Fisheries and Oceans Canada - Quarterly Financial Report for the Quarter Ended September 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 results 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 September 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 September 30, 2016 2017-18 Authorities as at September 30, 2017 Variance in Authorities Expenditures during the quarter ended September 30, 2016 Expenditures during the quarter ended September 30, 2017 Variance in Expenditures
Vote 1 – Net Operating expenditures 1,430,799 1,525,242 94,443 313,581 372,538 58,957
Vote 5 – Capital expenditures 1,055,390 944,403 (110,987) 143,155 184,339 41,184
Vote 10 – Grants and Contributions 94,450 136,736 42,286 17,640 18,901 1,261
Statutory Authorities 131,248 135,742 4,494 32,513 29,894 (2,619)
Total 2,711,887 2,742,123 30,236 506,889 605,672 98,783

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2017-18 from those in 2016-17 by $30.2 million (1.1%). This is the result of an increase in Vote 1 authorities of $94.4 million, a decrease in Vote 5 authorities of $111.0 million, an increase in Vote 10 authorities of $42.3 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 project milestones 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
Funding to maintain mission-critical services to Canadians (e.g. fisheries management activities and maintenance of the fleet for continued safety and security of Canadian waters) 126,577
Funding for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment (horizontal item) 80,935
Funding to address the threat of pollutants from the Manolis L and M/V Kathryn Spirit 14,000
Funding to implement activities to achieve marine conservation targets (Budget 2016) 13,865
Other departmental requirements 7,724
Funding to invest in ocean and freshwater research in Canada 5,248
Funding to promote clean growth and address climate change (Budget 2016) 2,627
Funding for the federal infrastructure initiatives (Budget 2015 federal infrastructure initiative and Budget 2016 maintain and upgrade federal infrastructure assets) (65,670)
Funding for the 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 (9,810)
Operating Budget Carry Forward (9,402)
Transfer between votes (8,737)
Budget 2016 reductions in professional services, advertising and travel (5,445)
Funding related to the assessment, management and remediation of federal contaminated sites (4,469)
Sub-total Net Operating expenditures 94,443
Vote 5 – Capital expenditures
Funding to maintain mission-critical services to Canadians (e.g. fisheries management activities and maintenance of the fleet for continued safety and security of Canadian waters) 40,105
Funding for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment (horizontal item) 39,782
Transfer between votes 8,600
Capital Budget Carry Forward 5,918
Funding for the federal infrastructure initiatives (Budget 2015 federal infrastructure initiative and Budget 2016 maintain and upgrade federal infrastructure assets) (133,889)
Canadian Coast Guard Vessels, Lifeboats and Helicopters (58,935)
Funding to invest in 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 (110,987)
Vote 10 – Grants and Contributions
Funding for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment (horizontal item) 24,797
Funding to support negotiations on fisheries and marine matters 15,000
Other departmental requirements 2,352
Transfer between votes 137
Sub-total Grants and Contributions 42,286
Statutory
Sub-total Statutory Authorities 4,494
Total Authorities 30,236

In the second quarter of 2017-18, total budgetary authorities available for use amounted to $2,742.1 million compared to $2,577.8 million reported in the first quarter of 2017-18, which represents an increase of $164.3 million. This is the result of the receipt of the Operating and Capital Budget Carry-Forwards.

Authorities Used Analysis

In the second quarter of 2017-18, total budgetary expenditures amounted to $605.7 million compared to $506.9 million reported in the same quarter of 2016-17, which represents an increase of $98.8 million or 19.5%.

Authorities used in Vote 1, Net Operating expenditures, increased by $59.0 million compared to the same quarter last year representing an increase of approximately 18.8% between the two years. The increase is related to $58.0 million in personnel expenditures, which is mainly the result of collective bargaining retroactive payments and higher regular pay across the Department. Vote 1 expenditures also increased as a result of a $5.7 million increase in other subsidies and payments and $5.1 million in higher transportation costs which were offset by slight decreases across several other standard objects.

Authorities used in Vote 5, Capital expenditures, increased by $41.2 million compared to the same quarter last year representing an increase of approximately 28.8% between the two years. This is due to a $69.1 million increase in spending on professional and special services which was mainly related to $64.7 million in higher spending on architectural services for Canadian Coast Guard (CCG) Offshore Fisheries Science Vessels. The increase is partially offset by a $19.9 million decrease in the acquisition of land, buildings and works and a $6.3 million decrease in repair and maintenance expenditures.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $1.3 million compared to the same quarter of last year representing an increase of approximately 7.2% between the two years. The increase is mainly due to $2.8 million increase in contribution agreements within the Aquatic Ecosystems Sector.

Statutory authorities decreased by $2.6 million compared to the same quarter last year representing a decrease of approximately 8.1%. The decrease is mainly related to the timing of contributions to employee benefit plans.

