Natural Resources Canada Quarterly Financial Report (Unaudited) for the Quarter Ended September, 2020
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. 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) for the 2020-21 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 September 30, 2020, which include Main Estimates for which interim supply was released and Supplementary Estimates (A) for which full supply was released. The details presented in this report focus on and compare the second quarter results of 2020-21 with those of 2019-20.
As per Table 1, presented at the end of this document, and on Graph 1 below, as at September 30, 2020, NRCan has authorities available for use of $1,225.5 million in 2020-21 compared to $2,499.6 million as of September 30, 2019, for a net decrease of $1,274.1 million or 51%.
|(in millions of dollars)||Fiscal year 2019-20||Fiscal year 2020-21|
|total available for use for the year ending 31-Mar-20||total available for use for the year ending 31-Mar-21|
|Vote 1 - Operating||596||448|
|Vote 5 - Capital||17||10|
|Vote 10 - Grants and contributions||489||404|
|Total budgetary authorities||2,499||1,225|
The decrease of $1,274.1 million in authorities in 2020-21 compared to 2019-20 is primarily due to a decrease in statutory authorities (most notably $950 million for the Federation of Canadian Municipalities, who administer the Green Municipal Fund). It is also explained by the availability of supply in 2020-21 as well as the net effect of 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 (2020-21 compared with 2019-20)
|Total available for use for the year ending March 31, 2020||2,499,601|
|Vote 1 - Operating|
|New funding for collective bargaining to cover wage increases for 2020-21.||13,836|
|New funding for Accommodation Measures for the Trans Mountain Expansion project.||6,720|
|Increased funding for Ensuring Better Disaster Management Preparation Program.||4,465|
|Increase in Operating Budget Carry Forward due to a higher lapse in 2019-20.||3,194|
|Decrease for the Trans Mountain Expansion Reconsideration Pipeline process as this phase of the program is completed||(12,637)|
|Decrease for the Geo-Mapping for Energy and Minerals initiative, pending renewal of funding
later in 2020-21
|Decrease for the Indigenous Partnerships Office-West, pending renewal of funding later in 2020-21||(3,316)|
|Decrease for the Targeted Geoscience Initiative, pending renewal of funding later in 2020-21||(3,253)|
|Decrease for the Major Project Management Office Initiative, pending renewal of funding later in 2020-21||(3,325)|
|Various minor net decreases||(3,553)|
|Sub total Vote 1 - Operating||(8,256)|
|Vote 5 - Capital|
|Increased funding for Ensuring Better Disaster Management Preparation Program.||3,225|
|Reduction in Capital Budget Carry Forward due to a lower lapse in 2019-20.||(1,665)|
|Decrease in proceeds from the sale of real property.||(3,920)|
|Planned decrease in overall capital budget.||(2,843)|
|Various minor net increases.||775|
|Sub total Vote 5 - Capital||(4,428)|
|Vote 10 - Grants & Contributions|
|Increased funding for the Green Infrastructure initiative||33,477|
|Increased funding for the Impact Canada Fund||19,362|
|Transfer from other government department for emergency order for the southern mountain population of woodland caribou||11,400|
|Transfer from other government department for energy efficiency programming in the automotive sector||10,000|
|Increased funding for Accommodation Measures for the Trans Mountain Expansion project||9,800|
|Decrease in year-over-year funding for the ecoENERGY for Renewable Power program as the program nears completion||(36,760)|
|Decrease in year-over-year funding for Advancing Clean Technology due to reprofiling of funding||(18,003)|
|Various minor net increases||(1,570)|
|Sub total Vote 10 - Grants & Contributions||27,706|
|Contribution to the Canada/Newfoundland Offshore Petroleum Board due to increased level of activity.||1,712|
|Minister of Natural Resources – Salary and motor car allowance||2|
|Sunsetting Funding for the Federation of Canadian Municipalities - Green Municipal Fund.||(950,000)|
|Newfoundland Offshore Petroleum Resource Revenue Fund adjustment, as it was forecasted at the time of Main Estimates that less revenue would be collected in 2020-21 than in 2019-20, due to fluctuations in oil prices, variances in production and a decrease in planned expenditures.*||(84,410)|
|Employee Benefit Plan (EBP) adjustments, due to salary adjustments in 2020-21 compared to 2019-20||(2,297)|
|Sub total Statutory||(1,034,993)|
|Total decrease from previous year due to year-over-year changes||(1,019,971)|
|Reduced supply of the Main Estimates. Due to the COVID-19 pandemic and limited sessions in the spring for Parliament to study supply, the Standing Orders of the House of Commons were amended to extend the study period into the Fall. NRCan is expected to receive full supply for the 2020-21 Main Estimates in December 2020.||(254,142)|
|Total available for use for the year ending March 31, 2021||1,225,488|
