Quarterly Financial Report for the quarter ended December 31, 2024 (unaudited)

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

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of Canada uses financial information to support decision making, for policy development, for service delivery and for historical reference.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, Supplementary Estimates (A) and Supplementary Estimates (B). 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 December 31, 2024.

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 2024-25, 2024-25 Supplementary Estimates (A) and 2024-25 Supplementary Estimates (B). 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.

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 December 31, 2024 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 December 31, 2024 and those as of December 31, 2023.

Long description of the Comparison of Budgetary Authorities and Expenditures

(in millions of dollars)

	FY 2024-25	FY 2023-24
Authorities	$1,864.90	$1,806.40
Expenditures – Quarter 1	$307.00	$279.50
Expenditures – Quarter 2	$341.40	$347.50
Expenditures – Quarter 3	$422.00	$352.60
Total expenditures	(57.4% of Authorities)	(54.2% of Authorities)

As shown in the graph above, the NRC's expenditures totalled $422.0M during the third quarter of 2024-25 which represents an increase of $90.8M in year-to-date expenditures when compared to the prior year, with $69.4M realized over the third quarter of 2023-24. Refer to 2.3 Significant changes to budgetary expenditures for additional details.

2.2 Significant changes to authorities

As of December 31, 2024, NRC's authorities were $1,864.9M, representing an increase of $58.5M (3.2%) in comparison to the 2023-24 authorities of the same period.

The net increase of $58.5M in authorities is mainly explained by the following items:

• An increase of $49.3M in funding for the modernization of the NRC facilities to support economic growth and government priorities as presented in the Fall Economic Statement 2022;
• An increase of $36.0M to the NRC's statutory revenue carry-forward;
• An increase of $35.7M in compensation allocation related to the signing of collective bargaining agreements;
• An increase of $20.0M in funding for the NRC IRAP AI Assist program;
• An increase of $7.4M in funding to support the Critical Minerals Strategy;
• An increase of $6.5M in the value of funding reprofiled through the Capital Budget Carry-Forward;

Offset by

• A decrease of $10.5M in funding as a result of the Budget 2023 Refocusing Government Spending initiative;
• A decrease of $20.8M in funding to support the costs of the Thirty Meter Telescope Observatory;
• A decrease of $24.8M in funding available for NRC's response to COVID-19;
• A decrease of $36.2M due to temporary funding received through Budget 2021 for NRC IRAP.

The following table summarizes the changes to NRC authorities since the publication of the Quarterly Financial Report prepared as of September 30, 2024:

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 December 31, 2024, year-to-date expenditures were $1,070.4M, representing an increase of $90.8M (9.3%) in comparison to the 2023-24 expenditures of the same period. The majority of this variance was realized in the third quarter, with quarterly expenditures of $422.0M in 2024-25 compared to $352.6M in 2023-24.

The cumulative increase of $90.8M and quarterly increase of $69.4M was mostly associated with the spending in the following standard objects:

• Personnel costs have grown by $52.1M in year-to-date expenditures, with an increase of $21.6M in this quarter due to several factors, including employee wages and one-time lump sum payments as a result of collective bargaining, and changes to the organization's workforce to implement new programs, initiatives, and authorities.
• Expenditures incurred for the acquisition of machinery and equipment have climbed in the year by $16.4M with $10.4M related to this quarter mainly due to the delivery of multiple large-scale capital infrastructure projects financed from an increase in NRC's capital allocation.
• Professional and Special Services costs have increased by $8.9M in yearly expenditures when compared to last year, which is consistent with the quarterly trend. The increase is primarily due to Canada's in-kind contribution to support the construction of the Square Kilometre Array Observatory which Canada officially joined as a member in the first quarter of 2024-25.
• Transfer payments overall have decreased in expenditures to date by $1.1M, however the amount used in this quarter has increased by $23.2M largely due to cash contributions provided for Canada's membership in the Square Kilometre Array Observatory.

3. Risks and uncertainties

In the third quarter of 2024-25, the top risks for the NRC were related to cyberattacks, aging infrastructure, workplace health and safety, and both risks and opportunities related to the rapid expansion and use of generative AI tools. To mitigate the threat of cyberattacks, the NRC is continuously strengthening its cyber security posture to safeguard the NRC's information technology and networks. The NRC will also continue to advance facility and building revitalization projects as part of its major facilities renewal initiative, and embed the modernization of its IT equipment into investment planning processes. To promote continuous improvement and vigilance pertaining to workplace health and safety, the NRC is increasing access to and analysis of proactive hazardous occurrence information to address potential issues before they lead to incidents, in addition to NRC-wide safety campaigns. To benefit from the potential of generative AI tools, the NRC provided staff with resources on the informed use of generative AI tools, produced an internally managed generative AI tool, and established a generative AI committee to support responsible use of AI at the NRC.

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

The NRC launched 3 new Challenge programs to deliver on Canada's research and innovation capacity in quantum, electric vehicles and AI. The Quantum Internetworking Challenge program will focus on developing solutions for networking quantum sensing, computing, and communications technologies. The e-Auto Challenge program is intended to speed up the growth of existing and new Canadian suppliers in the electric vehicles sector. Finally, the AI for Productivity Challenge program will drive AI adoption in manufacturing, clean tech and agriculture sectors to improve productivity and profitability.

The NRC's Departmental Sustainable Development Strategy (DSDS) Report for 2023–24 was tabled in Parliament on 1 November 2024, and is now publicly available. This report details the NRC's 2023 to 2024 results and accomplishments against its 2023 to 2027 DSDS commitments and its contributions to the Government of Canada's Federal Sustainable Development Strategy in all 3 dimensions of sustainable development: social, economic and environmental.

The 2023 to 2024 Departmental Results Report (DRR) was tabled in Parliament on 17 December 2024 The DRR informs Parliamentarians and Canadians about the NRC's results and achievements for the last fiscal year. The 2023 to 2024 DRR focuses on priority areas of business innovation and growth, climate change and sustainability, health and biomanufacturing, quantum and digital solutions, and ongoing foundational research.

On 28 November 2024, President Mitch Davies announced the retirement of the NRC's Vice-President of Corporate Services and Chief Financial Officer, Dale MacMillan, effective January 2025 with Karen Cahill joining the NRC as the new Vice-President of Corporate Services and Chief Financial Officer. Ms. Cahill comes to the NRC from the Treasury Board of Canada Secretariat (TBS), where she was the Assistant Secretary of the Corporate Services Sector and Chief Financial Officer for TBS.

Approved by senior officials

Approved by:

Ottawa, Canada

5. Statement of authorities (unaudited)

For the quarter ended December 31, 2024

6. Departmental budgetary expenditures by Standard Object

For the quarter ended December 31, 2024