Archived: Quarterly Financial Report for the quarter ended December 31, 2014, Environment Canada

Introduction

This 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, Supplementary Estimates and the previous Quarterly Financial Reports.

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

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

Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting (modified cash accounting). The accompanying Statement of Authorities includes Environment Canada’s spending authorities granted by Parliament and those used by the Department, consistent with the Main Estimates and the Supplementary Estimates for the 2014-2015 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.

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

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

Statement of Authorities (Table 1)

This quarterly report, ending December 31, 2014, reflects the authorities that were approved for this period. The funding available for use includes the 2014-2015 Main Estimates, the Operating and Capital budget carry-forwards, additional compensation adjustment for signed collective agreements, the increase of Environment Canada’s Vote Netted Revenues and the Supplementary Estimates ¨B¨. Authorities for Supplementary Estimates ¨C¨ will follow later this year. Environment Canada’s authorities “Total available for use for the year ending March 31, 2015” is higher by approximately $24.5M ($1,037.5M - $1,013.0M)^{Footnote 1}when compared to the same quarter of the previous year. This difference is explained by increases in Vote 1 - Operating of $5.8M ($744.0M - $738.2M)^{Footnote 1}, in Vote 5 - Capital of $2.5M ($66.3M - $63.8M)^{Footnote 1}, in Vote 10 - Grants and contributions of $12.6M ($132.3M - $119.7M)^Footnote1 and in Budgetary statutory authorities for the Employee Benefit Plans, Minister’s Salary and Car Allowance, and the Nature Conservancy of Canada of $3.6M ($94.9M - $91.3M)^Footnote1.

Compared with previous fiscal year, the year to date Operating authorities have increased by a net amount of $5.8M due to the following:

• $22.3M increase for the Randle Reef Contaminated Sediment Remediation Project in Hamilton Harbour and year over year changes in funding for the Freshwater initiative;
• $7.5M increase for the revitalization of Canada’s Weather Services;
• $4.5M increase for the strategy to implement a world class prevention, preparedness and response regime for oil spills;
• $2.4M increase for the implementation of the National Conservation Plan;
• $2.3M increase related to the assessment, management and remediation of federal contaminated sites;
• $0.9M increase due to a reduction in the amount transferred to Shared Services Canada for the centralization of information technology services;

offset by:

• $18.4M decrease for savings measures identified as part of the Budget 2012;
• $6.4M decrease under the Clean Air Regulatory Agenda;
• $2.5M decrease related to the Departmental Financial Management System Implementation;
• $2.2M decrease under the Meteorological Service of Canada to improve Canada’s Weather Services by ensuring the integrity of Government of Canada’s weather and environmental monitoring;
• $1.9M decrease authorities for collective agreements or approved wage increases;
• $0.9M decrease for supporting conservation measures within Canada’s marine based ecosystems (Health of the Oceans Initiative);
• $0.7M decrease of the Operating budget carry-forward;
• $0.5M decrease for Sydney Tar Ponds and Coke Ovens Remediation Project; and,
• $0.6M net decrease from various other smaller adjustments.

Compared with previous fiscal year, the year to date Capital authorities have increased by a net amount of $2.5M due to the following:

• $1.7M increase for the revitalization of Canada’s Weather Services;
• $1.6M increase to improve Canada’s Weather Services by ensuring the integrity of the Government of Canada’s weather and environmental monitoring;
• $0.9M increase for the strategy to implement a world class prevention, preparedness and response regime for oil spills;

offset by:

• $1.5M decrease for savings measures identified as part of the Budget 2012; and,
• $0.2M net decrease from various other smaller adjustments.

Compared with previous fiscal year, the year to date Grants and contributions authorities have increased by a net amount of $12.6M due to the following:

• $23.1M increase for the implementation of the National Conservation Plan.
• $12.5M increase to Sustainable Development Technology Canada (SDTC) for the Sustainable Development Technology Fund;
• $2.2M increase for the renewal of the Lake Simcoe program;
• $1.2M increase for the facilitation of Aboriginal Participation in West Coast Energy Development;
• $0.3M net increase from various other smaller adjustments;

offset by:

• $25.0M decrease to Sustainable Development Technology Canada (SDTC) for the Next Generation Biofuels Fund; and,
• $1.7M decrease for savings measures identified as part of the Budget 2012.

Compared with previous fiscal year, the year to date Budgetary statutory authorities have increased by a net amount of $3.6M due to the following:

•  $8.8M increase for the Nature Conservancy of Canada;

offset by:

• $5.2M net decrease under the Employee Benefit Plans (EBPs).

Expenditure Analysis

Total net expenditures for the third quarter, ending December 31, 2014, was $206.9M and is lower by $20.7M (9.1%) in comparison to the same quarter in the previous year. The year to date expenditures as of December 31, 2014 is $659.3M which represents an increase of $24.7M (3.9%) compared to the same period last year.

Vote 1 - Operating authorities used during the third quarter of 2014-2015 totaled $161.9M, which represents a decrease of $20.5M (11.2%) compared to the same quarter in 2013-2014. This decrease is mainly due to the reduction of payments in lieu of severance pay, retroactive salaries and wages as well as professional and special services offset by higher rates of pay a result of collective agreements renewed and signed last fiscal year.

Vote 5 - Capital authorities used during the third quarter of 2014-2015 totaled $10.5M, which represents an increase of $1.2M (12.6%) compared to the same quarter in 2013-2014. This increase is mainly due to the Departmental Financial Management System Implementation offset by various smaller decreases resulting from the timing of payments.

