Natural Resources Canada Quarterly Financial Report (Unaudited) for the Quarter Ended December 31, 2018

Statement outlining results, risks and significant changes in operations, personnel and programs

1. Introduction

This quarterly financial report should be read in conjunction with the Main Estimates and any Supplementary Estimates approved in a given year by the date of this report, as well as Canada’s Budget 2018. It has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by Treasury Board. This quarterly financial report has not been subject to an external audit or review. 

1.1 Authority, Mandate and Programs

Natural Resources Canada (NRCan) works to improve the quality of life of Canadians by ensuring that our natural resources are developed sustainably, providing a source of jobs, prosperity, and opportunity, while preserving our environment and respecting our communities and Indigenous peoples.

Further details on NRCan’s authority, mandate and programs can be found in Part II of the Main Estimates. 

1.2 Basis of Presentation

This quarterly financial report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes NRCan’s spending authorities granted by Parliament and those used by NRCan for the 2018-19 fiscal year, consistent with the Main Estimates, Supplementary Estimates (A) and allocations from Treasury Board central votes for the Operating and Capital budget carry forward and Budget Implementation. 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. 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.

NRCan uses the full accrual method of accounting to prepare and present its annual unaudited 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 Fiscal Quarter and Fiscal Year-to-Date Results

This Departmental Quarterly Financial Report reflects the results as of December 31, 2018, which include Main Estimates, Supplementary Estimates (A) and allocations from the Budget Implementation Vote for which full supply was released, whereas the December 31, 2017 results include Main Estimates, Supplementary Estimates (A) and Supplementary Estimates (B). The details presented in this report focus on and compare the third quarter results of 2018-19 with those of 2017-18.

2.1 Authorities

As per Table 1, presented at the end of this document, and on Graph 1 below, as at December 31, 2018, NRCan has authorities available for use of $1,524 million in 2018-19 compared to $1,451.5 million as of December 31, 2017, for a net increase of $72.5 million or 5%.

The increase of $72.5 million in authorities in 2018-19 compared to 2017-18 is explained by the net change within Vote 1 operating expenditures, Vote 5 capital expenditures, Vote 10 grants and contributions, and statutory authorities. The following table provides a detailed explanation of these changes.

2.2 Budgetary Expenditures by Standard Object

The spending for the quarter ending December 31, 2018 amounts to $330.9 million or 22% of total funding available for the fiscal year, compared to $240.9 million or 17% for the same quarter last year. This increase of $90 million in spending is mainly related to an increase in expenditures for transfer payments in 2018-19 compared to the same type of expenditures in 2017-18, partially offset by a decrease in expenditures for Acquisition of land, buildings and works in 2018-19 compared to the same type of expenditures in 2017-18. Further analysis is presented in Graph 2 below for standard objects with significant expenses. Table 2 at the end of this document presents the spending for all standard objects.

 

3. Risks and Uncertainties

NRCan recognizes that a solid understanding of its risk environment (both internal and external) is fundamental to the delivery of its mandate and fulfilment of its core responsibilities. Risk management equips the department to respond proactively to change and uncertainty by defining and understanding its operating environment and the factors that drive risk.  Risk considerations are integrated into strategic and operational decision- making, priority setting, and resource allocation in order to minimize potential negative impacts and maximize opportunities across the diverse range of services and operations.  NRCan’s approach to risk management is codified in the Integrated Risk Management Policy Framework, which is aligned with the Treasury Board Framework for the Management of Risk.

Natural resources are at the nexus of Canada’s economic and environmental agendas. They confer significant large economic benefits, accounting for about 17% of Canada’s nominal Gross Domestic Product and the creation of 1.8 million jobs in 2017. Furthermore, our natural resources sectors inform Canada’s environmental performance. Our collective challenge is to set and implement a plan that will ensure the growth of the resource sectors and the achievement of our goals in terms of the reduction of our greenhouse gas emissions.

During the third quarter of 2018-19, the department focused on managing its risks to advance priorities in the areas of energy infrastructure and market access, softwood lumber; regulatory review, Canada-U.S. relations (including aluminium and steel tariffs), clean technology, Indigenous reconciliation and Budget 2018 implementation, including funding for actions to support the Pan-Canadian Framework on Clean Growth and Climate Change. During this quarter, Canada, the United States and Mexico reached an agreement on NAFTA and signed the new Canada-United States-Mexico Agreement (CUSMA).

