Fisheries and Oceans Canada - Quarterly Financial Report for the Quarter Ended June 30, 2020

1. Introduction

This quarterly financial report has been prepared as required by section 65.1 of the Financial Administration Act. The quarterly report should be read in conjunction with the Main Estimates, Supplementary Estimates (A) as well as 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 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 2020-21 Main Estimates and 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. In this quarter, the appropriation acts for 2020-21 Main Estimates includes 75% of Vote 1 and Vote 5 authorities, and approximately 90% of Vote 10 authorities. Full supply of 2020-21 Main Estimates is expected to be received by the end of the third quarter.

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, 2020 as compared to the same period last year.

Highlights of the Fiscal Quarter and the Fiscal Year-to-Date (YTD) Results (thousands of dollars)
	2019-20 Authorities as at June 30, 2019	2020-21 Authorities as at June 30, 2020	Variance in Authorities	Expenditures during the quarter ended June 30, 2019	Expenditures during the quarter ended June 30, 2020	Variance in Expenditures
Vote 1 – Net Operating expenditures	1,736,757	1,378,659	(358,098)	347,320	352,413	5,093
Vote 5 – Capital expenditures	801,787	589,581	(212,206)	84,625	65,468	(19,157)
Vote 10 – Grants and Contributions	297,446	654,717	357,271	16,597	24,525	7,928
Statutory Authorities	157,201	636,516	479,315	38,911	40,160	1,249
Total	2,993,191	3,259,473	266,282	487,453	482,566	(4,887)

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2020-21 from those in 2019-20 by $266.3 million (8.9%). This is the result of an increase in Vote 10 authorities of $357.3 million, an increase in spending authority for statutory payments of $479.3 million, a decrease in Vote 1 authorities of $358.1 million, and a decrease in Vote 5 authorities of $212.2 million. The Explanation of Changes table below includes variances between the receipt of full supply for the 2019-20 Main Estimates and the two interim supply periods for the 2020-21 Main Estimates. Full supply of 2020-21 Main Estimates is expected to be received by the end of the third quarter.

Amounts displayed in this table represent the achievement of project milestones, planned changes to funding profiles, as well as variances due to the timing the authorities are granted by Parliament. As such, the negative amounts do not represent cuts to program spending.

Explanation of Changes (2020-21 compared to 2019-20)	Change (thousands of dollars)
Vote 1 – Net Operating expenditures
Funding for the Canadian Coast Guard's fleet renewal and recapitalization projects	24,806
Funding for the Big Bar Landslide	19,851
Funding for signing of collective bargaining agreements	13,902
Funding for the Trans Mountain Expansion project	12,158
Funding to meet international commitments under the Pacific Salmon Treaty	9,304
Funding profile change for the Sustainable Aquaculture Program	(9,523)
Funding profile change for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment	(38,007)
Funding profile change for maintaining mission-critical services to Canadians (e.g. fisheries management activities and maintenance of the fleet for continued safety and security of Canadian waters)	(48,631)
Funding profile change for the 2018 Budget measure "Renewing Canada’s Network of Small Craft Harbours"	(48,674)
Funding from partial receipt of authorities by Parliament in lieu of full supply	(281,146)
Other Departmental Adjustments	(12,138)
Sub-total Net Operating expenditures	(358,098)
Vote 5 – Capital expenditures
Funding for the Canadian Coast Guardʼs fleet recapitalization projects	109,705
Funding profile change for the Oceans Protection Plan to improve marine safety and protect Canadaʼs marine environment	(10,698)
Funding profile change for the succesful completion for federal infrastructure investments	(30,526)
Funding profile change to procure icebreakers for the Canadian Coast Guard	(58,280)
Funding profile change for the Canadian Coast Guard Vessels, Lifeboats and Helicopters	(60,680)
Funding profile change for the 2018 Budget measure "Renewing Canada's Network of Small Craft Harbours"	(81,220)
Funding profile change for the Canadian Coast Guard Offshore Oceanographic Science Vessel project	(89,342)
Other Departmental Adjustments	8,835
Sub-total Capital expenditures	(212,206)
Vote 10 – Grants and Contributions
Funding to advance reconciliation on Indigenous and treaty rights issues	320,303
Funding for the Trans Mountain Expansion Project	36,057
Funding for the establishment of Fisheries Fund Programs	7,122
Other Departmental Adjustments	(6,211)
Sub-total Grants and Contributions	357,271
Statutory
Payments to support Canada’s fish harvesters pursuant to the Public Health Events of National Concern Payments Act	469,400
Payments to the Canadian Seafood Stabilization Fund pursuant to the Public Health Events of National Concern Payments Act	6,200
Other Departmental Adjustments	3,715
Sub-total Statutory Authorities	479,315
Total Authorities	266,282

