Fisheries and Oceans Canada - Quarterly Financial Report for the Quarter Ended June 30, 2016

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. The quarterly report should be read in conjunction with the Main Estimates, Supplementary Estimates (A) as well as Budget 2015 and Budget 2016.

This quarterly report has not been subject to an external audit or review.

Further details on Fisheries and Oceans Canada's authority, mandate and programs 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 Fisheries and Oceans Canada's spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates and Supplementary Estimates (A) for 2016-17. 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 a cash basis.

2. Highlights of Fiscal Quarter and Fiscal Year-to-Date

The following section highlights the financial results and provides explanations for the fiscal quarter ended June 30, 2016 as compared to the same period last year.

Highlights of Fiscal Quarter and Fiscal Year to Date (thousands of dollars)

  2015-16 Authorities as at June 30, 2015 2016-17 Authorities as at June 30, 2016 Variance in Authorities Year-to-date expenditures as at June 30, 2015 Year-to-date expenditures as at June 30, 2016 Variance in Expenditures
Vote 1 – Net Operating expenditures 1,228,042 1,369,803 141,761 239,810 251,751 11,941
Vote 5 – Capital expenditures 648,535 948,598 300,063 83,948 44,581 (39,367)
Vote 10 – Grants and Contributions 93,237 94,450 1,213 8,876 10,382 1,506
Statutory Authorities 122,754 131,248 8,494 30,741 32,012 1,271
Total 2,092,568 2,544,099 451,531 363,375 338,726 (24,649)

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2016-17 from those in 2015-16 by $451.5 million (21.6%). This is the result of an increase in Vote 1 authorities of $141.8 million, an increase in Vote 5 authorities of $300.1 million, an increase in Vote 10 authorities of $1.2 million, and an increase in spending authority for statutory payments of $8.5 million.

The negative amounts in the table below do not represent cuts to program spending. They represent the achievement of milestone projects as well as planned changes in the funding profile of initiatives. As well, some variances are due to timing of the authorities granted by Parliament.

Explanation of Changes (thousands of dollars) Total Change
Vote 1 – Net Operating expenditures
Federal Infrastructure Investments (Budget 2016) 41,010
Strategy to address financial pressures and to maintain service integrity for the Canadian Coast Guard 37,000
Investing in ocean and freshwater research in Canada 22,866
Fuel costs for the Canadian Coast Guard 16,000
Federal Contaminated Sites Action Plan (FCSAP) 6,175
Funding to address the threat of pollutants from the Manolis L 6,000
Support regulatory reviews for major natural resource projects 5,991
Federal Infrastructure Initiative (Budget 2015) 5,226
Transfer between votes 3,044
Other departmental requirements (1,551)
Sub-total Net Operating expenditures 141,761
Vote 5 – Capital expenditures
Federal Infrastructure Investments (Budget 2016) 118,370
Purchase, construction and life extension of vessels (ships and helicopters) 105,871
Federal Infrastructure Initiative (Budget 2015) 95,266
Investing in ocean and freshwater research in Canada 12,600
Funding to enhance marine emergency response capacity in British Columbia 7,974
Transfer between votes 1,260
Small Craft Harbours Program for repair and maintenance (22,200)
Enhancement of the safety of marine transportation in the Arctic (World Class Tanker Safety System) (7,429)
Reinvestment of revenues from the sale or transfer of real property (6,500)
Other departmental requirements (5,149)
Sub-total Capital expenditures 300,063
Vote 10 – Grants and Contributions
Investing in ocean and freshwater research in Canada 4,470
Establish a certification and market access program for seal products 1,417
Other departmental requirements 903
Transfer between votes (4,304)
Implementation of the Tla'amin First Nation Final Agreement (1,273)
Sub-total Grants and Contributions 1,213
Statutory
Sub-total Statutory Authorities 8,494
Total Authorities 451,531

Authorities Used Analysis

In the first quarter of 2016-17, total budgetary expenditures amounted to $338.7 million compared to $363.4 million reported in the same quarter of 2015-16, which represents a decrease of $24.6 million or 6.8%.

Authorities used in Vote 1, Net Operating expenditures, increased by $11.9 million compared to the same quarter last year representing an increase of approximately 5.0% between the two years. The increase is mainly due to higher spending on professional services by the legal sector which is a result of the Department of Justice’s new billing process that requires pre-payment for legal counsel and litigation expenses. The total increase is also as a result of higher repair and maintenance expenditures for Canadian Coast Guard (CCG) vessels caused by timing differences in the vessel maintenance schedule.

