2011-2012 Quarterly Financial Report for the quarter ended December 31, 2011
Statement outlining results, risks and significant changes in operations, personnel and programs
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. This report should be read in conjunction with the Main Estimates and with the quarterly financial reports previously published. This report has not been subject to an external audit or review.
Canada's fisheries and oceans have played and continue to play an important historic, economic, and cultural role in Canada's development and growth as a nation. Fisheries and Oceans Canada (DFO) has the lead federal role in managing Canada's fisheries and safeguarding its waters.
The Canadian Coast Guard (CCG), a Special Operating Agency within DFO, is responsible for services and programs that contribute to the safety, security, and accessibility of Canada's waterways. CCG supports other government organizations by providing a civilian fleet and a broadly distributed shore-based infrastructure.
Further details on Fisheries and Oceans Canada's authority, mandate and program activities 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 DFO's spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates and Supplementary Estimates (B) for 2011-2012. DFO did not seek an increase to its spending authorities through 2011-2012 Supplementary Estimates (A). 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 of accounting.
2. Highlights of fiscal quarter and fiscal year-to-date (YTD) results
2.1 Statement of Authorities
DFO's total authorities available for use as at the end of the third quarter of 2011-2012 were $2,005.9 million - $40.3 million, or 2.0% less than the $2,046.2 million authorized at the same point in 2010-2011.
The total authorities available for Vote 1, Net Operating expenditures increased by $40 million when compared to the same quarter of 2010-2011. This is mainly due to the net effect of the following factors:
- Funding received for the reimbursement of severance pays, termination benefits and parental leaves of $57.6 million; the reimbursement for 2010-2011 was received in the fourth quarter;
- Inclusion of the Operating Budget Carry Forward provision of $37.6 million which represents an increase of $13.7 million over the 2010-2011 Carry Forward;
- Funding relief of $31.6 million for the extraordinary storm events in Atlantic Canada, Quebec and Manitoba in 2010 received in 2011-2012;
- Increase in funding of $5.0 million for the Divestiture of Non-core Harbours Program;
- A decrease of $65.1 million in 2011-2012 related to the Federal Contaminated Sites Action Plan and Small Craft Harbours projects as a result of the termination of funding related to the Economic Action Plan; and
- Removal of funding of $2.8 million received for collective agreements in accordance with cost containment measures from Budget 2010.
The total authorities available for Vote 5, Capital expenditures decreased by a total of $81.2 million when compared to the same quarter of 2010-2011. This is mainly due to the net effect of the following factors:
- Funding of $41.1 million received in 2011-2012 to acquire new Mid Shore Patrol Vessels;
- Inclusion of the carry forward of capital funds of $21.5 million which represents an increase of $12.3 million over the 2010-2011 Carry Forward;
- Funding of $11.5 million received in 2011-2012 to support construction of the Pangnirtung Small Craft Harbour in Nunavut;
- Funding relief of $11.3 million for the extraordinary storm events in Atlantic Canada, Quebec and Manitoba in 2010 received in 2011-2012;
- Increased funding in 2011-2012 by $7.8 million for the acquisition of an air cushion vehicle to support marine search and rescue in the Pacific region;
- Increased funding by $5.5 million for the acquisition of new Offshore Science Vessels
- A decrease of $136.8 million related to the Federal Contaminated Sites Action Plan and Canadian Coast Guard and Small Craft Harbours projects as a result of the termination of funding related to the Economic Action Plan in 2010-2011;
- Decreased funding by $24.5 million related to the Deferred Maintenance of Federal Laboratories Initiative; and
- Decreased funding by $10.7 million for Small Craft Harbour construction and renovation projects.
The total authorities available for Vote 10, Grants and Contributions decreased by $9.2 million when compared to the same quarter of 2010-2011. This is mainly due to the net effect of the following factors:
- Funding of $6.4 million in 2011-2012 to support Quebec and Atlantic Canada lobster harvesters and fisheries;
- Reduced funding requirements in the Maa-nulth First Nations Final Agreement, Fraser Basin Initiative and for the Pacific Integrated Commercial Fisheries Initiative of $7.3 million; and
- Reduction of $5 million stemming from the strategic review exercise announced in the Federal Budget 2011.
