Quarterly Financial Report for the Quarter Ended September 30, 2013

Statement outlining results, risks and significant changes in operations, personnel and programs

[ Quarterly Financial Reports ]

Table of Contents

1. Introduction

This quarterly financial report has been prepared by management as required by section 65.1 of the Financial Administration Act (FAA) and in the form prescribed by the Treasury Board. The report should be read in conjunction with the 2013–14 Main Estimates as well as Canada's Economic Action Plan 2012 (Budget 2012). The Department had no items in the 2013–14 Supplementary Estimates (A) process. In addition, the Departmental Audit Committee (DAC) has reviewed and commented on the report, but no external audit or review has been conducted.

The glossary (Section 8) contains definitions for key financial terms that are hyperlinked in the text.

1.1 Justice Mandate

The Department of Justice has the mandate to support the dual roles of the Minister of Justice and the Attorney General of Canada.

Under Canada's federal system, the administration of justice is an area of shared jurisdiction between the federal government and the provinces and territories. The Department supports the Minister of Justice in his responsibilities for 49 statutes and areas of federal law by ensuring a bilingual and bijural national legal framework principally within the following domains: criminal justice (including youth criminal justice), family justice, access to justice, Aboriginal justice, public law and private international law.

The Department also supports the Attorney General as the chief law officer of the Crown, both in terms of the ongoing operations of government and of the development of new policies, programs and services for Canadians. The Department provides legal advice to the Government and federal government departments and agencies, represents the Crown in civil litigation and before administrative tribunals, drafts legislation and responds to the legal needs of federal departments and agencies.

Further information on the mandate, roles, responsibilities and programs of the Department can be found in the Department of Justice 2013–14 Main Estimates, available at: http://www.tbs-sct.gc.ca/ems-sgd/20132014/me-bpd/me-bpd-eng.pdf#page=224

1.2 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting 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 Authorities includes the Department's spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates for the 2013–14 fiscal year.

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 appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, Section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements, which are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

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. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in Budget 2012 could not be reflected in the 2012–13 Main Estimates.

In fiscal year 2012–13, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013–14, the changes to departmental authorities were reflected in the 2013–14 Main Estimates tabled in Parliament. 

1.3 Department of Justice Financial Structure

The Department of Justice financial structure is comprised of several budgetary authorities:

As the primary legal services provider to other government departments and agencies, the Department of Justice collects and spends revenue generated by these legal services as part of its Vote 1 authority. The Department of Justice also has the authority to spend revenues collected for providing internal administrative support services to other government departments. In departmental reporting, these revenues reduce total departmental authorities and expenditures. For the purposes of this report, these revenues are referenced as “Net Vote Authorities (NVA)” or “Revenues netted against expenditures (revenues)”.

2. Highlights of Fiscal Quarter and Fiscal Year To Date (YTD) Results

This section highlights the significant items that contributed to the net decrease in resources available for the year and net changes in actual expenditures for the quarter ended September 30, 2013. Graph 1 outlines the Department's gross and net budgetary authorities and expenditures.

Graph 1: Comparison of Budgetary Authorities and Expenditures as of September 30, 2012, and September 30, 2013
($Millions)

Graph 1: Comparison of Budgetary Authorities and Expenditures as of September 30, 2012, and September 30, 2013

* Decimal rounding resulted in $0.1M discrepancy for the total gross budgetary expenditures as of September 30, 2013.

Description

For the period ending September 30, 2013 authorities provided to the Department included only Main Estimates. The Department had no items in Supplementary Estimates (A) as of the end of the second quarter in either fiscal year.  For the corresponding period of the fiscal year 2012-13, authorities provided to the Department, in addition to Main Estimates, included Treasury Board Central Votes for the Operating Budget Carry Forward of $27.3 million.

The Department's total gross expenditures as of September 30, 2013 were $196.3 million compared to $165.7 million as of September 30, 2012. The increase in spending to date, totalling $30.6 million, can be explained in part by:

  • an increase of $30.7 million in personnel costs associated largely with the severance payments resulting from ratification of various collective agreements; and
  • an increase of $1.1 million in the processing of transfer payments associated with departmental grants and contributions. More specifically, processing of some payments that occurred in the previous year after the second quarter-end, were processed during the second quarter of the current year. As the timing of billing often depends on the client, such variations form part of a regular business.

