnel	24.1	21.1	3.0
Non-personnel	5.5	3.7	1.8
Vote 5 - Grants and scholarships	689.3	605.2	84.1
Total budgetary expenditures	718.9	630.0	88.9

Total budgetary expenditures amounted to $718.9 million at the end of the second quarter of fiscal year 2019–20, compared to $630.0 million reported in the same period in the previous fiscal year.

Grants and scholarships

At the end of the second quarter of 2019–20, the grant and scholarship expenses increased by $84.1 million, compared to what was reported in the same period of the previous fiscal year. The differences are attributable to the following:

a net increase of $56.7 million, due to timing differences on payments;
an increase of $21.3 million for the Discovery suite of programs, due to the increased authorities from Budget 2018;
an increase of $5.6 million for the Centres of Excellence for Commercialization and Research program, due to the 2018 competition;
an increase of $3.2 million for the Canada Research Chairs program, due to the increased authorities from Budget 2018; and
a decrease of $2.8 million for the Canada Excellence Research Chairs program, due to the ending of the first award cycle.

Operating expenditures

The personnel expenditures have increased by $3.0 million compared to the same period in 2018–19. This increase is mainly due to additional full-time employees (FTEs) hired related to Budget 2018 and the Common Grants Management Solution project.

The non-personnel expenditures have increased by $1.8 million due to increased spending in professional services and the acquisition of office equipment, computers and mobile phones related to the increased number of employees.

Authorities used based on elapsed time

The total authorities used during the second quarter ($367.3 million) of fiscal year 2019–20 represent 27% of total available authorities ($1,368.8 million).

Quarterly spending

The total authorities used during the second quarter of 2019–20 amounted to $367.3 million (27% of the total available authorities; 27% of the total authorities for grant and scholarship programs; and 25% of the total authorities for operating expenditures and employee benefits).

Year-to-date budgetary expenditures used at quarter-end (million of dollars)	2019-20	2018-19	Variance
Vote 1 - Operating expenditures
Personnel	11.8	10.5	1.3
Non-personnel	3.4	2.2	1.2
Vote 5 - Grants and scholarships	352.1	267.0	85.1
Total budgetary expenditures	367.3	279.7	87.6

Grants and scholarships

Transfer payments represent 95.5% of NSERC’s available authorities. Variances in transfer payments stem from the nature of program cycles. During the second quarter of 2019–20, NSERC’s transfer payment expenditures increased by $85.1 million compared to the same quarter of the previous fiscal year, which is a result of the following:

a net increase of $71.5 million due to timing differences on payments;
an increase of $8.2 million for the Discovery suite of programs, due to the increased authorities from Budget 2018; and
an increase of $5.4 million for the Centres of Excellence for Commercialization and Research program, due to the 2018 competition.

Operating expenditures

The personnel expenditures for the second quarter of fiscal year 2019–20 have increased by $1.3 million, due to additional FTEs hired related to Budget 2018 and the Common Grants Management Solution project.

The non-personnel expenditures have increased by $1.2 million, mainly due to the increased spending in professional services and the acquisition of office equipment, computers and mobile phones related to the increased number of employees.

Risks and uncertainties

Through the corporate risk identification exercise, NSERC annually identifies corporate-level risks and develops response measures to minimize their likelihood and/or impact. Senior management closely monitors the risks listed below to ensure they are continuously mitigated and that the residual risk level is acceptable.

Strategic risk 1—resource management: There is a risk that resources (i.e., human, technological, financial) will be insufficient or inappropriately allocated to support program design and delivery.

With increased pressures to deliver, NSERC has experienced challenges related to the capacity to hire/onboard skilled human resources. Where appropriately skilled human resources were not available, it was necessary to rely on contractors at much higher costs. Furthermore, pressures to deliver new funding opportunities on short timeframes required a relatively large number of contractors. The risk response strategy identified during initial planning for 2018–19 is still relevant, and key aspects of the identified action items were completed.

Strategic risk 2—change management: There is a risk that NSERC’s change management processes will not allow the agency to effectively plan for, implement and sustain transformations to the organization, employees and research community.

As per the People Strategy Action Plan, concrete activities have been put in place in an effort to respond to challenges identified through the 2017 Public Service Employee Survey. Change management resources have been contracted (or are in the process of being contracted) to support major corporate initiatives such as workplace renewal. The Common Administrative Services Directorate (CASD) is also exploring options to develop a portfolio management / change management office that would coordinate change management for projects across CASD. Based on early lessons, organizational needs and senior management buy-in, this office may expand to provide change management services across all of NSERC.

Significant changes related to operations, personnel and programs

NSERC is pleased to welcome Dr. Alejandro Adem as its new president, effective October 1, 2019.

In June 2019, following the announcement in Budget 2019, NSERC, in collaboration with the Canadian Institutes of Health Research and the Social Sciences and Humanities Research Council of Canada, announced the doubling of the duration of paid parental leave for graduate students and postdoctoral fellows supported by the agencies. The maximum duration will be 12 months instead of six for those on active paid parental leave on April 1, 2019, or later, including those who began their leave before this date. The change applies to holders of a graduate scholarship or postdoctoral fellowship from the granting agencies, as well as to students and fellows who are paid from a supervisor’s agency grant.

Approved by:

Original signed by

Dr. Alejandro Adem
President

Ottawa, Canada
November 29, 2019