Fisheries and Oceans Canada – Quarterly Financial Report for the Quarter Ended December 31, 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) and (B), 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) and (B) 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 December 31, 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 December 31,
2015
2016-17 Authorities as at December 31,
2016
Variance in Authorities Expenditures during the quarter ended December 31,
2015
Expenditures during the quarter ended December 31,
2016
Variance in Expenditures
Vote 1 – Net Operating expenditures 1,274,291 1,450,685 176,394 306,341 308,364 2,023
Vote 5 – Capital expenditures 714,252 1,056,978 342,726 187,773 230,393 42,620
Vote 10 – Grants and Contributions 93,237 99,441 6,204 16,399 17,983 1,584
Statutory Authorities 122,754 133,089 10,335 32,000 32,370 370
Total 2,204,534 2,740,193 535,659 542,513 589,110 46,597

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2016-17 from those in 2015-16 by $535.7 million (24.3%). This is the result of an increase in Vote 1 authorities of $176.4 million, an increase in Vote 5 authorities of $342.7 million, an increase in Vote 10 authorities of $6.2 million, and an increase in spending authority for statutory payments of $10.3 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
Protecting marine and coastal areas 11,391
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
Funding to review changes to the Fisheries Act and to enhance monitoring and reporting of existing projects permitted under the Fisheries Act 2,686
Promoting clean growth and addressing climate change 2,627
Strengthening marine incident prevention, preparedness and response in waters south of the 60th parallel 1,676
Reinvestment of royalties from intellectual property 1,473
From Environment to Fisheries and Oceans to continue the environmental restoration of key aquatic areas of concern identified under the Canada-United States Great Lakes Water Quality Agreement 1,329
Transfer between votes 758
Other departmental requirements (562)
Sub-total Net Operating expenditures 176,394
Vote 5 – Capital expenditures
Federal Infrastructure Investments (Budget 2016) 118,370
Purchase, construction and life extension of vessels (ships and helicopters) 107,384
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 (5,073)
Sub-total Capital expenditures 342,726
Vote 10 – Grants and Contributions
Investing in ocean and freshwater research in Canada 4,470
Other departmental requirements 2,168
Funding to support projects under the Small Craft Harbours Grants program 1,440
Establish a certification and market access program for seal products 1,417
Transfer between votes (2,018)
Implementation of the Tla'amin First Nation Final Agreement (1,273)
Sub-total Grants and Contributions 6,204
Statutory
Sub-total Statutory Authorities 10,335
Total Authorities 535,659

In the third quarter of 2016-17, total budgetary authorities available for use amounted to $2,740.2 million compared to $2,711.9 million reported in the second quarter of 2016-17, which represents an increase of $28.3 million. This represents the full amount accessed by the Department through the 2016-17 Supplementary Estimates (B). In 2015-16, the Supplementary Estimates (B) were delayed due to the dissolution of Parliament for the purposes of a general election.

Authorities Used Analysis

In the third quarter of 2016-17, total budgetary expenditures amounted to $589.1 million compared to $542.5 million reported in the same quarter of 2015-16, which represents an increase of $46.6 million or 8.6%.

Authorities used in Vote 1, Net Operating expenditures, increased by $2.0 million compared to the same quarter last year representing an increase of approximately 0.7% between the two years. The increase is mainly related to repair and maintenance services received by the Canadian Coast Guard (CCG). Specifically, the variance is due to the timing of invoices for dredging services and for the CCGS Pierre Radisson vessel life extension.

Authorities used in Vote 5, Capital expenditures, increased by $42.6 million compared to the same quarter last year representing an increase of approximately 22.7% between the two years. This is mainly due to a $47.0 million increase in spending on professional and special services for CCG’s Offshore Fisheries Science Vessels. The total increase is also due to $37.1 million in higher spending on land, buildings and works for the Federal Infrastructure Initiative, which is offset by a $35.7 million decrease in the acquisition of machinery and equipment as a result of fewer CCG helicopter deliveries during the quarter.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $1.6 million compared to the same quarter last year representing an increase of approximately 9.7% between the two years. The increase 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 $0.4 million compared to the same quarter last year representing an increase of approximately 1.2% indicating no significant variance between the two years.

Statement of Departmental Budgetary Expenditures by Standard Object

The increase of $46.6 million in total net budgetary expenditures in the third 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 decreased slightly by a total of $1.3 million in the third quarter of 2016-17 when compared to the same quarter of 2015-16. The change includes a $2.6 million decrease in overtime expenses and a $0.8 million decrease in provincial workers' compensation payments, which is offset by a $1.6 million increase in regular salaries.

Expenditures related to Professional and Special Services increased by a total of $53.9 million in the third quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly due to $47.0 million in higher spending by CCG on architectural services for various projects including Offshore Fisheries Science Vessels. In addition, the increase is also related to $4.7 million in services for the construction and delivery of new CCG helicopters, $3.9 million in engineering services, and $3.1 million for the environmental response and technical assessments needed to address the threat of pollution from the Manolis L and Kathryn Spirit vessels.

Expenditures related to Rentals decreased by a total of $1.7 million in the third quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly related to a credit for IT software licence fees that was coded against repair and maintenance costs in 2015-16.

