2011-2012 Quarterly Financial Report for the quarter ended June 30, 2011

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

1. Introduction

This quarterly financial 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 Accounting Standard 1.3. This report should be read in conjunction with the Main Estimates and has not been subject to an external audit or review.

Canada's fisheries and oceans have played and continue to play an important historic, economic, and cultural role in Canada's development and growth as a nation. Fisheries and Oceans Canada (DFO) has the lead federal role in managing Canada's fisheries and safeguarding its waters.

The Canadian Coast Guard (CCG), a Special Operating Agency within DFO, is responsible for services and programs that contribute to the safety, security, and accessibility of Canada's waterways. CCG supports other government organizations by providing a civilian fleet and a broadly distributed shore-based infrastructure.

Further details on Fisheries and Oceans (DFO) authority, mandate and program activities may be found in the Report on Plans and Priorities and the Main Estimates (Part II).

1.1 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes DFO's spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates for the 2011-2012 fiscal year. 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 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.

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

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

2.1 Statement of Authorities

In the first quarter of the 2011-2012 fiscal year, DFO's total authorities available for use decreased by $157.3 million (8.0%) to $1,822.7 million, when compared to the same quarter of 2010-2011. This can be mainly attributed to a decrease in Vote 5, Capital Expenditures authority of $110.4 million (25.2%) compared to the same period of 2010-2011 and is a result of the conclusion of the Economic Action Plan (EAP) funding that ended March 31, 2011. Areas that have reduced Vote 5 authorities due to the conclusion of EAP include Canadian Coast Guard fleet-related projects, Small Craft Harbours, and the Deferred Maintenance of Federal Laboratories Initiative.

2.1.1 Expenditure Analysis

In the first quarter of 2011-2012, total budgetary expenditures were $323.7 million compared to $340.1 million reported in the same period of 2010-2011.

With the conclusion of the EAP, Vote 5 Capital Expenditures decreased by $17.8 million (44.0%) to $22.7 million for the first quarter of 2011-2012 as compared to $40.5 million reported in the same period last year. However, the rate of spending compared to total authorities is comparable between the quarters with a rate of spending of 6.9% for 2011-2012 versus 9.2% for 2010-2011.

Expenditures in Vote 10, Grants and Contributions, are significantly higher in the first quarter of 2011-2012 than for the same period in 2010-2011. The variance of $8.3 million in expenditures is mainly attributable to the rate of spending in the Contribution program to support the economic viability and long term sustainability of the Quebec and Atlantic Canada lobster fishery (Atlantic Lobster Sustainability Measures). This program has a seasonal component that influences the timing of participation by harvesters. Since this relatively new program was announced late in the fall of 2009, few proposals were submitted for consideration prior to the 2010 lobster season resulting in low participation in the spring of 2010 and low expenditures for the first quarter of 2010-2011. As the program gained momentum, proposals were prepared and submitted for approval to the Department in the fall and winter of 2010. A large number of agreements were approved in March and April 2011 in time for the 2011 lobster season and this is reflected in the higher expenditures in the first quarter of 2011-2012.

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The total gross budgetary expenditures this quarter have decreased by $15.8 million as compared to the first quarter of 2010-2011. This decrease is primarily attributable to the decrease in overall authorities as the overall rate of expenditures for the quarter (17.8%) is comparable to last year during the same period (17.2%).

The types of expenditures that reflect significant decreases include Professional and special services, Repair and maintenance, Acquisition of machinery and equipment. This is due to a decrease in funding for capital projects that were funded as part of the EAP in 2010-2011.

A year-over-year increase in first quarter expenditures for transfer payments reflects the higher expenditures early in 2011-2012 in the contribution program that supports the economic viability and long term sustainability of the Quebec and Atlantic Canada lobster fishery as explained in section 2.1.1. Finally, an increase in Other Subsidies and Payments is linked to a difference in the timing of the redistribution of certain expenses.

3. Risks and Uncertainties

This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates for which full supply was released on June 27, 2011.

Planned spending for the fiscal year is $1.823 billion. The Department is primarily funded through voted parliamentary spending authorities and statutory authorities for operating expenditures, capital expenditures, and grants and contributions. Departmental operations are impacted by any change in parliamentary appropriations.

The most significant cost to the Department is personnel expenditures for the delivery of knowledge-based scientific, conservation and maritime programs and services across the country. Expenses related to the acquisition of machinery and equipment are the next highest cost, as the Department has the second largest asset base among Canadian federal departments.

