Natural Resources Canada Quarterly Financial Report (Unaudited) for the Quarter Ended June 30, 2022

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 for the 2022-23 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, 2022, which include Main Estimates for which full supply was released. The details presented in this report focus on and compare the 1^st quarter results of 2022-23 with those of 2021-22.

2.1. Authorities

As per Table 1, presented at the end of this document, and on Graph 1 below, as at June 30, 2022, NRCan has authorities available for use of $3,609.4M compared to $2,590.4M in 2021-22 for a net increase of $1,019.0M or 39.3%.

Graph 1

Comparison of Authorities as at June 30, 2022 Graph 1

Text Version

Graph 1 Comparison of Authorities as at June 30, 2022
(in millions of dollars)	Fiscal year 2021-22 total available for use for the year ending 31-Mar-22	Fiscal year 2022-23 total available for use for the year ending 31-Mar-23
Vote 1 - Operating	718	722
Vote 5 - Capital	14	37
Vote 10 - Grants and contributions	1,581	2,245
Statutory	277	605
Total budgetary authorities	2,590	3,609

The increase of $1,019.0M in authorities in 2022-23 compared to 2021-22 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:

**(in $000s)**
Vote 1 - Operating
Total available for use for the year ending March 31, 2022	2,590,366
New funding
Carbon Capture, Utilization and Storage	24,633
Critical Minerals	14,722
Clean Fuels Fund	12,329
Increased/(Decreased) Funding Profile
Flood Hazard Identification and Mapping Program	17,607
Atomic Workers Recognition Program	14,805
Greener Homes (Home Retrofit)	(78,759)
All other net decreases less than $10M individually	(442)
Sub total Vote 1 - Operating	4,895
Vote 5 - Capital
New funding
Critical Minerals	4,420
Increased Funding Profile
Funding to address Canadian Data Receiving Infrastructure (Budget 2021)	13,712
All other net increases less than $3M individually	4,180
Sub total Vote 5 - Capital	22,312
Vote 10 - Grants & Contributions
New Funding
Clean Fuels Fund	348,400
Carbon Capture, Utilization and Storage	23,250
Increased/(Decreased) Funding Profile
Greener Homes - Home Retrofits	324,550
Smart Renewables and Electrification Pathways Program	208,489
Natural Climate Solution Fund - 2B Tree	136,500
Encouraging Canadians to Use Zero Emission Vehicles (Top-up)	45,165
Investments in Forest Industry Transformation Program (Top-Up)	38,118
Emissions Reduction Fund	(297,356)
Youth Employment Strategy - Green Jobs	(34,518)
Green Infrastructure Phase II - Emerging Renewable Power	(24,559)
Sunsetters
Protecting Jobs Eastern Canada's Foresty Sector - Spruce Budworm (Operating partially ongoing)	(29,000)
CC Renewal - Advancing Clean Tech - Clean Growth	(28,227)
Impacts Canada Fund (Clean Technology Stream)	(23,868)
Green Infrastructure - Phase II - Electric Vehicles & Alternative Fuel	(23,360)
All other net increases less than $20M individually	701
Sub total Vote 10 - Grants & Contributions	664,285
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)	327,465
All other net increases	30
Sub total Statutory	327,495
Total increase from previous year due to year-over-year changes	1,018,987
Total available for use for the year ending March 31, 2023	3,609,353

2.2. Budgetary Expenditures by Standard Object

The spending for the quarter ending June 30, 2022 amounts to $284.3M or 7.9% of total funding available for the fiscal year, compared to $235.4M or 9.0% for the same quarter last year. This increase of $48.9M in spending is mainly related to an increase in expenditures for Personnel, Professional and Special Services and Transfer Payments in 2022-23 compared to the same type of expenditures in 2021-22. 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 June 30, 2022

Text Version

**Graph 2 Comparison of Standard Objects with significant variances as at June 30, 2022**
(in thousands of dollars)	Fiscal year 2021-22 Expended during the quarter ended 30-Jun-21	Fiscal year 2022-23 Expended during the quarter ended 30-Jun-22
Personnel	123,652	127,982
Professional and special services	17,686	21,259
Transfer payments	82,658	126,055
All Other Standard Objects	11,388	9,026
Total net budgetary expenditures	235,384	284,322

Variance in Budgetary Expenditures by Standard Object (2022-23 Q1 versus with 2021-22 Q1)
(in $000s)
Standard Object	Explanation	Variance
Personnel	The increase is mainly due to incremental hires to support new programs and/or programs approved in Q1 2021-22 or thereafter such as Smart Renewables and Electrification Pathways Program (SREPs), Greener Homes, Carbon Capture, Utilization and Storage (CCUS), Clean Fuels, etc.; offset by departures, recruitment challenges and/or staffing delays.	4,330
Professional and special services	The increase is mainly attributed to incremental spending to support new programs such as Critical Minerals and Greener Homes; increased cost for the Cloud Services as telework continues; increased spending related to the lifting of COVID-19 related travel restrictions in 2022-23; as well as contracts that were deferred from 2021-22 and are expected to resume in 2022-23.	3,573
Transfer Payments	The increase is mainly attributed to new spending for SREPs; increased grant spending for Greener Homes - Retrofits & Energy Assessments, a demand-driven program; offset by reduced contribution spending for the Emission Reduction Fund, as contribution funding ended in 2021-22 for the offshore component.	43,398
Other subsidies and payments	The decrease is mainly attributed to the timing of OGD transfers expected to occur in the next quarter.	(5,363)
All Other Standard Objects	Represents minor increases and/or decreases across all other Standard Objects.	3,000
Total Variance		48,938

3. Risks and Uncertainties

Canada’s vast natural resource sectors contribute significantly to economic growth across the country and play a vital role in creating jobs, fostering growth and prosperity for Canadians. NRCan continues to work with other government departments and central agencies to address risks that have an impact on the natural resources sector while strengthening the economy.