Authorities used in Vote 5, Capital expenditures, decreased by $39.4 million compared to the same quarter last year representing a decrease of approximately 46.9% between the two years. This is mainly due to a $43.8 million decrease in spending on professional services related to CCG Offshore Fisheries Science Vessels shipbuilding contract payments that were made in the first quarter of 2015-16. The total decrease is offset slightly by an increase in Federal Infrastructure Initiative expenditures.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $1.5 million compared to the same quarter last year representing an increase of approximately 17.0% between the two years. The increase is mainly as a result of the new Ocean and Freshwater Science Contribution Program in the Ecosystems and Oceans Science sector. In addition, the total increase is also related to the timing differences due to the Aboriginal Fisheries Strategy (AFS) and Aboriginal Aquatic Resource and Oceans Management (AAROM) programs as the programs have actively been negotiating agreements earlier in the year.

Statutory authorities increased by $1.3 million compared to the same quarter last year representing an increase of approximately 4.1%, and indicating no significant variance between the two years.

Statement of Departmental Budgetary Expenditures by Standard Object

The decrease of $24.6 million in total net budgetary expenditures in the first quarter of 2016-17 as compared to the same quarter in 2015-16 is reflected primarily in the net effect of the following standard objects of expenditures:

Personnel expenditures increased slightly by a total of $1.2 million in the first quarter of 2016-17 when compared to the same quarter of 2015-16. An increase of $2.3 million is related to higher part-time, seasonal, casual and student pay which is offset by lower spending on severance pay, termination benefits and holiday pay in lieu of leave.

Expenditures related to Transportation and Communications increased by a total of $1.5 million in the first quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly due to higher travel costs related to Federal Infrastructure Initiative construction projects.

Expenditures related to Professional and Special Services decreased by a total of $34.3 million in the first quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly due to a reduction in shipbuilding contracts and engineering services expenditures for the construction of new CCG Offshore Fisheries Science Vessels.

Expenditures related to Rentals increased by a total of $0.6 million in the first quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly related to the timing of crown housing cost payments to Public Services and Procurement Canada and leased space in the Maritimes for CCG cadets.

Expenditures related to Repair and Maintenance increased by a total of $1.5 million in the first quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly as a result of timing differences in CCG’s vessel maintenance schedule.

Expenditures related to the Acquisition of Land, Buildings and Works increased by a total of $5.9 million in the first quarter of 2016-17 when compared to the same quarter of 2015-16. This increase is mainly due to the Federal Infrastructure Initiative, which has resulted in an increased number of Small Craft Harbour improvement projects being underway in the Newfoundland, Maritimes, and Pacific regions.

Expenditures related to the Acquisition of Machinery and Equipment decreased by a total of $4.1 million in the first quarter of 2016-17 when compared to the same quarter of 2015-16. This decrease is mainly due to acceptance of CCG light-lift helicopters that occurred in the first quarter of 2015-16 and a decrease in spending related to CCG’s Marine Communications and Traffic Services communication systems modernization project.

Expenditures related to Transfer Payments increased by a total of $1.5 million in the first quarter of 2016-17 when compared to the same quarter of 2015-16. An increase of $0.9 million is due to the new Ocean and Freshwater Science Contribution Program. The total increase is also related to higher volume of Aboriginal Fisheries Strategy (AFS) and Aboriginal Aquatic Resource and Oceans Management (AAROM) agreements.

Other Subsidies and Payments increased by a total of $3.9 million in the first quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly due to a $3.0 million installment payment that was made to the Great Lakes Fisheries Commission in the first quarter of 2016-17. The increase is a result of a timing difference as this payment is normally made during the second quarter of the fiscal year.

3. Risks and Uncertainties

Fisheries and Oceans Canada operates in a dynamic environment. Fish stock fluctuation, northern development and the expansion of navigable waters, environmental changes and severe weather events, changes in the Canadian workforce, technological advances, changing maritime safety and security demands, and globalization of fisheries markets are among the factors impacting the Department. The Department continues to assess how it conducts its business, provides services and delivers its programs to meet client and stakeholder needs.

