Unaudited future-oriented statement of operations

For the year ending March 31, 2018

  Forecast results 2016-17 Planned results 2017-18
(in thousands of dollars)
Expenses
Discovery 497,405 523,888
Innovation 383,862 380,412
People 290,226 287,946
Internal Services 30,304 26,111
Total Expenses 1,201,797 1,218,357
Revenues
Miscellaneous revenues 379 579
Total Revenues 379 579
Net cost of operations 1,201,418 1,217,778

The accompanying notes form an integral part of this unaudited future-oriented statement of operations.

Notes to the Future-Oriented Statement of Operations (unaudited)

Authority and Objectives
The Natural Sciences and Engineering Research Council (NSERC) was established in 1978 by the Natural Sciences and Engineering Research Council Act, and is a departmental corporation named in Schedule II to the Financial Administration Act. NSERC's purpose is to help make Canada a country of discoverers and innovators for the benefit of all Canadians, by supporting students, postdoctoral fellows, university professors and university-industry research partnerships. NSERC delivers its objective under four program activities which are described in the Departmental Plan.

NSERC's grants, scholarships and operating expenditures are annually funded by voted budgetary authorities. Employee benefits are funded by statutory authorities.

Methodology and Significant Assumptions
The unaudited future-oriented statement of operations has been prepared on the basis of government priorities and departmental plans as described in the Departmental Plan.

The information in the estimated results for fiscal year 2016-17 is based on actual results as at December 31, 2016 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2017-18 fiscal year.

The main assumptions underlying the forecasts are as follows:

  • NSERC's activities will remain substantially the same as for the previous year.
  • Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue.

These assumptions are adopted as at December 31, 2016.

Variations and Changes to the Forecast Financial Information
Although every attempt has been made to forecast final results for the remainder of 2016-17 and for 2017-18, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this unaudited future-oriented statement of operations, NSERC has made estimates and assumptions about the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are based on past experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, and are continually evaluated.

Factors that could lead to material differences between the future-oriented statement of operations and the historical Statement of Operations include:

  • the timing and amount of acquisitions and disposals of tangible capital assets may affect gains/losses and amortization expense.
  • implementation of new terms and conditions of employment.
  • further changes to the operating budget through additional new initiatives or technical adjustments later in the year.
  • After the Departmental Plan is tabled in Parliament, NSERC will not be updating the forecasts for any changes in financial resources made in ensuing supplementary estimates. Variances will be explained in the Departmental Results Report.

Summary of Significant Accounting Policies
The unaudited future-oriented statement of operations has been prepared using the Government of Canada's accounting policies in effect for fiscal year 2016-17, and is based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

Expenses
Grants and scholarships (transfer payments) are recognized in the year in which the entitlement of the recipient has been established, when the recipient has met the eligibility criteria, the commitment has been approved, and the payment is due before the end of the fiscal year.

Operating expenses are recorded when goods are received or services are rendered, on an accrual basis. Vacation pay and compensatory leave are accrued as the benefits are earned under the respective terms of employment. Services provided without charge by other government departments and agencies for accommodation and the employer's contribution to the health and dental insurance plans are recorded as operating expenses at their estimated cost.

Expenses also include provisions to reflect changes in the value of assets, including provisions for bad debt on accounts receivable and amortization of tangible capital assets which is done on a straight-line basis over the estimated useful life of the asset as follows:

Asset Class Amortization Period
Informatics equipment, including standard software issued on desktop computers 3 years
Purchased network software and in-house developed software 5 years
Other equipment 5 years
Furniture 5 years
Motor vehicles 7 years
Leasehold improvements Lesser of their useful life or the term of the lease

Revenues
Revenues are accounted for in the period in which the related transactions or the event that gives rise to the revenues occurred. Miscellaneous revenues (respendable revenue) are revenue provided under a revolving fund or a net-voting authority and are netted against the costs of operations.

Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which related expenses are incurred.

Parliamentary Authorities
NSERC is financed by the Government of Canada through parliamentary authorities. Financial reporting of authorities provided to NSERC differs from financial reporting according to generally accepted accounting principles because authorities are based mainly on cash flow requirements. Items recognized in the future-oriented statement of operations in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, NSERC has different net cost of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

Reconciliation of Net Cost of Operations to Requested Authorities (in thousands of dollars)

  Forecast results 2016-17 Planned results 2017-18
Net cost of operations before government funding and transfers 1,201,418 1,217,778
Adjustments for items affecting net cost of operations but not affecting authorities:
Revenues 379 579
Amortization of tangible capital assets (1,836) (1,760)
Services provided without charge by other government departments (6,853) (6,917)
Increase in vacation pay and compensatory leave (63) (136)
Decrease in employee future benefits 211 183
Parental and other benefits paid by NSERC (691) (691)
Total items affecting net cost of operations but not affecting authorities (8,853) (8,742)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets 302 363
Increase in prepaid expenses (49) 0
Total items not affecting net cost of operations but affecting authorities 253 363
Requested authorities 1,192,818 1,209,399

Authorities Requested (in thousands of dollars)

  Forecast results 2016-17 Planned results 2017-18
Authorities requested:
Vote 05 - Grants & Scholarships 1,142,127 1,156,972
Vote 01 - Operating Expenditures 47,366 44,693
Statutory authorities
Contributions to employee benefits plan 5,314 4,787
Spending of revenues pursuant to subsection 4(2) of the Natural Sciences and Engineering Research Council Act 379 579
  1,195,186 1,207,031
Less:    
Authorities available (for future years) from previous years (2,368) 2,368
Total authorities requested 1,192,818 1,209,399

Authorities presented reflect current forecasts of statutory items, approved initiatives included and expected to be included in Estimates documents and Supply Bills and, when reasonable estimates can be made, estimates of amounts to be allocated from Treasury Board central votes.

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