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Quarterly Financial Report for the quarter ended December 31, 2017

Agriculture and Agri-Food Canada - Quarterly Financial Report for the quarter ended December 31, 2017 (PDF Version, 534 KB)

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

Introduction

Agriculture and Agri-Food Canada’s Quarterly Financial Report should be read in conjunction with the Main Estimates, Supplementary Estimates (A), Supplementary Estimates (B) as well as Budget 2017 Building a Strong Middle Class. This report has been prepared as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. As such, it has not been subject to an external audit or review.

Detailed information on Agriculture and Agri-Food Canada’s program activities can be found in the Departmental Plan

Basis of Presentation

This quarterly report has been prepared 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, Supplementary Estimates (A) and Supplementary Estimates (B) for the 2017-2018 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 monies 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 results

Authorities

Agriculture and Agri-Food Canada’s Quarterly Financial Report reflects the results of the 2017-2018 fiscal period ending December 31, 2017, for which full supply of Main Estimates and Supplementary Estimates (A) were released on June 23, 2017 and Supplementary Estimates (B) on December 12, 2017.

At the end of the third quarter of 2017-2018, Agriculture and Agri-Food Canada had total funding available for use of $2,396.7 million as detailed in Table 1. This amount includes the 2017-2018 Main Estimates of $2,251.2 million, the 2017-2018 Supplementary Estimates (A) of $47.5 million, the Supplementary Estimates (B) of $23.0 million, the Operating Budget Carry Forward from 2016-2017 of $29.2 million, $34.3 million for collective agreements signed, and $11.5 million related to proceeds collected from the sale of Crown assets. The net increase of $41.4 million compared to Agriculture and Agri-Food Canada’s total authorities at the same time in fiscal year 2016-2017 is mostly due to increases in Vote 1 Net Operating authorities and Vote 10 Grants and Contributions, offset by a decrease in Vote 5 Capital authorities.

Vote 1 Net Operating authorities as of December 31, 2017 totalled $606.7 million, an increase of $37.5 million from the December 31, 2016 amount of $569.1 million. This increase is mainly due to funding of $34.3 million for collective agreements signed and new funding of $6.0 million for the Dairy Farm Investment Program and the Dairy Processing Investment Fund. These increases are offset by a decrease of $3.9 million related to the Budget 2016 reduction for Professional Services, Travel and Advertising and other authority adjustments.

Vote 5 Capital authorities at the end of the third quarter of 2017-2018 totalled $77.8 million, a decrease of $11.7 million from the December 31, 2016 amount of $89.5 million. This decrease is mainly due to the ending of the Budget 2014 Federal Infrastructure Initiatives at the end of 2016-2017.

Vote 10 Grants and Contributions authority of $394.8 million as of December 31, 2017 reflects an increase of $21.4 million from $373.3 million at the same time in 2016-2017.  This is primarily attributed to funding of $37.6 million to implement the Dairy Farm Investment Program and the Dairy Processing Investment Fund, offset by the following: $8.5 million less in unused GF2 funding brought in from the previous year;$4.6 million decrease due to the sunsetting of the Churchill Port Utilization Program; and $4.5 million that was transferred to Western Economic Diversification in support of the Saskatchewan Canadian Cattlemen’s Association project under the Western Diversification Program.

Budgetary Statutory authorities available as at December 31, 2017 were $1,317.5 million, a decrease of $5.9 million from the December 31, 2016 amount of $1,323.4 million. This slight decrease is mainly attributed to an Employee Benefit Plan rate adjustment.

Graph 1: Comparison of Authorities Available for Use
Description of this image follows in Table 1
Table 1: Authorities Available for Use (in thousands of dollars) [1]
Authorities 2017-2018 2016-2017 Variances Percent
Vote 1 - Net Operating expenditures 606,655 569,134 37,521 7%
Vote 5 - Capital expenditures 77,817 89,475 (11,658) (13%)
Vote 10 - Grants and contributions 394,758 373,327 21,431 6%
Budgetary statutory authorities 1,317,462 1,323,401 (5,939) (0%)
Total Authorities 2,396,692 2,355,337 41,355 2%

Note:

[1] Totals may not add due to rounding.

Expenditures

As detailed in Table 2, at the end of the third quarter of 2017-2018, the Department had spent $1,061.8 million, compared to $1,155.3 million for the same period in fiscal year 2016-2017. The decrease of $93.5 million is mainly due to decreases in Budgetary Statutory expenditures and Vote 5 Capital expenditures, partially offset by an increase in Vote 1 Net Operating expenditures.

