Fisheries and Oceans Canada - Quarterly Financial Report for the Quarter Ended September 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 September 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 September 30, 2015 2016-17 Authorities as at September 30, 2016 Variance in Authorities Expenditures during the quarter ended September 30, 2015 Expenditures during the quarter ended September 30, 2016 Variance in Expenditures
Vote 1 – Net Operating expenditures 1,274,291 1,430,799 156,508 301,745 313,581 11,836
Vote 5 – Capital expenditures 714,252 1,055,390 341,138 130,391 143,155 12,764
Vote 10 – Grants and Contributions 93,237 94,450 1,213 20,803 17,640 (3,163)
Statutory Authorities 122,754 131,248 8,494 30,726 32,513 1,787
Total 2,204,534 2,711,887 507,353 483,665 506,889 23,224

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2016-17 from those in 2015-16 by $507.4 million (23.0%). This is the result of an increase in Vote 1 authorities of $156.5 million, an increase in Vote 5 authorities of $341.1 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) 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
Operating Budget Carry Forward 14,748
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 156,509
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
Capital Budget Carry Forward 41,074
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 341,137
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 507,353

In the second quarter of 2016-17, total budgetary authorities available for use amounted to $2,711.9 million compared to $2,544.1 million reported in the first quarter of 2016-17, which represents an increase of $167.8 million. This is the result of the receipt of the Operating and Capital Budget Carry-Forward.

Authorities Used Analysis

In the second quarter of 2016-17, total budgetary expenditures amounted to $506.9 million compared to $483.7 million reported in the same quarter of 2015-16, which represents an increase of $23.2 million or 4.8%.

Authorities used in Vote 1, Net Operating expenditures, increased by $11.8 million compared to the same quarter last year representing an increase of approximately 3.9% between the two years. The increase is mainly due to higher spending on professional services by the Canadian Coast Guard (CCG) for environmental response operations related to the Manolis L shipwreck in Notre Dame Bay, Newfoundland and the Kathryn Spirit abandoned cargo ship in Lac Saint-Louis near Montreal.

Authorities used in Vote 5, Capital expenditures, increased by $12.8 million compared to the same quarter last year representing an increase of approximately 9.8% between the two years. This is mainly due to a $37.5 million increase in spending on the acquisition of land, buildings, and works related to the Federal Infrastructure Initiative and Small Craft Harbour projects. The total increase is offset by a $25.4 million decrease in the acquisition of machinery and equipment due to the timing of CCG helicopter deliveries.

Authorities used in Vote 10, Grants and Contributions expenditures, decreased by $3.2 million compared to the same quarter last year representing a decrease of approximately 15.2% between the two years. The decrease is mainly due to timing as contribution funding in the Ecosystems and Fisheries Management Sector for the Recreational Fisheries Conservation Partnerships Program was received earlier in 2015-16.

Statutory authorities increased by $1.8 million compared to the same quarter last year representing an increase of approximately 5.8% indicating no significant variance between the two years.

Statement of Departmental Budgetary Expenditures by Standard Object

The increase of $23.2 million in total net budgetary expenditures in the second 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:

Expenditures related to Professional and Special Services increased by a total of $12.7 million in the second quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly due to higher spending by CCG on environmental response and technical assessments required to address the threat of pollution from the Manolis L and Kathryn Spirit vessels. In addition, professional services expenditures have also increased due to higher construction engineering consultant costs related to the Federal Infrastructure Initiative.

Expenditures related to Rentals increased by a total of $2.7 million in the second quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly related to the timing of software license purchases and renewals by the Information Management and Technology Services branch.

Expenditures related to Repair and Maintenance decreased by a total of $8.2 million in the second quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly due to $7.7 million in decreased spending by CCG due to the completion of several Vessel Life Extension projects.

Expenditures related to the Acquisition of Land, Buildings and Works increased by a total of $37.5 million in the second 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 underway in the Newfoundland, Maritimes, Gulf, Quebec, and Pacific regions.

