ARCHIVED - Canadian Coast Guard Business Plan 2010-2013
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Section 7: Financial Information
Status of Financial Management Initiatives in the Coast Guard
Sound financial management remains a high priority for the Canadian Coast Guard. We continue to dedicate significant effort and resources to ensuring ongoing improvements in the fields of financial planning, reporting, and monitoring.
To ensure fiscal responsibility, CCG has developed an activity-based budget allocation process and monthly forecasting/reporting exercise that is tailored to the Agency’s operating environment. The execution of these exercises has evolved over time to ensure maximum efficiency and effectiveness. The output from CCG’s financial management processes is widely used by senior management throughout the fiscal year for priority- and program-based decision-making.
CCG’s planning and budgeting cycle was developed in full consultation with the regions and CCG directorates. As a result of the improved budget allocation process, managers are now informed of their budget figures at the beginning of the fiscal year, thus enhancing accountability and program delivery. The planning cycle has been further refined in recent years by implementing a more proactive approach to information sharing that focuses on better communication among staff in the regions and in Headquarters. This has led to more informed and priority-based decision-making and greater transparency in the directorates.
CCG monitors and reports its financial results on an ongoing basis. Each month, each region and directorate provides CCG’s central resource management team with its most up-to-date forecasting and expenditure data. A challenge function ensues to ensure the most accurate and timely information is presented to senior management for decision-making purposes.
Highlights of CCG’s financial management framework include:
- The implementation of activity-based management and activity-based budgeting processes. These new processes have improved the link between our allocation decisions and Treasury Board’s Management, Resources and Results Structure (MRRS). As well, revisions to our Program Activity Architecture (PAA) have allowed us to more clearly quantify the cost of providing Canada with an operationally ready fleet.
- The development and implementation of standard financial practices in response to recommendations from the Auditor General. The goal of these standard practices is to ensure that CCG operates in a consistent manner across the country. Additional practices will continue be developed as required. In all cases, the standard practices are initiated in consultation with regional staff and are approved by senior management committees.
- The development of an Integrated Investment Planning (IIP) Framework. This has resulted in the first-ever CCG Integrated Investment Plan (IIP) for the 2010-2011 to 2014-2015 planning cycle. The new Framework is in line with Treasury Board’s new policies on investment planning. The development of the IIP has provided CCG with an opportunity to tell its asset management and investment story in a consolidated and priority-based manner. The IIP assesses the ability of our assets to meet program needs now and in the future and demonstrates how we will reduce gaps in this ability through targeted and sound capital investments.
CCG continues to adapt to overall economic trends and government-wide decisions that require a realignment of our financial management strategy. External decisions often place additional financial pressure on CCG and necessitate continuous attention by senior management. Despite the ongoing financial adjustments needed to remain within our budget allocation, CCG continually focuses on maintaining its advertised levels of services.
Notwithstanding the increase in major capital funding from the Economic Action Plan (EAP), the following external factors create challenges for the management of our operating budget.
- The CCG operating budget for fiscal year 2010-2011 has been decreased by approximately $2.8 million. This is due to a reduced Vote-Netted Revenue target at the CCG College, as well as an extension of government-wide budgetary reductions. These reductions stemmed from the expenditure review exercise outlined in Budget 2006 . This exercise tasked individual federal departments with reducing expenditures by improving operations and rigorously assessing the relevance and effectiveness of their programs.
- Budget 2010 also affected CCG’s 2010-2011 operating budget. All departments must absorb salary increases over the next three years, and no increase in funding for these expenses will be provided.
- The introduction of government-wide restraint measures in Budget 2009 will continue for discretionary spending on travel, hospitality, and conferences. CCG will continue to monitor and further reduce these expenditures in 2010-2011.
- CCG and DFO will be subject to a Strategic Review (SR) in 2010-2011. The SR is a key element in the government’s commitment to ensuring that our programs are relevant to Canadians and delivered efficiently. The SR process involves an assessment of direct program spending and aims to increase efficiency and effectiveness, enhance our role on core programs, and meet the priorities of Canadians.
- The impact of fuel-price fluctuations must also be taken into consideration. The risk of exceeding our core fuel budget remains high because of continuous volatility in fuel prices, as well as the acceptance of additional fuel-related risks in our SLAs with DFO Science and DFO FAM (Fisheries and Aquaculture Management). As a mitigation measure, fuel prices are monitored on an ongoing basis by a designated team within CCG. CCG spends approximately $40 million a year on fuel. Even a slight price increase puts significant financial pressure on the Agency.
