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
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.
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%.
|(in millions of dollars)||Fiscal year 2018-19||Fiscal year 2019-20|
|total available for use for the year ending
|total available for use for the year ending
|Vote 1 - Operating||540||581|
|Vote 5 - Capital||20||14|
|Vote 10 - Grants and contributions||438||489|
|Total budgetary authorities||1,466||1,532|
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:
|Total available for use for the year ending March 31, 2019||1,466,261|
|Vote 1 - Operating|
|New funding for Impact Assessment and Regulatory Measures (IARM) Programs||19,120|
|New funding for Trans Mountain Expansion Project Reconsideration Process||12,637|
|New funding for Ensuring Better Disaster Management Preparation Program||6,346|
|New funding for Strong Arctic and Northern Communities Program||6,226|
|New funding for Engaging Indigenous Communities in Major Resource Program||4,345|
|Decrease in funding for Geo Mapping for Energy and Minerals (GEM) Initiative||(3,201)|
|Decrease in funding for West Coast Energy Development – Aboriginal Engagement||(3,200)|
|Decrease in funding for Targeted Geoscience Initiative||(2,476)|
|Decrease in funding due to Budget 2018 fiscal dividend payment||(2,462)|
|Various minor net increases||3,805|
|Sub total Vote 1 - Operating||41,140|
|Vote 5 - Capital|
|Sunsetting of the Federal Infrastructure Initiative||(7,200)|
|Various minor net increases||1,499|
|Sub total Vote 5 - Capital||(5,701)|
|Vote 10 - Grants & Contributions|
|New and increased funding for the Green Infrastructure initiative||32,879|
|Increased funding year-over-year for the Softwood Lumber Action Plan due to reprofile in 2017-18||14,200|
|Increased funding for Advancing Clean Technology||10,512|
|New funding for Zero Emission Vehicles Program||9,350|
|New funding for Engaging Indigenous Communities in Major Resource Program||7,740|
|Increased funding for Protecting Jobs in Eastern Canada’s Forestry Sector (Spruce Budworm Early Intervention Strategy)||5,300|
|Increased funding for Green Construction Through Wood||4,307|
|New funding for Trans Mountain Expansion Project Reconsideration Process||3,500|
|Reduction in funding year-over-year for the ecoENERGY for Renewable Power program as the program nears completion||(30,067)|
|Sunsetting of the Youth Employment Strategy program||(8,400)|
|Sunsetting of the World Class Tanker Safety||(3,350)|
|Various minor net increases||4,757|
|Sub total Vote 10 - Grants & Contributions||50,728|
|Newfoundland Offshore Petroleum Resource Revenue Fund adjustment, as it was forecasted at the time of Main Estimates that less revenue would be collected in 2019-20 than in 2018-19, due to fluctuations in oil prices, variances in production and a increase in planned expenditures.Table note *||(18,342)|
|Employee Benefit Plan (EBP) adjustments, due to salary adjustments in 2019-20 compared to 2018-19||3,329|
|Payments of the Crown Share Adjustment for Nova Scotia Offshore Petroleum Resources, as it is expected to cease in 2019-20, due to the end of natural gas production at both projects.||(438)|
|Contribution to the Canada/Newfoundland Offshore Petroleum Board||640|
|Contribution to the Canada/Nova Scotia Offshore Petroleum Board due to a lower level of activity.||(50)|
|Nova Scotia Offshore Revenue Account, as revenues are to cease due to the end of production at the Deep Panuke and the Sable Offshore Energy Project in 2018.Table note *||(5,356)|
|Minister of Natural Resources – Salary and motor car allowance||2|
|Sub total Statutory||(20,215)|
|Total Change from Previous Year||65,952|
|Total available for use for the year ending March 31, 2020||1,532,214|
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.