Vote 1 Net Operating expenditures at the end of the third quarter were $400.4 million, 66% of the total available for use of $606.7 million, which is greater than expenditures of $365.3 million or 64% of the total available for the same period last fiscal year. The increase of $35.1 million is primarily due to increased salary expenditures of $38.8 million mainly attributed to retroactive payments for recently signed collective agreements of $23.8 million, offset by a $3.7 million decrease in non-pay operating.

Vote 5 Capital expenditures at the end of the third quarter were $22.7 million or 29% of the total available for use of $77.8 million. For the same period in 2016-2017, expenditures were $42.3 million or 47% of the budget of $89.5 million. The decrease of $19.5 million in capital expenditures is mainly due to decreased spending associated with the ending of the Budget 2014 Federal Infrastructure Initiatives in 2016-2017.

Vote 10 Grants and Contributions expenditures at the end of the third quarter of 2017-2018 were $126.6 million or 32% of the total available for use of $394.8 million. This is not materially different from the same period in 2016-2017 ($120.2 million or 32% of the total available for use of $373.3 million). Historically, the majority of spending on grants and contributions has been in the last half of the fiscal year.

Budgetary Statutory expenditures at the end of the third quarter of 2017-2018 were $512.0 million compared to $627.5 million for the same period of the previous year. The decrease of $115.5 million is mainly caused by a decrease of $106.6 million under the AgriInsurance program, a decrease of $7.9 million in the AgriInvest program, and a decrease of $1.3 million in AgriStability all largely due to the timing of claims received.

Graph 2: Comparison of Expenditures
Description of this image follows in Table 2
Table 2: Expenditures (in thousands of dollars) [1]
Expenditures 2017-2018 2016-2017 Variance Percent
Vote 1 - Net Operating expenditures 400,418 365,348 35,070 10%
Vote 5 - Capital expenditures 22,716 42,250 (19,534) (46%)
Vote 10 - Grants and contributions 126,633 120,157 6,477 5%
Budgetary statutory authorities 512,035 627,505 (115,470) (18%)
Total Net Budgetary Expenditures 1,061,802 1,155,260 (93,458) (8%)
Note:
[1] Totals may not add due to rounding.

Expenditures in Comparison to Authorities

At the end of the third quarter of 2017-2018, the Department had spent $1,061.8 million (44% of the total funding available for use), compared to $1,155.3 million for the same period in fiscal year 2016-2017 (49% of the total funding available for use).

Graph 3: Comparison of Total Authorities and Total Net Budgetary Expenditures as of December 31, for fiscal years 2017-2018 and 2016-2017
Description of this image follows

Table 3 presents budgetary expenditures for the first three quarters by standard object. The decrease of $93.5 million is a result of decreased spending in transfer payments, professional and special services, as well as acquisition of land buildings and works, offset by increased spending in personnel. The increase of $36.2 million or 11% in Personnel is primarily attributed to collective bargaining retroactive payments, higher pay rates and an increase in Full Time Equivalents (FTEs). The decrease of $16.7 million or 22% in Professional and Special Services is mainly due to a decrease of $8.8 million for the Swift Current Research Center refit project due to the timing of payments, and a $5.6 million decrease in consulting services for information technology and telecommunication. The decrease of $8.8 million or 43% in Acquisition of Land, Buildings and Works is caused by reduced spending associated with the ending of the Budget 2014 Federal Infrastructure Initiatives in 2016-2017. The decrease of $105.2 million or 15% in transfer payments is mainly caused by the decreased payment under the AgriInsurance program primarily due to the timing of claims received.

Agriculture and Agri-Food Canada has total Revenue Spending authority of up to $66.1 million for 2017-2018. The revenue is generated from collaborative research agreements between Agriculture and Agri-Food Canada and third parties, the grazing and breeding activities of the Community Pastures Program, the administration of the AgriStability Program, as well as recoveries for costs related to Internal Support Services provided to other departments. The Department has generated $46.3 million in revenues up to the end of the third quarter of 2017-2018 compared to $48.1 million for the same period last year. The $1.8 million decrease is mainly due to a $1.7 million decrease in the gradual divestiture of the Community Pastures Program.

