Fisheries and Oceans Canada - Quarterly Financial Report for the Quarter Ended June 30, 2019

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, as well as Budget 2018 and Budget 2019.

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 2019-20 Main Estimates and Budget 2019 Measures. 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 June 30, 2019 as compared to the same period last year.

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

  2018-19 Authorities as at June 30, 2018 2019-20 Authorities as at June 30, 2019 Variance in Authorities Expenditures during the quarter ended June 30, 2018 Expenditures during the quarter ended June 30, 2019 Variance in Expenditures
Vote 1 – Net Operating expenditures 1,549,032 1,736,757 187,725 323,686 347,320 23,634
Vote 5 – Capital expenditures 587,211 801,787 214,576 47,117 84,625 37,508
Vote 10 – Grants and Contributions 206,011 297,446 91,435 14,619 16,597 1,978
Statutory Authorities 138,514 157,201 18,687 33,980 38,911 4,931
Total 2,480,768 2,993,191 512,423 419,402 487,453 68,051

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2019-20 from those in 2018-19 by $512.4 million (20.7%). This is the result of an increase in Vote 1 authorities of $187.7 million, an increase in Vote 5 authorities of $214.6 million, an increase in Vote 10 authorities of $91.4 million, and an increase in spending authority for statutory payments of $18.7 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. Some variances are also due to the timing of the authorities granted by Parliament. As such, the negative amounts do not represent cuts to program spending.

Explanation of Changes
(2019-20 compared to 2018-19)
Change (thousands of dollars)
Vote 1 – Net Operating expenditures
Funding profile change for the 2018 Budget measure "Renewing Canada's Network of Small Craft Harbours" 57,674
Funding profile change to implement an amended Fisheries Act 42,944
Funding profile change 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) 31,317
Funding profile change to operate the newly procured icebreakers for the Canadian Coast Guard 29,423
Funding profile change for fisheries aerial surveillance and enforcement (FASE) program to deliver core aerial surveillance monitoring activities 13,060
Other Departmental Adjustments 13,307
Sub-total Net Operating expenditures 187,725
Vote 5 – Capital expenditures
Funding profile change for the Canadian Coast Guard Fleet 177,203
Funding profile change for the 2018 Budget measure "Renewing Canada's Network of Small Craft Harbours" 81,220
Funding profile change 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) 31,559
Funding profile change for the upgrade of federal infrastructure assets (24,821)
Funding profile change for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment (38,010)
Other Departmental Adjustments (12,575)
Sub-total Capital expenditures 214,576
Vote 10 – Grants and Contributions
Funding for the establishment of Fisheries Fund Programs 30,833
Funding profile change for 2018 Budget measures 20,590
Funding profile change to advance reconciliation on Indigenous and treaty rights issues 14,223
Funding profile change to implement an amended Fisheries Act 11,549
Funding profile change for the enhancement and expansion of the Indigenous fisheries program suite 6,791
Other Departmental Adjustments 7,449
Sub-total Grants and Contributions 91,435
Statutory
Sub-total Statutory Authorities 18,687
Total Authorities 512,423

Authorities Used Analysis

In the first quarter of 2019-20, total budgetary expenditures amounted to $487.5 million compared to $419.4 million reported in the same quarter of 2018-19, which represents an increase of $68.1 million or 16.2%.

Authorities used in Vote 1, Net Operating expenditures, increased by $23.6 million compared to the same quarter last year representing an increase of approximately 7.3% between the two years. The increase is primarily attributable to the Department’s efforts to implement an amended Fisheries Act and to maintain mission-critical services to Canadians, combined with new salary rates, which took effect in late 2018-19. In addition, the increase relates to Professional and Special Services as well as Repair and Maintenance for the renewal of small craft harbours.

Authorities used in Vote 5, Capital expenditures, increased by $37.5 million compared to the same quarter last year representing an increase of approximately 79.6% between the two years. The increase in capital spending is mainly due to capital improvements related to the Canadian Coast Guard fleet. Of this amount, the increase is primarily attributable to higher Professional and Special Services for the Offshore Oceanographic Science Vessel as well as a rate adjustment applied at the end of the 2018-19 fiscal year for Professional and Special Services for the Offshore Fisheries Science Vessel.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $2.0 million compared to the same quarter last year representing an increase of approximately 13.5% between the two years. As some of the contribution agreements are multi-year, processes are now in place to make payments earlier in the fiscal year, thus resulting in year-over-year increase in payments in the first quarter. Some examples are the British Columbia Salmon Restoration and Innovation Fund, Atlantic Fisheries Fund and the Canadian Coast Guard Auxiliary.

Statutory authorities increased by $4.9 million compared to the same quarter last year representing an increase of approximately 14.5%. The increase to contributions to employee benefit plans is directly aligned with the growth in salary expenditures.

Statement of Departmental Budgetary Expenditures by Standard Object

The increase of $68.1 million in total net budgetary expenditures in the first quarter of 2019-20 as compared to the same quarter in 2018-19 is primarily due to the following:

Personnel expenditures increased by a total of $22.0 million in the first quarter of 2019-20 when compared to the same quarter of 2018-19. The increase is primarily related to the Department’s efforts to maintain mission-critical services to Canadians, to increases in contributions to employee benefit plans and to new salary rates which took effect in late 2018-19.