Because of the global recession and its impact on the shipping industry, the revenue CCG collects for icebreaking and maritime navigation services decreased significantly in 2009-2010. As the Canadian economy begins to rebound in 2010-2011, it is expected that the revenues collected by CCG will increase from their recent low, thus reducing the negative impact the reduced revenues have had on the operating budget.
CCG’s sound financial management practices ensure that the external factors that affect the Agency’s bottom line are dealt with in a proactive and priority-based manner. Senior management’s fiscal prudence and financial restraint enable CCG to continue to provide its mandated operations and maintain its advertised levels of service.
Assets and Liabilities
CCG uses a wide range of equipment and other physical assets to carry out its day-to-day activities. The CCG asset base is made up of 9,616 individual assets with values greater than $10,000. The assets can be divided into two broad categories:
- Fleet assets: CCG’s fleet consists of 116 vessels, 989 small craft, and 23 helicopters. These assets are used to support the programs and commitments of the Government of Canada through CCG, DFO, and other departments.
The depreciated book value of the entire asset base is only $573 million – the net book value of the fleet assets is $451 million and the remaining $122 million relates to equipment and other moveable assets. This is the most startling indication of how old our asset base is.
The replacement value of CCG’s assets has increased from the previously reported amount of $11.6 billion in 2009-2010 to $14 billion in 2010-2011 – $12.5 billion relates to fleet assets and $1.6 billion relates to program infrastructure assets. The primary reason for this increase is a marked escalation in the replacement cost of new vessels. The realities of today’s shipbuilding costs were incorporated into a pricing analysis undertaken as part of the Fleet Renewal Plan, which extensively measured the cost of replacing each of the fleet’s essential vessels. Also, as one Polar Icebreaker is expected to cost in the neighbourhood of $800 million, a $12.5 billion replacement value for the entire fleet (measured in constant dollars and assuming the entire fleet is replaced today) is probably a more reasonable estimate than that previously reported.
In recent years, it has become apparent that the inadequate recapitalization of our fleet assets would result in the eventual inability of CCG to sustain its required levels of service. There have therefore been a number of financial infusions in recent federal budgets, such as funding for Mid-shore Patrol Vessels and a Polar Icebreaker, which will ensure that the book value of our fleet asset base increases over time and that required levels of service are maintained.
CCG’s shore-based infrastructure continues to deteriorate. Although the number of assets in poor condition has reduced, many more assets or sites remain to be fixed. CCG must also respond to rapid and accelerating change, as technological advances are revolutionizing communications and CCG aids to navigation services are moving away from traditional physical aids toward modern electronic systems and information-based services. Significant strategic investments will be required for some years to enable CCG to move forward effectively on these fronts.
The continued deterioration of this asset base reflects the enormous challenge posed by Canada’s size. The issue persists despite an annual funding increase of $22.3 million received in 2003 through the National Capital Spending Plan (NCSP). While there have been improvements, we still rely on outdated and fully depreciated shore-based infrastructure, as recapitalization has not kept pace with the rate of depreciation. The condition of our shore-based assets therefore continues to deteriorate, and technological advances have rendered much of our existing equipment obsolete and more costly to maintain than it was at the beginning of the previous planning cycle.
To communicate our asset management and investment planning strategy in a more integrated manner, CCG has embarked on an initiative to update its overall planning process for capital investment. The new Integrated Investment Planning process will ensure that our investment decisions are based on a full assessment of risks, priorities, and capabilities.
Impact of Recent Funding Injections
As previously noted, the three most recent federal budgets have significantly increased our capital budget, resulting in supplementary government investments in the Coast Guard of $1.7 billion since 2005.
Economic Action Plan (EAP) funding has provided a welcome short-term infusion of investment funding, which achieved the double benefit of generating economic benefit for Canada and addressing some outstanding investment requirements that were not affordable within available funding. CCG received $175 million in EAP funding for six investment projects. In accordance with EAP requirements, these funds must be spent in 2009-2010 and 2010-2011. CCG still has $93 million in funding to invest in 2010-2011, and we plan to spend all of it.
The additional funding for our fleet assets will produce tangible benefits for the programs we support and ensure that we are able to maintain the excellence in maritime service that our clients rely on.
