Quarterly Financial Report for the Quarter Ended June 30, 2016 - Revised

Erratum:

Date: December 9, 2016

Location: Section 2.2 Significant Changes to Revenues Collected

Revision: “(total revenues collected of $102.3 million) replaces “(deferred revenues of $102.1 million)”.

Rationale for the revision: Terminology used was incorrect and minor change required to amount reported.

Locations:

  • Section 2. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results – Graph 1
  • Section 2.2 Significant Changes to Revenues Collected
  • Section 5. Statement of Authorities (unaudited)
  • Section 6. Departmental Budgetary Expenditures by Standard Object (unaudited)

Revision:  Revenues Recognized as of June 30, 2016 are $41.5 million (or $41,510 in thousands) instead of $47.7 million (or $47,678 in thousands).

Rationale for the revision: Original amount reported erroneously included Employee Benefit Plan (non-respendable revenues). 

Locations: 

  • Section 2. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results – Graph 1
  • Section 5. Statement of Authorities (unaudited)
  • Section 6. Departmental Budgetary Expenditures by Standard Object (unaudited)

Revision:  Sub-totals and totals have been updated as a result of the correction above (change in the amount of revenues recognized).

Rationale for the revision: Sub-totals and totals needed to be updated due to the correction above.

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 2016-17 Main Estimates as well as Budget 2016. 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 7) 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 her responsibilities for 52 statutes (46 for which she assumes full responsibility and 6 others where the responsibility is shared) and areas of federal law by ensuring a bilingual and bijural national legal framework, principally within the following domains: criminal justice (including victims of crime and 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, and drafts legislation.

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 2016-17 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.

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.

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 increase in resources available for the year and net changes in actual expenditures for the quarter ended June 30, 2016. Graph 1 outlines the Department’s gross and net budgetary authorities and expenditures.

Graph 1: Comparison of Budgetary Authorities and Expenditures as of June 30, 2015 and June 30, 2016
($Millions)

Graph 1: Comparison of Budgetary Authorities and Expenditures as of June 30, 2015, and June 30, 2016

Description

For the period ending June 30, authorities provided to the Department included Main Estimates only since the Department had no items in Supplementary Estimates (A). The Department requested a total of $2 million (vote 1 and vote 5) in Supplementary Estimates (A) in 2015-16. This funding was included in the 2016-17 Main Estimates.

2.1 Significant Changes to Authorities

(Please refer to the Statement of Authorities table presented in Section 5.)

When compared to the first quarter of the previous fiscal year, the total gross budgetary authorities available for 2016-17 are higher by $3.0 million, from $972.1 million to $975.1 million. This increase comprises:

  • Decrease of $7.4 million in Vote 1- Operating Expenditures:
    • Decrease of $5.6 million due to the sunsetting of the Supporting Families Experiencing Separation and Divorce Initiative;
    • Increase of $4.6 million for activities related to Division 9 of the Immigration and Refugee Protection Act, as well as the pursuit of enhanced diplomatic assurances against torture or mistreatment in serious inadmissibility cases;
    • Decrease of $3.0 million associated with the Legal Services Review;
    • Decrease of $2.7 million related to the sunsetting of temporary funding that had been allocated to enhance activities pursuant to the Protecting Canada’s Immigration System Act, related to the cessation and vacation of refugee status;
    • Decrease of $2.7 million related to the sunsetting of Authorities to Support Comprehensive Claims and Self-Government Negotiations Across Canada;
    • Increase of $1.7 million in support of Investigative Powers for the 21st Century (IP21C), stemming from the Protecting Canadians from Online Crime Act and the expected Ratification of the Council of Europe’s Convention on Cybercrime (Budapest Convention);
    • Increase of $0.3 million related to other adjustments below $1 million.
  • Increase of $9.0 million in Vote 5 - Grants and Contributions (G&C):
    • Increase of $7.9 million in support of legislative and non-legislative measures to implement the Canadian Victims Bill of Rights;
    • Increase of $1.5 million for activities related to Division 9 of the Immigration and Refugee Protection Act, as well as the pursuit of enhanced diplomatic assurances against torture or mistreatment in serious inadmissibility cases;
    • Decrease of $0.4 million related to other adjustments below $1 million.
  • Increase of $1.5 million in budgetary statutory authorities:
    • Increase of $1.9 million due to a change to the Employee Benefit Plan (EBP) rate (from 16.8% to 17.2%);
    • Decrease of $0.4 million due to other adjustments below $1 million.