These increases were offset by a $0.8 million reduction in spending for professional and special services, mainly due to decreased use of consultants for information technology, management consultants, and computer services. Other spending reductions include streamlined internal services operations and continued reductions in travel, hospitality and conference spending through the increased use of tele-conferencing and video conferencing.

Excluding $114.2 million in revenues the Department received as of September 30, 2013 and $52.2 million received as of September 30, 2012, total net expenditures were $249.2 million and 265.8 million respectively.

2.1 Significant Changes to Authorities

When compared to the second quarter of the previous fiscal year, the total net budgetary Authorities available for 2013–14 were reduced by $64.4 million, from $721.9 million to $657.5 million. This reduction comprises:

  • Reduction of $36.9 million in Vote 1 Operating Expenditures, explained by:
    • Decrease of $27.3  million due to a delay in the receipt of the Operating Budget Carry Forward in the fiscal year 2013-14 from the preceding fiscal year;
    • Decrease of $18.9 million associated with the implementation of savings measures announced in Budget 2012;
    • Decrease of $0.9 million due to sunsetting of the Initiative in Support of Access to Justice in Both Official Languages[1];
    • Decrease of $1.0 million for other adjustments, none exceeding $0.5 million;
    • Increase of $4.6 million in funding for activities that support the National Security Inadmissibility Initiative and Division 9 Cases under the Immigration and Refugee Protection Act;
    • Increase of $3.0 million in funding to support the legislative and regulatory provisions related to the Protecting Canada's Immigration System Act, namely enhancing cessation and vacation activities;
    • Increase of $2.4 million in funding for various collective agreements; and
    • Increase of $1.2 million in funding for the renewal of the delivery of immigration and refugee legal aid in provinces and territories and the management of court-ordered counsel in federal Prosecution.
  • Reduction of $27.2 million in Vote 5—Grants and Contributions (G&C), explained by:
    • Decrease of $38.8 million associated with the implementation of savings measures announced in Budget 2012;
    • Decrease of $4.0 million due to sunsetting of the Initiative in Support of Access to Justice in Both Official Languages[1];
    • Increase of $13.1 million due to renewal of the delivery of immigration and refugee legal aid in provinces and territories and the management of court-ordered counsel in federal prosecution;
    • Increase of $2.1 million for funding of activities that support the National Security Inadmissibility Initiative and Division 9 Cases under the Immigration and Refugee Protection Act; and
    • Increase of $0.4 million for miscellaneous items, none exceeding $0.5 million.
  • Reduction of $0.3 million in budgetary statutory authorities, explained by:
    • Decrease of $2.4 million in EBP funding associated with the implementation of savings measures announced in Budget 2012;
    • Decrease of $1.0 million related to the reduction of EBP rates from 17.6 percent to 17.4 percent, as prescribed by Treasury Board Secretariat; and
    • Increase of $3.1 million in EBP funding associated with Vote 1 – operating increases, as noted above.

An increase of $6.2 million in Net Vote Authority was granted via the 2013–14 Main Estimates process. This authority allows the Department, in a fiscal year, to expend revenues and offset expenditures related to the provision of internal support services, as well as mandatory legal services to government departments and agencies. As shown in the table in Section 6, however, Net Vote Authority is netted against Vote 1—Operating Expenditures. Consequently, the increase in authority has no impact on variances in Net Vote—1 Operating Expenditures.

2.2 Significant Changes to Revenues Collected

(See also Statement of Authorities table in Section 6.)

Compared to the previous year, revenues collected in the second quarter ending September 30, 2013 increased from $29.9 million to $78.1 million. This increase of $48.2 million is largely associated with the improvement in functioning and operating of the Department's new cost recovery system, final product of the Cost Recovery Process Improvement Project (CRPI), which was launched in the beginning of the fiscal year 2012–13.

Following the implementation of the new system, a large portion of the second quarter 2012-13 billing was delayed to the third quarter. The delay is primarily attributable to unforeseen issues with this new system.  Further delays were experienced as Justice's employees and managers adjusted to the new processes, system and timelines. As a result, billings of $49.4 million were delayed. The offsetting reduction of $1.2 million is a result of the regular fluctuations that occur in the timing of billing the clients. The new cost recovery system continues to add to a more timely collection of revenues earned, further promoting good management and fiscal accountability.

