Quarterly Financial Report for the quarter ended June 30, 2018

1.0 Introduction

This quarterly financial report should be read in conjunction with the Main Estimates and Supplementary Estimates. It has been prepared by Canadian Grain Commission (Canadian Grain Commission) 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.

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.

3.0 Risks and Uncertainties

The Canadian Grain Commission receives funding through voted appropriations and fees related to services and licenses it provides to the grain sector. Fee revenue is largely based on grain volumes, which fluctuate 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 annual budget is also re-profiled throughout the year to deal with shifting needs and priorities, including risk mitigation strategies that enable the Canadian Grain Commission to accommodate up to a 20 percent swing in forecasted grain volumes.

The Canadian Grain Commission updated fees 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 departmental result.

After the Canadian Grain Commission implemented its fee schedule on August 1, 2013, the Canadian Grain Commission has inspected and weighed significantly higher than projected export grain volumes while operating costs remained relatively constant. While the updated funding model and fees eliminated the Canadian Grain Commission’s dependence on annual ad hoc federal appropriations, higher than expected grain volumes resulted in revolving fund surpluses of $25.902 million in 2016-17. This led to a total authority available for future years of $121.789 million as of March 31, 2017 reported in the Public Accounts of Canada. The Canadian Grain Commission continued to report a surplus in its 2017-18 quarterly financial reports.

Effective August 1, 2017, the Canadian Grain Commission mitigated the risk of further accumulation of surplus funds through reducing fees for official inspection and weighing services by 24% as these fees were generating the majority of the surplus. This fee reduction occurred 8 months ahead of the end of the Canadian Grain Commission’s 5-year review cycle. Further fee updates came into effect April 1, 2018 to better align revenues and costs, and factor in projected increases in grain volumes inspected and weighed by the Canadian Grain Commission. In 2017-18, the fee reductions resulted in sector savings of $10.8 million. Going forward the Canadian Grain Commission expects that these reductions will result in sector savings of approximately $15.5 million annually.

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;
• updated grain volume projections, as well as the uncertainty associated with these projections. The Canadian Grain Commission’s updated model for projecting grain volumes uses time-series analysis. Annual grain volumes of approximately 34.405 MMT are projected over the next five years. The previous historical average annual grain volume model for forecasting annual revenue projections was replaced because higher than projected annual grain volumes over the past several years have led to total revolving fund revenue being higher than expected;
• completed user fees consultations during the first quarter of 2017 to ensure the user fees amendment process, as per the Service Fees Act, was completed in a timely manner;
• conducted consultations with stakeholders regarding potential uses of available surplus funds; and
• will continue to engage collaboratively with all stakeholders to understand their priorities and to expand awareness 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 to 2013 to fiscal year 2015 to 2016, the Canadian Grain Commission transformed itself into a streamlined and financially sustainable organization. This was achieved by moving the responsibility for inward inspection and weighing from the Canadian Grain Commission to the private sector and updating the Canadian Grain Commission's fees to cover the costs of providing its services. Changes resulted in a reduction in operational spending of $21.835 million between 2012 to 2013 and 2015 to 2016.

Planned operational spending began to stabilize at approximately $60.537 million in 2015 to 2016. 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 to 2016.

The Canadian Grain Commission reduced fees for official inspection and weighing services as well as eliminated recoverable overtime as of August 1, 2017. Further fee updates came into effect April 1, 2018 to better align revenues and costs, and factored in projected increases in grain volumes inspected and weighed by the Canadian Grain Commission.

In early 2016, the federal government implemented the policy on results. The policy requires departments to establish and implement a Departmental Results Framework (DRF). The Canadian Grain Commission’s DRF was approved on October 30, 2017 and the new framework took effect April 1, 2018. The DRF identifies the Canadian Grain Commission’s one core responsibility as Grain Regulation, and includes a Program Inventory of three programs: Grain quality, Grain research, and Safeguards for grain farmers. These three programs replace the programs and sub-programs established in the Program Alignment Architecture.

In 2017-18, the Canadian Grain Commission relocated its Service Centre in Chatham, Ontario, to Hamilton, Ontario. The decision to move will allow the Canadian Grain Commission to deliver more cost-effective service. In January 2018 a new division was established, Corporate Services. This Division is responsible for Corporate Information Services; Policy, Planning and Reporting; National Affairs; and the newly established Project Management Office unit. The Canadian Grain Commission welcomed Jon Friesen as Director, Corporate Services.

The Canadian Grain Commission established its own Pay Integration Unit to provide support to employees with complex or untimely pay issues and supported the resolution of larger scale problems affecting employee pay.

Approval by Senior Official

Approved by:

Statements of Budgetary Authorities (Unaudited)

Departmental Budgetary Expenditures by Standard Object (Unaudited)