The budgetary statutory authorities increased by a total of $10.1 million when compared to the same quarter of 2010-2011 as a result of an increase in the cost of employee benefit plans, from 17% to 18% of personnel expenditures.
2.2 Statement of Departmental Budgetary Expenditures by Standard Object
Compared to the previous year, the year to date expenditures at quarter-end have increased by $39.1 million. This represents an increase of 3.2% against year to date expenditures in 2010-2011. This difference is for the most part explained by increases in Operating expenditures of $40.9 million.
Total spending for the third quarter in 2011-2012 was $460.5 million, or $2.2 million lower than the $462.7 million reported for the same period of 2010-2011.
Personnel expenditures have increased by $21.9 million in the third quarter. The principal reason for significantly higher expenditures for personnel costs is the increase in severance payments. Recent collective bargaining agreements have included provisions that allow employees to exercise an option to request a pay-out of accumulated severance allowances, or some portion thereof. As a result, severance payments by the Department in the third quarter of 2011-2012 were $16.5 million, $14.3 million more than in the third quarter of 2010-2011. It should be noted that these one-time costs were funded by the Treasury Board Secretariat in the third quarter.
Professional and Special Services expenditures have decreased by $9.2 million in the third quarter. This is mainly due to the following factors:
- Sea survey work planned for FY 2011-2012($1.5M) to support the Department's input into the Government of Canada's submission for the United Nations Convention on the Law of the Sea (UNCLOS) was not scheduled to occur;
- A number of real property projects were terminated in 2011-2012 and not replaced by other projects in the Maritime region ($2.3 million); and
- Termination of the Economic Action Plan funding and reductions in the Federal Contaminated Sites Action Plan funding ($5.6 million).
Repair and Maintenance expenditures have decreased by $29.5 million in the third quarter. This is mainly due to the termination of the Economic Action Plan funding in 2010-2011 for capital projects such as the Small Craft Harbors and the Canadian Coast Guard.
3. Risks and Uncertainties
This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates for which full supply was released on June 27, 2011.
Planned spending for the fiscal year is now $2,005.9 million. The Department is primarily funded through voted parliamentary spending authorities and statutory authorities for operating expenditures, capital expenditures and grants and contributions. Departmental operations are impacted by any change in parliamentary appropriations.
The most significant cost to the Department is the personnel expenditures for the delivery of knowledge-based scientific, conservation, and maritime programs and services across the country. Expenditures related to the acquisition of machinery and equipment is the next highest cost as the Department has one of the largest asset bases within the federal community.
The Department operates in a dynamic and changing environment today. Globalization, northern development, environmental changes, technological advances, increased pressures on resources, conflicting demands from stakeholders and the environment of fiscal restraint are among the factors impacting the Department. Changes in Canada's north also have implications for the Department.
To restore fiscal balance, the government has implemented a number of measures to improve efficiency while lowering the rate of growth in the size and operations of the public service. Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-2011 levels for the fiscal years 2011-2012 and 2012-2013. Departmental budgets will not be increased to fund increases in annual wages for the federal public service, or to fund increases set out in collective agreements. Budget 2010 also mandated a series of strategic reviews of various federal departments and agencies to identify cost reductions.
For the Department, the impact of these measures in 2011-2012 includes:
- wage reduction measures, requiring the reallocation of an estimated $10 million to cover the cumulative increase related to Budget 2010 Cost Containment measures;
- reductions totaling $9.1 million stemming from strategic review exercise announced in the Federal Budget 2011.
The current environment of fiscal constraint has required the Department to reassess how it conducts its business, provides services and delivers on its programs to meet client and stakeholder needs.
This new operating reality raises many challenges to which the Department must be responsive. In this changing environment, the Department has identified several key internal and external corporate risks. DFO's mission critical corporate risks for 2011-2012 are, in order of severity:
- Financial Capacity Risk
- Communications & Reputation Risk
- Human Capital Risk
- Physical Infrastructure Risk
- Legal and Compliance Risk
The Financial Capacity Risk which has been deemed as having the greatest severity to the Department has several key action plans designed to manage it to an acceptable level. These are:
- Implement rigorous forecasting, budgeting and internal controls;
- Determine funding strategies and options such as partnering, tapping into external funds or central agency reserves;
- Ensure Strategic Review and Strategic Operational Reviews recommendations are followed, monitored and implemented; and
- Analysis and review of Programs to reduce Departmental footprint related to the Canadian Coast Guard and to Real Property.
