Fisheries and Oceans Canada - Quarterly Financial Report for the quarter ended December 31, 2018

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 2017 and Budget 2018.

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 2018-19 Main Estimates, Supplementary Estimates (A), Budget 2018 Measures, and the Operating and Capital Budget Carry Forward. 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, 2018 as compared to the same period last year.

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

  2017-18 Authorities as at December 31, 2017 2018-19 Authorities as at December 31, 2018 Variance in Authorities Expenditures during the quarter ended December 31, 2017 Expenditures during the quarter ended December 31, 2018 Variance in Expenditures
Vote 1 – Net Operating expenditures 1,596,203 1,649,656 53,453 364,735 408,152 43,417
Vote 5 – Capital expenditures 972,766 1,641,325 668,559 194,220 156,312 (37,908)
Vote 10 – Grants and Contributions 156,579 267,933 111,354 24,261 31,349 7,088
Statutory Authorities 136,897 142,187 5,290 30,054 34,229 4,175
Total 2,862,445 3,701,101 838,656 613,270 630,042 16,772

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2018-19 from those in 2017-18 by $838.7 million (29.3%). This is the result of an increase in Vote 1 authorities of $53.4 million, an increase in Vote 5 authorities of $668.6 million, an increase in Vote 10 authorities of $111.4 million, and an increase in spending authority for statutory payments of $5.3 million.

Some of the amounts presented in this table 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. As such, the negative amounts do not represent cuts to program spending.

Explanation of Changes
(2018-19 compared to 2017-18)
Change
(thousands of dollars)
Vote 1 – Net Operating expenditures
Funding for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment 62,911
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) 30,003
Funding for the 2018 Budget measure "Renewing Canada's Network of Small Craft Harbours" 28,128
Funding to implement an amended Fisheries Act 18,336
Funding for the 2018 Budget measure "Protecting Canada's Nature, Parks and Wild Spaces" 15,420
Funding for the 2018 Budget measure, Protecting Marine Life, to implement a comprehensive initiative for the protection and recovery of endangered whale populations 5,497
Funding to transition to new impact assessment and regulatory processes 4,439
Funding to procure three icebreakers for the Canadian Coast Guard 1,745
Other Departmental Requirements 743
Funding for signing collective bargaining agreements (35,204)
Operating Budget Carry Forward (20,857)
Funding profile change for the upgrade of federal infrastructure assets (20,799)
Sunsetting funding for the removal of the Kathryn Spirit vessel (20,000)
Sunsetting funding for Species at Risk (7,486)
Funding profile change for the implementation of a World-Class Tanker Safety System South of 60° North Latitude (Phase II) (5,021)
Transfer between votes (4,402)
Sub-total Net Operating expenditures 53,453
Vote 5 – Capital expenditures
Funding to procure three icebreakers for the Canadian Coast Guard 825,570
Funding for the Canadian Coast Guard Offshore Oceanographic Science Vessel project 57,795
Funding for the 2018 Budget measure "Renewing Canada's Network of Small Craft Harbours" 51,064
Funding for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment 43,632
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) 36,943
Transfer between votes 10,802
Transfer from Transport Canada to Fisheries and Oceans for the Port de Carleton 10,500
Capital Budget Carry Forward 2,102
Other Departmental Requirements 327
Funding profile change for the upgrade of federal infrastructure assets (207,278)
Funding profile change for the Canadian Coast Guard Vessels, Lifeboats and Helicopters (162,898)
Sub-total Capital expenditures 668,559
Vote 10 – Grants and Contributions
Funding to support the implementation of the Atlantic Fisheries Fund Program 45,393
Funding to advance reconciliation on Indigenous and treaty rights issues 33,850
Funding for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment 16,705
Funding for the enhancement and expansion of the Indigenous fisheries program suite 4,557
Funding for the Fisheries and Aquaculture Clean Technology Adoption Program 4,136
Funding to implement treaty obligations under the Tla'amin Final Agreement and the Nisga'a Final Agreement 3,189
Funding to implement an amended Fisheries Act 3,000
Funding for the 2018 Budget measure "Renewing Canada's Network of Small Craft Harbours" 2,975
Funding for the renewal of Atlantic and Pacific Commercial Fisheries Initiatives 2,003
Other Departmental Requirements 1,946
Transfer between votes (6,400)
Sub-total Grants and Contributions 111,354
Statutory
Sub-total Statutory Authorities 5,290
Total Authorities 838,656

In the third quarter of 2018-19, total budgetary authorities available for use amounted to $3,701.1 million compared to $2,714.0 million reported in the second quarter of 2018-19, which represents an increase of $987.1 million. This is primarily the result of the receipt of the funding to procure three icebreakers, funding for the Canadian Coast Guard Offshore Oceanographic Science Vessel project and the funding for the 2018 Budget measure “Renewing Canada’s Network of Small Craft Harbours”.

