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Natural Resources Canada Quarterly Financial Report (Unaudited) for the Quarter Ended December 31, 2023

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. 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 are consistent with the Main Estimates and Supplementary Estimates (A) and (B) for the 2023-24 fiscal year, as well as budget adjustments approved by Treasury Board (TB) up to December 31, 2023. 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, 2023, which include Main Estimates and Supplementary Estimates (A) and (B) for which full supply was released, as well as TB approved adjustments. The details presented in this report focus on and compare the third quarter results of 2023-24 with those of 2022-23.

2.1. Authorities

As per Table 1, presented at the end of this document, and on Graph 1 below, as at December 31, 2023, NRCan has authorities available for use of $5,207.9M compared to $3,966.8M in 2022-23, for a net increase of $1,241.1M or 31.3%.

 

Graph 1

Comparison of Authorities as at December 31, 2023
Text Version
Graph 1 : Comparison of Authorities as at December 31, 2023
(in millions of dollars) Fiscal year 2022-23 Fiscal year 2023-24
  Total available for use for the year ending 31-Mar-23 Total available for use for the year ending 31-Mar-24
Vote 1 - Operating 806 944
Vote 5 - Capital 52 50
Vote 10 - Grants and contributions 2,500 2,422
Statutory 609 1,792
Total budgetary authorities 3,967 5,208

The increase of $1,241.1M in authorities in 2023-24 compared to 2022-23 is mainly explained by the increase within the statutory authorities of $1,183.4M as well as the net effect of smaller fluctuations within Vote 1 operating expenditures, Vote 5 capital expenditures, and Vote 10 grants and contributions, as per the following:

Changes to Voted and Statutory Authorities (2023-24 compared with 2022-23)
(in $000s)
Total available for use for the year ending March 31, 2023 3,966,778
Vote 1 - Operating
Increased/(Decreased) Funding Profile  
  Critical Minerals 35,027
  Clean Technology Stream and Clean Growth Program 16,375
  Emissions Reduction Plan (ERP) - Canada Green Buildings Strategy 11,955
  Flood Hazard Identification and Mapping Program 11,208
  Atomic Workers Recognition Program (19,183)
  Impact Assessment and Regulatory Processes - Cumulative effects (11,504)
Increase in Collective Bargaining Agreements 33,386
All other net increases less than $10M individually 60,736
Sub-total Vote 1 - Operating 138,000
Vote 5 - Capital
Increased/(Decreased) Funding Profile  
  Critical Minerals (4,797)
  Funding to address Canadian Data Receiving Infrastructure (4,621)
All other net increases less than $3M individually 7,483
Sub-total Vote 5 - Capital (1,935)
Vote 10 - Grants & Contributions
New Funding  
  Oil to Heat Pump Affordability Program 59,173
  Critical Minerals Infrastructure Program 103,996
Increased/(Decreased) Funding Profile  
  Smart Renewables and Electrification Pathways Program 99,308
  Natural Climate Solution Fund - 2B Trees 88,500
  Electricity Predevelopment Program 75,000
  Clean Technology Stream and Clean Growth Program 45,000
  Decarbonization of On-road Transportation - Zero-Emission Vehicle Infrastructure Program 26,808
  Fighting and Managing Wildfires in a Changing Climate 26,000
  Clean Fuels Fund 26,000
  Emissions Reduction Plan (ERP) - Green Industrial Facilities and Manufacturing Program 20,000
  Investments in Forest Industry Transformation Program (62,883)
  Decarbonization of On-road Transportation - Green Freight Program (56,168)
  Accelerating Energy System Transformation and Net-Zero Growth - Regional Energy Resource Tables (50,964)
  Greener Homes - Home Retrofits (27,675)
Sunsetters  
  Emissions Reduction Fund (384,000)
  Mountain Pine Beetle (39,730)
All other net decreases less than $20M individually (26,749)
Sub-total Vote 10 - Grants & Contributions (78,383)
Statutory
Newfoundland Offshore Petroleum Resources Revenue Fund
(Forecasts are revised annually based on projected oil & natural gas production levels, prices, exchange rates and operator's costs)
1,172,646
All other net increases 10,756
Sub-total Statutory 1,183,402
Total increase from previous year due to year-over-year changes 1,241,083
Total available for use for the year ending March 31, 2024 5,207,861