|* In order to establish the statutory authority to be presented in the Main Estimates, NRCan executes its economic forecasting model. The model assesses trends in oil and natural gas prices, production levels, anticipated provincial corporate income taxes, and currency rates, among other things.|
2.2 Budgetary Expenditures by Standard Object
The spending for the quarter ending September 30, 2020 amounts to $241.0 million or 19.7% of total funding available for the fiscal year, compared to $1,309.3 million or 52.4% for the same quarter last year. This decrease of $1,068.2 million in spending is mainly related to a decrease in transfer payments in 2020-21 compared to the same type of expenditures in 2019-20. 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 2019-20||Fiscal year 2020-21|
|Expended during the quarter ended 30-Sep-19||Expended during the quarter ended 30-Sep-20|
|Transportation and Communication||5,253||444|
|Professional and special services||23,327||23,529|
|All Other Standard Objects||129,360||123,886|
|Total net budgetary expenditures||1,309,280||241,000|
Variance in Budgetary Expenditures by Standard Object (2020-21 compared with 2019-20)
|Standard Object||Explanation||Variance between 2020-21 and 2019-20 Q2 expenditures July 1 to September 30||Variance between 2020-21 and 2019-20 YTD expenditures April 1 to September 30|
|Transportation and Communication||The decrease is mainly attributed to the impact of COVID-19 on travel expenditures causing postponement and cancellation of activities and reduction in freight, courier services and transportation of goods and equipment.||(4,808)||(8,148)|
|Rentals||The decrease is mainly due to cancelled aircraft logistics and rental because of COVID-19 limitations and the closure of Polar Continental Shelf Program’s (PCSP) facility in Resolute.||(4,697)||(6,966)|
|Professional and special services||The year-to-date decrease is mainly attributed to the impact of COVID-19 pandemic causing delays or cancellations to the delivery of goods and services and procurement, as well as the timing of payments from one year to the next.||202||(4,102)|
|Transfer Payments||The decrease is primarily due to a decrease in statutory authorities for the Federation of Canadian Municipalities, who administer the Green Municipal Fund.||(1,053,503)||(1,085,164)|
|All Other Standard Objects||Minor decreases within different standard objects.||(5,474)||(1,468)|
3. Risks and Uncertainties
Natural resources are a long-standing source of Canadian economic growth and prosperity from coast to coast. They accounted for about 17% of Canada’s nominal Gross Domestic Product and supported 1.9 million jobs in 2019. As with all sectors in the Canadian economy, the natural resources sector experienced a significant disruption due to the spread of COVID-19. During the height of the economic lockdown, gross domestic product in the natural resources sector decreased by approximately 15 per cent, and sector employment decreased by roughly 12 per cent. There are early indications that a recovery is underway, but typically well understood risks have given way to vague uncertainties. For example, external economic forecasters have stressed that the shape of projected recoveries are highly contingent on stopping the spread of the pandemic and that projections are characterized by unusually high degrees of risk. Moreover, since Canada’s natural resources sector is export-intensive, its capacity to sustain a robust recovery could be determined, in part, by the spread of COVID-19 in destination markets.
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 has equipped the department to respond proactively to change and uncertainty by defining and understanding its operating environment and the factors that drive risk. The focus of operational risk management was to develop an immediate response to risks related to the emerging COVID-19 public health crisis. Emerging risks during this time consisted largely of business continuity planning and addressing IM/IT systems to increase effective remote working capacity for the whole Department while maintaining security. NRCan has worked with central agencies and other government departments to develop targeted risk mitigation initiatives to address the impacts of COVID-19 on natural resource sectors to stabilize and support their economic recovery. New initiatives like NRCan’s Emissions Reduction Fund were announced in part to assist the natural resources sector during COVID-19, with a major focus on supporting Canada’s environmental protection goals and strengthening Canada’s competitiveness as it recovers from the global pandemic.
NRCan will continue to monitor and integrate risk information into strategic and operational decision-making in support of Canada’s natural resource sectors during an unprecedented global pandemic.
4. Significant Changes in Relation to Operations, Personnel, Programs
During the second quarter of 2020-2021, Prime Minister Trudeau announced that effective September 21, 2020, Mr. Jean-François Tremblay would become the Deputy Minister of Natural Resources Canada.