Russia’s invasion of Ukraine in February 2022 has caused severe impacts and disruptions to the global economy and exposed the Canadian natural resource sector to a higher degree of uncertainty. One of the biggest impacts on the Canadian natural resource economy was a rapid rise of global energy and oil prices as well as supply chain disruptions, combined to a rising inflation and labour shortage across the country. Meanwhile, Canadian economic activity is still facing and recovering from the adverse consequences of the COVID-19 pandemic.

Real GDP of the natural resources sector edged up 0.3% in the first quarter of 2022 relative to the previous quarter. In contrast, the economy-wide real GDP rose 0.9%. Production in the natural resources sector was affected by colder than usual temperatures, omicron outbreaks, and maintenance activities at oil sands facilities. For employment rates, the natural resources sector rose 2.0% in the first quarter of 2022 compared to 0.8% growth across the entire Canadian economy. In Finance Canada’s Budget 2022 report, Canadian GDP growth for 2022 was revised down to 3.9% from 4.2% due to the uncertainties surrounding Russia’s invasion of Ukraine. Similarly, the Bank of Canada also revised down its 2022 forecast for GDP growth to 3.5% from 4.2% in its July Monetary Policy Report, citing the spillover impacts from the war, global inflationary pressures and supply chain challenges.

The Government of Canada’s Budget 2022 investments position NRCan to help lay the foundation for Canada’s clean energy future, from clean energy to critical minerals to combatting wildfires. For example, in collaboration with partners, NRCan initiatives contribute to strengthening energy efficiency and climate resilience for Canadian homes, investing in natural resources workers and the creation of inclusive green jobs, advancing net-zero electricity generation, enhancing critical minerals development, building new wildfire monitoring satellite systems, and supporting Indigenous partnerships, capacity building and benefits sharing.

NRCan continues to manage internal and external risks to deliver its mandate and core responsibilities. Internal processes were initiated to strengthen the integration of risk management, priority setting and decision-making to support results delivery, including assessment and monitoring of strategic and operational risks. As Canada transitions to a low-carbon economy, NRCan also ensures that its programs, policies and processes are inclusive by design and address systemic barriers. Equity, diversity and inclusion are key outcomes that NRCan strives to achieve. NRCan is also mindful of its priority to foster inclusive growth in the natural resource sectors and to remain fully committed to advancing reconciliation and partnerships with Indigenous Peoples in the natural resource sectors.

NRCan also coordinated plans on the future of work and continues advancing business continuity and safe work environment for all employees. Improvements have been made, for example by upgrading NRCan’s technology and modernizing the work space, as well as collaborating with other government departments to ensure that NRCan has the tools in place to track and manage work arrangements in a consistent way. Appropriate adjustments and communications have also been incorporated as impacts of the pandemic evolve.

Managing risks and uncertainties remain a priority for the Department, and NRCan will continue to monitor risks to inform decision-making and support Canadians and the natural resources sector in 2022 and beyond.

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

Several significant changes have occurred during the 1^st quarter of 2022-23, namely:

NRCan modernized its Energy Enterprise by reorganizing its 3 key energy sectors – from the Low Carbon Energy Sector (LCES), Energy Technology Sector (ETS), and Strategic Petroleum Policy and Investment Office (SPPIO) to the Energy Systems Sector (ESS), Energy Efficiency and Technology Sector (EETS) and Fuels Sector (FS) – to better serve Canadians as a key delivery agent in Canada’s energy transformation, effective April 1^st, 2022.
Mollie Johnson was appointed Associate Deputy Minister, previously Assistant Deputy Minister (ADM) of ESS. In turn, Debbie Scharf was appointed ADM of ESS, both effective June 20^th, 2022.
Beth MacNeil, ADM of the Canadian Forest Services, retired on June 30^th, 2022 – Glenn Hargrove (previously ADM of FS) was appointed to the position, and Sebastien Labelle has assumed the role of acting ADM of FS, effective July 4^th, 2022.
Lorraine McKenzie Presley was appointed ADM of the Communication and Portfolio Sector, effective July 4^th, replacing her predecessor, Jeannine Ritchot who left for a new opportunity as of April 18^th, 2022.
Marc Saner joined NRCan as the Departmental Science Advisor, a position reporting directly to the Deputy Minister to provide independent scientific advice to NRCan’s senior management, effective May 24^th, 2022.

In addition, NRCan is transitioning toward a hybrid work model that is flexible, productive, agile and inclusive to enable work–life balance while maximizing efficiency and effectiveness; achieve greater diversity and be more regionally inclusive; and provide access to talent and skills from across Canada.

Original signed by:

John F.G. Hannaford
Deputy Minister

Date signed
August 25, 2022
Ottawa, Canada