2.2. Budgetary Expenditures by Standard Object

The spending for the quarter ending December 31, 2023 amounts to $676.6M or 13.0% of total funding available for the fiscal year, compared to $516.8M or 13.0% for the same quarter last year. The increase of $159.8M in spending is mainly related to an increase in expenditures for personnel, professional and special services and transfer payments in 2023-24 compared to the same type of expenditures in 2022-23. Further analysis has been done on standard objects with significant expenses, as noted in Graph 2 below. Table 2 at the end of this document presents the spending for all standard objects.

 

Graph 2

Comparison of Standard Objects with significant variances as at December 31, 2023

Text Version
Graph 2 : Comparison of Standard Objects with significant variances as at December 31, 2023
(in millions of dollars) Fiscal year 2022-23 Fiscal year 2023-24
  Expended during the quarter ended 31-Dec-22 Expended during the quarter ended 31-Dec-23
Personnel 141 181
Professional and special services 36 41
Transfer Payments 314 431
All Other Standard Objects 26 24
Total net budgetary expenditures 517 677

 

Variance in Budgetary Expenditures by Standard Object (2023-24 compared with 2022-23)
(in $000s)
Standard Object Explanation Variance between
2023-24 and 2022-23
Q3 expenditures
Variance between
2023-24 and 2022-23
YTD expenditures
Personnel The increase is mainly due to programming growth related to various initiatives such as 2 Billion Trees (2BT), Greener Homes (GH), Oil to Heat Pump Affordability (OPHA), Smart Renewables Electrification Pathways (SREP), Electricity Predevelopment, Off-Diesel, Grid Council, Impact Assessment and Regulatory Process (IARP), Emission Reduction Plan (ERP) and Critical Minerals; additional hires to enhance cyber security and corporate services; and salary pay increases, including retroactive payments, that were processed during the 3rd quarter this year following the ratification of collective agreements for multiple employee groups. 39,880 73,402
Professional and special services The increase is mainly due to incremental spending to support new and recent programs such as ERP, Clean Fuels Fund, and Zero Emissions Vehicles Infrastructure program (ZEVIP); and other annual recurring payments processed earlier this year. 4,975 15,541
Transfer Payments The increase is mainly attributed to Statutory Offshore transfer payments (province of Newfoundland and Labrador); increase in payments under GH, and new spending for 2BT, SREP, and the ZEVIP which received increased budgets this year. 117,236 522,698
Other subsidies and payments The decrease is mainly attributed to a decrease in disbursements of ex-gratia payments for the Atomic Workers Recognition Program and the timing of OGD transfers and associated payments. (7,128) (6,768)
All Other Standard Objects Represents minor increases and/or decreases across all other Standard Objects. 4,778 11,762
Total Variance 159,741 616,635

3. Risks and Uncertainties

Canada’s vast natural resource sectors continually contribute significantly to economic growth across the country and play a vital role in creating jobs, fostering growth and prosperity for Canadians. Additionally, Canada continues to support national and international actions to confront the impacts of a changing climate and major climate events that are becoming more prevalent. NRCan maintains its ongoing work to develop policies and programs that enhance the contribution of the natural resources sector, while working with other government departments, provincial partners, and Indigenous Partners to address risks that have an impact on the environment and natural resources while strengthening the economy for all Canadians.

The global economy continues to face an elevated level of uncertainty due to the war between Israel and Hamas, the ongoing war in Ukraine, the Red Sea route and Panama Canal disruptions, as well as increasing geoeconomic fragmentation. One of the biggest challenges of the Canadian natural resources sector is the uncertainty surrounding commodity demand and prices, combined with high borrowing costs, in the context of a global economic slowdown.

