Fisheries and Oceans Canada - Quarterly Financial Report for the Quarter Ended June 30, 2017

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. The quarterly report should be read in conjunction with the Main Estimates, Supplementary Estimates (A) as well as Budget 2016 and Budget 2017.

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 Departmental Plan 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 2017-18. 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 an expenditure basis.

2. Highlights of the Fiscal Quarter and the Fiscal Year-to-Date (YTD) results

The following section highlights the financial results and provides explanations for the fiscal quarter ended June 30, 2017 as compared to the same period last year.

Highlights of the Fiscal Quarter and the Fiscal Year-to-Date (YTD) results (thousands of dollars)

  2016-17 Authorities as at June 30, 2016 2017-18 Authorities as at June 30, 2017 Variance in Authorities Year-to-date expenditures as at June 30, 2016 Year-to-date expenditures as at June 30, 2017 Variance in Expenditures
Vote 1 – Net Operating expenditures 1,369,803 1,473,648 103,845 251,751 290,891 39,140
Vote 5 – Capital expenditures 948,598 831,693 (116,905) 44,581 96,876 52,295
Vote 10 – Grants and Contributions 94,450 135,236 40,786 10,382 11,409 1,027
Statutory Authorities 131,248 135,742 4,494 32,012 30,250 (1,762)
Total 2,544,099 2,576,319 32,220 338,726 429,426 90,700

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2017-18 from those in 2016-17 by $32.2 million (1.3%). This is the result of an increase in Vote 1 authorities of $103.8 million, a decrease in Vote 5 authorities of $116.9 million, an increase in Vote 10 authorities of $40.8 million, and an increase in spending authority for statutory payments of $4.5 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
(2017-18 compared to 2016-17)
Change
(thousands of dollars)
Vote 1 – Net Operating expenditures
Mission-critical services to Canadians 126,577
Oceans Protection Plan 80,935
Funding to address the threat of pollutants 14,000
Marine Conservation Targets 13,865
Other Departmental Requirements 7,724
Ocean and freshwater research in Canada 5,248
Climate Change 2,627
Federal Infrastructure Initiatives (65,670)
Strategy to address financial pressures and to maintain service integrity for the Canadian Coast Guard (37,000)
Funding for incremental fuel costs for the Canadian Coast Guard (16,000)
Funding to enhance the safety of marine transportation in the Arctic (World Class Tanker Safety System) (9,810)
Transfer between votes (8,737)
Budget 2016 reductions in professional services, advertising and travel (5,445)
Federal Contaminated Sites Action Plan (4,469)
Sub-total Net Operating expenditures 103,845
Vote 5 – Capital expenditures
Mission-critical services to Canadians 40,105
Oceans Protection Plan 39,782
Transfer between votes 8,600
Federal Infrastructure Initiatives (133,889)
Canadian Coast Guard Vessels, Lifeboats and Helicopters (58,935)
Ocean and Freshwater Research in Canada (6,500)
Funding to enhance marine emergency response capacity in British Columbia (5,805)
Other Departmental Requirements (263)
Sub-total Capital expenditures (116,905)
Vote 10 – Grants and Contributions
Oceans Protection Plan 24,797
Funding to support increased Aboriginal participation 15,000
Other Departmental Requirements 852
Transfer between votes 137
Sub-total Grants and Contributions 40,786
Statutory
Sub-total Statutory Authorities 4,494
Total Authorities 32,220

Authorities Used Analysis

In the first quarter of 2017-18, total budgetary expenditures amounted to $429.4 million compared to $338.7 million reported in the same quarter of 2016-17, which represents an increase of $90.7 million or 26.8%.

Authorities used in Vote 1, Net Operating expenditures, increased by $39.1 million compared to the same quarter last year representing an increase of approximately 15.6% between the two years. The increase is mainly related to personnel expenditures, which was driven by higher regular pay and overtime across the Department. Personnel expenditures also increased because of $5.5 million in retroactive pay as several bargaining units have ratified new collective agreements. Finally, Vote 1 expenditures also increased as a result of $7.0 million in repair and maintenance expenses incurred by the Canadian Coast Guard (CCG) as part of the vessel maintenance schedule.

Authorities used in Vote 5, Capital expenditures, increased by $52.3 million compared to the same quarter last year representing a significant increase of approximately 117.3% between the two years. This is mainly related to a $53.3 million increase in spending on professional and special services mostly for CCG’s Offshore Fisheries Science Vessels.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $1.0 million compared to the same quarter last year representing an increase of approximately 9.9% between the two years. The increase is mainly due to more agreements for Ecosystems and Fisheries Management Sector’s Recreational Fisheries Conservation Partnerships Program being signed earlier in 2017-18.

Statutory authorities decreased by $1.8 million compared to the same quarter last year representing a decrease of approximately 5.5% indicating no significant variance between the two years.

Statement of Departmental Budgetary Expenditures by Standard Object

The increase of $90.7 million in total net budgetary expenditures in the first quarter of 2017-18 as compared to the same quarter in 2016-17 is reflected primarily in the net effect of the following standard objects of expenditures:

Personnel expenditures increased by a total of $15.5 million in the first quarter of 2017-18 when compared to the same quarter of 2016-17. The change includes an increase of $8.6 million in regular pay, $5.5 million in retroactive pay, and $1.6 million in overtime expenses.

Expenditures related to Transportation and Communications increased by a total of $2.6 million in the first quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to higher travel costs related to CCG crew changes, the CCGS Hudson Vessel Life Extension, and Federal Infrastructure Initiative projects.

Expenditures related to Professional and Special Services increased by a total of $56.2 million in the first quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to $49.7 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 a $2.8 million increase for construction engineering consultants for the Offshore Oceanographic Science Vessel project.