Authorities Used Analysis

In the first quarter of 2020-21, total budgetary expenditures amounted to $482.6 million compared to $487.5 million reported in the same quarter of 2019-20, which represents a decrease of $4.9 million or 1.0%.

Authorities used in Vote 1, Net Operating expenditures, increased by $5.1 million compared to the same quarter last year representing an increase of approximately 1.5% between the two years. The increase is mostly related to professional services costs for work being done on the Fraser River Rockslide as well as increased personnel costs primarily related to higher salary rates from newly signed collective agreements. These increases were partially offset by decreased staffing, travel, and repair and maintenance due to COVID-19 as well as lower spending on fuel.

Authorities used in Vote 5, Capital expenditures, decreased by $19.2 million compared to the same quarter last year representing a decrease of approximately 22.6% between the two years. This decrease is primarily related to delays in the Vessel Life Extension Program resulting from slowdowns at various shipyards due to COVID-19, in addition to decreased expenditures for the Medium Icebreakers, Small Craft Harbours, and Real Property projects as project milestones are completed. This is offset by an increase in payments resulting from delays in shipments from the end of the previous fiscal year, due to COVID-19, as well as an increase in equipment purchases related to the Oceans Protection Plan and the acquisition of helicopters.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $7.9 million compared to the same quarter last year representing a 47.8% increase between the two years. This increase is primarily related to the ramp up of the British Columbia Salmon Restoration and Innovation Fund, increased engagement and co-development with Indigenous groups, and a larger number of contribution agreements being signed related to the Costal Restoration Fund and the Atlantic Fisheries Fund.

Statutory authorities used increased by $1.2 million compared to the same quarter last year representing an increase of approximately 3.2%. The increase for contributions to employee benefit plans is directly aligned with the growth in salary expenditures.

Statement of Departmental Budgetary Expenditures by Standard Object

The decrease of $4.9 million in total net budgetary expenditures in the first quarter of 2020-21 as compared to the same quarter in 2019-20 is primarily due to the following:

Expenditures related to Personnel increased by a total of $16.8 million in the first quarter of 2020-21 when compared to the same quarter of 2019-20. The increase is in line with additional funding provided to the Department which has increased its complement of employees.

Expenditures related to Transportation and Communications decreased by a total of $12.8 million in the first quarter of 2020-21 when compared to the same quarter of 2019-20. The decrease is primarily related to decreased travel and relocation costs due to restrictions from COVID-19.

Expenditures related to Professional and Special Services increased by a total of $9.3 million in the first quarter of 2020-21 when compared to the same quarter of 2019-20. The growth is primarily related to work being done on the Fraser River Rockslide, partially offset by decreases in legal services costs and reduced spending on management consulting services related to the Oceans Protection Plan.

Expenditures related to Repair and Maintenance decreased by a total of $8.4 million in the first quarter of 2020-21 when compared to the same quarter of 2019-20. This decrease is mainly attributable to delays and de-scoping of work as scheduling of contractors and technicians was minimized to operationally essential due to COVID-19.

Expenditures related to Utilities, Materials, and Supplies decreased by a total of $6.8 million in the first quarter of 2020-21 when compared to the same quarter of 2019-20. This is primarily related to lower spending on fuel resulting from decreased commodity prices as well as less consumption.

Expenditures related to the Acquisition of Land, Buildings and Works decreased by a total of $6.7 million in the first quarter of 2020-21 when compared to the same quarter of 2019-20.This is primarily related to an expected decrease in work related to Small Craft Harbours and Real Property projects as per project timelines. This is partially offset by an increase in payments resulting from delays in shipments from the end of the previous fiscal year, due to COVID-19.

