Fisheries and Oceans Canada - Quarterly Financial Report for the quarter ended September 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 and the Operating and Capital Budget Carry Forwards.

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 second 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 September 30, 2021, as compared to the same period last year.

Highlights of the fiscal quarter and the fiscal year-to-date (YTD) results (thousands of dollars)
	2020-21 Authorities as at September 30, 2020	2021-22 Authorities as at September 30, 2021	Variance in Authorities	Expenditures during the quarter ended September 30, 2020	Expenditures during the quarter ended September 30, 2021	Variance in Expenditures
Vote 1 – Net Operating expenditures	1,442,498	1,959,486	516,988	421,512	430,443	8,931
Vote 5 – Capital expenditures	784,268	1,337,224	552,956	154,202	160,987	6,785
Vote 10 – Grants and Contributions	661,211	1,173,395	512,184	44,523	101,236	56,713
Statutory Authorities	636,516	168,380	(468,136)	174,293	42,100	(132,193)
Total	3,524,493	4,638,485	1,113,992	794,530	734,766	(59,764)

Statement of voted and statutory authorities

Total budgetary authorities available for use increased in 2021-22 from those in 2020-21 by $1,114.0 million (31.6%). This is the result of an increase in Vote 5 authorities of $553.0 million, an increase in Vote 1 authorities of $517.0 million, an increase in Vote 10 authorities of $512.2 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.

Explanation of Changes (2021-22 compared to 2020-21)	Change (thousands of dollars)
Vote 1 – Net Operating expenditures
Receipt of Full Supply in 2021-22 vs partial receipt of authorities in 2020-21	302,018
Funding for signed collective agreements	46,119
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)	44,981
Funding profile change for the Oceans Protection Plan	32,224
Funding for the Big Bar Landslide	19,611
Funding for the Canadian Coast Guard's fleet renewal and recapitalization projects	25,003
Funding to support self-employed fish harvesters in Canada affected by COVID-19	14,233
Funding for the Sustainable Aquaculture Program	10,727
Incremental change in the Operating Budget Carry Forward	10,055
Funding profile change to implement the fish stocks provisions in the Fisheries Act	8,476
Funding profile change to protect Canada's nature, parks and wild spaces	7,997
Sunsetting funding for the renewal of Canada's network of small craft harbours (Budget 2018)	(9,000)
Other Departmental Adjustments	4,544
Sub-total Net Operating expenditures	516,988
Vote 5 – Capital expenditures
Funding related to the Canadian Coast Guard's 2012 fleet renewal projects	198,593
Funding profile change for the Canadian Coast Guard's fleet recapitalization projects	110,221
Funding profile change for the Oceans Protection Plan	97,069
Funding profile change to procure icebreakers for the Canadian Coast Guard	50,658
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)	46,452
Funding for the Big Bar Landslide	37,900
Receipt of Full Supply in 2021-22 vs partial receipt of authorities in 2020-21	32,865
Funding profile change for the Program Icebreaker project	(11,348)
Incremental change in the Capital Budget Carry Forward	(13,163)
Other Departmental Adjustments	3,709
Sub-total Capital expenditures	552,956
Vote 10 – Grants and Contributions
Funding to advance reconciliation on Indigenous rights and fisheries issues	277,611
Funding for self-employed Fish Harvesters affected by COVID-19	119,805
Funding for the Trans Mountain Expansion Project	90,352
Receipt of Full Supply in 2021-22 vs partial receipt of authorities in 2020-21	17,733
Funding profile change for the enhancement and expansion of the Indigenous Fisheries Program Suite	5,941
Funding profile change to protect Canada's nature, parks and wild spaces	3,576
Sunsetting funding for the Fisheries and Aquaculture Clean Technology Adoption Program	(5,463)
Other Departmental Adjustments	2,629
Sub-total Grants and Contributions	512,184
Statutory
Payments to support Canada’s fish harvesters pursuant to the Public Health Events of National Concern Payments Act	(469,400)
Other Departmental Adjustments	1,264
Sub-total Statutory Authorities	(468,136)
Total Authorities	1,113,992

Authorities used analysis

In the second quarter of 2021-22, total budgetary expenditures amounted to $734.8 million compared to $794.5 million reported in the same quarter of 2020-21, which represents a decrease of $59.8 million or 7.5%.

Authorities used in Vote 1, Net Operating expenditures, increased by $8.9 million compared to the same quarter last year representing an increase of approximately 2.1% between the two years. This is primarily due to an increase in personnel expenditures, a timing difference in the reallocation of financial transactions between departments and air surveillance services as a new contract was put in place. This is partially offset by an increase in marine service revenue attributed to an overstatement in our financial system. This is expected to be corrected in future quarters.

Authorities used in Vote 5, Capital expenditures, increased by $6.8 million compared to the same quarter last year representing an increase of approximately 4.4% between the two years. This is primarily due to an increase in engineering costs related to the next phase of the Big Bar landslide project and timing delays in vessel maintenance projects due to COVID-19. This is partially offset by a decrease in costs related to vessel dry docking and betterment work completed last year.

Authorities used in Vote 10, Grants and Contributions expenditures, increased by $56.7 million compared to the same quarter last year representing a 127.4% increase between the two years. This increase is primarily due to the advancement of funds to Employment and Social Development Canada to support Canada’s fish harvesters as well as the timing of payments and the signing of contribution agreements.