Delivery of DFO's departmental programs and services may be impacted by several internal and external risks. Key corporate risks for 2011-2012 include:

The Department has developed a Corporate Risk Profile to identify and manage key risks. This risk profile and mitigation measures are reviewed regularly by the Departmental Management Board and the external Departmental Audit Committee.

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-2011 levels for the fiscal years 2011-2012 and 2012-2013. In addition, the Department will be implementing measures to reduce the deficit announced in Budget 2011.

The Department has adopted several measures to mitigate this financial risk. Business planning has been streamlined to identify key program priorities. Internal budget allocation and in-year forecasting have been improved to ensure that priorities are funded and program pressures are addressed, and a Financial Management Framework, including a multi-year, risk-based Internal Control work plan has been developed to document and test the effectiveness of existing key controls in relation to financial planning and budgeting.

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

There have been no significant changes in relation to ongoing departmental operations or in senior personnel, as represented by the Departmental Management Board, during the reporting period.

The first quarter of fiscal year 2011-2012 has marked a transition in DFO programming as a result of the completion of DFO's response to Canada's Economic Action Plan and the planned phase out of $222.1 million in stimulus funding from 2010-2011 reference levels.

Planned reductions in Economic Action Plan stimulus funding included $97.4 million for Small Craft Harbours; $85.0 million for the Canadian Coast Guard fleet; $24.5 million for deferred maintenance of federal laboratories; and $13.1 million related to the Federal Contaminated Sites Action Plan.

Approval by Senior Officials

Claire Dansereau,
Deputy Minister
Roch Huppé,
Chief Financial Officer

Ottawa, Canada
August 18, 2011

Statement of Authorities (unaudited)

(in thousands of dollars)

  Fiscal year 2011-2012 Fiscal year 2010-2011
Total available for use for the year ending March 31, 2012 * Used during the quarter ended June 30, 2011 Year to date used at quarter-end Total available for use for the year ended March 31, 2011 * Used during the quarter ended June 30, 2010 Year to date used at quarter-end
Vote 1 - Net Operating Expenditures 1,229,050 249,296 249,296 1,282,520 258,761 258,761
Vote 5 - Capital Expenditures 328,062 22,719 22,719 438,454 40,531 40,531
Vote 10 - Grants and Contributions 127,653 17,153 17,153 131,203 8,827 8,827
Budget Statutory Authorities 137,920 34,513 34,513 127,830 31,991 31,991
Total Budgetary Authorities 1,822,685 323,681 323,681 1,980,007 340,110 340,110
Non-Budgetary Authorities - - - - - -
Total Authorities 1,822,685 323,681 323,681 1,980,007 340,110 340,110
* Includes only Authorities available for use and granted by Parliament at quarter-end.

More information is available in the table below.

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)

  Fiscal year 2011-2012 Fiscal year 2010-2011
Planned expenditures for the year ending March 31, 2012 Expended during the quarter ended June 30, 2011 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2011 Expended during the quarter ended June 30, 2010 Year to date used at quarter-end
Expenditures:
Personnel 903,708 233,964 233,964 879,880 234,079 234,079
Transportation and communications 64,397 13,643 13,643 75,408 15,148 15,148
Information 4,132 299 299 5,597 469 469
Professional and special services 176,309 19,384 19,384 206,240 21,700 21,700
Rentals 19,793 1,978 1,978 28,193 2,106 2,106
Repair and maintenance 158,507 13,710 13,710 147,282 27,804 27,804
Utilities, materials and supplies 82,507 12,487 12,487 101,428 12,521 12,521
Acquisition of land, buildings and works 62,264 1,642 1,642 87,420 2,560 2,560
Acquisition of machinery and equipment 257,269 9,540 9,540 347,270 17,080 17,080
Transfer payments 127,653 17,153 17,153 131,203 8,827 8,827
Public debt charges - - - - - -
Other subsidies and payments 14,161 8,632 8,632 18,001 5,980 5,980
Total gross budgetary expenditures 1,870,700 332,432 332,432 2,027,922 348,274 348,274
Less Revenues netted against expenditures:
Sales of goods and services 48,015 8,751 8,751 47,915 8,164 8,164
Total Revenues netted against expenditures: 48,015 8,751 8,751 47,915 8,164 8,164
Total net budgetary expenditures 1,822,685 323,681 323,681 1,980,007 340,110 340,110