Natural Resources Canada Quarterly Financial Report (Unaudited) for the Quarter Ended September 30, 2024

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 (TB). 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 to 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 2024-2025 fiscal year, as well as budget adjustments approved by TB up to September 30, 2024. 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, 2024, which include Main Estimates and Supplementary Estimates (A) for which full supply was released, as well as TB approved adjustments. The details presented in this report focus on and compare the second quarter results of 2024-2025 with those of 2023-2024.

2.1 Authorities

As per Table 1, presented at the end of this document, and on Graph 1 below, as at September 30, 2024, NRCan has authorities available for use of $5,811.7M compared to $4,951.0M in 2023-2024, for a net increase of $860.7M or 17.4%.

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Graph 1: Comparison of Authorities as at September 30, 2024

(in millions of dollars)	Fiscal year 2023-2024 Total available for use for the year ending March 31, 2024	Fiscal year 2024-2025 Total available for use for the year ending March 31, 2025
	Vote 1 - Operating	846	934
Vote 5 - Capital	39	50
Vote 10 - Grants and contributions	2,279	2,996
Statutory	1,787	1,831
Total budgetary authorities	4,951	5,812

The increase of $860.7M in authorities in 2024-2025 compared to 2023-2024 is mainly explained by the increase within the Vote 10 grants and contributions as well as the net effect of smaller fluctuations within Vote 1 operating expenditures, Vote 5 capital expenditures and Statutory authorities, as per the following:

Changes to Voted and Statutory Authorities (2024-2025 compared with 2023-2024)
(in $000s)

Total available for use for the year ending March 31, 2024	4,950,988
Vote 1 - Operating
The Sustainable Advancement of Canada's Forest Economy	34,540
Increase in Collective Bargaining Agreements	33,606
National Adaptation Strategy - Wildfire Resilient Futures Initiatives	14,791
B2023 Refocusing Government Spending	(28,304)
All other net increases less than $10M individually	34,005
Sub-total Vote 1 - Operating	88,638
Vote 5 - Capital
Energy Innovation Program	3,001
Polar Continental Shelf Program	(3,547)
All other net increases less than $3M individually	11,864
Sub-total Vote 5 - Capital	11,318
Vote 10 - Grants & Contributions
Greener Homes	251,624
Oil to Heat Pump Affordability Program	131,429
Critical Minerals	115,550
The Sustainable Advancement of Canada's Forest Economy	82,308
Natural Climate Solution Fund - 2 Billion Trees	55,500
Decarbonization of On-road Transportation - Deep Retrofit Accelerator	42,000
National Adaptation Strategy - Wildfire Resilient Futures Initiative	36,900
Emissions Reduction Plan (ERP) - Green Industrial Facilities and Manufacturing Program	24,000
Fighting and Managing Wildfires in a Changing Climate	23,000
Decarbonization of On-road Transportation - Zero-Emission Vehicle Infrastructure Program	(41,303)
All other net decreases less than $20M individually	(3,962)
Sub-total Vote 10 - Grants & Contributions	717,046
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)	42,533
All other net increases	1,149
Sub-total Statutory	43,682
Total increase from previous year due to year-over-year changes	860,684
Total available for use for the year ending March 31, 2025	5,811,672

2.2 Budgetary Expenditures by Standard Object

The spending for the quarter ending September 30, 2024 amounts to $909.3M or 15.6% of total funding available for the fiscal year, compared to $814.3M or 16.4% for the same quarter last year. The increase of $95.0M in spending is mainly related to an increase in expenditures for transfer payments and personnel in 2024-2025 compared to the same type of expenditures in 2023-2024. 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.