Real GDP of the natural resources sector dropped 0.2% in the third quarter of 2023 relative to the previous quarter. In contrast, the economy-wide real GDP was essentially unchanged at -0.05%. Despite the decline of the natural resources sector, the mining, oil and gas industry grew in the third quarter, driven by oil and gas extraction. This sector rebounded from the effect of forest fires on natural gas extraction in the second quarter, while oil sands extraction continued to expand for the second consecutive quarter. As for the employment level, the natural resources sector increased by 3.0% in the third quarter of 2023, compared to a modest 0.4% growth across the entire Canadian economy. According to the OECD (Economic Outlook, Nov. 2023), Canadian GDP growth will drop to 0.8% in 2024 (from 1.4% in its previous report), reflecting slowing domestic demand in the wake of high borrowing costs, and subdued foreign demand.

The accelerating transition to net-zero has started a global race to attract investments in building clean economies and Canada must keep pace at the international level to meet the country's global commitments related to the sustainable development of natural resources. The Government of Canada’s Budget 2023 investments have positioned NRCan to continue laying the foundation for Canada’s transition to net-zero by 2050, from clean energy to critical minerals to combatting wildfires. For example, it introduced tools to put Canada’s electricity sector on the path to a net-zero electricity grid by 2035, building Canada’s clean economy, tax credits to advance Canada’s leadership in critical minerals, and investments in sustainable forestry.

As Canada transitions to a low-carbon economy, NRCan continues to ensure that its programs, policies, and processes are inclusive by design and address systemic barriers. Advancing the principles of inclusion, diversity, equity, and accessibility along with utilizing gender-based plus analysis, the Department will consider the impacts on vulnerable, marginalized, and underrepresented groups and work to embed concrete measures in policy and program design in the development of natural resource projects that support the transition to a clean energy future. In addition, NRCan maintains its commitment to reconciliation by promoting an integrated and coordinated approach to Indigenous partnerships and economic reconciliation-focused initiatives in the natural resources sectors. This will be achieved by advancing shared governance of Canada’s resources, building meaningful relationships and collaborative partnerships with Indigenous organizations and communities, and developing a new national benefits-sharing framework to ensure that Indigenous communities benefit from major resource projects.

To adapt to the ever-evolving digital world, including hybrid work and cybersecurity, the Department will work to implement an integrated plan to respond to Canada’s Digital Ambition. By investing in the use of technology, data, cybersecurity, and upskilling staff, NRCan will seek to strengthen the foundations required to deliver improved digital services. Given that cyber security is an increasingly high priority in light of rising cyber threats across the natural resource sectors, and the global landscape, ensuring proper actions are taken to secure digital resources and information will only increase NRCan’s ability to maintain delivery of key functions while ensuring protection of data.

NRCan continues to strengthen the Department’s capabilities to manage risks effectively, while maintaining the focus to deliver its mandate and core responsibilities. The Department is moving forward with the integration of risk management, which will aid in priority setting and decision-making to support results delivery by effectively and efficiently implementing key mitigation strategies. As outlined in the 2023-24 Departmental Plan, the Department is monitoring the following six strategic risks and three operational risks:

Strategic Risks

  • External Engagement
  • Policy, Funding Authority
  • Federal Alignment
  • Regulatory Regime
  • Reconciliation
  • Inclusion, Diversity, Equity and Accessibility

Operational Risks

  • Cyber Security
  • Workplace Wellness
  • Corporate Service Delivery

Strategic risks threaten the Department as a whole, and its ability to deliver expected outcomes and mandates. Concurrently, Operational risks relate to the effectiveness and/or efficiencies of our activities. NRCan will monitor these key corporate risks closely and routinely to inform leadership on risk status and if further action is required, while continuing to support Canadians and the natural resources sector in 2023-24.