Table 3: Budgetary Expenditures by Standard Object (in thousands of dollars) [1]
Expenditures 2017-2018 2016-2017 Variance Percent
Personnel 377,548 341,324 36,224 11%
Transportation and communications 9,965 9,315 650 7%
Information 3,315 3,728 (413) (11%)
Professional and special services 59,333 76,071 (16,738) (22%)
Rentals 5,265 5,591 (326) (6%)
Repairs and maintenance 8,618 8,381 237 3%
Utilities, materials and supplies 20,216 21,350 (1,134) (5%)
Acquisition of land, buildings and works 11,579 20,411 (8,832) (43%)
Acquisition of machinery and equipment 12,982 12,190 792 6%
Transfer payments 589,037 694,279 (105,242) (15%)
Other subsidies and payments 10,221 10,738 (517) (5%)
Total Gross Budgetary Expenditures 1,108,079 1,203,378 (95,299) (8%)
Less: Revenues netted against expenditures 46,277 48,118 (1,841) (4%)
Total Net Budgetary Expenditures 1,061,802 1,155,260 (93,458) (8%)

Note:

[1] Totals may not add due to rounding.

Risks and Uncertainties

Agriculture and Agri-Food Canada continues to exercise prudent management in delivering its policies and programs. The Department systematically identifies, assesses, monitors, and responds to a variety of corporate, operational, program and project-level internal and external risks and opportunities. These activities are captured within a few tools that are in place, including the Department’s Program Performance Measurement and Risk Management Strategies which identify and monitor ongoing performance measurement, including risk and opportunity monitoring and performance information availability, to effectively support program expenditures. The Department's decision-making capacity is enhanced by effectively embedding risk and opportunity management within its culture, processes, and planning practices. Annually, Agriculture and Agri-Food Canada updates its Corporate Risk Profile to communicate the key risks and opportunities that have the potential to influence departmental priorities, resource allocation, and the achievement of Strategic Outcomes.

In addition, Agriculture and Agri-Food Canada continues to mitigate the issues arising with the implementation of the Phoenix pay system and to monitor any salary payments adjustments that may be required. To reduce impact on employees, AAFC has implemented an AAFC Pay Liaison Team to help resolve pay issues and stabilize the pay system. The Department has also provided emergency salary advances and priority payments to employees experiencing hardship due to pay issues.

Significant changes in relation to operations, personnel and programs

Programs

There are two new AAFC programs that are designed to help the dairy sector begin to adapt to new competition resulting from the Comprehensive Economic and Trade Agreement (CETA). The Dairy Farm Investment Program (DFIP) ($250 million over five years) will help dairy farmers modernize their operations and improve their productivity. The Dairy Processing Investment Fund (DPIF) ($100 million over four years) will support dairy processors as they modernize their facilities and conduct near market activities to introduce new and improved products that will compete with expected imports. The 2017-2018 portion of this funding ($44.9 million) has been reflected in this report.

Approval by Senior Officials
Approved by:

Original signed by
Chris Forbes, Deputy Head
Ottawa, Canada

Original signed by
Pierre Corriveau, Chief Financial Officer

Statement of Authorities (unaudited)
For the quarter ended December 31, 2017
(in thousands of dollars)
Fiscal year 2017-2018 [1] Fiscal year 2016-2017 [1]
Total available for use for the year ending March 31, 2018 [2] Used during the quarter ended December 31, 2017 Year to date used at quarter-end Total available for use for the year ending March 31, 2017 [2] Used during the quarter ended December 31, 2016 Year to date used at quarter-end
Vote 1 - Net Operating expenditures $606,655 $135,424 $400,418 $569,134 $124,163 $365,348
Vote 5 - Capital expenditures 77,817 9,444 22,716 89,475 22,471 42,250
Vote 10 - Grants and contributions 394,758 64,549 126,633 373,327 61,537 120,157
Budgetary statutory authorities [3] 1,317,462 312,180 512,035 1,323,401 433,292 627,505
Total Budgetary authorities 2,396,692 521,598 1,061,802 2,355,337 641,463 1,155,260
Total authorities $2,396,692 $521,598 $1,061,802 $2,355,337 $641,463 $1,155,260

Notes:

[1] Totals may not add due to rounding.

[2] Includes only Authorities available for use and granted by Parliament at quarter-end.

[3] Details on Budgetary statutory authorities are included the table below.