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Graph 2: Comparison of Standard Objects with significant variances as at September 30, 2024

(in millions of dollars)	Fiscal year 2023-2024 Expended during the quarter ended September 30, 2023	Fiscal year 2024-2025 Expended during the quarter ended September 30, 2024
	Personnel	161	175
Transfer payments	591	670
All other standard objects	62	64
Total net budgetary expenditures	814	909

Variance in Budgetary Expenditures by Standard Object (2024-2025 compared with 2023-2024)
(in $000s)

Standard Object	Explanation	Variance between 2024-2025 and 2023-2024 Q2 expenditures	Variance between 2024-2025 and 2023-2024 YTD expenditures
Personnel	The variance is mainly due to the wage increases from the collective bargaining settlements, timing of OGD salary transfers occurring earlier this year as well as the programming growth and ramp up related to various initiatives such as Energy Innovation, Polar Continental Shelf, Critical Minerals, National Adaptation Strategy Wildfire Resilient Futures Initiative and Oil to Heat Pump Affordability.	13,708	48,450
Transfer Payments	The variance is mainly attributed to the increase in payments under Energy Innovation Program, Greener Homes (ramp up), Oil to Heat Pump Affordability as well as the timing of payments for the Forest Innovation, Investments in Forest Industry Transformation, and International Forest Model Network programs offset by a decrease in payments for the Smart Renewables Electrification Pathways program and transfers for offshore activity.	79,291	367,688
All Other Standard Objects	Minor increases and decreases within different standard objects.	2,024	3,312
Total Variance		95,023	419,450

3. Risks and Uncertainties

Canada’s vast natural resource sectors continue to contribute significantly to economic growth across the country by supporting vital natural resource-based jobs and fostering sustainable prosperity for Canadians. NRCan maintains its ongoing work to develop policies and programs that enhance the economic contribution of the natural resource sectors, while reducing emissions and other environmental impacts. NRCan continues to work with other government departments, provincial partners, and Indigenous groups to strengthen the economy for all Canadians. Additionally, Canada continues to support national and international actions to confront the impacts of climate change and extreme weather events that are becoming more prevalent.

The accelerating transition to net-zero has initiated a global race to attract investments in building clean economies. Canada must keep pace at the international level to meet the country's global commitments related to the sustainable development of natural resources while maintaining a focus on proactive risk management. 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 Analysis Plus, the Department will consider the impacts on vulnerable, marginalized, and underrepresented groups, and advance work to embed inclusive measures in policy and program design 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 natural resources sectors. This will be achieved by advancing shared governance of Canada’s resources, implementation of the United Nations Declaration on the Rights of Indigenous Peoples Act (UNDA) legislation in operations, 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 taking place on or near to their traditional territories.

To adapt to the ever-evolving digital world, including hybrid work and growing cybersecurity risk, the Department will work to implement an integrated plan to respond to Canada’s Digital Ambition. By investing in the use of technology, research and innovation, cybersecurity, and upskilling staff, NRCan will continue to strengthen and modernize delivery of improved digital services. Given the high priority of enhanced cyber security, in light of increasingly sophisticated cyber-attacks, ensuring proper actions are taken to secure digital resources and information will increase NRCan’s ability to protect data assets while maintaining key programs and services for Canadians.

The global economy continues to face an elevated level of uncertainty due to ongoing events such as the conflicts in the Middle East (Israel, Lebanon and Iran), the war in Ukraine, and supply chain disruptions, as well as increasing geoeconomic fragmentation and natural disasters. One of the biggest challenges of the Canadian natural resources sector is the uncertainty surrounding commodity demand and prices, in the context of a global economic slowdown and growing geopolitical risk.

NRCan continues to strengthen its risk management capabilities and effectiveness, in support of delivering on its mandate and core responsibilities. The Department is moving forward with the integration of risk management with other departmental processes in support of priority setting and decision-making. This ensures mitigation actions are informed by regular assessment of risk information, serving to strengthen NRCan’s capacity to recognize and understand challenges.

As outlined in the 2023-2026 Corporate Risk Profile, 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 internal-facing 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 resource sectors in 2024-2025.

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

Further to the Budget 2024 reduction measures aiming to achieve further savings primarily through natural attrition, as announced earlier this spring, the department is reviewing its programs and operations in support of the government's efforts to refocus spending.

No further significant changes to report.