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

Several significant changes have occurred during the 3rd quarter of 2023-24, namely:

  • Effective October 23rd, Francis Brisson became the Chief Financial Officer for NRCan and Assistant Deputy Minister of the Corporate Management Services Sector.
  • It was announced on October 3rd that Rinaldo Jeanty will be assuming the role of ADM of the Lands and Minerals Sector (LMS).

No further significant changes to report.

Original signed by:

Michael Vandergrift
Deputy Minister

 

Date signed
February 23, 2024
Ottawa, Canada

Original signed by:

Francis Brisson
Chief Financial Officer

 

Date signed
February 21, 2024
Ottawa, Canada

Table 1: Statement of Authorities (unaudited)
(in thousands of dollars) Fiscal Year 2023-24 Fiscal Year 2022-23
Total available for use for the year ending March 31, 2024Footnote * Expended during the quarter ended December 31, 2023 Year-to-date used at quarter-end Total available for use for the year ending March 31, 2023Footnote ** Expended during the quarter ended December 31, 2022 Year-to-date used at quarter-end
Vote 1 - Net Operating Expenditures 944,326 223,231 593,368 806,326 182,530 505,863
Vote 5 - Capital Expenditures 50,136 4,856 11,528 52,071 4,192 8,590
Vote 10 - Grants and Contributions 2,421,511 291,430 733,303 2,499,895 188,662 376,827
Statutory Payments            
Minister of Natural Resources – Salary and motor car allowance 95 23 71 93 23 69
Contributions to employee benefit plans 78,159 17,229 51,689 67,713 16,041 48,124
Contribution to the Canada/Newfoundland Offshore Petroleum Board 11,805 3,229 9,008 11,187 (4,947) (2,433)
Contribution to the Canada/Nova Scotia Offshore Petroleum Board 2,383 - 1,348 2,693 327 1,518
Payments to the Nova Scotia Offshore Revenue Account - - 41 - 717 19,438
Payments to the Newfoundland Offshore Petroleum Resource Revenue Fund 1,699,446 136,674 471,966 526,800 129,248 297,528
Spending of amounts equivalent to proceeds from disposal of surplus crown assets - - - - 48 73
Climate Action Support - (90) (90) - - -
Total Statutory Payments 1,791,888 157,065 534,033 608,486 141,457 364,317
Total Budgetary Authorities 5,207,861 676,582 1,872,232 3,966,778 516,841 1,255,597
Table 2: Budgetary Expenditures by Standard Object (unaudited)
(in thousands of dollars) Fiscal Year 2023-24 Fiscal Year 2022-23
Total available for use for the year ending March 31, 2024Footnote * Expended during the quarter ended December 31, 2023 Year-to-date used at quarter-end Total available for use for the year ending March 31, 2023Footnote ** Expended during the quarter ended December 31, 2022 Year-to-date used at quarter-end
Budgetary Expenditures:
  Personnel 607,870 180,601 482,857 513,154 140,720 409,455
  Transportation and communication 23,338 4,174 12,436 26,217 4,135 9,262
  Information 34,414 3,862 7,219 32,265 2,627 6,065
  Professional and special services 262,949 41,143 105,009 216,414 36,168 89,468
  Rentals 30,381 4,484 19,988 32,577 3,748 16,717
  Repair and maintenance 12,932 581 1,857 12,169 839 1,666
  Utilities, materials and supplies 43,291 5,064 12,185 42,355 3,786 9,319
  Acquisition of land, buildings and works 14,700 1,262 2,923 8,886 1,521 2,796
  Acquisition of machinery and equipment 65,468 7,417 14,901 65,520 6,995 15,076
  Transfer payments 4,135,144 431,243 1,215,576 3,040,574 314,007 692,878
  Other subsidies and payments 15,755 1,418 9,991 14,821 8,546 16,758
Total Budgetary Expenditures 5,246,242 681,249 1,884,942 4,004,952 523,092 1,269,460
  Less: Total Revenues Netted Against Expenditures 38,381 4,667 12,710 38,174 6,251 13,863
Total Net Budgetary Expenditures 5,207,861 676,582 1,872,232 3,966,778 516,841 1,255,597

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