Fisheries and Oceans Canada - Quarterly Financial Report for the Quarter Ended December 31, 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) and (B) 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) and (B) 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 December 31, 2017 as compared to the same period last year.

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

  2016-17 Authorities as at December 31, 2016 2017-18 Authorities as at December 31, 2017 Variance in Authorities Expenditures during the quarter ended December 31, 2016 Expenditures during the quarter ended December 31, 2017 Variance in Expenditures
Vote 1 – Net Operating expenditures 1,450,685 1,596,203 145,518 308,364 364,735 56,371
Vote 5 – Capital expenditures 1,056,978 972,766 (84,212) 230,393 194,220 (36,173)
Vote 10 – Grants and Contributions 99,441 156,579 57,138 17,983 24,261 6,278
Statutory Authorities 133,089 136,897 3,808 32,370 30,054 (2,316)
Total 2,740,193 2,862,445 122,252 589,110 613,270 24,160

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2017-18 from those in 2016-17 by $122.3 million (4.5%). This is the result of an increase in Vote 1 authorities of $145.5 million, a decrease in Vote 5 authorities of $84.2 million, an increase in Vote 10 authorities of $57.1 million, and an increase in spending authority for statutory payments of $3.8 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 80,935
Funding for the signing of collective agreements 65,354
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 6,347
Funding to invest in ocean and freshwater research in Canada 5,248
Funding to expand the Aquatic Invasive Species Program 5,221
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)
Transfer between votes (17,311)
Funding for incremental fuel costs for the Canadian Coast Guard (16,000)
Funding to protect marine and coastal areas (11,391)
Funding to enhance the safety of marine transportation in the Arctic (9,810)
Operating Budget Carry Forward (9,402)
Budget 2016 reductions in professional services, advertising and travel (5,445)
Sub-total Net Operating expenditures 145,518
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 39,782
Transfer between votes 8,600
Capital Budget Carry Forward 5,918
Other departmental requirements 3,279
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 (35,702)
Funding to invest in ocean and freshwater research in Canada (6,500)
Funding to enhance marine emergency response capacity in British Columbia - Kitsilano (5,805)
Sub-total Capital expenditures (84,212)
Vote 10 – Grants and Contributions
Funding for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment 24,797
Funding to support negotiations on fisheries and marine matters 15,000
Transfer between votes 8,711
Funding to support the implementation of the Atlantic Fisheries Fund Program 6,940
Funding for the enhancement and expansion of the Indigenous fisheries program suite 2,768
Other departmental requirements (1,078)
Sub-total Grants and Contributions 57,138
Statutory
Sub-total Statutory Authorities 3,808
Total Authorities 122,252

In the third quarter of 2017-18, total budgetary authorities available for use amounted to $2,862.4 million compared to $2,742.1 million reported in the second quarter of 2017-18, which represents an increase of $120.3 million. This represents the full amount accessed by the Department through the 2017-18 Supplementary Estimates (B) and funds for the signing of collective agreements.

Authorities Used Analysis

In the third quarter of 2017-18, total budgetary expenditures amounted to $613.3 million compared to $589.1 million reported in the same quarter of 2016-17, which represents an increase of $24.2 million or 4.1%.

Authorities used in Vote 1, Net Operating expenditures, increased by $56.4 million compared to the same quarter last year representing an increase of approximately 18.3% between the two years. The increase is related to $36.3 million in personnel expenditures due to new funding for the Oceans Protection Plan and Comprehensive Review, combined with increases related to the signing of collective agreements. Vote 1 expenditures also increased because of a $21.3 million increase in professional and special services costs, which were offset by slight decreases across several other standard objects.

Authorities used in Vote 5, Capital expenditures, decreased by $36.2 million compared to the same quarter last year representing a decrease of approximately 15.7% between the two years. This is mainly due to a $34.1 million decrease in spending on the acquisition of helicopters as the project is nearing completion, and an overall spending decrease of $16.9 million in the acquisition of land, buildings and works that is primarily related to decreased spending on Small Craft Harbour and Real Property projects in Newfoundland, Gulf and Québec regions caused by the winding down of Federal Infrastructure Initiative. These were offset by an increase of $17.4 million in funding for the vessel refurbishment project.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $6.3 million compared to the same quarter of last year representing an increase of approximately 34.9% between the two years. An increase of $5.0 million is mainly due to spending in the Ocean and Freshwater Science Contribution Program within the Ecosystems and Oceans Science sector.

Statutory authorities decreased by $2.3 million compared to the same quarter last year representing a decrease of approximately 7.2%. The decrease is mainly related to lower contributions to employee benefit plans.

Statement of Departmental Budgetary Expenditures by Standard Object

The increase of $24.2 million in total net budgetary expenditures in the third 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 $34.0 million in the third quarter of 2017-18 when compared to the same quarter of 2016-17. The change includes an increase of $2.8 million in retroactive payments related to new collective agreements and a $30.2 million increase in regular pay.

Expenditures related to Transportation and Communications increased by a total of $5.9 million in the third quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to travel costs associated with Coast Guard (CG) vessel crew changes resulting from increased CG operations related to the Oceans Protection Plan and Comprehensive Review funding.