Vote 10 - Grants and contributions authorities used during the third quarter of 2014-2015 totaled $13.0M, which represents a decrease of $0.6M (4.2%) compared to the same quarter in 2013-2014.

Statutory authorities used during the third quarter of 2014-2015 totaled $21.5M, which represents a decrease of $0.9M (4.0%) compared to the same quarter in 2013-2014 and is due to reduced expenditures tied to the Employee Benefit Plans.

Statement of Departmental Expenditures by Standard Object (Table 2)

Personnel expenditures have decreased by $9.5M (5.7%) during the third quarter and is mainly explained by reduction of payments in lieu of severance pay, and retroactive salaries and wages offset by higher rates of pay as a result of collective agreements renewed and signed last fiscal year.

Professional expenditures have decreased by $4.1M (13.0%) during the third quarter and are mainly due to reduced use of IT consultants and payments for EC’s Eastgate offices project, which was completed in 2013-2014.

Acquisition of machinery and equipment has decreased by $3.4M (44.7%) during the third quarter and is mainly attributable to the timing of payments.

Transfer Payments expenditures have decreased by $0.6M (4.2%) during the third quarter. Year to date expenditures have increased by $15.3M (42.9%) which is mainly due to the grant payment of $8.8M to the Nature Conservancy of Canada (NCC) and the contribution payment for Canada’s share of the Commission of Environmental Co-operation (CEC), which were issued earlier this year as well as the earlier payments resulting from improvements to the departmental Grants and contributions approval process.

Other subsidies and payments have increased by $0.2M (38.5%) compared to the same quarter last year. Year to date expenditures have increased by $19.8M which is due to a one-time transition payment for implementing a salary payment in arrears by the Government of Canada.

Revenues have increased by $1.5M (7.0%) compared to the third quarter last year and year to date revenues have decreased by $8.8M (15.5%). This is mainly due to the timing of the collection for various programs.

Risks and Uncertainties

Environment Canada 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. Environment Canada's planned spending reflects approved funding by Treasury Board to support the departmental strategic priorities and programs. In 2014-2015, Environment Canada will continue to contribute to the Government of Canada's plan to return to fiscal balance.

Environment Canada objectives and strategic priorities are influenced by various internal and external factors. Extensive consultations in 2013-2014, engaging the risk governance structure, resulted in the development of Environment Canada’s 2014-2017 Corporate Risk Profile which is broadly communicated to all employees. The following corporate risks were identified: Delivering Environment Canada’s Services, Working with Partners/Stakeholders, Workforce Readiness, Managing Information and Regulatory/Legislation.

Environment Canada proactively manages risks through ongoing monitoring, with adjustments made to departmental strategies, resources or program objectives to ensure appropriate controls and mitigation measures are applied as required. Environment Canada’s Blueprint 2020 engagement strategies have also been considered in the development of the following key mitigating activities and management actions:

• Maintaining channels, protocols and agreements to ensure that risks of not being able to deliver Environment Canada's services are managed. The viability and readiness of the Business Continuity Plan is tested and training on emergency response is provided.
• Building and strengthening relations with stakeholders and partners through collaborative planning networks/processes to facilitate better sharing of information, understanding of strategic priorities and potential changes, clarity of roles and responsibilities and more timely mitigating actions as required.
• Building a capable workforce through training and the promotion of a culture of performance management. Environment Canada will also examine other science-based department strategies to inform Environment Canada’s resourcing model for scientists.
• Continuing to advance the implementation of protocols and procedures, ongoing communication and provision of relevant training on information management, security, file management, privacy, quality assurance and compliance testing.
• Maintaining or strengthening relationships with partners and stakeholders, domestically and internationally to share and understand regulatory/legislative expectations.

Risk management continues to be a key activity for the Department. Environment Canada will continue to integrate risk information into priority setting, business and resource planning, performance management and decision making. Risk management practices will continue to be strengthened through capacity building initiatives to foster a culture of responsible and informed risk-taking from senior management to the lowest level.

Significant changes in relation to operations, personnel and programs

There are no significant financial management governance changes in relation to operations, personnel and programs to report during the third quarter of 2014-2015.

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that are being implemented in order to refocus government and programs; make it easier for Canadians and businesses to deal with their government; and, modernize and reduce the back office.

Environment Canada will achieve Budget 2012 savings of $53.8M in fiscal year 2014-2015 by streamlining departmental operations through better management and by working with partners as well as by eliminating or reducing programs that do not contribute directly to the Department's core mandate.

Examples of Environment Canada's administrative efficiencies to achieve these savings include:

• Domestic travel between major cities has been reduced and replaced, when possible, using communications technology such as videoconferencing, telepresence and webinars;
• The overall size of Environment Canada’s vehicle fleet has been reduced with better management of vehicles through their whole life-cycle; and
• The use of professional services has been reduced.

Examples of reductions to non-core activities in 2014-2015 include:

• Reducing involvement in promoting and compiling information about water use as provincial and municipal governments are responsible for water treatment and use; and,
• Similarly, duplication in the area of wastewater research will be eliminated where other levels of government and the academic sector have demonstrated capacity.

In the first year of implementation, the Department achieved savings of $13.3M. Savings of $31.5M were achieved in 2013-2014, and $53.8M for 2014-2015 and ongoing are expected.

There was no incremental funding provided to Environment Canada to complete the work related to the implementation of its Budget 2012 savings measures.

There are no significant financial risks or uncertainties related to the implementation of Environment Canada’s Budget 2012 savings measures. The Department has developed detailed roll-out plans for each of its savings measures and progress against these plans is monitored by departmental senior management on a quarterly basis.

Approved by: