Quarterly Financial Report, quarter ended June 30, 2018: Environment and Climate Change Canada

Statement outlining results, risks and significant changes in operations, personnel and programs.

Introduction

This first quarterly report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board (TB). This quarterly report should be read in conjunction with the Main Estimates and Budget 2018.

This quarterly report has not been subject to an external audit or review.

Authority, Mandate and Program Activities

Environment and Climate Change Canada (ECCC) is the lead federal department for a wide range of environmental issues. The Department addresses these issues through various actions including the implementation of the Pan-Canadian Framework on Clean Growth and Climate Change; engaging with our strategic partners including provinces, territories and Indigenous peoples; monitoring; science-based research; policy and regulatory development; and, through the enforcement of environmental laws. The Department’s programs focus on minimizing threats to Canadians and their environment from pollution; equipping Canadians to make informed decisions on weather, water and climate conditions; and conserving and restoring Canada’s natural environment.

Under the Department of the Environment Act, the powers, duties and functions of the Minister of Environment and Climate Change extend to matters such as:

  • the preservation and enhancement of the quality of the natural environment, including water, air and soil quality, and the coordination of the relevant policies and programs of the Government of Canada;
  • renewable resources, including migratory birds and other non-domestic flora and fauna;
  • meteorology; and,
  • the enforcement of rules and regulations.

A summary description of the ECCC Raison d’être and program activities can be found in Part II of the Main Estimates and the Departmental Plan.

Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the department's spending authorities granted by Parliament, and those used by the department consistent with the Main Estimates and the newly created Budget Implementation Vote (BIV), centrally managed by Treasury Board (TB Vote 40) for the 2018-19 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.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

Highlights of the fiscal quarter and the fiscal year-to-date (YTD) results

Authority analysis

The Statement of Authorities presented in this quarterly financial report (see Table 1) reflects the authorities that were approved as of June 30, 2018. The funding available for use includes the 2018-19 Main Estimates and the newly created BIV, centrally managed by Treasury Board (TB Vote 40). Authorities for Supplementary Estimates “A” and “B” will follow later this year.

ECCC’s total available authorities for use for the year ending March 31, 2019 is higher by approximately $569.6M ($1,581.0M - $1,011.4M)Footnote 1   when compared to the same quarter of the previous year. This difference is explained by an increase in Vote 1 – Net Operating of $77.4M ($789.9M - $712.5M), in Vote 10 – Grants and Contributions of $492.2M ($622.8M - $130.6M) and in Budgetary Statutory authorities of $5.3M ($91.0M - $85.7M) offset by a decrease in Vote 5 – Capital of $5.2M ($77.4M - $82.6M).

Vote 1 – Net Operating authorities

The $77.4M increase compared to last fiscal year in the net Operating authorities is mainly due to the following:

  • $24.1M increase related to Protecting Canada’s Nature, Parks & Wilds Spaces;
  • $18.1M increase related to initiatives supporting Clean Growth and Climate Change;
  • $16.6M increase related to the compensation allocations from TBS related to the new collective agreements;
  • $16.4M increase related to the Federal Contaminated Sites Action Plan;
  • $10.2M increase related to Great Lakes and Lake Winnipeg basin program components;
  • $7.3M increase for the Pacific Environment Center (PEC) Arbitration Award and Rent;
  • $5.2M increase related to the Low Carbon Economy Fund;
  • $2.3M increase related to initiatives associated with the revitalization of meteorological services;
  • $2.2M increase related to the Oceans Protection Plan;
  • $1.6M increase related to Protecting Marine Life;
  • $1.0M increase related to activities Addressing Air Pollution; and
  • $0.8M increase for various other small initiatives.

offset by:

  • $15.1M decrease related to Contaminated Sediment Remediation Projects;
  • $7.9M decrease related to the Species at Risk Act;
  • $3.1M decrease related to the Federal Infrastructure Initiative; and
  • $2.3M related to the World Class Oil Spills Regime.

Vote 5 – Capital authorities

The $5.2M decrease compared to last fiscal year in the Capital authorities is mainly due to the following:

  • $9.1M decrease related to the Federal Infrastructure Initiative;
  • $3.6M decrease related to the World Class Oil Spills Regime; and
  • $1.8M decrease related to the National Conservation Plan;

offset by:

  • $9.3M increase related to initiatives associated with the revitalization of meteorological services.

Vote 10 – Grants and contributions authorities

The $492.2M increase compared to last fiscal year in the Grants and Contributions authorities is mainly due to the following:

  • $467.7M increase related to the Low Carbon Economy Fund;
  • $21.7M increase related to Protecting Canada’s Nature, Parks & Wilds Spaces;
  • $4.2M increase related to Great Lakes and Lake Winnipeg basin program components;
  • $1.9M increase related to initiatives supporting Clean Growth and Climate Change; and
  • $0.7M increase for various other small initiatives.

offset by:

  • $4.0M decrease related to the Species at Risk Act.

Statutory authorities

The $5.3M increase compared to last fiscal year in the Budgetary statutory authorities is mainly due to the following:

  • $5.3M increase related to the contributions to Employee Benefit Plans.