All these mission critical risks, including their response strategies and action plans, are regularly reviewed and adjusted as necessary by the Departmental Management Board and the external Departmental Audit Committee. The senior management cadre meets semi-annually to review the corporate risks, and considers management of these risks at each stage of the planning, review and reporting cycles.
4. Significant changes in relation to operations, personnel and programs
Pursuant to s. 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, $9.262 million is deemed to have been appropriated to Shared Services Canada (Vote 1- Operating and Vote 5 - Capital), which results in a reduction for the same amount in DFO's Vote 1- Operating and Vote 5 - Capital, Appropriation Act No.1, 2011-2012. To date $1.3 million in expenditures have been incurred on behalf of Shared Services Canada by DFO against the Shared Services Canada Regular Operating and Capital Votes.
Shared Services Canada's mandate is to standardize and consolidate information technology services in the federal government in order to reduce costs, improve services, and leverage capacity in the public and private sectors through pooled resources and greater buying power.
Approval by Senior Officials
Chief Financial Officer
21 février 2012
Statement of Authorities (unaudited)
(in thousands of dollars)
|Fiscal year 2011-2012||Fiscal year 2010-2011|
|Total available for use for the year ending March 31, 2012 *||Used during the quarter ended December 31, 2011||Year to date used at quarter-end||Total available for use for the year ended March 31, 2011 *||Used during the quarter ended December 31, 2010||Year to date used at quarter-end|
|Vote 1 - Net Operating Expenditures||1,371,541||341,059||932,732||1,331,489||318,378||891,869|
|Vote 5 - Capital Expenditures||372,477||67,545||183,263||453,686||98,119||212,817|
|Vote 10 - Grants and Contributions||123,973||17,172||53,489||133,166||13,731||36,237|
|Budget Statutory Authorities||137,919||34,766||106,946||127,830||32,455||96,405|
|Total Budgetary Authorities||2,005,910||460,542||1,276,430||2,046,171||462,683||1,237,328|
|* Includes only Authorities available for use and granted by Parliament at quarter-end.|
More information is available in the table below.
Pursuant to s. 31.1 of the Financial Administration Act and Order-in-Council P.C. 2011-1297 effective November 15, 2011, $9.262 million is deemed to have been appropriated to Shared Services Canada (Vote 1- Operating and Vote 5 - Capital), which results in a reduction for the same amount in DFO's, Vote 1- Operating and Vote 5 - Capital, Appropriation Act No.1, 2011-2012. To date $1.3 million in expenditures have been incurred on behalf of Shared Services Canada by DFO against the Shared Services Canada Regular Operating Vote and Capital Votes.
Departmental Budgetary Expenditures by Standard Object (unaudited)
(in thousands of dollars)
|Fiscal year 2011-2012||Fiscal year 2010-2011|
|Planned expenditures for the year ending March 31, 2012||Expended during the quarter ended December 31, 2011||Year to date used at quarter-end||Planned expenditures for the year ending March 31, 2011||Expended during the quarter ended December 31, 2010||Year to date used at quarter-end|
|Transportation and communications||74,168||19,116||51,580||79,182||20,152||53,028|
|Professional and special services||203,059||51,504||124,458||223,584||60,753||135,467|
|Repair and maintenance||182,556||42,056||108,268||157,728||71,577||152,316|
|Utilities, materials and supplies||95,025||24,359||66,751||110,154||23,149||56,643|
|Acquisition of land, buildings and works||70,919||11,894||31,321||101,131||11,947||24,566|
|Acquisition of machinery and equipment||293,029||28,163||67,896||347,673||24,012||59,840|
|Other subsidies and payments||16,310||14,384||27,033||18,685||8,176||25,395|
|Total gross budgetary expenditures||2,053,925||469,873||1,303,872||2,094,086||472,665||1,265,260|
|Less Revenues netted against expenditures:|
|Sales of goods and services||48,015||9,331||27,442||47,915||9,982||27,932|
|Total Revenues netted against expenditures:||48,015||9,331||27,442||47,915||9,982||27,932|
|Total net budgetary expenditures||2,005,910||460,542||1,276,430||2,046,171||462,683||1,237,328|
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