Quarterly Financial Report for the quarter ended December 31, 2019

Introduction

This quarterly report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates (A).

The Canadian Northern Economic Development Agency (CanNor) works with partners to advance economic development in Canada's territories. The Agency supports, invests in and advocates for national, territorial and community level economic development; fosters growth and innovation; contributes to building capacity; and invests in foundational economic development projects in the territories. In addition, through the Northern Projects Management Office the Agency coordinates federal participation in the territorial environmental review processes and maintains the Crown consultation record for major projects.

Further details on CanNor's authorities, mandate and program activities may be found in the Departmental Plan and the Main Estimates.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes CanNor's spending authorities granted by Parliament and those used by the Agency, consistent with the Main Estimates, Supplementary Estimates (A) and other adjustments approved by Treasury Board, for the 2019-2020 fiscal year. The authority of Parliament is required before moneys can be spent by the Government. 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.

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.

As part of the departmental performance reporting process, CanNor prepares its annual departmental financial statements on a full accrual basis in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector. However, the spending authorities voted by Parliament remain on an expenditure basis.

Highlights of fiscal quarter and fiscal year to date (YTD) results

Risks and Uncertainties

While the North presents opportunities for economic development, growth and innovation, factors including its vast and remote geography, lack of infrastructure, connectivity challenges, the cost and access to energy, and shortage of skilled labour all contribute to a challenging operating environment. These factors create additional challenges for businesses and can also prevent Northerners from fully benefiting from economic development opportunities.

CanNor's key risks and response strategies are published in the Departmental Plan:

• Limited Economic Diversification - A high degree of reliance on the mining and oil/gas sector resulting in an increased vulnerability to the cyclical changes in commodity prices.
• Infrastructure Deficit - Higher capital and operating costs compared to southern Canada resulting from a core infrastructure deficit, including connectivity, constrain opportunities for northern economic development and impact the effectiveness of CanNor's programming.
• Labour Market - Competition within the limited labour pool in the North carries risks for recruitment and retention, which impacts the ability of businesses to grow and diversify.

Statement of Authorities (unaudited)

(in thousands of dollars)

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)