Expenditures analysis by authority

Details of expenditures by authority are presented in Tables 1 and 2.

In the first quarter of 2018-19, total budgetary expenditures were $219.8M compared to $211.3M reported for the same period in 2017-18, resulting in an increase of $8.5M or 4.0%.

Vote 1 – Net Operating authorities used during the first quarter of 2018-19 totalled $179.9M, which represents an increase of $6.6M or 3.8% ($179.9M - $173.3M) compared to the same quarter in 2017-18. This variance is mainly due to the increase of salary payments to employees following the ratification and signing of some collective agreements as well as an increase in rent for the Pacific Environment Centre site in West Vancouver.

Vote 5 – Capital authorities used during the first quarter of 2018-19 totalled $2.9M, which represents a decrease of $0.3M or 9.4% ($2.9M - $3.2M) compared to the same quarter in 2017-18. This variance is mainly due to a decrease in engineering consulting fees for various construction activities.

Vote 10 – Grants and Contributions authorities used during the first quarter of 2018-19 totalled $15.4M, which represents an increase of $1.7M or 12.4% ($15.4M - $13.7M) compared to the same quarter in 2017-18. This variance is mainly due to an increase related to International Climate Financing.

Statutory authorities used during the first quarter of 2018-19 totalled $21.6M, which represents an increase of $0.4M or 1.9% ($21.6M - $21.2M) compared to the same quarter in 2017-18. This variance is mainly due to an increase related to the contributions to Employee Benefit Plans

Expenditures analysis by Standard Object

Details of expenditures by Standard Object are presented in Tables 3 and 4.

Personnel expenditures have increased by $5.9M or 3.6% ($169.8M - $163.9M) compared to the same quarter last year. This increase is mainly due to the increase of salary payments to employees following the ratification and signing of collective agreements.

Rental expenditures have increased by $4.6M or 42.2% ($15.5M - $10.9M) compared to the same quarter last year. This increase is mainly due to the increased rent for the Pacific Environment Centre site in West Vancouver.

Transfer payments expenditures have increased by $1.7M or 12.4% ($15.4M - $13.7M) compared to the same quarter last year. This variance is mainly due to an increase related to International Climate Financing payments.

Quarterly other subsidies and payments have decreased by $0.7M or 21.9% ($2.5M - $3.2M) compared to the same quarter last year. The decrease is mainly attributable to a reduction of overpayments recognized by Phoenix during the first quarter.

Revenues collected have increased by $3.1M or 22.8% ($16.7M - $13.6M) compared to the same quarter last year. These are mainly due to increased activities related to the Oil Sands Monitoring Program.

Risks and Uncertainties

ECCC is primarily funded through voted parliamentary spending authorities for operating expenditures, capital expenditures, and transfer payments as well as statutory authorities. The Department is also partially funded through vote-netted revenues. ECCC’s planned spending reflects approved funding by Treasury Board and Parliament.

ECCC’s ability to deliver results for Canadians is influenced by a wide range of internal and external factors such as the increasing frequency of severe weather events, and the expectation to consult and collaborate with federal government and provinces, territories, Indigenous peoples, and other partners to address common environmental challenges. In its financial management, the Department considers these factors and their potential impact related to the department’s financial plan. For example, Budget 2018 provided funding of $130.3 million over five years to complete the modernization of Canada’s weather forecast and severe weather warning systems, and to revitalize water monitoring stations and improve water forecasts. In 2018–19, the Department continues to work to prevent further decline, and build sustainable populations of species at risk, support and enhance biodiversity across Canada, and expand Canada’s National Wildlife Areas, Migratory Bird Sanctuaries, and protected areas. This work is made possible due to the historic investment of $1.3 billion over five years in nature conservation announced in Budget 2018.

This additional funding represents new financial opportunities for ECCC in delivering on departmental expected outcomes. To ensure effective program delivery, ECCC will secure financial authorities in a timely manner so that program areas are able to quickly ramp up to meet new requirements and will continue to conduct program monitoring and proactive financial risk management and planning, all of which have been integrated into ECCC’s business planning and reporting processes.

The Government of Canada has implemented a new pay system as part of the pay transformation initiative. There are known issues associated with the implementation of this system that have resulted in salary over/underpayments to employees. ECCC has proactively implemented a number of compensatory controls to monitor this risk and will continue to monitor and report on the situation closely in consultation with Public Services and Procurement Canada and Treasury Board Secretariat.

Significant changes in relation to operations, personnel and programs

The following major changes in relation to operations, personnel and programs occurred during the first quarter:

  • ECCC authorities have significantly increased (56.3%) starting in 2018-19 compared to previous years. This is mostly related to Budget 2017 announcement for Low Carbon Economy Fund. Projects that will be considered under the Fund will reduce emissions, create jobs and save Canadians and companies money by making homes and buildings more efficient; help companies innovate or use technologies to reduce their emissions; and support the forest and agriculture sectors to enhance stored carbon in forests and soils. Although projects implementation began in 2017-18, the impact of spending will be more evident in 2018-19 as the Provinces and Territories will be ready to receive funding.
  • The Prime Minister announced on June 5, 2018 the appointment of Patricia Fuller as Canada’s new Ambassador for Climate Change, for a term of three years.

