2013-14 Quarterly Financial Report for the quarter ended December 31, 2013 - Revised

Erratum

Date: March 13, 2014

Location: Departmental Budgetary Expenditures by Standard Object (unaudited), Fiscal year 2012-13, Year to date used at quarter-end, Personnel.

Revision: “Personnel expenditures $716,402 thousands” replaces “Personnel $416,402 thousands”.

Rational for the revision:Original amount reported was incorrect due to a key stroke error.

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 (B) as well as Canada's Economic Action Plan 2012 and 2013 (Budget 2012 and Budget 2013), 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 (B) for 2013-14. DFO did not seek an adjustment to its spending authorities through 2013-14 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.

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, 2012, 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 were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013-14, the changes to departmental authorities were reflected in the 2013-14 Main Estimates tabled in Parliament.

Additional funding was sought by Fisheries and Oceans Canada through the 2012-13 Supplementary Estimates (C). The department received this additional authority net of the planned savings or other amounts transferred by Treasury Board authority to a frozen allotment.

Budget 2013 was tabled in Parliament on March 21, 2013, after the tabling of the Main Estimates on February 25, 2013. As a result, the measures announced in the Budget 2013 could not be reflected in the 2013-14 Main Estimates. In fiscal year 2013-14, frozen allotments were established by Treasury Board authority in departmental votes via Supplementary Estimates (B) to prohibit the spending of funds already identified as savings measures in Budget 2013. 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 for the year as at the end of the third quarter of 2013-14 were $1,898.6 million, i.e. $7.0 million, or 0.4% less than the $1,905.6 million authorized at the same point in 2012-13.

The total authorities available for Vote 1, Net Operating expenditures decreased by $41.9 million when compared to the same quarter in 2012-13. 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 $38.3 million when compared to the same quarter in 2012-13. This is mainly due to the net effect of the following factors:

The total authorities available for Vote 10, Grants and Contributions decreased by $0.7 million when compared to the same quarter in 2012-13. This is mainly due to the net effect of the following factors:

The total Budgetary Statutory authorities available for 2013-14 decreased by $2.7 million when compared to the same quarter in 2012-13. This is mainly due to the net effect of the following factors on the Employee Benefit Plans cost:

2.1.1 Authorities Used Analysis

In the third quarter of 2013-14, total budgetary expenditures amounted to $411.4 million compared to $451.2 million reported in the same period of 2012-13.

Authorities used in Vote 1, Net Operating expenditures decreased by $16.2 million compared to the same quarter last year. The decrease mainly relates to the timing of expenditures in Other Subsidies and Payments. It should be noted that over the same quarter there was also a decrease in personnel costs which was offset by an increase in Professional Services.

Authorities used in Vote 5, Capital expenditures decreased by $21.3 million compared to the same quarter last year. The decrease mainly relates to the completion of the Pangnirtung Harbour project in Nunavut and to the winding down of the Mid-Shore Patrol Vessels and Near Shore Fisheries Research Vessels projects.

Authorities used in Vote 10, Grants and Contributions expenditures decreased by $1.2 million compared to the same quarter last year. The decrease relates to the expiry of the Aquaculture Innovation and Market Access Program (AIMAP) and to the timing of payments.

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The decrease of $39.7 million in total net budgetary expenditures in the third quarter of 2013-14 as compared to the same period in 2012-13 is reflected primarily in the net effect of the following standard objects of expenditures:

Personnel expenditures decreased by a total of $7.2 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. A decrease of $4.2 million is due to fewer payments related to employee severance allowances and employee work force adjustment payments. The remaining decrease is due to a reduction in personnel and the associated Employee Benefit Plan expenditures.

Expenditures related to Transportation and Communications decreased by a total of $2.1 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. This was mainly due to the implementation of department-wide spending reductions related to travel.

Expenditures related to Professional and Special Services increased by a total of $7.6 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. The increase is mainly due to the net effect of expenditures related to the oil and cargo recovery operation on the Brigadier General M.G. Zalinski, ice reconnaissance services, an upgrade of the Departmental Financial Management System, and the end of construction at St. Andrews Biological Station.