Expenditures related to Repair and Maintenance decreased by a total of $8.1 million in the third quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly due to a $7.1 million decrease in Pacific region resulting from new capitalization standards, which transferred the coding of expenditures resulting in capital assets from the Repair and Maintenance category to the Acquisition of Land, Buildings and Works category.

Expenditures related to Utilities, Materials, and Supplies decreased by a total of $5.9 million in the third quarter of 2016-17 when compared to the same quarter of 2015-16. The decrease is primarily related to $4.8 million in lower spending by the CCG on diesel fuel due the timing of payments as well as lower average fuel prices in 2016-17 compared to 2015-16.

Expenditures related to the Acquisition of Land, Buildings and Works increased by a total of $37.7 million in the third 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. The increase is also related to new capitalization standards, which transferred expenditures previously recorded under the Repair and Maintenance category to the Land, Buildings, and Works category.

Expenditures related to the Acquisition of Machinery and Equipment decreased by a total of $33.3 million in the third quarter of 2016-17 when compared to the same quarter of 2015-16. This decrease is mainly due to $35.6 million in lower spending related to fewer CCG helicopter deliveries than in the third quarter of 2015-16.

Expenditures related to Transfer Payments increased by a total of $1.6 million in the third quarter of 2016-17 when compared to the same quarter of 2015-16. An increase of $1.5 million is due to the Recreational Fisheries Conservation Partnerships Program and an increase of $0.9 million is due to the Ocean and Freshwater Science Contribution Program. The total increase is offset by an overall $0.8 million decrease in spending across all other grants and contribution programs.

Other Subsidies and Payments increased by a total of $3.3 million in the third quarter of 2016-17 when compared to the same quarter of 2015-16. This is mainly due to a $2.9 million increase in expenses related to the Department’s accounts receivables as well as a $1.8 million increase in expenses related to other liabilities. The total increase is offset by a $2.9 million decrease in damages and other claims against the Crown related to a settlement paid out to halibut commercial fisheries in the third quarter of 2015-16.

3. Risks and Uncertainties

Fisheries and Oceans Canada (DFO) operates in a dynamic environment and risk management plays a significant role in the Department’s ability to capitalize on new challenges and opportunities. In response to factors such as fish stock fluctuations, northern development, the expansion of navigable waters, environmental changes, technological advances, changing maritime safety and security demands, and the globalization of fisheries markets, DFO has identified the following six mission-critical corporate risks for this fiscal year:

While financial considerations are associated with a number of the risks, they are most prominently reflected in Program Delivery Risk, described as follows:

DFO’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 also reviews the Corporate Risk Profile, and provides advice for continual improvement.

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

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

5. Approval by Senior Officials

Approved by:

Original signed by

______________________________

Catherine Blewett, Deputy Minister

Original signed by

______________________________

Tony Matson, Chief Financial Officer

Ottawa, Canada
February 21, 2017

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 December 31,
2015
Year to date used at quarter-end Total available for use for the year ended March 31,
2017*
Used during the quarter ended December 31,
2016
Year to date used at quarter-end
Vote 1 – Net Operating expenditures 1,274,291 306,341 847,896 1,450,685 308,364 873,696
Vote 5 – Capital expenditures 714,252 187,773 402,111 1,056,978 230,393 418,129
Vote 10 – Grants and Contributions 93,237 16,399 46,078 99,441 17,983 46,006
Statutory
Statutory - Contributions to employee benefit plans 122,672 30,668 92,004 133,005 31,821 95,460
Statutory - Minister of Fisheries and Oceans – Salary and motor car allowance 82 21 62 84 - 14
Statutory - Spending of proceeds from the disposal of surplus Crown assets - 541 631 - 549 1,413
Statutory – Refunds of amounts credited to revenues in previous years - 770 770 - - 7
Total Statutory Authorities 122,754 32,000 93,467 133,089 32,370 96,894
Total Authorities 2,204,534 542,513 1,389,552 2,740,193 589,110 1,434,725

* 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 December 31,
2015
Year to date used at quarter-end Planned expenditures for the year ended March 31,
2017*
Expended during the quarter ended December 31,
2016
Year to date used at quarter-end
Expenditures:
Personnel 860,457 226,300 670,214 937,562 225,029 670,052
Transportation and communications 59,216 15,704 40,545 63,429 16,888 44,192
Information 2,577 346 944 3,562 451 1,107
Professional and special services 201,627 75,642 215,404 278,696 129,555 247,710
Rentals 13,419 6,974 12,961 15,982 5,304 14,686
Repair and maintenance 218,287 55,968 130,896 218,849 47,841 116,097
Utilities, materials and supplies 85,777 24,306 64,258 113,232 18,358 58,904
Acquisition of land, buildings and works 232,824 39,886 71,311 239,969 77,629 152,454
Acquisition of machinery and equipment 470,316 89,321 149,900 801,129 56,044 93,576
Transfer payments 93,237 16,399 46,077 99,441 17,983 46,006
Other subsidies and payments 14,712 3,025 19,252 16,257 6,320 23,300
Total gross budgetary expenditures 2,252,449 553,871 1,421,762 2,788,108 601,402 1,468,084
Less Revenues netted against expenditures:
Sales of goods and services 47,915 11,358 32,210 47,915 12,292 33,359
Total Revenues netted against expenditures: 47,915 11,358 32,210 47,915 12,292 33,359
Total net budgetary expenditures 2,204,534 542,513 1,389,552 2,740,193 589,110 1,434,725

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