Statement of Departmental Budgetary Expenditures by Standard Object

The increase of $98.8 million in total net budgetary expenditures in the second 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 $55.6 million in the second quarter of 2017-18 when compared to the same quarter of 2016-17. The change includes an increase of $38.1 million in retroactive payments related to the new collective agreements, a $14.8 million increase in regular pay, and a $2.9 million increase in overtime expenses.

Expenditures related to Transportation and Communications increased by a total of $5.2 million in the second quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to travel costs for CCG vessel crew changes as a result of increased CCG operations related to the Oceans Protection Plan and Comprehensive Review funding.

Expenditures related to Professional and Special Services increased by a total of $62.5 million in the second quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to $64.7 million in higher spending by CCG on architectural services for the Offshore Fisheries Science Vessels.

Expenditures related to Rentals decreased by a total of $1.5 million in the second quarter of 2017-18 when compared to the same quarter of 2016-17. This decrease is a result of timing differences related to a $1.6 million payment for Oracle software licences and support costs. Last year, Information Management and Technology Services made the payment in the second quarter; however, this year the payment was made earlier in the first quarter.

Expenditures related to Repair and Maintenance decreased by a total of $7.5 million in the second quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to a $2.7 million decrease in CCG Vessel Life Extension Program expenditures and a $2.2 million decrease due to the timing of payments related to the CCG vessel maintenance schedule. The decrease in expenditures is also due to a $2.1 million decrease in Quebec region related to reconstruction work on the Queen’s Wharf that took place in the second quarter of last year.

Expenditures related to the Acquisition of Land, Buildings and Works decreased by a total of $20.0 million in the second quarter of 2017-18 when compared to the same quarter of 2016-17. This decrease is mainly due to $23.8 million in lower spending for Small Craft Harbour projects in Newfoundland, Maritimes, Gulf, and Quebec regions. The total decrease is partially offset by increased expenditures of $3.0 million by CCG on Federal Infrastructure Investment projects.

Expenditures related to Transfer Payments increased by a total of $1.3 million in the second quarter of 2017-18 when compared to the same quarter of 2016-17. An increase of $1.8 million is due to the Recreational Fisheries Conservation Partnerships Contribution Program and an increase of $1.5 million is due to the Ice Assistance Program. The total increase is offset by an overall $1.6 million decrease in spending in the Aboriginal Fisheries Strategy Program.

Other Subsidies and Payments increased by a total of $4.4 million in the second quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to a $3.1 million net increase in accounts receivable related to salary overpayments due to technical issues with the Government of Canada’s 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 second 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
November 22, 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 September 30, 2016 Year to date used at quarter-end Total available for use for the year ending March 31, 2018* Used during the quarter ended September 30, 2017 Year to date used at quarter-end
Vote 1 – Net Operating expenditures 1,430,799 313,581 565,332 1,525,242 372,538 663,428
Vote 5 – Capital expenditures 1,055,390 143,155 187,736 944,403 184,339 281,215
Vote 10 – Grants and Contributions 94,450 17,640 28,022 136,736 18,901 30,310
Statutory Authorities
Statutory - Contributions to employee benefit plans 131,164 31,820 63,640 135,658 29,931 59,861
Statutory - Minister of Fisheries and Oceans – Salary and motor car allowance 84 7 14 84 21 42
Statutory - Spending of proceeds from the disposal of surplus Crown assets - 683 864 - (59) 241
Statutory – Refunds of amounts credited to revenues in previous years - 3 7 - 1 1
Total Statutory Authorities 131,248 32,513 64,525 135,742 29,894 60,145
Total Authorities 2,711,887 506,889 845,615 2,742,123 605,672 1,035,098

* 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 September 30, 2016 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2018* Expended during the quarter ended September 30, 2017 Year to date used at quarter-end
Expenditures:
Personnel 926,515 226,470 445,024 993,381 282,023 516,079
Transportation and communications 61,872 15,477 27,304 64,172 20,682 35,097
Information 3,527 414 656 3,355 518 874
Professional and special services 270,824 85,584 118,155 291,963 148,077 236,895
Rentals 15,944 6,708 9,381 20,372 5,245 9,753
Repair and maintenance 218,396 46,151 68,256 213,051 38,623 65,865
Utilities, materials and supplies 111,953 26,501 40,546 120,987 25,915 41,371
Acquisition of land, buildings and works 239,010 61,350 74,825 165,992 41,360 57,591
Acquisition of machinery and equipment 801,054 24,367 37,532 760,147 22,353 35,546
Transfer payments 94,450 17,640 28,022 136,736 18,901 30,310
Other subsidies and payments 16,257 6,379 16,980 19,882 10,742 27,053
Total gross budgetary expenditures 2,759,802 517,041 866,681 2,790,038 614,439 1,056,434
Less Revenues netted against expenditures:
Sales of goods and services 47,915 10,152 21,066 47,915 8,767 21,336
Total Revenues netted against expenditures 47,915 10,152 21,066 47,915 8,767 21,336
Total net budgetary expenditures 2,711,887 506,889 845,615 2,742,123 605,672 1,035,098

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