Quarterly financial report for the period ending June 30, 2017
- 1.0 Introduction
- 2.0 Highlights of fiscal year to date
- 3.0 Risks and uncertainties
- 4.0 Significant changes to operations, personnel and programs
- Statements of budgetary authorities (unaudited)
- Departmental budgetary expenditures by standard object (unaudited)
This quarterly financial report should be read in conjunction with the Main Estimates and Supplementary Estimates. It has been prepared by Canadian Grain Commission (CGC) management as required by section 65.1 of the Financial Administration Act and is in the form and manner prescribed by the Treasury Board Accounting Standard 1.3. This quarterly report has not been subject to an external audit or review.
1.1 Authority, Mandate and Program Activities
The Canadian Grain Commission was established in 1912 and is the federal government department responsible for administering the provisions of the Canada Grain Act (CGA).
The Canadian Grain Commission’s mandate as set out in the act is to, “in the interests of the grain producers, establish and maintain standards of quality for Canadian grain and regulate grain handling in Canada, to ensure a dependable commodity for domestic and export markets”.
The Canadian Grain Commission’s vision is “To be a world class, science-based quality assurance provider”. The Minister of Agriculture and Agri-Food is responsible for the Canadian Grain Commission.
In order to effectively pursue its mandate, the Canadian Grain Commission aims to achieve the following strategic outcome: Canada’s grain is safe, reliable and marketable and Canadian grain producers are properly compensated for grain deliveries to licensed grain companies.
The Canadian Grain Commission’s Program Alignment Architecture has five programs. The Quality Assurance Program, Quantity Assurance Program, Grain Quality Research Program, and Producer Protection Program each contribute to making progress to the sole strategic outcome. The Internal Services Program supports all other programs within the Canadian Grain Commission.
Further details on the Canadian Grain Commission’s authority, mandate, and program activities may be found in the Departmental Plan (formerly the Report on Plans and Priorities) and the Main Estimates.
1.2 Basis of Presentation
This quarterly report has been prepared by management using an expenditure basis of accounting (modified cash) and a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities. The accompanying Statement of Budgetary Authorities compares the department’s spending authorities granted by Parliament to those used by the department. Information in the Statement of Authorities is consistent with that in the Main Estimates and Supplementary Estimates.
The authority of Parliament is required before moneys can be spent by the Government. Approvals are given in the form of annually approved limits through Appropriations Acts or through legislation in the form of statutory spending for specific purposes.
As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year.
The Canadian Grain Commission uses the full accrual method of accounting to prepare and present its annual departmental financial statements included in the Departmental Results Report (formerly the Departmental Performance Report). However, the spending authorities voted by Parliament are on an expenditure basis (modified cash) of accounting.
1.3 Canadian Grain Commission Financial Structure
The Canadian Grain Commission funding structure is based on budgetary authorities that are comprised of both statutory and voted (non-statutory) authorities. The statutory authorities include employee benefit plan authority for appropriation-funded personnel costs and Canadian Grain Commission revolving fund authority, which allows the Canadian Grain Commission to re-spend fees that it has collected. The voted authority is Vote 1 – Program Expenditures, which includes annual appropriation authority and any one time ad hoc appropriation authority for the fiscal year.
A revolving fund was set up for the Canadian Grain Commission in 1995 with the expectation that the Canadian Grain Commission would be largely self-funded through fees for service. Prior to August 1, 2013, Canadian Grain Commission user fees had not increased since 1991 despite continually increasing operating costs. As a result, overall cost recovery had fallen from approximately 90 percent in the early 1990s to between 50 and 60 percent. The Canadian Grain Commission’s falling cost recovery level caused the Canadian Grain Commission to rely on ad hoc government appropriation from 1999 to 2014 to fund operations on an annual basis.
In fall 2012, the Canadian Grain Commission initiated a process to modernize user fees to align with amendments to the CGA introduced in Parliament as part of Bill C-45. Bill C-45 received Royal Assent on December 14, 2012. Amended legislation and updated user fees came into force concurrently on August 1, 2013. These changes eliminated the need for annual ad hoc funding going forward.
Planned spending for fiscal year 2017-18 is based on operations under an amended CGA and updated user fees. The Canadian Grain Commission plans to recover approximately 91 percent of its costs through user fees. User fees will increase based on inflation as published in November 2012 in the Canadian Grain Commission’s User Fee Consultation and pre-proposal notification. Planned FTEs are 404 during fiscal year 2017-18 as per the Departmental Plan (formerly the Report on Plans and Priorities).
During 2015-16, the Canadian Grain Commission commenced a review of the user fees structure as part of the organizations five year user fees review cycle. The review will ensure that user fees accurately reflect the costs of providing services and reflect updated grain volume projections and the uncertainty associated with such projections. User fees consultations have taken place. An updated user fees schedule is expected to be in place by April 1, 2018. In addition, to reflect updated grain volume forecasts and costs for official inspection and weighing services and to control the accumulation of additional surplus in the Canadian Grain Commission revolving fund, the Canadian Grain Commission is reducing fees for official inspection and official weighing services as of August 1, 2017.