2.3 Significant Changes to Budgetary Expenditures

(See also Departmental Budgetary Expenditures by Standard Object table in Section 7.)

Second quarter gross budgetary expenditures increased from $165.7 million in 2012–13 to $196.3 million in 2013–14. This increase of $30.6 million is made up primarily of variances associated with the following standard objects:

  • Personnel: An increase of $30.7 million is largely related to the severance pay, based on employees' length of service and received in lieu of severance pay on retirement, according to changes to the terms and conditions of the collective agreement ($29.2 million), for which payments were made. Another $1.0 increase is associated with the transition support measures for employees affected by Budget 2012 reductions. The remaining reduction of $0.5 million comprises various miscellaneous items, each no greater then $0.5 million.
  • Transfer payments: an increase of $1.1 million in the processing of transfer payments associated with departmental grants and contributions associated with variations in timing of processing of these payments during the two corresponding periods.
  • Professional services: a decrease of $0.8 million in spending for professional and special services is mainly due to decreased use of consultants for information technology ($-1.0 million), management consultants ($-0.3 million), associated mainly with the efforts to streamline internal services operations as part of the implementation of Budget 2012.  The residual variance is due to regular day-to-day fluctuations in overall spending in Professional Services.
  • The remaining reductions totalling to $0.4 million reflect further departmental efforts to align spending with the highest priorities and increase the effectiveness and efficiency of programs and services delivery in a context of fiscal constraint. In line with the implementation of Budget 2012 savings measures, the Department has reduced costs through the review and elimination of newspaper subscriptions and has also reduced travel, hospitality and conference spending through the increased use of tele-conferencing and video conferencing.

The Department also experienced a $48.2 million (162%) increase in revenues collected for legal services during the second quarter, from $29.9 million in 2012–13 to $78.1 million during the current quarter. Consequently, when revenues collected are netted against gross budgetary expenditures, net budgetary expenditures during the second quarter decreased by $17.6 million from $135.8 million in 2012–13 to $118.2 million in the corresponding period of 2013–14.  

3. Risks and Uncertainties

Justice Canada carries the salary and operating liability of maintaining capacity to support its clients. Risk is created for Justice Canada as federal departments and agencies seek to reduce expenditures in light of cost containment measures announced in Budget 2010 and Budget 2012. This risk is amplified by recent compensation increases for lawyers that have exerted an upward pressure on rates charged to clients.

To mitigate this risk, the Department continues to focus on improvements to its cost recovery and forecasting processes. The Department also continues to undertake joint planning with clients to help them effectively manage their legal risks and find sound ways to lower their demand for legal services.

4. Significant Changes in Relation to Operations, Personnel and Programs

No changes have occurred that would have significantly impacted departmental operations, personnel or programs in the recent quarter.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that are being implemented in order to refocus government and programs, make it easier for Canadians and businesses to deal with their government, and modernize and reduce the back office.

Over the budget's three-year implementation period, which includes the 2012-13, 2013-14 and 2014-15 fiscal years, the Department of Justice has committed to achieving savings of $67.5 million. Effective April 1, 2013 Grants and Contributions spending was reduced by $38.8 million; more specifically the Youth Justice Services Funding Program is now funded at a level of $141.7 million annually.

Justice's initiatives to achieve these savings include:

  • Streamlining internal services by consolidating the delivery of Communications, Human Resources, Finance and other administrative and management services. Consolidation has taken place. New organizational structures are created and are being implemented. New work processes have been, or are being, developed in each of the functional areas with a view to maximizing efficiencies and effectiveness;
  • Streamlining the delivery of legal services to government departments through the implementation of various innovative measures to enhance efficiency and manage the demand for legal services. These measures include the establishment of performance indicators and benchmarks as well as the enhanced screening and prioritization of client demands for legal advisory services. This initiative is ongoing and has resulted in staff reductions and savings;
  • Partnering with other government departments to achieve mutually satisfactory organizational redesign and a focus on streamlining legal services delivery. This initiative is ongoing;
  • Creating centres of legal expertise in some areas of law to increase efficiency, and continuing to implement cost effective legal services processes and practices. This initiative is well under way;
  • Modernizing operations by moving to electronic information sources and expanding the use of electronic information services;
  • Reducing travel, hospitality and conference spending through the increased use of tele-conferencing/video conferencing in order to increase the effectiveness and efficiency of programs and services delivery.

