2011-2012 Quarterly Financial Report for the quarter ended December 31, 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 with the quarterly financial reports previously published. This report 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 Canada's 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 and Supplementary Estimates (B) for 2011-2012. DFO did not seek an increase to its spending authorities through 2011-2012 Supplementary Estimates (A). 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

DFO's total authorities available for use as at the end of the third quarter of 2011-2012 were $2,005.9 million - $40.3 million, or 2.0% less than the $2,046.2 million authorized at the same point in 2010-2011.

The total authorities available for Vote 1, Net Operating expenditures increased by $40 million when compared to the same quarter of 2010-2011. This is mainly due to the net effect of the following factors:

The total authorities available for Vote 5, Capital expenditures decreased by a total of $81.2 million when compared to the same quarter of 2010-2011. This is mainly due to the net effect of the following factors:

The total authorities available for Vote 10, Grants and Contributions decreased by $9.2 million when compared to the same quarter of 2010-2011. This is mainly due to the net effect of the following factors:

The budgetary statutory authorities increased by a total of $10.1 million when compared to the same quarter of 2010-2011 as a result of an increase in the cost of employee benefit plans, from 17% to 18% of personnel expenditures.

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

Compared to the previous year, the year to date expenditures at quarter-end have increased by $39.1 million. This represents an increase of 3.2% against year to date expenditures in 2010-2011. This difference is for the most part explained by increases in Operating expenditures of $40.9 million.

Total spending for the third quarter in 2011-2012 was $460.5 million, or $2.2 million lower than the $462.7 million reported for the same period of 2010-2011.

Personnel expenditures have increased by $21.9 million in the third quarter. The principal reason for significantly higher expenditures for personnel costs is the increase in severance payments. Recent collective bargaining agreements have included provisions that allow employees to exercise an option to request a pay-out of accumulated severance allowances, or some portion thereof. As a result, severance payments by the Department in the third quarter of 2011-2012 were $16.5 million, $14.3 million more than in the third quarter of 2010-2011. It should be noted that these one-time costs were funded by the Treasury Board Secretariat in the third quarter.

Professional and Special Services expenditures have decreased by $9.2 million in the third quarter. This is mainly due to the following factors:

Repair and Maintenance expenditures have decreased by $29.5 million in the third quarter. This is mainly due to the termination of the Economic Action Plan funding in 2010-2011 for capital projects such as the Small Craft Harbors and the Canadian Coast Guard.

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 now $2,005.9 million. 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 the personnel expenditures for the delivery of knowledge-based scientific, conservation, and maritime programs and services across the country. Expenditures related to the acquisition of machinery and equipment is the next highest cost as the Department has one of the largest asset bases within the federal community.

The Department operates in a dynamic and changing environment today. Globalization, northern development, environmental changes, technological advances, increased pressures on resources, conflicting demands from stakeholders and the environment of fiscal restraint are among the factors impacting the Department. Changes in Canada's north also have implications for the Department.

To restore fiscal balance, the government has implemented a number of measures to improve efficiency while lowering the rate of growth in the size and operations of the public service. 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. Departmental budgets will not be increased to fund increases in annual wages for the federal public service, or to fund increases set out in collective agreements. Budget 2010 also mandated a series of strategic reviews of various federal departments and agencies to identify cost reductions.

For the Department, the impact of these measures in 2011-2012 includes:

The current environment of fiscal constraint has required the Department to reassess how it conducts its business, provides services and delivers on its programs to meet client and stakeholder needs.

This new operating reality raises many challenges to which the Department must be responsive. In this changing environment, the Department has identified several key internal and external corporate risks. DFO's mission critical corporate risks for 2011-2012 are, in order of severity:

  1. Financial Capacity Risk
  2. Communications & Reputation Risk
  3. Human Capital Risk
  4. Physical Infrastructure Risk
  5. Legal and Compliance Risk

The Financial Capacity Risk which has been deemed as having the greatest severity to the Department has several key action plans designed to manage it to an acceptable level. These are:

All these mission critical risks, including their response strategies and action plans, are regularly reviewed and adjusted as necessary by the Departmental Management Board and the external Departmental Audit Committee. The senior management cadre meets semi-annually to review the corporate risks, and considers management of these risks at each stage of the planning, review and reporting cycles.