Expenditures related to the Acquisition of Machinery and Equipment decreased by a total of $19.0 million in the second quarter of 2016-17 when compared to the same quarter of 2015-16. This decrease is mainly due to $25.4 million in lower spending related to CCG light-lift helicopter deliveries that occurred in the second quarter of 2015-16 and is partially offset by a $3.9 million increase in Federal Infrastructure Initiative spending on search and rescue (SAR) lifeboats, Small Craft Acquisition Program (SCAP) and aids to navigation replacements.

Expenditures related to Transfer Payments decreased by a total of $3.2 million in the second quarter of 2016-17 when compared to the same quarter of 2015-16. A decrease of $5.0 million is due to the Recreational Fisheries Conservation Partnerships Contribution Program. The total decrease is offset by an overall $1.8 million increase in spending across all other grants and contribution programs.

Other Subsidies and Payments decreased by a total of $3.1 million in the second quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly due to a $2.1 million installment payment that was made to Great Lakes Fisheries Commission in the second quarter of 2015-16. The decrease is a result of a timing difference as this payment was made earlier this year during the first quarter of 2016-17. The decrease is also as a result of a $1.2 million decrease in claims against the Crown.

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.

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

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

5. Approval by Senior Officials

Approved by:

Original signed by
_________________________
Kevin Stringer, A/Deputy Minister

Original signed by
_________________________
Farhat Khan, A/Chief Financial Officer

Ottawa, Canada
November 14, 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 September 30, 2015 Year to date used at quarter-end Total available for use for the year ending March 31, 2017* Used during the quarter ended September 30, 2016 Year to date used at quarter-end
Vote 1 - Net Operating expenditures 1,274,291 301,745 541,555 1,430,799 313,581 565,332
Vote 5 - Capital expenditures 714,252 130,391 214,339 1,055,390 143,155 187,736
Vote 10 - Grants and Contributions 93,237 20,803 29,679 94,450 17,640 28,022
Statutory Authorities
Statutory - Contributions to employee benefit plans 122,672 30,668 61,336 131,164 31,820 63,640
Statutory - Minister of Fisheries and Oceans - Salary and motor car allowance 82 21 41 84 7 14
Statutory - Spending of proceeds from the disposal of surplus Crown assets - 37 89 - 683 864
Statutory - Refunds of amounts credited to revenues in previous years - - - - 3 7
Total Statutory Authorities 122,754 30,726 61,466 131,248 32,513 64,525
Total Authorities 2,204,534 483,665 847,039 2,711,887 506,889 845,615

* 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 September 30, 2015 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2017* Expended during the quarter ended September 30, 2016 Year to date used at quarter-end
Expenditures:
Personnel 860,457 226,570 443,914 926,515 226,470 445,024
Transportation and communications 59,216 14,506 24,841 61,872 15,477 27,304
Information 2,577 346 598 3,527 414 656
Professional and special services 201,627 72,875 139,762 270,824 85,584 118,155
Rentals 13,419 3,962 5,986 15,944 6,708 9,381
Repair and maintenance 218,287 54,314 74,928 218,396 46,151 68,256
Utilities, materials and supplies 85,777 25,195 39,952 111,953 26,501 40,546
Acquisition of land, buildings and works 232,824 23,864 31,425 239,010 61,350 74,825
Acquisition of machinery and equipment 470,316 43,361 60,579 801,054 24,367 37,532
Transfer payments 93,237 20,803 29,679 94,450 17,640 28,022
Other subsidies and payments 14,712 9,487 16,227 16,257 6,379 16,980
Total gross budgetary expenditures 2,252,449 495,283 867,891 2,759,802 517,041 866,681
Less Revenues netted against expenditures:
Sales of goods and services 47,915 11,618 20,852 47,915 10,152 21,066
Total Revenues netted against expenditures: 47,915 11,618 20,852 47,915 10,152 21,066
Total net budgetary expenditures 2,204,534 483,665 847,039 2,711,887 506,889 845,615

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