Authorities Used Analysis

In the third quarter of 2018-19, total budgetary expenditures amounted to $630.0 million compared to $613.3 million reported in the same quarter of 2017-18, which represents an increase of $16.8 million or 2.7%.

Authorities used in Vote 1, Net Operating expenditures, increased by $43.4 million compared to the same quarter last year representing an increase of approximately 11.9% between the two years. The increase is mostly due to the hiring of staff and a growth in spending in repair and maintenance, as well as in the acquisition of machinery and equipment, in support of the Oceans Protection Plan and the Department’s efforts to maintain mission-critical services to Canadians.

Authorities used in Vote 5, Capital expenditures, decreased by $37.9 million compared to the same quarter last year representing a decrease of approximately 19.5% between the two years. The decrease is mainly due to the funding profile change to our Federal Infrastructure investments as the majority of these initiatives have been successfully completed and the winding down of initiatives such as the Offshore Fisheries Science Vessels.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $7.1 million compared to the same quarter last year representing an increase of approximately 29.2% between the two years. The increase is mostly aligned with the incremental investments in transfer payment programs in 2017-18. Some examples are the Atlantic Fisheries Fund which supports the fish and seafood sector, the Coastal Restoration Fund which supports the implementation of the Oceans Protection Plan, and the Canadian Coast Guard Auxiliary, a volunteer water rescue and safety organization.

Statutory authorities increased by $4.2 million compared to the same quarter last year representing an increase of approximately 13.9%. The increase to contributions to employee benefit plans is directly aligned with the hiring of new incremental staff.

Statement of Departmental Budgetary Expenditures by Standard Object

The increase of $16.8 million in total net budgetary expenditures in the third quarter of 2018-19 as compared to the same quarter in 2017-18 is primarily due to the following:

Personnel expenditures increased by a total of $59.0 million in the third quarter of 2018-19 when compared to the same quarter of 2017-18. The increase is due to retroactive payments related to collective agreements paid out in the third quarter of 2018-19 as well as increases associated with the hiring of staff in support of the Oceans Protection Plan and the Department’s efforts to maintain mission-critical services to Canadians.

Expenditures associated with Transportation and Communications increased by a total of $3.4 million in the third quarter of 2018-19 when compared to the same quarter of 2017-18. This is in large part related to additional travel costs for the Canadian Coast Guard vessel crew changes resulting from increased operations in support of the Oceans Protection Plan.

Expenditures related to Professional and Special Services decreased by a total of $26.6 million in the third quarter of 2018-19 when compared to the same quarter of 2017-18. The decrease is mainly due to the funding profile change to our Federal Infrastructure investments as the majority of these initiatives have been successfully completed and the winding down of initiatives such as the Offshore Fisheries Science Vessels.

Expenditures related to Repair and Maintenance increased by a total of $11.8 million in the third quarter of 2018-19 when compared to the same quarter of 2017-18. This increase is primarily attributable to fluctuations in the Canadian Coast Guard vessel maintenance schedule, partially offset by Vessel Life Extension work that is now reported under Acquisition of Machinery and Equipment as the Department has realigned and adjusted its approach to categorizing capitalizable extension projects.

Expenditures related to Utilities, Materials, and Supplies increased by a total of $4.4 million in the third quarter of 2018-19 when compared to the same quarter of 2017-18. This is mainly related to increased fuel purchases by the Canadian Coast Guard.

Expenditures related to the Acquisition of Land, Buildings and Works decreased by a total of $22.1 million in the third quarter of 2018-19 when compared to the same quarter of 2017-18. The decrease is mainly due to the funding profile change to our Federal Infrastructure investments as the majority of these initiatives have been successfully completed.

Expenditures related to Acquisition of Machinery and Equipment increased by a total of $15.6 million in the third quarter of 2018-19 when compared to the same quarter of 2017-18. This is in large part related to an increase in the Medium Icebreakers projects.

Expenditures related to Transfer Payments increased by a total of $7.1 million in the third quarter of 2018-19 when compared to the same quarter of 2017-18. The increase is mostly aligned with the incremental investments in transfer payment programs in 2017-18. Some examples are the Atlantic Fisheries Fund which supports the fish and seafood sector, the Coastal Restoration Fund which supports the implementation of the Oceans Protection Plan, and the Canadian Coast Guard Auxiliary, a volunteer water rescue and safety organization.