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

Pursuant to s. 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, $9.262 million is deemed to have been appropriated to Shared Services Canada (Vote 1- Operating and Vote 5 - Capital), which results in a reduction for the same amount in DFO's Vote 1- Operating and Vote 5 - Capital, Appropriation Act No.1, 2011-2012. To date $1.3 million in expenditures have been incurred on behalf of Shared Services Canada by DFO against the Shared Services Canada Regular Operating and Capital Votes.

Shared Services Canada's mandate is to standardize and consolidate information technology services in the federal government in order to reduce costs, improve services, and leverage capacity in the public and private sectors through pooled resources and greater buying power.

Approval by Senior Officials

Claire Dansereau,
Deputy Minister
Roch Huppé,
Chief Financial Officer

Ottawa, Canada
21 février 2012

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 December 31, 2011 Year to date used at quarter-end Total available for use for the year ended March 31, 2011 * Used during the quarter ended December 31, 2010 Year to date used at quarter-end
Vote 1 - Net Operating Expenditures 1,371,541 341,059 932,732 1,331,489 318,378 891,869
Vote 5 - Capital Expenditures 372,477 67,545 183,263 453,686 98,119 212,817
Vote 10 - Grants and Contributions 123,973 17,172 53,489 133,166 13,731 36,237
Budget Statutory Authorities 137,919 34,766 106,946 127,830 32,455 96,405
Total Budgetary Authorities 2,005,910 460,542 1,276,430 2,046,171 462,683 1,237,328
Non-Budgetary Authorities - - - - - -
Total Authorities 2,005,910 460,542 1,276,430 2,046,171 462,683 1,237,328
* Includes only Authorities available for use and granted by Parliament at quarter-end.

More information is available in the table below.

Pursuant to s. 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, $9.262 million is deemed to have been appropriated to Shared Services Canada (Vote 1- Operating and Vote 5 - Capital), which results in a reduction for the same amount in DFO's, Vote 1- Operating and Vote 5 - Capital, Appropriation Act No.1, 2011-2012. To date $1.3 million in expenditures have been incurred on behalf of Shared Services Canada by DFO against the Shared Services Canada Regular Operating Vote and Capital Votes.

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 December 31, 2011 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2011 Expended during the quarter ended December 31, 2010 Year to date used at quarter-end
Expenditures:
Personnel 967,331 256,107 760,281 887,507 234,255 708,527
Transportation and communications 74,168 19,116 51,580 79,182 20,152 53,028
Information 4,759 496 1,352 6,012 674 1,892
Professional and special services 203,059 51,504 124,458 223,584 60,753 135,467
Rentals 22,796 4,622 11,443 29,264 4,239 11,349
Repair and maintenance 182,556 42,056 108,268 157,728 71,577 152,316
Utilities, materials and supplies 95,025 24,359 66,751 110,154 23,149 56,643
Acquisition of land, buildings and works 70,919 11,894 31,321 101,131 11,947 24,566
Acquisition of machinery and equipment 293,029 28,163 67,896 347,673 24,012 59,840
Transfer payments 123,973 17,172 53,489 133,166 13,731 36,237
Other subsidies and payments 16,310 14,384 27,033 18,685 8,176 25,395
Total gross budgetary expenditures 2,053,925 469,873 1,303,872 2,094,086 472,665 1,265,260
Less Revenues netted against expenditures:
Sales of goods and services 48,015 9,331 27,442 47,915 9,982 27,932
Total Revenues netted against expenditures: 48,015 9,331 27,442 47,915 9,982 27,932
Total net budgetary expenditures 2,005,910 460,542 1,276,430 2,046,171 462,683 1,237,328