Expenditures related to Rentals increased by a total of $1.3 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. An increase of $1.0 million relates to the oil and cargo recovery operation on the Brigadier General M.G. Zalinski. The remaining increase is mainly due to increased crown housing costs and the rental of ship time in support of multi-species survey activity in the Central and Arctic Region.

Repair and Maintenance expenditures increased by a total of $5.6 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. An increase of $4.6 million is attributable to projects under the Canadian Coast Guard Vessel Life Extension and Mid-Life Modernization programs. The remaining increase is due to the reconstruction of the Queen's wharf and the wharfs at Pointe-aux-Loups and Mingan in Quebec.

Expenditures related to Utilities, Materials and Supplies increased by a total of $3.2 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. This is mainly due to Canadian Coast Guard fleet diesel fuel purchases.

Expenditures related to the Acquisition of Land, Buildings and Works decreased by a total of $8.7 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. This is mainly due to the completion of the Pangnirtung Harbour project in Nunavut.

Expenditures related to the Acquisition of Machinery and Equipment decreased by a total of $22.7 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. This is mainly due to the decrease of Canadian Coast Guard expenditures related to the acquisition of Mid-Shore Patrol Vessels, Near Shore Fisheries Research Vessels and Air Cushion vehicles.

Transfer Payments expenditures decreased by a total of $1.2 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. A decrease of $0.5 million relates to the expiry of the Aquaculture Innovation and Market Access Program (AIMAP). The remaining decrease relates to the timing of payments.

Other Subsidies and Payments expenditures decreased by a total of $15.8 million in the third quarter of 2013-14 when compared to the same quarter of 2012-13. This is mainly due to the timing of interdepartmental settlement transactions.

3. Risks and Uncertainties

This Departmental Quarterly Financial Report reflects the results of the current fiscal period in relation to the Main Estimates for which full supply was released on June 19, 2013.

Planned expenditures for the fiscal year amount to $1,898.6 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 bases within the federal community.

The Department currently operates in a dynamic and changing environment. Globalization of fisheries markets, northern development and the expansion of navigable waters, environmental changes, technological advances, increased pressures on resources, changing maritime safety and security demands and conflicting demands from stakeholders are among the factors impacting the Department. The current environment of fiscal restraint 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 operating environment 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. Physical Infrastructure
  2. Human Resources: Employee Engagement
  3. Financial Capacity
  4. Human Resources: Workforce
  5. Hazard & Crisis

All of DFO's mission critical risks' response strategies and action plans are regularly reviewed and adjusted as necessary by the Departmental Management Board. The external Departmental Audit Committee reviews the Corporate Risk Profile, and provides advice and assurance on the robustness of the integrated risk management regime. 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.

The Financial Capacity Risk, which impacts all three of the Department's strategic outcomes, is defined as follows: Increasing operational costs and increasing stakeholder expectations could mean that sufficient resources may not be available to maintain appropriate service levels for internal and external stakeholders and client groups.

In December 2012, the Departmental Management Board reduced this risk from the highest to the third highest mission critical risk for the Department. This decrease was the result of several mitigating actions undertaken in 2012-13. The Departmental Management Board decided to further mitigate this risk and asked for new action plans for 2013-14. These new action plans are being implemented. Each one has a lead at the Assistant Deputy Minister level, is integrated into the business planning process, and is monitored throughout the year for progress.

The risk action plans for the Financial Capacity Risk, and their status at mid-year, are presented in the table below. All action plans are on track to be completed by March 31, 2014.

Action Plan Status
Strengthen financial management and internal control and financial systems. On Track
Oversee the implementation of deficit reduction action plan to ensure that the Department achieves its full-time equivalent reduction and savings targets as well as accomplishes planned restructuring and reorganization goals On Track
Develop and implement a Long-term Strategy that will propose options for the financial sustainability of the Small Craft Harbours Program. On Track
Pursue policy authority and funding opportunities to help ensure continuity of Aboriginal programs. On Track
Pursue funding options to continue program management within the new financial environment. On Track

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

The following changes in personnel were made during the third quarter:

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 a balanced federal budget. 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 are being 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 achieved savings of $3.8 million. Savings increased to $13.4 million in 2013-14 and will result in ongoing savings of $79.3 million by 2014-15.