The Coast Guard continues to implement and enhance financial management initiatives that will help us continue to organize our operations in a more businesslike and rational manner. The improved financial management framework has helped us better communicate our capacity and funding deficiencies, resulting in significant infusions of capital funding. The new funding will help stabilize our fleet infrastructure; however, it is becoming increasingly evident that the state of our shore-based infrastructure should also be addressed in the near term.
CCG has taken several measures to ensure a more priority-based allocation process, delivered through a strengthened planning, budgeting, and reporting framework. Nevertheless, we must continue to effectively manage our operating and investment budgets to ensure that the most pertinent programs are properly funded. By continuing to improve our financial management processes, CCG will ensure that it remains strong now and into the future.
|(Thousands of Dollars)||Salary||O&M||Sub-total||Capital||VNR||G&C||Total|
|2009-10 Total Budget||300,782.5||168,971.6||469,754.1||256,406.0||(49,958.0)||5,038.0||681,240.1|
|2010-11 Efficiency Savings (PWGSC)||(862.8)||(862.8)||(862.8)|
|Science, FAM & NAFO Ships Funding||(38,696.0)||(20,225.9)||(58,921.9)||(58,921.9)|
|Real Property at College||(2,447.7)||(2,447.7)||(2,447.7)|
|Expansion of AIS into the Upper Great Lakes||55.7||425.7||481.4||(431.1)||50.3|
|WMU ( Contribution Agreement with TC)||75.0||75.0||(150.0)||(75.0)|
|RCMP Great Lakes MSOC||600.9||(95.4)||505.5||505.5|
|Economic Action Plan (EAP)||-||(90,000.0)||(90,000.0)|
|Economic Action Plan (EAP)||-||85,000.0||85,000.0|
|EAP Loan repayment from SCH||8,000.0||8,000.0|
|Fiscal Frmk not yet appropriated||-||(26,162.0)||(26,162.0)|
|Reprofile of Fiscal Frmk||-||16,562.0||16,562.0|
|Polar Icebreaker (incremental)||8,000.0||8,000.0|
|Science, FAM & NAFO Portions of Refit Vote Conversion||(6,032.8)||(6,032.8)||(6,032.8)|
|Temporary Salary Conversions||(1,028.0)||1,234.6||206.6||206.6|
|PSAT (Sec. Tact. Comm. Trial) - Fleet||(730.2)||(730.2)||(730.2)|
|PSAT (Sec. Tact. Comm. Trial) - Fleet||772.0||772.0||772.0|
|Collective Bargainings - Round 25 (FI & SO)||2,060.0||2,060.0||2,060.0|
|Collective Bargainings - Round 26 (PA, EC & SV)||7,758.9||7,758.9||7,758.9|
|AIS ARLU Capital Reprofile||(8,435.5)||(8,435.5)|
|Health of Oceans||(750.0)||(750.0)|
|Other (3 items)||(462.5)||(462.5)||(462.5)|
|2010-11 Preliminary Main Estimates||272,826.4||134,689.6||407,516.0||272,937.4||(49,958.0)||4,888.0||635,383.4|
|Science Fleet Funding (Net of Lay Day) *||18,654.0||6,168.7||24,822.7||24,822.7|
|FAM & NAFO Fleet Funding (Net of Lay Day)||15,921.7||6,923.1||22,844.8||22,844.8|
|Collective Bargainings - Round 27 (EL & RE)||980.5||980.5||980.5|
|Collective Bargainings - Round 28 (AV, CS, EX, NR, OM, PE, PL, RO, SO & SP)||1,933.4||1,933.4||1,933.4|
|FAM & NAFO Refit||1,756.0||1,756.0||1,756.0|
|College VNR Shortfall||(2,000.0)||(2,000.0)||2,000.0||-|
|2010-11 Notional Allocation||310,316.0||161,852.7||472,168.7||272,937.4||(47,958.0)||4,888.0||702,036.1|
|In Kind Contribution to Auxiliary||-33.0||-33.0||33.0||0.0|
|Supporting Emerging Fish. In Nunavut||375.3||375.3||375.3|
|Remission Order - Ontario Ferries||-43.0||-43.0||43.0||0.0|
|IMIT Funding position in Prescott||21.6||21.6||21.6|
|Air Cushion Vehicle||0.0||10,000.0||10,000.0|
|Funding to the Enablers||-1,711.5||-448.7||-2,160.2||-2,160.2|
|1.5% Salary funding reduction||-4,700.0||-4,700.0||-4,700.0|
|Permanent transfer to Science - terminable allowance||-39.5||-39.5||-39.5|
|Loan to Real Property||(5,000.0)||(5,000.0)|
