2012-13 Quarterly Financial Report for the quarter ending December 31, 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, Supplementary Estimates (A) and Supplementary Estimates (B) 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 third quarter of 2012-13 were $1,905.6 million, i.e. $100.3 million, or 5.0% less than the $2,005.9 million authorized at the same point in 2011-12.

The total authorities available for Vote 1 Net Operating Expenditures decreased by $88.4 million when compared to the same quarter in 2011-12. This is mainly due to the net effect of the following factors:

The total authorities available for Vote 5, Capital Expenditures increased by a total of $28.3 million when compared to the same quarter in 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 $35.0 million when compared to the same quarter in 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 $5.3 million when compared to the same quarter in 2011-12. This is mainly due to the net effect of the following factors:

2.1.1 Expenditure Analysis

In the third quarter of 2012-13, total net budgetary expenditures were $451.2 million compared to $460.5 million reported in the same quarter of 2011-12.

Authorities used in Vote 1, Operating expenditures, during the third quarter of 2012-13 decreased by $20.8 million compared to the same quarter in 2011-12. The decrease is mainly due to a combination of factors such as activities being transferred to Shared Services Canada in 2012-13, completion of major refit projects and curtailed spending on diesel fuel consumed by the Canadian Coast Guard fleet vessels.

Authorities used in Vote 5, Capital expenditures, during the third quarter of 2012-13 increased by $16.0 million compared to the same quarter in 2011-12. This is mainly due to significant increases in expenditures on Acquisition of Machinery and Equipment. This increase is mainly the result of the nature of Canadian Coast Guard's major capital projects, i.e. expenditures are recorded and progress payments are made based on the milestones set in the construction schedule for the major vessel construction projects. Expenditures level can fluctuate significantly from period to period as a result of the progress of the projects.

Authorities used in Vote 10, Grants and Contributions, during the third quarter of 2012-13 decreased by $3.4 million compared to the same quarter 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 payment. The decrease is mainly the result of the Atlantic Lobster Sustainability Measure program that was at its peak funding in 2011-12.

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The $451.2 million in net budgetary expenditures in the third quarter and year-to-date as compared to the same period in 2011-12 is reflected primarily in the net effect of the following expenditures:

Expenditures for Personnel decreased by a total of $12.3 million when compared to the same quarter in 2011-12. This decrease is mainly due a reduction in reimbursement of severance payout and maternity leave.

Expenditures for Transportation and Communications decreased by a total of $3.2 million when compared to the same quarter in 2011-12. This decrease is mainly due to $2.5 million in activities that were transferred to Shared Services Canada, a reduction of $0.6 million in travel by holding the discretionary travel at a minimum level in the third quarter of 2012-13, and to the wind-down of the Cohen Commission of Inquiry.

Expenditures for Purchase of Repairs and Maintenance decreased by a total of $4.9 million when compared to the same quarter in 2011-12. This decrease is mainly due to the following factors: completion in 2011-12 of major refit for some large vessels of the Canadian Coast Guard; wind-down of various harbour construction projects; completion of the major renovations to Les Escoumins building refit completed in 2011-12; completion of repairs related to the funding relief for extraordinary storm events in Atlantic Canada, Québec and Manitoba ended in 2011-12.

Expenditures for Utilities, Material and Supplies decreased by a total of $3.1 million when compared to the same quarter in 2011-12 largely due to the curtailed spending on diesel fuel consumed by the Canadian Coast Guard fleet vessels.

Expenditures for Acquisition of Machinery and Equipment increased by a total of $13.8 million when compared to the same quarter in 2011-12. This increase is mainly the result of the nature of Canadian Coast Guard's major capital projects, i.e. expenditures are recorded and progress payments are made based on the milestones set in the construction schedule for the major vessel construction projects. Expenditure levels can fluctuate significantly from period to period as a result of the progress of the projects. The majority of the expenditures were related to the Mid Shore Patrol Vessels and Near Shore Fisheries Research Vessels projects.

Expenditures for Transfer Payments decreased by a total of $3.4 million when compared to the same quarter in 2011-12. This decrease is mainly the result of the Atlantic Lobster Sustainibility Measure program that was at its peak funding in 2011-12.

Expenditures for Other Subsidies and Payments increased by a total of $2.3 million when compared to the same quarter in 2011-12. This increase is mainly the result of the timing of the International Fisheries Commissions Agreements payments.

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 net spending for the fiscal year is $1,905.6 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 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 currently operates in a dynamic and changing environment. Globalisation, northern development, environmental changes, technological advances, increased pressures on resources, and conflicting demands from stakeholders are among the factors impacting the Department. The current environment of fiscal constraint continues to require 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 corporate risks. DFO's mission critical corporate risks are, in order of severity:

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

All of DFO's 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 during the third quarter was the appointment of Mr. Matthew King to the position of Deputy Minister effective January 14, 2013. Mr. King joined the department from National Defence where he was the Associate Deputy Minister.

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:

In order to manage the Financial Capacity risk related to Budget 2012 measures, the Department is closely monitoring all measures related to Budget 2012.

Approval by Senior Officials

Matthew King, 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 December 31, 2012 Year to date used at quarter-end Total available for use for the year ended March 31, 2012 * Used during the quarter ended December 31, 2011 Year to date used at quarter-end
Vote 1 - Net Operating Expenditures 1,283,110 320,220 865,768 1,371,540 341,059 932,732
Vote 5 - Capital Expenditures 400,801 83,518 166,176 372,477 67,545 183,263
Vote 10 - Grants and Contributions 88,988 13,775 37,906 123,973 17,172 53,489
Budgetary Statutory Authorities 132,667 33,648 100,368 137,919 34,766 106,945
Total Budgetary Authorities 1,905,567 451,161 1,170,218 2,005,910 460,542 1,276,429
Non-Budgetary Authorities - - - - - -
Total Authorities 1,905,567 451,161 1,170,218 2,005,910 460,542 1,276,429
* Includes only Authorities available for use and granted by Parliament at quarter-end.

More information is available in the attached table.

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 December 31, 2012 Year to date used at quarter-end Planned expenditures for the year ended March 31, 2012 Expended during the quarter ended December 31, 2011 Year to date used at quarter-end
Expenditures:
Personnel 930,404 243,852 716,402 967,331 256,107 760,280
Transportation and communications 60,847 15,929 41,032 74,168 19,116 51,580
Information 3,631 487 1,149 4,759 496 1,352
Professional and special services 197,602 52,031 117,562 203,059 51,504 124,458
Rentals 18,066 4,933 12,306 22,796 4,622 11,443
Repair and maintenance 170,400 37,111 80,399 182,556 42,056 108,268
Utilities, materials and supplies 78,558 21,302 62,647 95,025 24,359 66,751
Acquisition of land, buildings and works 70,051 11,837 14,535 70,919 11,894 31,321
Acquisition of machinery and equipment 323,573 41,937 82,504 293,029 28,163 67,896
Transfer payments 88,988 13,776 37,906 123,973 17,172 53,489
Other subsidies and payments 11,360 16,711 32,806 16,310 14,384 27,033
Total gross budgetary expenditures 1,953,481 459,906 1,199,248 2,053,925 469,873 1,303,871
Less Revenues netted against expenditures:
Sales of goods and services 47,915 8,744 29,032 48,015 9,331 27,442
Total Revenues netted against expenditures 47,915 8,744 29,032 48,015 9,331 27,442
Total net budgetary expenditures 1,905,567 451,162 1,170,216 2,005,910 460,542 1,276,429

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