Specifically, 2013-14 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.

4.2 Budget 2013 Implementation

This section provides an overview of the savings measures announced in Budget 2013 that are being implemented in order to identify savings to support the Government's commitment to return to balanced budgets over the medium term. As outlined in Budget 2013, Fisheries and Oceans Canada identified savings of $33.0 million per year resulting mainly from the realization of internal departmental efficiencies.

The Department will modernize the organizational structure of its headquarters in order to provide cost-effective services to Canadians. For example, it will reduce administrative overhead and will pursue organizational changes to reduce duplication and improve decision-making processes. To complement these savings, Fisheries and Oceans Canada will also improve regional program efficiency by reducing management overhead and consolidating decision-making authority. Organizational changes required to generate these savings will not impact front line staff or services to Canadians.

In the first year of implementation, the Department will achieve savings of $4.0 million. Savings will result in ongoing savings of $33.0 million by 2015-16.

Approval by Senior Officials

Matthew King, Deputy Minister
Ottawa, Canada
Marty Muldoon CMA, MBA
Chief Financial Officer

Statement of Authorities (unaudited)

(in thousands of dollars)

  Fiscal year 2013-14 Fiscal year 2012-13
Total available for use for the year ending March 31, 2014* Used during the quarter ended December 31, 2013 Year to date used at quarter-end Total available for use for the year ended March 31, 2013* Used during the quarter ended December 31, 2012 Year to date used at quarter-end
Vote 1 - Net Operating expenditures 1,241,177 304,057 854,004 1,283,110 320,220 865,768
Vote 5 - Capital expenditures 439,086 62,181 149,656 400,801 83,518 166,176
Vote 10 - Grants and Contributions 88,314 12,554 36,403 88,988 13,776 37,906
Statutory - Contributions to employee benefit plans 129,898 32,480 97,429 132,589 33,148 99,442
Statutory - Minister of Fisheries and Oceans - Salary and motor car allowance 79 20 59 78 21 61
Statutory - Spending of proceeds from the disposal of surplus Crown assets - 145 607 - 479 832
Statutory - Refunds of amounts credited to revenues in previous years - 1 78 - - 33
Total Budgetary Authorities 1,898,554 411,438 1,138,236 1,905,567 451,162 1,170,218
Non-Budgetary Authorities - - - - - -
Total Authorities 1,898,554 411,438 1,138,236 1,905,567 451,162 1,170,218
* Includes only Authorities available for use and granted by Parliament at quarter-end

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

More information is available in the attached table.

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)

  Fiscal year 2013-14 Fiscal year 2012-13
Planned expenditures for the year ending March 31, 2014 Expended during the quarter ended December 31, 2013 Year to date used at quarter-end Planned expenditures for the year ended March 31, 2013 Expended during the quarter ended December 31, 2012 Year to date used at quarter-end
Expenditures:
Personnel 887,270 236,627 720,339 930,404 243,852 716,402
Transportation and communications 55,222 13,856 37,361 60,847 15,929 41,032
Information 3,026 265 891 3,631 487 1,149
Professional and special services 215,249 59,677 120,552 197,602 52,031 117,562
Rentals 14,810 6,224 11,504 18,066 4,933 12,306
Repair and maintenance 164,926 42,718 93,579 170,400 37,111 80,399
Utilities, materials and supplies 75,748 24,462 62,515 78,558 21,302 62,647
Acquisition of land, buildings and works 84,990 3,181 5,841 70,051 11,837 14,535
Acquisition of machinery and equipment 346,530 19,267 53,903 323,573 41,937 82,504
Transfer payments 88,314 12,554 36,403 88,988 13,776 37,906
Other subsidies and payments 10,384 939 23,857 11,360 16,711 32,806
Total gross budgetary expenditures 1,946,469 419,770 1,166,745 1,953,481 459,906 1,199,250
Less Revenues netted against expenditures:
Sales of goods and services 47,915 8,332 28,509 47,915 8,744 29,032
Total Revenues netted against expenditures: 47,915 8,332 28,509 47,915 8,744 29,032
Total net budgetary expenditures 1,898,554 411,438 1,138,236 1,905,567 451,162 1,170,218

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