|2010-11 Budget Allocation||309,413.0||165,860.4||475,273.4||287,195.6||(47,915.0)||4,921.0||719,475.0|
|PAA Sub-activity||Salary||Other Operations and Maintenance (O&M)||Total Operating||Major Capital||Grants and Contributions||Total Planned Spending**|
|Aids to Navigation Services||12,301.2||11,919.7||24,220.9||-||-||24,220.9|
|Waterways Management Services||2,997.5||6,434.5||9,432.0||-||-||9,432.0|
|Marine Communications and Traffic Services||33,197.3||6,360.9||39,558.2||-||-||39,558.2|
|Search and Rescue Services||11,228.2||16,182.9||27,411.1||-||4,921.0||32,332.1|
|Environmental Response Services||6,185.9||2,902.0||9,088.0||-||-||9,088.0|
|Coast Guard College||8,063.0||4,349.1||12,412.1||-||-||12,412.1|
|Coast Guard Fleet Operational Readiness *||175,239.3||67,016.0||242,255.2||229,395.7||-||471,650.9|
|Lifecycle Asset Management Services||53,463.7||25,856.7||79,320.3||57,799.9||-||137,120.2|
* O&M includes fuel for FAM, Science & NAFO
** Excludes Vote-Netted Revenue (VNR)
|Newfoundland and Labrador||53,174.0||27,413.9||80,588.0|
|Central & Arctic||40,154.9||16,046.1||56,201.0|
|National Capital Region *||71,548.5||62,695.6||134,244.1|
* Funding in NCR includes a total of $18M related to National Programs - these funds will ultimately be spent in the regions; distribution of those funds has not yet occurred.
|PAA Sub-activity||New-foundland and |
|Maritimes||Quebec||Central & Arctic||Pacific||National Capital Region||National Programs||Total|
|Aids to Navigation Services||4,573.5||3,298.1||1,591.0||4,029.6||7,037.4||3,666.3||25.0||24,220.9|
|Waterways Management Services||38.0||1,751.9||4,825.9||842.7||1,096.6||876.9||-||9,432.0|
|Marine Communications and Traffic Services||6,267.1||6,312.7||6,787.7||6,284.9||11,213.1||867.8||1,824.9||39,558.2|
|Search and Rescue Services||6,128.6||5,799.1||3,052.3||3,473.1||5,831.4||2,891.6||235.0||27,411.1|
|Environmental Response Services||1,376.5||1,280.6||1,340.1||1,881.3||1,324.3||1,885.2||-||9,088.0|
|Coast Guard College||-||-||-||-||-||12,412.1||-||12,412.1|
|Coast Guard Fleet Operational Readiness||47,810.3||24,567.1||30,370.5||21,261.8||35,878.3||80,102.5||2,264.8||242,255.2|
|Lifecycle Asset Management Services||11,952.6||13,383.1||14,728.9||13,182.7||13,874.4||12,198.7||-||79,320.3|
|PAA Sub-activity||Ice Recon-naissance||Helicopters||Automatic Identification System||Marine Security Operations Centres||New Initiatives Fund||Research and Development||Total|
|Aids to Navigation Services||25.0||25.0|
|Waterways Management Services||-|
|Marine Commun-ications and Traffic Services||1,824.9||-||1,824.9|
|Search and Rescue Services||235.0||-||235.0|
|Environmental Response Services||-||-|
|Coast Guard College||-|
|Coast Guard Fleet Operational Readiness||2,264.8||2,264.8|
|Lifecycle Asset Management Services||-|
|PAA Sub Activity||Marine Navigation Services Fees||Icebreaking Services Fees||Marine Dredging Fee||CCG College Fees||Other||Total|
|Aids to Navigation||(4,728.0)||(4,728.0)|
|Waterways Management Services||(4,600.0)||(4,600.0)|
|Search and Rescue Services||(75.0)||(75.0)|
|Marine Communications and Traffic Services||(250.0)||(250.0)|
|Coast Guard College||(1,700.0)||(1,700.0)|
|Fleet Operational Readiness||(12,609.5)||(9,217.2)||(21,826.7)|
|Lifecycle Asset Management Services||(10,321.5)||(2,030.7)||(12,352.1)|
Contributions from the St. Lawrence Seaway Management Corporation (SLSMC) to Fisheries and Oceans Canada for the provision of CCG aids to navigation within the Seaway are not collected through any of the fees identified in this table. Rather, SLSMC contributions are attributed to the government's Consolidated Revenue Fund and are not re-spendable by the Department.