Other Subsidies and Payments decreased by $33.6 million in the third quarter of 2018-19 when compared to the same quarter of 2017-18. In the second quarter, there was a timing difference in the reallocation of the Interdepartmental Settlement in the Department’s financial system. This is temporary in nature and the decrease in the third quarter represents the offset to the increase observed in the second quarter. The overall impact is nil on the Department.

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. The Department maintains a Corporate Risk Profile which identifies and assesses high-level risks that could affect the achievement of its objectives and priorities. Additional information regarding the Department’s key risk areas is presented in the 2018-19 Departmental Plan.

Certain risks would have financial impacts should they materialize, for example many factors affecting the timing of transfer payments lie outside the control of the Department and could require funds to be reprofiled to future years. To minimize these impacts, the Department continuously monitors its program funding and expenditures throughout the year.

The Government of Canada implemented a new pay system as part of the Transformation of Pay Administration Initiative. There are known and ongoing issues associated with the implementation of this system that have resulted in salary over/underpayments to employees. Given the complexity of our workforce coupled with the nature of our organization, the Department has experienced a significant number of pay related issues. To mitigate the impact on its employees, Fisheries and Oceans Canada has created a pay support team to help employees whose pay has been impacted and to accelerate urgent matters to the Pay Centre. The Department has been working with employees to recover salary overpayments through repayment plans to ensure no undue hardship on the employee. The Department will continue to work internally and with external stakeholders to resolve these issues.

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
_________________________
Tim Sargent, Deputy Minister

Original signed by
_________________________
Jen O’Donoughue,
Chief Financial Officer

Ottawa, Canada
February 21st, 2019

Statement of Authorities (unaudited)

(in thousands of dollars)

  Fiscal year 2017-18 Fiscal year 2018-19
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 Total available for use for the year ending March 31, 2019* Used during the quarter ended December 31, 2018 Year to date used at quarter-end
Vote 1 – Net Operating expenditures 1,596,203 364,735 1,028,163 1,649,656 408,152 1,139,282
Vote 5 – Capital expenditures 972,766 194,220 475,435 1,641,325 156,312 848,692
Vote 10 – Grants and Contributions 156,579 24,261 54,571 267,933 31,349 73,458
Statutory Authorities
Statutory - Contributions to employee benefit plans 136,813 29,930 89,791 142,101 33,948 101,843
Statutory - Minister of Fisheries and Oceans – Salary and motor car allowance 84 22 64 86 21 65
Statutory - Spending of proceeds from the disposal of surplus Crown assets 0 102 343 0 260 315
Statutory – Refunds of amounts credited to revenues in previous years 0 0 1 0 0 11
Total Statutory Authorities 136,897 30,054 90,199 142,187 34,229 102,234
Total Authorities 2,862,445 613,270 1,648,368 3,701,101 630,042 2,163,666

* 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 2017-18 Fiscal year 2018-19
Planned expenditures for the year ending March 31, 2018* Expended during the quarter ended December 31, 2017 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2019* Expended during the quarter ended December 31, 2018 Year to date used at quarter-end
Expenditures:
Personnel 1,065,356 259,036 775,115 1,071,042 318,083 857,449
Transportation and communications 64,549 22,737 57,834 65,829 26,136 65,447
Information 1,902 699 1,573 2,663 943 1,973
Professional and special services 294,191 143,608 380,503 324,747 117,039 232,759
Rentals 20,897 9,524 19,278 19,437 8,493 21,532
Repair and maintenance 212,034 19,800 85,665 224,157 31,602 75,559
Utilities, materials and supplies 120,588 22,054 63,426 118,154 26,436 74,171
Acquisition of land, buildings and works 170,992 61,404 118,994 219,687 39,290 73,337
Acquisition of machinery and equipment 783,510 57,575 93,120 1,403,553 73,202 689,397
Transfer payments 156,579 24,261 54,571 267,932 31,349 73,457
Other subsidies and payments 19,762 2,511 29,564 22,901 (31,105) 29,628
Public Debt Charges 0 0 0 0 1 1
Total gross budgetary expenditures 2,910,360 623,209 1,679,643 3,740,102 641,469 2,194,710
Less Revenues netted against expenditures:
Sales of goods and services 47,915 9,939 31,275 39,001 11,427 31,044
Total Revenues netted against expenditures 47,915 9,939 31,275 39,001 11,427 31,044
Total net budgetary expenditures 2,862,445 613,270 1,648,368 3,701,101 630,042 2,163,666

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