Quarterly Financial Report for the period ended June 30, 2016

Statement Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs (Unaudited)

1. 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 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.

The Canadian Grain Commission’s mandate as set out in the Canada Grain 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 contributes 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 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 Performance Reports. 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 Canada Grain Act 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 2016-17 is based on operations under an amended Canada Grain Act 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 full time equivalents are 404 during fiscal year 2016-17.

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 are planned during 2016-17. Updated user fees are expected to be in place by April 1, 2018.

2. 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, 2016 (in millions of dollars)

Authorities available and used for the period ended June 30, 2016. Details below.

*Authority available based on amounts approved through the Estimates process. Amounts detailed in Statement of Authorities.

Authorities available and used for the period ended June 30, 2016, text version
Authorities available and used for the period ended June 30, 2016 (in millions of dollars)
Sources of funds Annual Authority available* Authority used year to date
2016 to 2017 2015 to 2016 2016 to 2017 2015 to 2016
Statutory (Revolving fund revenue) 56.368 55.062 12.646 11.839
Statutory (Access to accumulated surplus and employee benefits plan) 0.606 0.591 0.152 0.149
Vote 1 (Appropriation including Ad hoc) 4.776 4.884 0.884 0.877
Total 61.750 60.537 13.682 12.865
*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, 2016 is $5.382 million, as compared to $5.475 million as at June 30, 2015. The authorities available between the fiscal years are consistent.

With the implementation of revised user fees to support its sustainable funding model, the Canadian Grain Commission forecasts an increase of $1.306 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, 2016 is ($6.904 million), as compared to ($2.510 million) as at the quarter ended June 30, 2015. The decrease of $4.394 million in total budgetary authority used can be attributed to:

  1. the overall increase of $5.211 million in revenues collected in the quarter ended June 30, 2016 primarily due to increase in accounts receivable as at the end of period 12 as compared to the previous; and
  2. the overall increase of $0.817 million in expenditures is as a result of the following significant variances:
    1. Professional and special services increased by $0.644 million as compared to the same quarter last year due to the 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 will be reflected in the Quarter 2 report; 
    2. Rental costs increased by $0.233 million as compared to the same quarter last year due to the timing of software license purchases; and 
    3. Acquisition of machinery and equipment decreased by $0.284 million as compared to the same period last year primarily due WIFI equipment purchased in 2015-16.

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. 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 Canada Grain Act 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 integrated people and business management. A stable funding environment may reduce overall organizational risk and allow 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. This risk was identified in the 2015-16 Report on Plans and Priorities and was successfully mitigated during the reporting period. For example, the Canadian Grain Commission:

  • Commenced 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; and
  • Worked closely with Agriculture and Agri-Food Canada and other government departments to prepare for user fees consultations planned during 2016-17 and to ensure the user fees amendment process, as per the User Fees Act, is completed in a timely manner.

4. 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 is 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 (as at March 31, 2013) to 404 full time equivalents by the end of 2015-16.

During the fourth quarter of 2015-16, Jim Smolik assumed the position of Acting Chief Commissioner upon the retirement of Elwin Hermanson.  It is expected that a process will be initiated to fill the Chief Commission position this fiscal year. Nathan Gerelus was appointed Director, Industry Services.

Significant changes to operations, personnel and programs are not anticipated in 2016-17.

Approval by Senior Official

Approved by:

Jim Smolik
Acting Chief Commissioner
Winnipeg, Manitoba
August 25, 2016

Cheryl Blahey
Chief Financial Officer
Winnipeg, Manitoba
August 25, 2016

Statements of Budgetary Authorities (unaudited)

Statements of Budgetary Authorities (unaudited) for the period ended June 30, 2016
Sources of funds Fiscal year 2016-17 Fiscal year 2015-16
Total available for use for the year ending March 31, 2017Footnote * Expended during the quarter ended June 30, 2016 Year-to date at quarter end Total available for use for the year ending March 31, 2016Footnote * Expended during the quarter ended June 30, 2015 Year-to date at quarter end
(in thousands of dollars) (in thousands of dollars)
Vote 1 Appropriation including Ad hoc 4,776 884 884 4,884 877 877
Statutory Authorities Revolving Fund Gross Expenditures 56,368 12,646 12,646 55,062 11,839 11,839
Revolving Fund Gross Revenues (56,368) (20,586) (20,586) (55,062) (15,375) (15,375)
Revolving Fund Net Expenditures 0 (7,940) (7,940) 0 (3,536) (3,536)
Employee Benefit Plan 606 152 152 591 149 149
Total Statutory Authorities 606 (7 788) (7 788) 591 (3 387) (3 387)
Total Budgetary Authorities 5,382 (6,904) (6,904) 5,475 (2,510) (2,510)
Due to rounding, totals may not add to totals shown.

Departmental Budgetary Expenditures by Standard Object (unaudited)

Departmental Budgetary Expenditures by Standard Object (unaudited) for the period ended June 30, 2016
Sources of funds Fiscal year 2016-17 Fiscal year 2015-16
Total available for use for the year ending March 31, 2017Footnote * Expended during the quarter ended June 30, 2016 Year-to date at quarter end Total available for use for the year ending March 31, 2016Footnote * Expended during the quarter ended June 30, 2015 Year-to date at quarter end
(in thousands of dollars) (in thousands of dollars)
Expenditures Personnel 42,616 9,818 9,818 41,674 9,738 9,738
Transportation and communication 2,892 720 720 3,510 646 646
Information 318 52 52 199 25 25
Professional and special services 3,059 902 902 3,212 259 259
Rentals 6,684 1,615 1,615 5,156 1,383 1,383
Repairs and maintenance 993 263 263 930 275 275
Utilities, materials and supplies 852 123 123 1,605 127 127
Acquisition of machinery and equipment 4,336 125 125 4,251 409 409
Other subsidies and payments 0 63 63 0 3 3
Total expenditures 61,750 13,682 13,682 60,537 12,865 12,865
Revolving fund revenue (to be credited to vote) (56,368) (20,586) (20,586) (55,062) (15,375) (15,375)
Total budgetary authorities 5,382 (6,904) (6,904) 5,475 (2,510) (2,510)
Due to rounding, totals may not add to totals shown.

Footnotes

Footnote 1

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

Return to first footnote * referrer