Quarterly Financial Report for the quarter ended September 30, 2017

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 to 2018 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 to 2018 as per the Departmental Plan (formerly the Report on Plans and Priorities).

During 2015 to 2016, 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 has reduced fees for official inspection and official weighing services as of August 1, 2017.

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 September 30, 2017 is $5.334 million, as compared to $5.418 million as at September 30, 2016. The authorities available for use are consistent with prior fiscal year 2016 to 2017.

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 September 30, 2017 is $2.242 million, as compared to ($2.230) million as at the quarter ended September 30, 2016. The change of $4.472 million in total budgetary authority used can be attributed to:

1. the overall decrease of $0.812 million in revenues received in the quarter ended September 30, 2017 primarily due to reduction of fees related to outward official inspection and weighing and elimination of recoverable overtime; and
2. the overall increase of $3.660 million in expenditures is primarily a result of the following significant variances:
   1. Personnel expenditures increased by $2.546 million as compared to the same quarter last year primarily due to retroactive payments for collective agreement settlements;
   2. Professional and special services expenditures increased by $0.839 million as compared to the same quarter last year primarily due to last year's correction of costs associated with the implementation of the SAP financial system being cleared against the payable at year end; and
   3. Acquisition of machinery and equipment expenditures increased by $0.260 million as compared to the same quarter last year primarily due to purchase of bench scales for Canadian Grain Commission service centers and terminal locations.

The total budgetary authority used in the year to September 30, 2017 is ($5.670 million) as compared to ($9.158 million) for the same period last year. The change of $3.488 million in budgetary authority used can be attributed to:

1. the overall decrease of $0.185 million in revenues collected is primarily due to reduction of fees related to outward official inspection and weighing and elimination of recoverable overtime; and
2. the overall increase of $3.673 million in expenditures is as a result of the following significant variances:
   1. Personnel expenditures increased by $3.121 million as compared to the same period last year primarily to retroactive payments for collective agreement settlements;
   2. Professional and special services expenditures increased by $0.240 million as compared to the same period last year primarily due to increased project management and consulting services for the development of a functional program for Canadian Grain Commission building; and
   3. Acquisition of machinery and equipment expenditures increased by $0.432 million as compared to the same period last year primarily due primarily due to purchase of bench scales for Canadian Grain Commission service centers and terminal locations.