Expenditures related to Acquisition of Machinery and Equipment decreased by a total of $11.5 million in the first quarter of 2020-21 when compared to the same quarter of 2019-20. This decrease is mainly due to delays in the Vessel Life Extension Program resulting from slowdowns at various shipyards due to COVID-19 in addition to decreased expenditures for the Medium Icebreakers project as milestones are completed. This is offset by an increase in equipment purchases related to the Oceans Protection Plan and the acquisition of helicopters.

Expenditures related to Transfer Payments increased by a total of $7.9 million in the first quarter of 2020-21 when compared to the same quarter of 2019-20. This increase is primarily related to the ramp up of the British Columbia Salmon Restoration and Innovation Fund, increased engagement and co-development with indigenous groups, and a larger number of contribution agreements being signed related to the Costal Restoration Fund and the Atlantic Fisheries Fund.

Expenditures related to Other Subsidies and Payments increased by a total of $4.6 million in the first quarter of 2020-21 when compared to the same quarter of 2019-20. The majority of the increase is due to a timing difference in the reallocation of Interdepartmental Settlements in the Department’s financial system. This is temporary in nature as this increase is expected to be offset by decreases in future quarters.

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 2020-21 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 COVID-19 pandemic introduces elements of risks and uncertainties. The physical distancing measures introduced in Canada by mid-March 2020 in an attempt to reduce the spread of the virus within Canada meant that the DFO maintained onsite critical services while most employees were asked to work remotely. Unforeseen expenses have been incurred to help protect the health and safety of our employees while continuing to provide essential services to Canadians. Such expenses include personal protective equipment, or minor alterations to workplaces as examples.

Since that time, governments are seeking to progressively resume more standard operations with provisions for safe re-entry to the workplace. The Department of Fisheries and Oceans has prepared its workplaces for the return of some employees, and is considering how best to gradually balance working remotely with traditional workplace presence.

The Government of Canada implemented a new pay system as part of the Transformation of Pay Administration Initiative in 2016. Given the complexity of our workforce coupled with the nature of our organization, the Department continues to experience pay related issues. To mitigate the impact on its employees, Fisheries and Oceans Canada created a pay support team to help employees whose pay has been impacted and to accelerate urgent matters to the Pay Centre. The Department continues to work 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:

The appointment of Chris Henderson as Deputy Commissioner, Operations, Canadian Coast Guard, National Capital Region, as of April 1^st, 2020 (as announced on January 7, 2020).
The appointment of Hugo Pagé as Assistant Deputy Minister and Chief Financial Officer, Chief Financial Sector, as of June 15, 2020.

5. Approval by Senior Officials

Approved by:

Original signed by
_________________________
Timothy Sargent, Deputy Minister

Original signed by
_________________________
Hugo Pagé,
Chief Financial Officer

Ottawa, Canada

Statement of Authorities (unaudited)

(in thousands of dollars)

	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	Total available for use for the year ending March 31, 2021*	Used during the quarter ended June 30, 2020	Year to date used at quarter-end
	Fiscal year 2019-20			Fiscal year 2020-21
Vote 1 – Net Operating expenditures	1,736,757	347,320	347,320	1,378,659	352,413	352,413
Vote 5 – Capital expenditures	801,787	84,625	84,625	589,581	65,468	65,468
Vote 10 – Grants and Contributions	297,446	16,597	16,597	654,717	24,525	24,525
Statutory Authorities
Statutory - Contributions to employee benefit plans	157,113	38,888	38,888	160,827	40,132	40,132
Statutory - Minister of Fisheries and Oceans – Salary and motor car allowance	88	22	22	89	22	22
Statutory - Spending of proceeds from the disposal of surplus Crown assets	0	0	0	0	6	6
Statutory – Refunds of amounts credited to revenues in previous years	0	1	1	0	0	0
Statutory - Payments to support Canada's fish harvesters pursuant to the Public Health Events of National Concern Payments Act	0	0	0	469,400	0	0
Statutory - Payments to the Canadian Seafood Stabilization Fund pursuant to the Public Health Events of National Concern Payments Act	0	0	0	6,200	0	0
Total Statutory Authorities	157,201	38,911	38,911	636,516	40,160	40,160
Total Authorities	2,993,191	487,453	487,453	3,259,473	482,566	482,566

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

Departmental Budgetary Expenditures by Standard Object (unaudited)