2012-13 Quarterly Financial Report for the quarter ended June 30, 2012

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 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, Supplementary Estimates A, as well as Canada's Economic Action Plan 2012 (Budget 2012), 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 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 (A) for 2012-13. 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.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-13, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

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 first quarter of 2012-13 were $1,671.8 million, i.e. $150.9 million, or 8.3% less than the $1,822.7 million authorized at the same point in 2011-12.

The total authorities available for Vote 1 Net Operating Expenditures decreased by $65.5 million when compared to the same quarter of 2011-12. 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 $14.5 million when compared to the same quarter of 2011-12. This is mainly due to the net effect of the following factors:

The total authorities available for Vote 10, Grants and Contributions decreased by $65.9 million when compared to the same quarter of 2011-12. This is mainly due to the net effect of the following factors:

The total Budgetary Statutory authorities available for 2012-13 decreased by $5.1 million when compared to the same quarter of 2011-12. This is mainly due to the net effect of the following factors:

2.1.1 Expenditure Analysis

In the first quarter of 2012-13, total budgetary expenditures were $320.8 million compared to $323.7 million reported in the same period of 2011-12.

Authorities used in Vote 1, Operating expenditures, during the first quarter of 2012-13 decreased by $1.4 million compared to the same quarter last year, indicating no significant variance between the two years.

Authorities used in Vote 5, Capital expenditures, during the first quarter of 2012-13 increased by $4.5 million compared to the same quarter last year. This is mainly due to the net effect of increased expenditures for milestone payments ($8.3 million) for two major capital projects for Canadian Coast Guard's Marine Communications and Traffic Services (MCTS) program and a payment of $1.2 million made in 2011-12 only to Public Works and Government Services Canada for the Pangnirtung project in Nunavut.

Authorities used in Vote 10, Grants and Contributions, are lower in the first quarter of 2012-13 than for the same period in 2011-12. Grants and Contributions funding is made up of various programs some of which have been ongoing and rather steady in the timing of their payments. The decrease of $4.6 million is the result of the Atlantic Lobster Sustainability Measures program peaking in 2011-12, the third year of the five year program. The Atlantic Lobster Sustainability Measures program issued fewer payments in the first Quarter of 2012-13 since most of the buyback licence programs took place in previous years. Payments for the remaining Atlantic Lobster Sustainability Measures programs are significantly less costly.

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The decrease by $2.8 million in budgetary expenditures in the first quarter and year-to-date as compared to the same period in 2011-12 is reflected primarily in the net effect of the following standard object of expenditure:

Expenditures on Transportation and Communication decreased by a total of $3.5 million when compared to the same quarter of 2011-12. This is mainly due to the Canadian Coast Guard reducing its expenditures by $1 million by holding the discretionary travel at the minimum level in the first quarter of 2012-13 and a reduction of $1.1 million of telephonic expenditure as a result of these activities being transferred to Shared Services Canada.

Expenditures on Professional and Special Services decreased by a total of $1.6 million when compared to the same quarter of 2011-12. This is mainly due to reduced Public Works and Government Services Canada Management fees related to Edmonton, Iqaluit, and Sault Ste Marie office renovations.

Expenditures on Acquisition of Land, Buildings and Works decreased by a total of $1.4 million when compared to the same quarter of 2011-12. This is mainly due to a payment of $1.2 million made in 2011-12 to Public Works and Government Services Canada for the Pangnirtung project in Nunavut.

Expenditures on Acquisition of Machinery and Equipment increased by a total of $7.2 million when compared to the same quarter of 2011-12. This is mainly due to the $8.3 million increase in expenditures for two major capital projects - the construction of nine Mid-shore Patrol Vessels (MSPV) and the construction of the Communications Control System (CCS) used by the Canadian Coast Guard's Marine Communications and Traffic Services (MCTS) program.

Expenditures on Transfer Payments decreased by a total of $4.6 million when compared to the same quarter of 2011-12. This is mainly due to the net effect of timing of payments in the programs: Atlantic Lobster Sustainability Measures (ALSM) reduced by $7.2 million, Aquaculture Innovation and Market Access Program (AIMAP) increased by $1.3 million and Aboriginal Fisheries Strategy (AFS) increased by $2.0 million.

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 28, 2012.

Planned spending for the fiscal year is now $1,671.8 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 are the next highest cost as the Department has one of the largest asset base within the federal community.

The Department operates in a dynamic and changing environment today. Globalisation, 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. 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 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

A significant change made in personnel over the last year was the appointment of Ms. Diane Orange to the position of Assistant Deputy Minister, Human Resources and Corporate Services, National Capital Region effective March 19, 2012.

