Natural Resources Canada Quarterly Financial Report (Unaudited) for the Quarter Ended June 30, 2019

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 2019. 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 allocations through the Budget Implementation Vote for the 2019-20 fiscal year. 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 June 30, 2019, which include Main Estimates and allocations from the Budget Implementation Vote for which full supply was released. The details presented in this report focus on and compare the first quarter results of 2019-20 with those of 2018-19.

2.1 Authorities

As per Table 1, presented at the end of this document, and on Graph 1 below, as at June 30, 2019, NRCan has authorities available for use of $1,532.2 million in 2019-20 compared to $1,466.3 million as of June 30, 2018, for a net increase of $65.9 million or 5%.

The increase of $65.9 million in authorities in 2019-20 compared to 2018-19 is explained by the net effect of fluctuations within Vote 1 operating expenditures, Vote 5 capital expenditures, Vote 10 grants and contributions, and statutory authorities, as per the following:

2.2 Budgetary Expenditures by Standard Object

The spending for the quarter ending June 30, 2019 amounts to $210.4 million or 14% of total funding available for the fiscal year, compared to $200.9 million or 14% for the same quarter last year. This increase of $9.5 million in spending is mainly related to an increase in expenditures for professional and special services and transfer payments in 2019-20 compared to the same type of expenditures in 2018-19. 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.

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 economic benefits, accounting for about 17% of Canada’s nominal Gross Domestic Product and the support of 1.7 million jobs in 2018. Furthermore, our natural resources sectors inform Canada’s environmental performance. Our collective challenge is to set and implement a plan that will ensure that the natural resources sectors are competitive while continuing to adopt sustainable development practices as we move towards a low carbon future.

During the first quarter of 2019-20, the department focused on managing its risks to advance priorities in the areas of energy infrastructure and market access (including Phase 3 engagement on the Trans Mountain Expansion Project), softwood lumber, regulatory review, Canada-U.S. relations (including aluminium and steel tariffs), clean technology, and Indigenous reconciliation. NRCan is also engaged in several Budget 2019 initiatives that will support Canada’s transition to a low-carbon economy. For example, NRCan is driving Canada’s broad-based energy efficiency work, supporting new energy-efficient housing units across the country, and expanding the charging and refueling station network for zero-emission vehicles. In addition, NRCan is supporting the Government of Canada’s initiative “Just Transition for Canadian Coal Power Workers and Communities” by investing in skills development and training. The department is continuing its efforts to transform the forest sector and emergency management measures.

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 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

Subsequent to quarter end, Linda Hurdle was appointed Assistant Deputy Minister, Corporate Management and Services Sector and Chief Financial Officer effective July 15, 2019.

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