Fisheries and Oceans Canada - Quarterly Financial Report for the Quarter Ended June 30, 2021

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 current year’s Main Estimates.

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 2021-22 Main Estimates. 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 money can be spent by the Government. Approval is 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 comparison to 2020-21 where only partial authorities were received by the end of the first quarter, Full Supply of the 2021-22 Main Estimates was received at the end of June, as is customary.

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, 2021, as compared to the same period last year.

Statement of Voted and Statutory Authorities

Total budgetary authorities available for use increased in 2021-22 from those in 2020-21 by $1,123.6 million (34.5%). This is the result of an increase in Vote 5 authorities of $566.1 million, an increase in Vote 10 authorities of $518.7 million, an increase in Vote 1 authorities of $506.9 million, offset by a decrease in spending authority for forecasted statutory payments of $468.1 million.

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

Authorities Used Analysis

In the first quarter of 2021-22, total budgetary expenditures amounted to $558.7 million compared to $482.6 million reported in the same quarter of 2020-21, which represents an increase of $76.2 million or 15.8%.

Authorities used in Vote 1, Net Operating expenditures, increased by $80.7 million compared to the same quarter last year representing an increase of approximately 22.9% between the two years. This is primarily due to a timing difference in the reallocation of financial transactions between departments and an increase in personnel expenditures in 2021-22. This is partially offset by a decrease attributable to the preparation work for the Big Bar landslide project as the scope of project evolves and moves towards the next phase.

Authorities used in Vote 5, Capital expenditures, decreased by $8.2 million compared to the same quarter last year representing a decrease of approximately 12.6% between the two years. This is primarily due to a difference in the timing of scheduled payments for large initiatives such as the Oceans Protection Plan and Canadian Coast Guard acquisition projects, as well as a decrease of work for marine installations due to COVID-19. This is partially offset by an increase in engineering costs related to the next phase of the Big Bar landslide project.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $1.8 million compared to the same quarter last year representing a 7.2% increase between the two years. This increase is primarily due to the upward spending trend related to the Atlantic Fisheries Fund. This is partially offset by a decrease attributable to a timing difference in payments for the Canadian Coast Guard Auxiliary.

Statutory authorities used increased by $1.9 million compared to the same quarter last year, representing an increase of approximately 4.8%. This is mainly attributed to an increase in contributions to Employee Benefit Plans which is related to the growth in salary expenditures.

Statement of Departmental Budgetary Expenditures by Standard Object

The increase of $76.2 million in total net budgetary expenditures in the first quarter of 2021-22 as compared to the same quarter in 2020-21 is primarily due to the following:

Expenditures related to Personnel increased by a total of $22.4 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. The increase is in line with additional funding provided to the Department which has increased its complement of employees.

Expenditures related to Professional and Special Services increased by a total of $2.4 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. This is primarily due to an increase in technical assessment contracts for oil response services and timing of payments related to the Offshore Fisheries Science Vessel project as it nears its closeout phase. This is partially offset by a reduction of on-site work associated with the Big Bar landslide project as the scope of project progresses and moves toward the next phase and a timing difference in the recognition of prepaid legal services year-over-year.

Expenditures related to Rentals decreased by a total of $5.9 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. This decrease is primarily related to the costs associated with the rental of a towing vessel that occurred in 2020-21, as well as a reduction of on-site work required prior to the implementation phase of the Big Bar landslide project due to the progression of the scope and movement toward the next phase.

Expenditures related to Repair and Maintenance increased by a total of $6.0 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. The increase is mainly attributed to Vessel Maintenance projects and engineering oil response services for the Canadian Coast Guard as well as additional repair and maintenance costs compared to the same period last year.

Expenditures related to Utilities, Materials, and Supplies decreased by a total of $4.9 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. This is primarily related to the timing of fuel purchases for Canadian Coast Guard Vessels as well as a reduction of on-site work required prior to the implementation phase of the Big Bar landslide project as the as the scope of project progresses and moves toward the next phase.

Expenditures related to the Acquisition of Land, Buildings and Works decreased by a total of $7.3 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. The variance is mainly attributed to a reduction in work on marine installations due to COVID-19 and the acquisition of land for Search and Rescue stations which occurred in 2020-21.

Expenditures related to Acquisition of Machinery and Equipment decreased by a total of $14.3 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. This variance is mainly attributed to the timing of payments for the Medium Icebreakers and Helicopters Projects.

Expenditures related to Transfer Payments increased by a total of $1.8 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. This increase is primarily due to a larger number of contribution agreements being signed related to the Atlantic Fisheries Fund. This is partially offset by a decrease attributable to a timing difference in payments for the Canadian Coast Guard Auxiliary.

Expenditures related to Other Subsidies and Payments increased by a total of $67.7 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. This is primarily due to a timing difference in the reallocation of financial transactions between departments.

Sales of goods and services decreased by $7.4 million in the first quarter of 2021-22 when compared to the same quarter of 2020-21. This decrease is primarily attributable to the timing of receipt of invoices for Marine Service Fees, and Dredging Fees.

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 stakeholders needs. The Department maintains a Departmental Risk Profile which assesses the most corporate strategic risks, which if not addressed, could impair DFO-CCG’s ability to deliver on its mandate and achieve results under the Department’s core responsibilities. Additional information regarding the Department’s key risk areas is presented in the 2021-22 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 shifted to future years. To minimize these impacts, the Department continuously monitors its program funding and expenditures throughout the year.

The COVID-19 pandemic continues to present certain elements of risk and uncertainties to DFO’s priorities and operations. The impact on departmental revenues and expenditures continues to be felt as the pandemic adversely affected the timely delivery of new and existing programs. It has also come with its share of challenges and opportunities for employees at DFO. Many employees kept working onsite either part-time or full-time to ensure the Department continued to deliver its mandate, while employees who could work remotely shifted to a temporary virtual mode. As vaccination rates increase across the country and different regions begin to ease restrictions, the Department is strategically working towards a transition to a post-pandemic workplace by building on lessons learned and leveraging new opportunities for a flexible, productive, and agile workplace. As DFO progresses towards a new normal, it will continue to protect the health and safety of its employees and provide essential services to Canadians, all while doing so as per the guidance and recommendations of public health officials and experts.

The department continues to address the financial risks associated with Phoenix pay issues by applying an established set of controls. To mitigate the impact on its employees, Fisheries and Oceans Canada has 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 diligently, both with internal and with external stakeholders, to resolve any and all issues.

4. Significant changes in relation to operations, personnel and programs

In 2021-22 the Department transitioned from our legacy financial system to SAP, which is in-line with the Government of Canada standard. This standardization of the Enterprise Reporting System (ERP) will simplify government-wide reporting and will ensure ongoing accuracy of financial information through the consolidation of several reporting systems in to one.

The following changes in personnel were made since the last published quarterly report:

• The appointment of Jean-Guy (J.-G.) Forgeron as Senior Assistant Deputy Minister, Fisheries and Harbour Management, as of April 1, 2021 (as announced on February 16, 2021).
• The appointment of Lawrence Hanson, Associate Deputy Minister of Fisheries and Oceans Canada, as of April 1, 2021 (as announced on February 26, 2021).
• The appointment of Doug Wentzell as Regional Director General, Maritimes Region, as of April 1, 2021 (as announced on March 15, 2021).
• The appointment of Dr. Niall O’Dea as Senior Assistant Deputy Minister, Strategic Policy, as of April 26, 2021.

5. Approval by Senior Officials

Approved by:

Ottawa, Canada

Statement of Authorities (unaudited)

(in thousands of dollars)

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

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)

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