Table 22 summarizes Coast Guard's planned major capital spending over a five-year period. The planned expenditures are organized by major investment category to outline the distribution of CCG's long-term major capital spending (for additional information on individual capital projects see, Annex A).
|A-Base Budget Envelope:|
|Refit - Ships||54,400.0||54,400.0||54,400.0||54,400.0||54,400.0||272,000.0|
|Refit - Helicopters||5,600.0||5,600.0||5,600.0||5,600.0||5,600.0||28,000.0|
|Refit - Shore-based Infrastructure||25,000.0||25,000.0||25,000.0||25,000.0||25,000.0||125,000.0|
|Waterway Channel Restoration||515.0||3,815.0||3,815.0||3,815.0||3,815.0||15,775.0|
|Vessel Maintenance Management||3,200.0||6,500.0||6,500.0||6,500.0||6,500.0||29,200.0|
|Small Craft Replacement||5,000.0||5,000.0||5,000.0||5,000.0||5,000.0||25,000.0|
|Contribution to MCP - MSPV||-||6,096.7||8,403.3||-||-||14,500.0|
|Residual for Decision||35,685.0||22,988.3||20,681.7||29,085.0||29,085.0||137,525.0|
|Total A-Base Budget||129,400.0||129,400.0||129,400.0||129,400.0||129,400.0||647,000.0|
|B-Base Budget Envelopes:|
|Major Crown Projects||60,571.1||201,435.7||235,170.2||167,155.8||250,675.0||915,007.8|
|Economic Action Plan||93,000.0||-||-||-||-||93,000.0|
|Major Crown Project Carry Forward||3, 127.5||-||-||-||-||3,127.5|
|Total B-Base Budget||156,698.6||201,435.7||237,183.8||167,969.4||250,675.0||1,013,962.4|
|A-Base Carry Forward||6, 097.0||6,097.0|
|Loan to Real Property - Bedford Institute of Oceanography (BIO) Building||(5,000.0)||2,500.0||2,500.0||-||-||-|
|Refit - Ships||75,963.3||59,900.0||54,400.0||54,400.0||54,400.0||299,063.3|
|Economic Action Plan||14,673.3||-||-||-||-||14,673.3|
|Refit - Helicopters||7,050.0||5,600.0||5,600.0||5,600.0||5,600.0||29,450.0|
|Vessel Maintenance Management||3,200.0||6,500.0||6,500.0||6,500.0||6,500.0||29,200.0|
|Small Craft Replacement||15, 654.0||5,000.0||5,000.0||5,000.0||5,000.0||35,654.0|
|Economic Action Plan||9, 254.0||-||-||-||-||9,254.0|
|Small Vessel Replacement||34,921.0||10,060.0||8,578.5||24,000.0||26,207.0||103,766.5|
|Economic Action Plan||31,458.0||-||-||-||-||31,458.0|
|Residual Ongoing Projects||2,000.0||3,700.0||-||-||-||5,700.0|
|Vessel Life Extension||26, 030.7||-||1,200.0||-||-||27,230.7|
|Economic Action Plan||25, 614.7||-||-||-||-||25,614.7|
|Vessel System/Technical Upgrades||1,568.7||1,300.0||1,164.0||-||-||4,032.7|
|Total Vessel Fleet||164,387.7||88,360.0||82,442.5||95,500.0||97,707.0||528,397.2|
|Refit - Shore-based Infrastructure||27,656.7||25,500.0||25,000.0||26,001.0||25,000.0||129,157.7|
|Residual Ongoing Projects||4,286.0||-||-||-||-||4,286.0|
|Waterway Channel Restoration||900.0||3,815.0||3,815.0||3,815.0||3,815.0||16,160.0|
|System Infrastructure||28, 999.8||21,504.0||28,637.4||29,092.6||38,827.0||147,060.8|
|Total Program Infrastructure||57, 556.5||50,819.0||57,452.4||58,908.6||67,642.0||292,378.5|
|Procurement of Major Vessels|
|Economic Action Plan||12,000.0||-||-||-||-||12,000.0|
|Total Procurement of Major Vessels||74,471.1||207,532.4||243,573.5||167,155.8||250,675.0||943,407.8|
|Total Planned Spending||296,415.3||346,711.4||383,468.4||321,564.4||416,024.0||1,764,183.4|
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