This environment raises many challenges for the Department that are reflected in six mission-critical corporate risks listed below:

Fisheries and Oceans Canada’s senior management reviews the mission critical risk response strategies and action plans regularly, completes a full review of the corporate risks annually and considers management of these risks at each stage of the planning, review and reporting cycles. In addition, the external Departmental Audit Committee reviews the Corporate Risk Profile, and provides advice for continual improvement.

There are financial considerations associated with a number of the risks; however, this is most prominently reflected in the Program Delivery Risk, an internal mission critical corporate risk that is defined as follows: As a result of factors such as increasing operational costs, reliance on third parties, increasing stakeholder expectations, and an internal environment of transformation, there is a risk that the Department may not be able to align resources to future program delivery needs.

A risk prioritization session was held jointly with the Directors General Management Committee and the Directors General Policy Committee in October 2015 and the Program Delivery Risk was identified as the sixth highest risk in severity for the Department for 2016-17. The Deputy’s Management Committee validated the prioritization of risks in November 2015 and decided to mitigate the Program Delivery Risk through the implementation of action plans. Each action plan has a lead at the Assistant Deputy Minister level and is monitored throughout the year.

The 2016-17 finance-related risk action plans for the Program Delivery Risk are as follows:

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

The following change in personnel was made during the first quarter:

5. Approval by Senior Officials

Approved by:

Original signed by
_________________________
Catherine Blewett, Deputy Minister

Original signed by
_________________________
Tony Matson CPA, CMA,
Chief Financial Officer

Ottawa, Canada
August 25, 2016

Statement of Authorities (unaudited)

(in thousands of dollars)

  Fiscal year 2015-16 Fiscal year 2016-17
Total available for use for the year ending March 31, 2016* Used during the quarter ended June 30, 2015 Year to date used at quarter-end Total available for use for the year ended March 31, 2017* Used during the quarter ended June 30, 2016 Year to date used at quarter-end
Vote 1 - Net Operating expenditures 1,228,042 239,810 239,810 1,369,803 251,751 251,751
Vote 5 - Capital expenditures 648,535 83,948 83,948 948,598 44,581 44,581
Vote 10 - Grants and Contributions 93,237 8,876 8,876 94,450 10,382 10,382
Statutory Authorities
Statutory - Contributions to employee benefit plans 122,672 30,668 30,668 131,164 31,820 31,820
Statutory - Minister of Fisheries and Oceans - Salary and motor car allowance 82 21 21 84 7 7
Statutory - Spending of proceeds from the disposal of surplus Crown assets - 52 52 - 181 181
Statutory - Refunds of amounts credited to revenues in previous years - - - - 4 4
Total Statutory Authorities 122,754 30,741 30,741 131,248 32,012 32,012
Total Authorities 2,092,568 363,375 363,375 2,544,099 338,726 338,726

* Includes Only Authorities available for use and granted by Parliament at quarter-end

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)

  Fiscal year 2015-16 Fiscal year 2016-17
Planned expenditures for the year ending March 31, 2016* Expended during the quarter ended June 30, 2015 Year to date used at quarter-end Planned expenditures for the year ended March 31, 2017* Expended during the quarter ended June 30, 2016 Year to date used at quarter-end
Expenditures:
Personnel 860,457 217,344 217,344 890,669 218,554 218,554
Transportation and communications 54,274 10,335 10,335 59,351 11,827 11,827
Information 2,362 252 252 3,434 242 242
Professional and special services 185,096 66,886 66,886 261,133 32,571 32,571
Rentals 12,296 2,025 2,025 15,288 2,674 2,674
Repair and maintenance 203,256 20,614 20,614 210,749 22,105 22,105
Utilities, materials and supplies 78,603 14,758 14,758 107,411 14,045 14,045
Acquisition of land, buildings and works 220,668 7,560 7,560 221,714 13,475 13,475
Acquisition of machinery and equipment 416,754 17,218 17,218 711,558 13,165 13,165
Transfer payments 93,237 8,876 8,876 94,450 10,382 10,382
Other subsidies and payments 13,480 6,741 6,741 16,257 10,601 10,601
Total gross budgetary expenditures 2,140,483 372,609 372,609 2,592,014 349,641 349,641
Less Revenues netted against expenditures:
Sales of goods and services 47,915 9,234 9,234 47,915 10,915 10,915
Total Revenues netted against expenditures: 47,915 9,234 9,234 47,915 10,915 10,915
Total net budgetary expenditures 2,092,568 363,375 363,375 2,544,099 338,726 338,726

* Includes Only Authorities available for use and granted by Parliament at quarter-end