(The original version was signed by)

Stephen Lucas,
Deputy Minister

Gatineau, Canada

Date:  August 14, 2018


(The original version was signed by)

Carol Najm,
Chief Financial Officer

Gatineau, Canada

Date:  August 13, 2018

Statement of Authorities (unaudited) – Table 1

Fiscal year 2018-19 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2019* Used during the quarter ended June 30, 2018 Year to date used at quarter end
Vote 1 – Net Operating expenditures 789,878 179,912 179,912
Vote 5 – Capital expenditures 77,362 2,898 2,898
Vote 10 – Grants and contributions 622,790 15,400 15,400
Budgetary Statutory – Employee Benefit Plans 90,865 21,590 21,590
Budgetary Statutory – Minister’s Salary and Motor Car Allowance 86 14 14
Budgetary Statutory – Spending of proceeds from the disposal of surplus Crown assets
0 0 0
Total Budgetary authorities 1,580,981 219,814 219,814
Non-budgetary authorities - - -
Total authorities 1,580,981 219,814 219,814

* The funding available for use includes the 2018-19 Main Estimates and the Budget Implementation Vote, and will be updated with supplementary Estimates “A” and “B” in future QFRs.

Statement of Authorities (unaudited) – Table 2

Fiscal year 2017-18 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2018* Used during the quarter ended June 30, 2017
Year to date used at quarter end
Vote 1 – Net Operating expenditures 712,461 173,272 173,272
Vote 5 – Capital expenditures 82,611 3,186 3,186
Vote 10 – Grants and contributions 130,626 13,709 13,709
Budgetary Statutory – Employee Benefit Plans 85,613 21,092 21,092
Budgetary Statutory – Minister’s Salary and Motor Car Allowance 84 21 21
Budgetary Statutory – Refund of previous years revenue 0 0 0
Budgetary Statutory – Spending of proceeds from the disposal of surplus Crown assets 0 44 44
Budgetary Statutory – Canada Foundation for Sustainable Development Technology Grant 0 0 0
Agency Fees under section 17.1 of the Financial Administration Act 0 0 0
Total Budgetary authorities 1,011,395 211,324 211,324
Non-budgetary authorities - - -
Total authorities 1,011,395 211,324 211,324

* The Total funding available for use includes the 2017-18 Main Estimates and Supplementary Estimates ¨A¨ only and was updated with Supplementary Estimates “B” and “C” in future QFRs.

Departmental budgetary expenditures by Standard Object (unaudited) – Table 3

Fiscal year 2018-19 (in thousands of dollars)
Authority Planned expenditures for the year ending  March 31, 2019* Expended during the quarter ended June 30, 2018
Year to date used at quarter end
Expenditures: - - -
Personnel 678,706 169,756 169,756
Transportation and communications 39,112 6,552 6,552
Information 3,933 502 502
Professional and special services 162,535 16,934 16,934
Rentals 31,582 15,466 15,466
Repair and maintenance 20,765 1,968 1,968
Utilities, materials and supplies 48,093 5,587 5,587
Acquisition of land, buildings and works 1,113 17 17
Acquisition of machinery and equipment 51,629 1,809 1,809
Transfer payments 622,790 15,400 15,400
Other subsidies and payments 4,542 2,505 2,505
Total gross budgetary expenditures 1,664,800 236,496 236,496
Less Revenues netted against expenditures: - - -
Revenues 83,819 16,682 16,682
Total Revenues netted against expenditures: 83,819 16,682 16,682
Total net budgetary expenditures 1,580,981 219,814 219,814

* The funding available for use includes the 2018-19 Main Estimates and the Budget Implementation Vote, and will be updated with supplementary Estimates “A” and “B” in future QFRs.

Fiscal year 2017-2018 (in thousands of dollars)
Standard Object Planned expenditures for the year ending March 31, 2018* Expended during the quarter ended June 30, 2017 Year to date used at quarter end
Expenditures: - - -
Personnel 629,299 163,887 163,887
Transportation and communications 33,765 5,992 5,992
Information 3,122 567 567
Professional and special services 157,055 17,731 17,731
Rentals 29,508 10,856 10,856
Repair and maintenance 15,196 1,885 1,885
Utilities, materials and supplies 44,106 5,490 5,490
Acquisition of land, buildings and works 937 23 23
Acquisition of machinery and equipment 43,007 1,599 1,599
Transfer payments 130,626 13,709 13,709
Other subsidies and payments 4,306 3,151 3,151
Total gross budgetary expenditures 1,090,927 224,890 224,890
Less Revenues netted against expenditures: - - -
Revenues 79,531 13,566 13,566
Total Revenues netted against expenditures: 79,531 13,566 13,566
Total net budgetary expenditures 1,011,395 211,324 211,324

* The Planned expenditures includes the 2017-18 Main Estimates and Supplementary Estimates "A" only and was updated with Supplementary Estimates "B" and "C" in future QFRs.

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