Departmental budgetary expenditures by Standard Object (unaudited)
For the quarter ended December 31, 2017
(in thousands of dollars)
Fiscal year 2017-2018 [1] Fiscal year 2016-2017 [1]
Planned expenditures for the year ending March 31, 2018 Expended during the quarter ended December 31, 2017 Year to date used  at quarter-end Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended December 31, 2016 Year to date used at quarter-end
Expenditures:
Personnel $504,831 $118,594 $377,548 $470,403 $110,094 $341,324
Transportation and communications 14,128 4,014 9,965 12,674 3,605 9,315
Information 7,498 1,557 3,315 5,902 2,647 3,728
Professional and special services 128,165 26,291 59,333 142,385 28,472 76,071
Rentals 3,223 1,314 5,265 4,257 1,631 5,591
Repair and maintenance 21,501 4,374 8,618 22,634 3,642 8,381
Utilities, materials and supplies 56,018 8,063 20,216 61,217 8,253 21,351
Acquisition of land, buildings and works 31,928 2,744 11,579 10,084 9,819 20,411
Acquisition of machinery and equipment 47,851 6,459 12,982 41,160 5,805 12,190
Transfer payments 1,637,182 359,692 589,037 1,615,751 476,254 694,279
Other subsidies and payments 10,501 4,290 10,221 28,815 8,671 10,739
Total gross budgetary expenditures 2,462,825 537,392 1,108,079 2,415,283 658,892 1,203,379
Less Revenues netted against expenditures:
Vote-netted revenues 66,133 15,793 46,277 59,946 17,428 48,118
Total Revenues netted against expenditures 66,133 15,793 46,277 59,946 17,428 48,118
Total net budgetary expenditures $2,396,692 $521,599 $1,061,802 $2,355,337 $641,464 $1,155,261

Note:

[1] Totals may not add due to rounding.

Appendix A

Budgetary Statutory Authorities Breakdown (unaudited)
For the quarter ended December 31, 2017
(in thousands of dollars)
Fiscal year 2017-2018 [1] Fiscal year 2016-2017 [1]
Planned expenditures for the year ending March 31, 2018 Expended during the quarter ended December 31, 2017 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended December 31, 2016 Year to date used at quarter-end
Contributions to employee benefit plans $63,449 $15,695 $47,084 $68,498 $17,099 $51,297
Contributions to employee benefit plans (Administrative Tribunals Support Service of Canada) - - - - - -
Minister of Agriculture and Agri-Food - Salary and motor car allowance 84 21 63 84 20 62
Contribution payments for the AgriStability program 219,300 1,135 (15,033) 219,300 (7,617) (12,229)
Contribution payments for the AgriInsurance program 640,800 241,062 344,406 640,800 364,435 450,966
Grant payments for the AgriInvest program 126,200 42,748 124,239 126,200 42,264 128,079
Payments in connection with theAgricultural Marketing Programs Act 65,900 5,237 13,390 65,900 5,541 11,717
Grant payments for the AgriStability program 41,000 (1,500) (3,046) 41,000 679 (4,532)
Contribution payments for the AgriInvest program 17,500 7,261 16,127 17,500 11,562 20,193
Loan guarantees under theCanadian Agricultural Loans Act 13,111 260 386 13,111 465 458
Canadian Cattlemen's Association Legacy Fund - - - - - -
Contributions in support of the Assistance to the Pork Industry Initiative - (978) (17,722) - (2,976) (20,782)
Grants to agencies established under theFarm Products Agencies Act 100 - - 100 - -
Contribution payments for the Agricultural Disaster Relief Program (ADRP)/AgriRecovery 118,513 - - 118,513 489 776
Canadian Pari-Mutuel Agency Revolving Fund - 38 (841) - 262 (1,159)
Spending of Amounts Equivalent to Proceeds from Disposal of Surplus Moveable Crown Assets 11,505 1,284 3,324 12,396 1,193 3,180
Refunds of amounts credited to revenues in previous years - - - - - 3
Contributions for agricultural risk management - Enhanced Spring Credit Advance program Business Risk Management - (69) (297) - (36) (279)
Class grant payments for the Transitional Industry Support program - - - - (2) (5)
Class grant payments for the Farm Income program - - 3 - (21) (21)
Grant payments for the Canadian Agricultural Income Stabilization program Inventory Transition Initiative - (10) (25) - (4) (25)
Contribution payments for the Canadian Agricultural Income Stabilization program Inventory Transition Initiative - - (20) - (7) (132)
Grants in support of the Grain and Oilseed Payment program - (5) (5) - (29) (35)
Grants in support of the Cost of Production Benefit - 2 2 - - (2)
Contribution for the Transitional Industry Support Program - - - - (25) (25)
Budgetary statutory authorities $1,317,462 $312,180 $512,035 $1,323,402 $433,292 $627,505

Note:
[1] Totals may not add due to rounding.

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