2.0 Highlights of Fiscal Year to Date
This section highlights any significant items that affected the year-to-date results and/or contributed to the net change in resources available for the year and actual expenditures. It should be read in conjunction with the Statement of Budgetary Authorities and the Departmental Budgetary Expenditures by Standard Object, which can be found at the end of this report.
Authorities Available and Used For the period ended June 30, 2017
|Annual Authority Available*||YTD Authority Used||Annual Authority Available*||YTD Authority Used|
|Statutory (Access to Accumulated Surplus and Employee Benefits Plan)||0.553||0.149||0.606||0.152|
|Statutory (Revolving Fund Revenue)||57.082||12.573||56.368||12.646|
|Total||62.381||13.671||61.750||13.682||* Authority available based on amounts approved through the Estimates process. Amounts detailed in Statement of Authorities.|
2.1 Authority Available Analysis
As reflected in the Statement of Budgetary Authorities, the department’s total authority available for use (net of Revolving Fund revenue) in the fiscal year as at June 30, 2017 is $5.299 million, as compared to $5.382 million as at June 30, 2016. The authorities available for use are consistent with prior fiscal year 2016-17.
With the implementation of revised user fees to support its sustainable funding model, the Canadian Grain Commission forecasts an increase of $0.714 million in its revolving fund gross revenues authorities due to inflation adjustments for user fees. This increase does not affect the change in the Canadian Grain Commission budgetary authorities.
2.2 Authority Used Analysis
As reflected in the Departmental Budgetary Expenditures by Standard Object, the department’s total budgetary authority used in the quarter ended June 30, 2017 is ($7.912 million), as compared to ($6.904 million) as at the quarter ended June 30, 2016. The change of $1.008 million in total budgetary authority used can be attributed to:
- the overall increase of $0.997 million in revenues received in the quarter ended June 30, 2017 primarily due to higher grain volumes handled as compared to the same quarter last year; and
- the overall decrease of $0.011 million in expenditures is primarily a result of the following significant variances:
- Salary expenditures increased by $0.569 million as compared to the same quarter last year primarily due to initiating staffing actions and retroactive payments for collective agreement settlements; and
- Professional and special services expenditures decreased by $0.599 million as compared to the same quarter last year primarily due to last fiscal year 2016-17 costs associated with the implementation of the SAP financial system. These costs should have been recorded paid against the payable at year end account. The correction was reflected in the last year Quarter 2 report.
As reflected in both the Statement of Budgetary Authorities and the Departmental Budgetary Expenditures by Standard Object, overall expenditures, with consideration to the above changes, are consistent between fiscal periods.
3.0 Risks and Uncertainties
The Canadian Grain Commission receives funding through both voted appropriations and fees related to the handling of grain. Service fee revenue is largely based on grain volumes handled — a volume which fluctuates from year to year. The Canadian Grain Commission revolving fund is utilized as effectively as possible. The annual budget is also re-profiled throughout the year to deal with shifting needs and priorities, including planning for and accommodating a potential 20 percent swing in projected grain volumes.
In fall 2012, the Canadian Grain Commission initiated a process to modernize user fees to align with amendments to the CGA introduced in Parliament as part of Bill C-45. Bill C-45 received Royal Assent on December 14, 2012. Amended legislation and updated user fees came into force concurrently on August 1, 2013. These changes eliminated the need for annual ad hoc funding going forward and created a more stable environment for business and people management. A stable funding environment has reduced overall organizational financial risk and allows the Canadian Grain Commission to continue to successfully deliver its program activities and achieve its strategic outcome.
While updated user fees took effect on August 1, 2013, there continues to be external pressure and corresponding risks related to the Canadian Grain Commission’s funding structure. As noted above, Canadian Grain Commission revenues are dependent on annual grain volumes that can fluctuate considerably from year to year. In addition, grain volumes are not fully known prior to commencement of the fiscal year. This can result in significant variances between Canadian Grain Commission projected revenues and actual revenues. Because actual grain volumes vary from year to year, in years with higher-than-average grain volumes, revenues may exceed costs and the Canadian Grain Commission could accumulate surpluses (shown as unused authority carried forward in Public Accounts). In years with lower-than-average grain volumes, revenues could be less than costs and the Canadian Grain Commission is required to draw on its surpluses. The reduction to user fees on August 1, 2017 may increase the risk that Canadian Grain Commission will require the use of surplus during the year.