As outlined in Budget 2011, Fisheries and Oceans Canada contributed $56.8 million as part of the 2010 round of strategic reviews in order to return to balanced budgets. For this year the reduction of funding due to Strategic Review is $18.9 million. By modernizing its fisheries management and marine infrastructure, aligning programs with the department's core mandate, and improving program delivery, the department is increasing its capacity to achieve better results for Canadians. These changes will ensure that Fisheries and Oceans Canada is better equipped to deliver services effectively and efficiently and is able to focus on emerging government priorities.

4.1 Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

Fisheries and Oceans Canada, including the Canadian Coast Guard, will achieve Budget 2012 savings of $79.3 million by fiscal year 2014-15 through efficiency measures and program reductions that align resources to its core mandate, scaling back where the need is reduced; transforming how it works internally; and, by consolidating and streamlining. Fisheries and Oceans Canada will restructure its operations, consolidate internal services and leverage technology to realize efficiencies and achieve savings.

With these changes, the Department will continue to focus on three strategic outcomes: economically prosperous maritime sectors and fisheries; sustainable aquatic ecosystems; and safe and secure waters.

In the first year of implementation, the Department will achieve savings of approximately $3.8 million. Savings will increase to $13.4 million in 2013-14 and will result in ongoing saving of $79.3 million by 2014-15.

Specifically, 2012-13 savings are achieved by:

There is a variance of $5.8 million in the Department's authorities between fiscal years 2011-12 and 2012-13 related to the following Budget 2012 initiatives:

The balance of 2012-13 Budget 2012 savings will be reflected later in the fiscal year.

Expenditures in the first quarter of 2012-13 are only slightly less than the same period from last fiscal year.

Originals approved by

Claire Dansereau, Deputy Minister
Ottawa, Canada
Roch Huppé,
Chief Financial Officer

Statement of Authorities (unaudited)

(in thousands of dollars)

  Fiscal year 2012-13 Fiscal year 2011-12
Total available for use for the year ending March 31, 2013 * Used during the quarter ended June 30, 2012 Year to date used at quarter-end Total available for use for the year ended March 31, 2012 * Used during the quarter ended June 30, 2011 Year to date used at quarter-end
Vote 1 - Net Operating Expenditures 1,163,570 247,937 247,937 1,229,050 249,296 249,296
Vote 5 - Capital Expenditures 313,589 27,180 27,180 328,062 22,719 22,719
Vote 10 - Grants and Contributions 61,786 12,508 12,508 127,653 17,153 17,153
Budget Statutory Authorities 132,834 33,220 33,220 137,920 34,513 34,513
Total Budgetary Authorities 1,671,779 320,845 320,845 1,822,685 323,681 323,681
Non-Budgetary Authorities - - - - - -
Total Authorities 1,671,779 320,845 320,845 1,822,685 323,681 323,681
* 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 2012-13 Fiscal year 2011-12
Planned expenditures for the year ending March 31, 2013 Expended during the quarter ended June 30, 2012 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2012 Expended during the quarter ended June 30, 2011 Year to date used at quarter-end
Expenditures:
Personnel 889,880 233,573 233,573 903,708 233,964 233,964
Transportation and communications 54,608 10,128 10,128 64,397 13,643 13,643
Information 3,224 317 317 4,132 299 299
Professional and special services 158,346 17,820 17,820 176,309 19,384 19,384
Rentals 14,338 1,805 1,805 19,793 1,978 1,978
Repair and maintenance 150,742 15,020 15,020 158,507 13,710 13,710
Utilities, materials and supplies 69,209 12,968 12,968 82,507 12,487 12,487
Acquisition of land, buildings and works 59,261 200 200 62,264 1,642 1,642
Acquisition of machinery and equipment 248,843 16,703 16,703 257,269 9,540 9,540
Transfer payments 61,953 12,508 12,508 127,653 17,153 17,153
Other subsidies and payments 9,289 9,788 9,788 14,161 8,632 8,632
Total gross budgetary expenditures 1,719,693 330,830 330,830 1,870,700 332,432 332,432
Less Revenues netted against expenditures:
Sales of goods and services 47,915 9,985 9,985 48,015 8,751 8,751
Total Revenues netted against expenditures: 47,915 9,985 9,985 48,015 8,751 8,751
Total net budgetary expenditures 1,671,779 320,845 320,845 1,822,685 323,681 323,681

Due to rounding, figures may not add to the totals shown.