In addition, the appointments of a new Assistant Deputy Minister, Lands and Minerals Executive and new Assistant Deputy Minister, the Major Projects Management Office occurred in the second quarter of 2020-21.
No other significant changes in relation to operations, personnel or programs occurred during the second quarter of 2020-21. However, there has been an impact on how NRCan delivers its operations and programs, with the majority of employees working from home and reductions to field and laboratory work due to COVID-19 pandemic.
Original signed by:
November 17, 2020
Original signed by:
Linda Hurdle, CPA, CA
Chief Financial Officer
November 13, 2020
|(in thousands of dollars)||Fiscal year 2020-21||Fiscal year 2019-20|
|Total available for use for the year ending March 31, 2021*||Expended during the quarter ended September 30, 2020||Year-to-date used at quarter-end||Total available for use for the year ending March 31, 2020**||Expended during the quarter ended September 30, 2019||Year-to-date used at quarter-end|
|Vote 1 - Net Operating Expenditures||448,446||136,116||256,065||595,911||151,680||276,812|
|Vote 5 - Capital Expenditures||9,812||1,383||1,624||17,143||319||1,019|
|Vote 10 - Grants and Contributions||403,727||42,455||64,383||489,199||42,728||69,787|
|Minister of Natural Resources – Salary and motor car allowance||89||22||45||88||22||44|
|Contributions to employee benefit plans||58,166||14,278||28,557||59,315||14,545||29,089|
|Contribution to the Canada/Newfoundland Offshore Petroleum Board||11,187||-||-||9,475||3,412||3,412|
|Contribution to the Canada/Nova Scotia Offshore Petroleum Board||4,305||1,966||1,966||4,305||2,153||2,153|
|Payments to the Nova Scotia Offshore Revenue Account||-||39||39||-||881||881|
|Payments to the Newfoundland Offshore Petroleum Resource Revenue Fund||289,756||31,271||47,647||374,165||118,669||161,575|
|Crown Share Adjustment Payments for Nova Scotia Offshore Petroleum Resources||-||-||-||-||24,862||24,862|
|Spending of amounts equivalent to proceeds from disposal of surplus crown assets||-||-||-||-||9||9|
|Federation of Canadian Municipalities - Green Municipal Fund||-||-||-||950,000||950,000||950,000|
|Climate Action Support||-||280||280||-||-||-|
|Payments related to Public Health Events of National Concern and income support||-||13,190||13,190||-||-||-|
|Total Statutory Payments||363,503||61,046||91,724||1,397,348||1,114,553||1,172,025|
|Total Budgetary Authorities||1,225,488||241,000||413,796||2,499,601||1,309,280||1,519,643|
|* Total available for use includes only authorities available for use and granted by Parliament at quarter-end through the Main Estimates, for which interim supply of nine twelfths was released, and Supplementary Estimates (A), for which full supply was released.|
|** Total available for use includes only authorities available for use and granted by Parliament at quarter-end through the Main Estimates, for which full supply was released, and Budget Implementation Vote, which reflects some measures announced in Budget 2019.|
|(in thousands of dollars)||Fiscal year 2020-21||Fiscal year 2019-20|
|Total available for use for the year ending March 31, 2021||Expended during the quarter ended September 30, 2020||Year-to-date used at quarter-end||Total available for use for the year ending March 31, 2020||Expended during the quarter ended September 30, 2019||Year-to-date used at quarter-end|
|Transportation and communication||18,256||444||719||19,801||5,253||8,866|
|Professional and special services||93,808||23,529||35,422||129,597||23,327||39,524|
|Repair and maintenance||6,238||630||793||9,015||1,262||1,837|
|Utilities, materials and supplies||24,367||1,808||2,411||32,274||3,909||6,325|
|Acquisition of land, buildings and works||2,449||1,286||1,286||6,791||166||568|
|Acquisition of machinery and equipment||20,383||1,158||2,121||28,846||2,197||3,513|
|Other subsidies and payments||5,519||2,894||7,206||7,088||5,301||6,273|
|Total Budgetary Expenditures||1,264,071||243,415||419,585||2,537,242||1,312,728||1,527,206|
|Less: Total Revenues Netted Against Expenditures||38,583||2,415||5,789||37,641||3,448||7,563|
|Total Net Budgetary Expenditures||1,225,488||241,000||413,796||2,499,601||1,309,280||1,519,643|
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