In line with Budget 2012 commitments, the Department achieved savings in 2012-13 and is committed to achieving savings in 2013-14 and 2014-15.

Approval by Senior Officials

Approved by:

Original signed by William F. Pentney
November 28, 2013




William F. Pentney
Deputy Minister of Justice and
Deputy Attorney General of Canada

Original signed by Marie-Josée Thivierge
November 28, 2013




Marie-Josée Thivierge
Assistant Deputy Minister
Management Sector, and
Chief Financial Officer


Ottawa, Canada

6. Statement of Authorities (unaudited)

Department of Justice
For the quarter ended September 30, 2013
Statement of Authorities (unaudited)
(In thousands of dollars)
  Fiscal year 2013-2014 Fiscal year 2012-2013
Total available for use for the year ending March 31, 2014* Used during the quarter ended September 30, 2013 Year to date used at quarter end Total available for use for the year ending March 31, 2013*, ** Used during the quarter ended September 30, 2012*** Year to date used at quarter end
Vote 1 - Operating expenditures 532,186 159,268 298,018 562,893 129,627 257,902
Less: Revenues netted against expenditures (296,200) (78,115) (114,240) (290,000) (29,862) (52,199)
Net Vote 1 operating expenditures 235,986 81,153 183,778 272,893 99,765 205,703
Vote 5 - Grants and contributions 341,635 17,055 25,503 368,799 15,915 19,916
Contributions to employee benefit plans 79,777 19,944 39,888 80,089 20,022 40,045
Minister of Justice and Attorney General of Canada - Salary and motor car allowance 79 20 40 78 19 39
Spending of proceeds from the disposal of surplus Crown assets 2 0 0 3 0 0
Refunds of amounts credited to revenues in previous years 0 20 24 0 87 105
Budgetary statutory authorities 79,858 19,984 39,952 80,170 20,129 40,189
TOTAL AUTHORITIES 657,479 118,192 249,233 721,862 135,809 265,808

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

** Total available for use does not reflect measures announced in Budget 2012.

*** The 1st quarter (June 30, 2013) Statutory authority split was reclassified to place an amount of $18,000 in "Refunds of amounts credited to revenues in previous years" instead of "Spending of proceeds from the disposal of surplus Crown assets".

7. Departmental Budgetary Expenditures by Standard Object (unaudited)

Department of Justice
For the quarter ended September 30, 2013
Departmental Budgetary Expenditures by Standard Object (unaudited)
(In thousands of dollars)
  Fiscal year 2013-2014 Fiscal year 2012-2013
Planned expenditures for the year ending March 31, 2014 Expended during the quarter ended September 30, 2013 Year to date used at quarter end Planned expenditures for the year ending March 31, 2013**** Expended during the quarter ended September 30, 2012 Year to date used at quarter end
Expenditures
Personnel 538,343 167,863 317,342 535,221 137,130 273,828
Transportation and communications 11,980 1,517 2,905 19,548 1,786 3,391
Information 4,342 689 1,147 6,357 696 1,182
Professional and special services 32,997 6,278 10,741 49,617 7,023 13,255
Rentals 3,586 1,095 2,421 3,856 1,474 2,912
Repair and maintenance 6,955 236 1,021 8,338 287 973
Utilities, materials and supplies 3,955 952 1,438 5,655 869 1,593
Acquisition of machinery and equipment 7,382 518 728 10,687 361 666
Transfer payments 341,635 17,055 25,503 368,799 15,935 19,938
Other subsidies and payments 2,504 104 227 3,784 110 269
Total gross budgetary expenditures 953,679 196,307 363,473 1,011,862 165,671 318,007
Less revenues netted against expenditures
(Revenues)
(296,200) (78,115) (114,240) (290,000) (29,862) (52,199)
Total revenues netted against expenditures (296,200) (78,115) (114,240) (290,000) (29,862) (52,199)
TOTAL NET BUDGETARY EXPENDITURES 657,479 118,192 249,233 721,862 135,809 265,808

**** Planned expenditures do not reflect measures announced in Budget 2012.

8. Glossary

Authorities

Expenditure authorities are approvals from Parliament for individual government organizations to spend up to specific amounts. Expenditure authority is provided in two ways:

  1. Annual Appropriation Acts that specify the amounts and broad purposes for which funds can be spent; and
  2. Other specific statutes that authorize payments and set out the amounts and time periods for those payments.
Bijural

Relates to the coexistence and interaction of two legal systems or legal traditions in a given legal framework. In Canada, this relates to Quebec civil law and Canadian common law, taking into account other sources of federal law, including aboriginal rules and customs.