The fees for the 2013 to 2018 user fees cycle are based on an annual average grain volume of 23.253 million metric tonnes. A simple 15-year average linear regression model of grain volumes inspected and weighed was used to establish the average of 23.253 million metric tonnes. Since the implementation of the user fee schedule on August 1, 2013, the Canadian Grain Commission has inspected and weighed significantly higher than projected export grain volumes while operating costs have remained relatively constant. While the updated funding model and user fees have eliminated the Canadian Grain Commission’s dependence on annual ad hoc federal appropriations, the Canadian Grain Commission has accumulated a surplus of $95.887 million as of March 31, 2016 due to higher than expected grain volumes in recent years.
To mitigate the risks associated with the funding model, the Canadian Grain Commission:
- completed a review of its fee structure to ensure that user fees accurately reflect the costs of providing services and updated grain volume projections, as well as the uncertainty associated with these projections;
- completed user fees consultations during the first quarter of 2017 to ensure the user fees amendment process, as per the User Fees Act, is completed in a timely manner;
- is assessing possible options and uses for the accumulated surplus by engaging central agencies and stakeholders; and
- will continue to engage collaboratively with all stakeholders to understand their needs and requirements and to expand awareness and appreciation of what the Canadian Grain Commission does and how it adds value.
4.0 Significant Changes to Operations, Personnel, and Programs
From fiscal year 2012-13 to fiscal year 2015-16, the Canadian Grain Commission transformed itself into a streamlined and financially sustainable organization. This was due to certain activities being eliminated and other activities being adjusted and/or implemented to allow the Canadian Grain Commission to continue to achieve its mandate and manage risk. Changes resulted in a reduction in operational spending of $21.835 million between 2012-13 and 2015-16.
Planned operational spending began to stabilize at approximately $60.537 million in 2015-16. This includes $5.475 million from annual appropriation and projected spending of approximately $55.062 million of revenue earned through user fees as adjusted for inflation. Planned human resource requirements decreased from approximately 731 full time equivalents (FTEs) (as at March 31, 2013) to 404 FTEs by the end of 2015-16.
During the first quarter of 2017-18, Canadian Grain Commission’s Chief Operating Officer (COO), Gordon Miles retired from the Public Service. Effective June 19, 2017, Jocelyn Beaudette was appointed as Canadian Grain Commission’s new COO.
Canadian Grain Commission is reducing fees for official inspection and official weighing services as of August 1, 2017.
Significant changes to operations and programs are not anticipated in 2017-18 even though there will be a transfer of services from Chatham to Hamilton service center.
Approval by Senior Official
August 24, 2017
Chief Financial Officer
August 24, 2017
Statements of Budgetary Authorities (Unaudited)
|Fiscal Year 2017-18||Fiscal Year 2016-17|
|(in thousands of dollars)||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||Total available for use for the year ending March 31, 2017*||Used during the quarter ended June 30, 2016||Year-to date used at quarter end|
|Appropriation including Ad hoc||$4,746||949||949||$4,776||884||884|
|Revolving Fund Gross Expenditures||57,082||12,573||12,573||56,368||12,646||12,646|
|Revolving Fund Gross Revenues||(57,082)||(21,583)||(21,583)||(56,368)||(20,586)||(20,586)|
|Revolving Fund Net Expenditures||$0||(9,010)||(9,010)||$0||(7,940)||(7,940)|
|Employee Benefit Plan||553||149||149||606||152||152|
|Total Statutory Authorities||553||(8,861)||(8,861)||606||(7,788)||(7,788)|
|Total Budgetary Authorities||$5,299||(7,912)||(7,912)||$5,382||(6,904)||(6,904)||* Includes only Authorities available for use and granted by Parliament at quarter-end. Due to rounding, totals may not add to totals shown.|
Departmental Budgetary Expenditures by Standard Object (Unaudited)
|Fiscal Year 2017-18||Fiscal Year 2016-17|
|(in thousands of dollars)||Planned Expenditures for the year ending March 31, 2018*||Expended during the quarter ended June 30, 2017||Year-to date used at quarter end||Planned Expenditures for the year ending March 31, 2017*||Expended during the quarter June 30, 2016||Year-to date used at quarter end|
|Transportation and communications||3,515||604||604||2,892||720||720|
|Professional and special services||2,677||303||303||3,059||902||902|
|Repair and Maintenance||1,931||317||317||993||263||263|
|Utilities, materials and supplies||880||248||248||852||123||123|
|Acquisition of machinery and equipment||4,423||297||297||4,336||125||125|
|Other Subsidies and payments||0||68||68||0||63||63|
|Total Gross Budgetary Expenditures||62,381||13,671||13,671||61,750||13,682||13,682|
|Revolving Fund Revenue (To be credited to Vote)||(57,082)||(21,583)||(21,583)||(56,368)||(20,586)||(20,586)|
|Total Net Budgetary Expenditures||$5,299||(7,912)||(7,912)||$5,382||(6,904)||(6,904)||* Includes only Authorities available for use and granted by Parliament at quarter-end. Due to rounding, totals may not add to totals shown.|
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