|(in thousands of dollars)||Fiscal year 2018-19||Fiscal year 2019-20|
|Expended during the quarter ended
|Expended during the quarter ended
|Professional and special services||15,896||16,197|
|All Other Standard Objects||13,329||11,883|
|Total net budgetary expenditures||200,873||210,364|
|Standard Object||Explanation||Variance between
2019-20 and 2018-19
April 1 to June 30
|Personnel||The increase is due to new hires to support new programs, partially offset by the timing of transfers to other departments which were completed in Q1 of 2018-19 and are expected to take place by Q2 in 2019-20.||1,145|
|Professional and Special Services||The increase is due to contract renewals for existing programs and an increase in contracts related to new programs, partially offset by the timing of transfers to other departments which were completed in Q1 of 2018-19 and are expected to take place by Q2 in 2019-20.||301|
|Rentals||The increase is due to increased activity in the Polar Continental Shelf Program and the timing of a credit received from the Department of National Defence for the rental of 615 Booth received in Q1 2018-19 and not received in Q1 2019-20.||1,903|
|Transfer Payments||The increase is mainly attributed to Statutory Atlantic Offshore transfers as a result of higher production and oil prices/increase royalties compared to last year at Q1 and increase in spending related to new and existing grants and contributions programs.||9,492|
|All Other Standard Objects||The net decrease is due to minor increases and decreases within different standard objects.||(3,349)|
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.
Original signed by:
August 26, 2019
Linda Hurdle, CPA, CA
Chief Financial Officer
August 26, 2019
|(in thousands of dollars)||Fiscal Year 2019-20||Fiscal Year 2018-19|
|Total available for use for the year ending March 31, 2020Table note *||Expended during the quarter ended June 30, 2019||Year-to-date used at quarter-end||Total available for use for the year ending March 31, 2019Table note **||Expended during the quarter ended June 30, 2018||Year-to-date used at quarter-end|
|Vote 1 - Net Operating Expenditures||581,296||125,132||125,132||540,156||124,385||124,385|
|Vote 5 - Capital Expenditures||14,371||700||700||20,072||2,089||2,089|
|Vote 10 - Grants and Contributions||489,199||27,059||27,059||438,470||25,262||25,262|
|Minister of Natural Resources – Salary and motor car allowance||88||22||22||86||22||22|
|Contributions to employee benefit plans||59,315||14,544||14,544||55,986||13,903||13,903|
|Contribution to the Canada/Newfoundland Offshore Petroleum BoardTable note ***||9,475||-||-||8,835||(1,530)||(1,530)|
|Contribution to the Canada/Nova Scotia Offshore Petroleum BoardTable note ***||4,305||-||-||4,355||1,076||1,076|
|Payments to the Nova Scotia Offshore Revenue Account||-||-||-||5,356||605||605|
|Payments to the Newfoundland Offshore Petroleum Resource Revenue Fund||374,165||42,906||42,906||392,507||35,061||35,061|
|Crown Share Adjustment Payments for Nova Scotia Offshore Petroleum Resources||-||-||-||438||-||-|
|Total Statutory Payments||447,348||57,472||57,472||467,563||49,137||49,137|
|Total Budgetary Authorities||1,532,214||210,363||210,363||1,466,261||200,873||200,873|
|(in thousands of dollars)||Fiscal year 2019-20||Fiscal year 2018-19|
|Total available for use for the year ending March 31, 2020Table note *Table note ***||Expended during the quarter ended June 30, 2019||Year-to-date used at quarter-end||Total available for use for the year ending March 31, 2019Table note **||Expended during the quarter ended June 30, 2018||Year-to-date used at quarter-end|
|Transportation and communication||19,801||3,613||3,613||15,883||3,179||3,179|
|Professional and special services||115,073||16,197||16,197||111,083||15,896||15,896|
|Repair and maintenance||9,015||575||575||7,793||418||418|
|Utilities, materials and supplies||32,274||2,416||2,416||46,311||1,939||1,939|
|Acquisition of land, buildings and works||6,791||402||402||14,469||1,234||1,234|
|Acquisition of machinery and equipment||26,074||1,316||1,316||6,398||1,739||1,739|
|Other subsidies and payments||7,088||972||972||745||4,043||4,043|
|Total Budgetary Expenditures||1,569,855||214,478||214,478||1,503,386||204,364||204,364|
|Less: Total Revenues Netted Against Expenditures||37,641||4,115||4,115||37,125||3,491||3,491|
|Total Net Budgetary Expenditures||1,532,214||210,363||210,363||1,466,261||200,873||200,873|
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