Cost Recovery Process Improvement Project (CRPI)

A project undertaken by the Department of Justice to increase the efficiency and frequency of invoicing and collections activities related to the provision of legal services to other government departments. The CRPI involves the integration of the case management and financial system and standardization of business processes.

Employee Benefit Plan (EBP)

A statutory item that includes employer costs for the Public Service Superannuation Plan, the Canada and the Quebec Pension Plans, Death Benefits, and the Employment Insurance accounts. Expressed as a percentage of salary, the EBP rate is changed every year as directed by the Treasury Board Secretariat.

Expenditure basis

Costs are reported when liabilities are incurred or cash is paid out. Revenues are reported when cash is received.

Full accrual method of accounting

Costs are reported based on their consumption. Revenues are reported when earned.

Main Estimates

Each year, the government prepares estimates in support of its request to Parliament for authority to spend public funds. This request is formalized through the introduction of appropriation bills in Parliament. In support of the Appropriation Act, the Main Estimates identify the spending authorities (Votes) and amounts to be included in subsequent appropriation bills. Parliament is asked to approve these Votes to enable the government to proceed with its spending plans.

Net Vote Authority

The authority by which the Department of Justice has permission to collect and spend revenue earned and collected from the provision of legal and internal services within government.

Operating Budget Carry Forward

Treasury Board centrally managed vote that permits departments to bring forward eligible lapsing funds from one fiscal year to the next in an amount up to five percent of the operating budgets contained in their Main Estimates. (See also Voted and statutory appropriations.)

Paylist Requirements vote

Treasury Board centrally managed vote, that supplements other appropriations for requirements related to parental and maternity allowances, entitlements on cessation of service or employment and adjustments made to terms and conditions of service or employment in the public service.

Reference level

The amount of funding that the Treasury Board has approved for departments and agencies to carry out policies and programs for each year of the planning period.

Special purpose financial reporting framework

The Quarterly Financial Report requirements and structure as defined in the Treasury Board Accounting Standard 1.3.

Standard objects

A system in accounting that classifies and summarizes records by categories, such as type of good or service acquired, for monitoring and reporting.

Sunsetting

The end of temporary funding.

Supplementary Estimates

The President of the Treasury Board tables three Supplementary Estimates usually in late spring, late fall and early spring to obtain the authority of Parliament to adjust the government's expenditure plan set out in the estimates for that fiscal year. Supplementary Estimates serve two purposes. First, they seek authority for revised spending levels that Parliament will be asked to approve in an Appropriation Act. Second, they provide Parliament with information on changes in the estimated expenditures to be made under the authority of statutes previously passed by Parliament. Each Supplementary Estimates document is identified alphabetically A, B, C, etc.

Treasury Board Centrally Managed Votes

Special authorities that enable Treasury Board to perform its statutory responsibilities for managing the government’s financial, human and materiel resources.

Voted and statutory appropriations

Expenditures made by government require the authority of Parliament. That authority is provided in two ways: annual Appropriation Acts or Supply Bills specify the amounts and broad purposes for which funds can be spent; and other specific statutes authorize payments and set out the amounts and time periods for those payments. The amounts approved in appropriation acts are referred to as voted amounts, and the expenditure authorities provided through other statutes are called statutory authorities.

Vote 1—Operating Expenditures

A vote that covers most day-to-day expenses, such as salaries and utilities. It is used when there is a requirement for either a “capital expenditures” vote or a “grants and contributions” vote or both; that is, when expenditures of either type equal or exceeds $5 million. Where they do not, the appropriate expenditures are included in the “program expenditures” vote.

Vote 5—Grants and Contributions

A vote used when grants and/or contributions expenditures equal or exceed $5 million.


[1] Justice is working with partners to secure funding in line with the Roadmap for Canada’s Official Languages 2013-2018.

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