Expenditures related to Rentals increased by a total of $1.8 million in the first quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly related to $1.6 million in Oracle software licences and support incurred by the Information Management and Technical Services Directorate.

Expenditures related to Repair and Maintenance increased by a total of $5.1 million in the first quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to a $7.0 million increase by CCG as a result of the timing of payments related to the vessel maintenance schedule. The increase is partially offset by a $2.8 million decrease in Vessel Life Extension Program expenditures.

Expenditures related to Utilities, Materials, and Supplies increased by a total of $1.4 million in the first quarter of 2017-18 when compared to the same quarter of 2016-17. The increase is primarily related to $0.9 million in higher spending by the CCG on diesel fuel.

Expenditures related to the Acquisition of Land, Buildings and Works increased by a total of $2.8 million in the first quarter of 2017-18 when compared to the same quarter of 2016-17. This increase is mainly due to $3.2 million in higher spending on small craft harbours as well as Real Property and Environmental Management projects in the Quebec region. The increase is also related to new capitalization guidelines, which transferred expenditures previously recorded under the Repair and Maintenance category into the Acquisition of Land, Buildings, and Works category. The total increase is partially offset by a decrease of $2.5 million in the Maritimes region on Federal Infrastructure Initiative projects.

Expenditures related to Transfer Payments increased by a total of $1.0 million in the first quarter of 2017-18 when compared to the same quarter of 2016-17. An increase of $1.1 million is due to the Recreational Fisheries Conservation Partnerships Contribution Program and an increase of $0.9 million is due to the Aboriginal Fisheries Strategy Contribution Program. The total increase is partially offset by an overall $0.8 million decrease in spending in Ecosystems and Ocean Science’s Freshwater Science Contribution Program.

Other Subsidies and Payments increased by a total of $5.7 million in the first quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to a $5.1 million net increase in accounts receivable related to salary overpayments due to technical issues with the Government of Canada’s new Phoenix pay system.

3. Risks and Uncertainties

Fisheries and Oceans Canada operates in a dynamic environment that is affected by a number of factors, including: increased northern development; expansion of navigable waters; environmental changes; climate change; severe weather events; demographics; technological advances; changing maritime safety and security demands; and global geopolitical and economic conditions. 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 five mission-critical corporate risks listed below:

Fisheries and Oceans Canada’s risks are monitored throughout the fiscal year through the One-Pass Reporting process. Risk indicators and action plans are developed, monitored and tracked through the One-Pass Planning and One-Pass Reporting processes, making risk management part of the regular management of a program and its resources. This enables the Department to use risk information to inform planning and make adjustments as necessary.

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

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

5. Approval by Senior Officials

Approved by:

Original signed by
_________________________
Kevin Stringer, Acting Deputy Minister

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

Ottawa, Canada
August 16, 2017

Statement of Authorities (unaudited)

(in thousands of dollars)

  Fiscal year 2016-17 Fiscal year 2017-18
Total available for use for the year ending March 31, 2017* Used during the quarter ended June 30, 2016 Year to date used at quarter-end Total available for use for the year ended March 31, 2018* Used during the quarter ended June 30, 2017 Year to date used at quarter-end
Vote 1 - Net Operating expenditures 1,369,803 251,751 251,751 1,473,648 290,891 290,891
Vote 5 - Capital expenditures 948,598 44,581 44,581 831,693 96,876 96,876
Vote 10 - Grants and Contributions 94,450 10,382 10,382 135,236 11,409 11,409
Statutory Authorities
Statutory - Contributions to employee benefit plans 131,164 31,820 31,820 135,658 29,930 29,930
Statutory - Minister of Fisheries and Oceans - Salary and motor car allowance 84 7 7 84 21 21
Statutory - Spending of proceeds from the disposal of surplus Crown assets - 181 181 - 299 299
Statutory - Refunds of amounts credited to revenues in previous years - 4 4 - - -
Total Statutory Authorities 131,248 32,012 32,012 135,742 30,250 30,250
Total Authorities 2,544,099 338,726 338,726 2,576,319 429,426 429,426

* 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 2016-17 Fiscal year 2017-18
Planned expenditures for the year ending March 31, 2017* Expended during the quarter ended June 30, 2016 Year to date used at quarter-end Planned expenditures for the year ended March 31, 2018* Expended during the quarter ended June 30, 2017 Year to date used at quarter-end
Expenditures:
Personnel 890,669 218,554 218,554 977,980 234,055 234,055
Transportation and communications 59,351 11,827 11,827 60,832 14,415 14,415
Information 3,434 242 242 3,236 355 355
Professional and special services 261,133 32,571 32,571 277,829 88,819 88,819
Rentals 15,288 2,674 2,674 19,423 4,509 4,509
Repair and maintenance 210,749 22,105 22,105 201,658 27,242 27,242
Utilities, materials and supplies 107,411 14,045 14,045 114,728 15,457 15,457
Acquisition of land, buildings and works 221,714 13,475 13,475 145,864 16,230 16,230
Acquisition of machinery and equipment 711,558 13,165 13,165 667,566 13,193 13,193
Transfer payments 94,450 10,382 10,382 135,236 11,409 11,409
Other subsidies and payments 16,257 10,601 10,601 19,882 16,311 16,311
Total gross budgetary expenditures 2,592,014 349,641 349,641 2,624,234 441,995 441,995
Less Revenues netted against expenditures:
Sales of goods and services 47,915 10,915 10,915 47,915 12,569 12,569
Total Revenues netted against expenditures 47,915 10,915 10,915 47,915 12,569 12,569
Total net budgetary expenditures 2,544,099 338,726 338,726 2,576,319 429,426 429,426

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