Expenditures related to Professional and Special Services increased by a total of $14.1 million in the third quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to $3.9 million in higher spending by CG on construction engineering consultants for the Offshore Oceanographic Science Vessels project, as well as an overall increase of $11.9 million in funding for various projects related to the Federal Infrastructure Initiative, Marine Conservation Targets, Oceans Protection Plan and funding for enhancements within the departmental Real Property portfolio.

Expenditures related to Rentals increased by a total of $4.2 million in the third quarter of 2017-18 when compared to the same quarter of 2016-17. There are several reasons for the increase, including timing differences related to a $1.0 million payment for software licenses and support costs. A further $1.0 million can also be attributed to various Federal Infrastructure Investment projects. Lastly, an increase of $1.7 million is mainly related to ship charters for the survey of marine mammals.

Expenditures related to Repair and Maintenance decreased by a total of $28.0 million in the third quarter of 2017-18 when compared to the same quarter of 2016-17. This is primarily attributable to fluctuations in the Coast Guard vessel maintenance schedule, resulting in a $17.1 million decrease. A further $16.1 million decrease can be attributed to the implementation of new financial coding restrictions. The overall decrease is offset by increased expenditures of $3.8 million in the Quebec region related to reconstruction work on the Queen’s Wharf.

Expenditures related to the Acquisition of Land, Buildings and Works decreased by a total of $16.2 million in the third quarter of 2017-18 when compared to the same quarter of 2016-17. This decrease is mainly due to lower spending levels on Small Craft Harbour and Real Property projects related to the winding down of Federal Infrastructure Initiative in Newfoundland, Gulf, and Québec regions.

Expenditures related to Transfer Payments increased by a total of $6.3 million in the third quarter of 2017-18 when compared to the same quarter of 2016-17. An increase of $5.0 million is due to the Ocean and Freshwater Science Contribution Program and an increase of $1.4 million is related to the Coastal Restoration Fund (a part of the Oceans Protection Plan).

Other Subsidies and Payments decreased by a total of $3.8 million in the third quarter of 2017-18 when compared to the same quarter of 2016-17. This is mainly due to a $4.6 million net decrease in accounts receivable related to salary overpayments stemming from technical issues with the 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 third quarter:

5. Approval by Senior Officials

Approved by:

Original signed by
______________________________
Catherine Blewett, Deputy Minister

Original signed by
______________________________
Pablo Sobrino,
Interim Chief Financial Officer

Ottawa, Canada
February 21, 2018

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 December 31, 2016 Year to date used at quarter-end Total available for use for the year ending March 31, 2018* Used during the quarter ended December 31, 2017 Year to date used at quarter-end
Vote 1 – Net Operating expenditures 1,450,685 308,364 873,696 1,596,203 364,735 1,028,163
Vote 5 – Capital expenditures 1,056,978 230,393 418,129 972,766 194,220 475,435
Vote 10 – Grants and Contributions 99,441 17,983 46,006 156,579 24,261 54,571
Statutory Authorities
Statutory - Contributions to employee benefit plans 133,005 31,821 95,460 136,813 29,930 89,791
Statutory - Minister of Fisheries and Oceans – Salary and motor car allowance 84 0 14 84 22 64
Statutory - Spending of proceeds from the disposal of surplus Crown assets 0 549 1,413 0 102 343
Statutory – Refunds of amounts credited to revenues in previous years 0 0 7 0 0 1
Total Statutory Authorities 133,089 32,370 96,894 136,897 30,054 90,199
Total Authorities 2,740,193 589,110 1,434,725 2,862,445 613,270 1,648,368

* 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 December 31, 2016 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2018* Expended during the quarter ended December 31, 2017 Year to date used at quarter-end
Expenditures:
Personnel 937,562 225,029 670,052 1,065,356 259,036 775,115
Transportation and communications 63,429 16,888 44,192 64,549 22,737 57,834
Information 3,562 451 1,107 1,902 699 1,573
Professional and special services 278,696 129,555 247,710 294,191 143,608 380,503
Rentals 15,982 5,304 14,686 20,897 9,524 19,278
Repair and maintenance 218,849 47,841 116,097 212,034 19,800 85,665
Utilities, materials and supplies 113,232 18,358 58,904 120,588 22,054 63,426
Acquisition of land, buildings and works 239,969 77,629 152,454 170,992 61,404 118,994
Acquisition of machinery and equipment 801,129 56,044 93,576 783,510 57,575 93,120
Transfer payments 99,441 17,983 46,006 156,579 24,261 54,571
Other subsidies and payments 16,257 6,320 23,300 19,762 2,511 29,564
Total gross budgetary expenditures 2,788,108 601,402 1,468,084 2,910,360 623,209 1,679,643
Less Revenues netted against expenditures:
Sales of goods and services 47,915 12,292 33,359 47,915 9,939 31,275
Total Revenues netted against expenditures 47,915 12,292 33,359 47,915 9,939 31,275
Total net budgetary expenditures 2,740,193 589,110 1,434,725 2,862,445 613,270 1,648,368

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