Expenditures related to Professional and Special Services increased by a total of $17.9 million in the first quarter of 2019-20 when compared to the same quarter of 2018-19. The increase is mainly associated with construction engineering consultants for Canadian Coast Guard fleet projects and a rate adjustment applied at the end of 2018-19 relating to architectural services for the Offshore Fisheries Science Vessels. The increase is also attributable to a timing difference in reporting legal expenditures year-over-year.

Expenditures related to Rentals increased by a total of $2.1 million in the first quarter of 2019-20 when compared to the same quarter of 2018-19. This increase is primarily related to the rental of high performance computer equipment from Shared Services Canada (SSC), along with additional spending for ship chartering.

Expenditures related to Repair and Maintenance increased by a total of $2.6 million in the first quarter of 2019-20 when compared to the same quarter of 2018-19. This is primarily attributable to an increased number of projects undertaken as part of the renewal of small craft harbours network stemming from Budget 2018 funding, partially offset by a decrease in Canadian Coast Guard’s National Vessel refit.

Expenditures related to the Acquisition of Land, Buildings and Works increased by a total of $6.1 million in the first quarter of 2019-20 when compared to the same quarter of 2018-19. The increase is primarily for capital projects undertaken as part of the renewal of small craft harbours.

Expenditures related to Acquisition of Machinery and Equipment increased by a total of $15.9 million in the first quarter of 2019-20 when compared to the same quarter of 2018-19. This is in large part related to capital improvements to the ships for the Medium Icebreakers Project and the CCGS Louis St. Laurent.

Expenditures related to Transfer Payments increased by a total of $2.0 million in the first quarter of 2019-20 when compared to the same quarter of 2018-19. As some of the contribution agreements are multi-year, processes are now in place to make payments earlier in the fiscal year, thus resulting in year-over-year increase in payments in the first quarter. Some examples are the British Columbia Salmon Restoration and Innovation Fund, Atlantic Fisheries Fund and the Canadian Coast Guard Auxiliary.

Sales of goods and services increased by $2.2 million in the first quarter of 2019-20 when compared to the same quarter of 2018-19. This increase is primarily attributable to an increase in invoices issued in the first quarter of 2019-20 for Marine Service Fees, Icebreaking Fees and Dredging Fees as compared to 2018-19. The increase is also attributable to an increased rate for Dredging Fees that took effect in April 2019.

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 2019-20 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 its workforce coupled with the nature of the 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 first 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
August 29th, 2019

Statement of Authorities (unaudited)

(in thousands of dollars)

  Fiscal year 2018-19 Fiscal year 2019-20
Total available for use for the year ending March 31, 2019* Used during the quarter ended June 30, 2018 Year to date used at quarter-end Total available for use for the year ending March 31, 2020* Used during the quarter ended June 30, 2019 Year to date used at quarter-end
Vote 1 – Net Operating expenditures 1,549,032 323,686 323,686 1,736,757 347,320 347,320
Vote 5 – Capital expenditures 587,211 47,117 47,117 801,787 84,625 84,625
Vote 10 – Grants and Contributions 206,011 14,619 14,619 297,446 16,597 16,597
Statutory Authorities
Statutory - Contributions to employee benefit plans 138,428 33,948 33,948 157,113 38,888 38,888
Statutory - Minister of Fisheries and Oceans – Salary and motor car allowance 86 21 21 88 22 22
Statutory - Spending of proceeds from the disposal of surplus Crown assets 0 0 0 0 0 0
Statutory – Refunds of amounts credited to revenues in previous years 0 11 11 0 1 1
Total Statutory Authorities 138,514 33,980 33,980 157,201 38,911 38,911
Total Authorities 2,480,768 419,402 419,402 2,993,191 487,453 487,453

* 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 2018-19 Fiscal year 2019-20
Planned expenditures for the year ending March 31, 2019* Expended during the quarter ended June 30, 2018 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2020* Expended during the quarter ended June 30, 2019 Year to date used at quarter-end
Expenditures:
Personnel 1,045,060 267,100 267,100 1,179,660 289,130 289,130
Transportation and communications 58,123 18,068 18,068 64,759 18,173 18,173
Information 2,086 497 497 2,307 489 489
Professional and special services 289,567 39,849 39,849 356,809 57,708 57,708
Rentals 16,369 4,428 4,428 18,926 6,489 6,489
Repair and maintenance 203,553 21,248 21,248 203,763 23,846 23,846
Utilities, materials and supplies 105,769 18,030 18,030 104,391 18,902 18,902
Acquisition of land, buildings and works 169,519 10,459 10,459 197,991 16,533 16,533
Acquisition of machinery and equipment 403,163 21,846 21,846 575,607 37,729 37,729
Transfer payments 206,011 14,619 14,619 297,446 16,597 16,597
Other subsidies and payments 20,549 13,144 13,144 31,543 13,922 13,922
Public Debt Charges 0 0 0 0 0 0
Total gross budgetary expenditures 2,519,769 429,288 429,288 3,033,202 499,518 499,518
Less Revenues netted against expenditures:
Sales of goods and services 39,001 9,886 9,886 40,011 12,065 12,065
Total Revenues netted against expenditures 39,001 9,886 9,886 40,011 12,065 12,065
Total net budgetary expenditures 2,480,768 419,402 419,402 2,993,191 487,453 487,453

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