Statutory authorities used decreased by $132.2 million compared to the same quarter last year, representing a decrease of approximately 75.9%. This decrease is mainly attributed to the Fish Harvesters Benefit program which was introduced during the second quarter of 2020-21, pursuant to the Public Health Events of National Concern Payments Act.

Statement of departmental budgetary expenditures by standard object

The decrease of $59.8 million in total net budgetary expenditures in the second 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 $32.3 million in the second 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 as well as compensation related to the impact of the Phoenix pay system.

Expenditures related to Transportation and Communications increased by a total of $3.4 million in the second quarter of 2021-22 when compared to the same quarter of 2020-21. This is primarily due to increased travel requirements for environmental response incidents.

Expenditures related to Professional and Special Services increased by a total of $24.6 million in the second quarter of 2021-22 when compared to the same quarter of 2020-21. This is primarily due to an increase in air surveillance services as a new contract was put in place, as well as construction and engineering costs related to the reconstruction of two docks and Oceans Protection Plan projects. In addition, the increase is attributable to the timing of payments mainly related to international commissions.

Expenditures related to Repair and Maintenance increased by a total of $26.5 million in the second quarter of 2021-22 when compared to the same quarter of 2020-21. This variance is mainly explained by temporary incorrect coding offset by the decrease in Acquisition of Machinery and Equipment, both of which are expected to be corrected in future quarters. In addition, the increase is related to rise in work for vessel maintenance projects as COVID-19 work restriction have been eased. This is partially offset by a number of Small Craft Harbour projects completed last year.

Expenditures related to the Acquisition of Land, Buildings and Works decreased by a total of $9.9 million in the second quarter of 2021-22 when compared to the same quarter of 2020-21. The variance is mainly attributed to the completion of various Budget 2018 Small Craft Harbour projects.

Expenditures related to Acquisition of Machinery and Equipment decreased by a total of $36.5 million in the second quarter of 2021-22 when compared to the same quarter of 2020-21. This variance is mainly explained by temporary incorrect coding offset by the increase in Repair and Maintenance, both of which are expected to be corrected in future quarters. In addition, expenditures are lower due to a decrease in costs related to vessel dry docking and completion of betterment work.

Expenditures related to Transfer Payments increased by a total of $6.7 million in the second quarter of 2021-22 when compared to the same quarter of 2020-21. This increase is primarily due to the timing of payments and the signing of contribution agreements.

Expenditures related to Other Subsidies and Payments decreased by a total of $69.6 million in the second quarter of 2021-22 when compared to the same quarter of 2020-21. The majority of the decrease is due to the timing of reallocating financial transactions between departments, largely related to the payments to support Canada’s fish harvesters that were processed by Employment and Social Development Canada in the second quarter of 2020-21.

Sales of goods and services increased by $37.7 million in the second quarter of 2021-22 when compared to the same quarter of 2020-21. This increase is primarily attributable to an overstatement of revenues in our financial system and is expected to be corrected 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 stakeholders needs. The Department maintains a Departmental Risk Profile which assesses 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.

As the COVID-19 pandemic continues to evolve, DFO remains committed to adapting its mitigation strategy to align with updated public health guidance. The impact on departmental revenues and expenditures continues 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. As an operational and scientific department, a large portion of our workforce has been working onsite and will continue to do so as we transition into a Beyond COVID work environment. When operationally feasible, there are opportunities to establish hybrid work arrangements. 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 abiding by the guidance and recommendations of public health officials and experts.

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

In 2021-22 the Department is transitioning 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 ensure ongoing accuracy of financial information through the consolidation of several reporting systems into one.

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

The appointment of Michelle Langan as Regional Director General, Ontario and Prairie Region, as of September 13, 2021.

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, 2021*	Used during the quarter ended September 30, 2020	Year to date used at quarter-end	Total available for use for the year ending March 31, 2022*	Used during the quarter ended September 30, 2021	Year to date used at quarter-end
	Fiscal year 2020-21			Fiscal year 2021-22
Vote 1 – Net Operating expenditures	1,442,498	421,512	773,925	1,959,486	430,443	863,549
Vote 5 – Capital expenditures	784,268	154,202	219,670	1,337,224	160,987	218,241
Vote 10 – Grants and Contributions	661,211	44,523	69,048	1,173,395	101,236	127,515
Statutory Authorities
Statutory - Contributions to employee benefit plans	160,827	40,132	80,263	168,290	42,073	84,145
Statutory - Minister of Fisheries and Oceans – Salary and motor car allowance	89	22	45	90	27	42
Statutory - Spending of proceeds from the disposal of surplus Crown assets	0	0	6	0	0	0
Statutory – Refunds of amounts credited to revenues in previous years	0	0	0	0	0	0
Statutory - Payments to support Canada's fish harvesters pursuant to the Public Health Events of National Concern Payments Act	469,400	134,139	134,139	0	0	0
Statutory - Payments to the Canadian Seafood Stabilization Fund pursuant to the Public Health Events of National Concern Payments Act	6,200	0	0	0	0	0
Total Statutory Authorities	636,516	174,293	214,453	168,380	42,100	84,187
Total Authorities	3,524,493	794,530	1,277,096	4,638,485	734,766	1,293,492

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

Departmental budgetary expenditures by standard object (unaudited)