NRCan also managed uncertainties regarding its future funding level and spending. The Department continuously tracks program spending, following best practices that comply with the Financial Administration Act and requesting the reprofiling of funds, as required, to ensure program objectives continue to be met. NRCan pro-actively engages with central agencies to manage the financial uncertainty associated with the sunsetting of specific time-limited programs. The department also continues to assess ways to realign resources to address pressures and multi-year transformation initiatives. NRCan mitigates its financial risks through scenario planning, monthly analysis of trends and forecasting in both salary and non-salary expenditures, and comprehensive quarterly reviews.

NRCan will continue to monitor and integrate risk information into strategic and operational decision-making in support of advancing the prosperity of Canada’s natural resource sectors while also achieving environmental results through sustainable practices.

4. Significant Changes in Relation to Operations, Personnel, Programs

The appointment of Shawn Tupper as the Associate Deputy Minister of Natural Resources occurred in the third quarter of 2018-19.

Table 1: Statement of Authorities (unaudited)

(in thousands of dollars)	Fiscal Year 2018-19			Fiscal Year 2017-18
	Total available for use for the year ending March 31, 2019Table note *	Used during the quarter ended December 31, 2018	Year-to-date used at quarter-end	Total available for use for the year ending March 31, 2018Table note **	Used during the quarter ended December 31, 2017	Year-to-date used at quarter-end
Vote 1 - Net Operating Expenditures	584,916	135,994	395,345	567,592	127,380	392,677
Vote 5 - Capital Expenditures	32,072	3,182	8,606	69,182	13,503	25,633
Vote 10 - Grants and Contributions	438,821	42,092	99,673	351,135	49,659	116,346
Statutory Payments
Minister of Natural Resources – Salary and motor car allowance	86	22	65	84	22	64
Contributions to employee benefit plans	56,614	13,904	41,710	54,514	13,350	40,051
Spending of amounts equivalent to proceeds from disposal of surplus crown assets	-	4	4	-	56	56
Contribution to the Canada/Newfoundland Offshore Petroleum BoardTable note ***	8,835	(5,230)	(2,023)	8,835	(2,257)	2,161
Contribution to the Canada/Nova Scotia Offshore Petroleum BoardTable note ***	4,355	(977)	(414)	4,355	(44)	1,045
Payments to the Nova Scotia Offshore Revenue Account	5,356	62,279	64,702	6,624	2,241	5,802
Payments to the Newfoundland Offshore Petroleum Resource Revenue Fund	392,507	79,510	223,227	387,367	36,973	143,778
Crown Share Adjustment Payments for Nova Scotia Offshore Petroleum Resources	438	123	123	1,818	-	53
Total Statutory Payments	468,191	149,635	327,394	463,597	50,341	193,010
Total Budgetary Authorities	1,524,000	330,903	831,018	1,451,506	240,883	727,666

 

 

Table 2:  Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)	Fiscal year 2018-2019			Fiscal year 2017-2018
	Total available for use for the year ending March 31, 2019Table note *	Expended during the quarter ended Dec 31, 2018	Year-to-date used at Quarter-end	Total available for use for the year ending March 31, 2018Table note **	Expended during the quarter ended December 31, 2017	Year-to-date used at Quarter-end
Budgetary Expenditures:
Personnel	433,081	110,231	328,559	429,227	110,880	341,297
Transportation and communication	18,695	4,255	12,045	14,515	4,059	11,151
Information	7,045	1,243	2,851	5,524	1,303	3,274
Professional and special services	141,740	27,782	67,728	132,435	25,851	63,291
Rentals	18,550	2,001	11,618	33,315	(546)	10,739
Repair and maintenance	7,819	678	2,375	5,432	2,274	4,235
Utilities, materials and supplies	47,562	3,827	9,526	37,517	3,804	10,036
Acquisition of land, buildings and works	14,469	2,079	6,161	2,121	6,222	15,328
Acquisition of machinery and equipment	18,955	2,770	6,706	67,091	3,136	5,862
Transfer payments	850,312	177,551	385,041	760,133	85,648	268,261
Other subsidies and payments	2,897	3,123	10,992	2,661	3,019	10,670
Total Budgetary Expenditures	1,561,125	335,540	843,602	1,489,971	245,650	744,144
Less:
Total  Revenues Netted Against Expenditures	37,125	4,637	12,584	38,465	4,767	16,478
Total Net Budgetary Expenditures	1,524,000	330,903	831,018	1,451,506	240,883	727,666