In addition to the appropriations allocated to the Department through Main Estimates, the Department also has Net Vote Authority (NVA). 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. For both respective quarters ending June 30 of 2015-16 and 2016-17, the Department’s NVA remained unchanged at $296.2 million.

Therefore, the $975.1 million gross budgetary authorities available for 2016-17 include $296.2 million of Net Vote Authorities. The net budgetary authorities available for 2016-17 total $678.9 million.

2.2 Significant Changes to Revenues Collected

(Please refer to the Statement of Authorities table presented in Section 5.)

The Department of Justice has implemented a new funding and billing model for legal services provided to client departments as of April 1, 2016. Justice has now adopted an advanced billing process whereas it records the funds received in advance from other government departments as deferred revenues. Please refer to Section 4 Significant Changes in Relation to Operations, Personnel and Programs for additional information regarding Revenues.

Compared to the previous year, revenues recognized in the first quarter ending June 30, 2016 decreased by $5.1 million, from $46.6 million to $41.5 million. Due to the change in funding model, this is the first quarter that the Department has collected revenues in excess of the revenues recognized (total revenues collected of $102.3 million).

2.3 Significant Changes to Budgetary Expenditures

(Please refer to the Departmental Budgetary Expenditures by Standard Object table presented in Section 6.)

First quarter gross budgetary expenditures decreased from $158.0 million in 2015-16 to $154.2 million in 2016-17. This decrease of $3.9 million consists of variances associated with the following:

  • a decrease of $4.7 million in salary expenditures due to a decrease in workforce size;
  • an increase of $0.8 million for a variety of small variances in other standard objects.

First quarter net budgetary expenditures decreased from $111.4 million in 2015-16 to $106.5 million in 2016-17.  

3. Risks and Uncertainties

In its delivery of legal services to the federal government, Justice Canada must work closely with client departments and agencies, who share joint responsibility for managing legal risks. Decisions by clients to engage, or not engage, Justice Canada shape the Department’s workload (the nature and volume of demands), as well as its overall delivery capacity since a significant portion of service delivery is funded through cost recovery from clients. Consequently, any unplanned or uncoordinated service demands could impact Justice Canada’s ability to deliver effective and fiscally sustainable services, particularly as federal departments seek to contain spending on legal services. For instance, a decision to not seek legal advice on an item of higher legal risk could lead to more costly litigation in the future, and/or a missed opportunity to consider the issue from a government-wide perspective. Conversely, engaging legal counsel on files that have no legal issues could increase costs unnecessarily. In addition, as legal services expenditures are contained or reduced, the Department could face unanticipated imbalances between expenditures and revenues. Moreover, as the Department balances legal service delivery capacity to respond to current demands, it may have limited capacity to respond to any future surges in demands (in either volume or complexity).

To address this risk, the Department has improved its financial forecasting practices and continued joint planning with clients. This collaboration includes sharing information on the effective management of legal risks, the triggers and costs of litigation, and the appropriate role of legal counsel. These activities are informed by the recent Legal Services Review (LSR) to improve the delivery of legal services across government. The LSR has been undertaken to manage the demand for legal services and to ensure the fiscal sustainability of those services in the long term. Based on the finding of this review, the Department continues to implement a number of measures to refine its service delivery model. The Department also continues to make improvements to its cost recovery processes to effectively mitigate financial risks.

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

The Department of Justice received Treasury Board (TB) approval to implement a new funding and billing model for legal services provided to client departments as of April 1, 2016. More specifically, Justice moved away from after-the-fact monthly billing for legal services rendered (i.e. service provided in April being invoiced in May) to advance billing for clients above a $200K threshold. The Department now records the funds received in advance from other government departments as deferred revenues. Revenues are recognized against actual costs (legal services rendered) on a monthly basis (in the appropriate accounting period) to ensure that future advance payments are in line with forecasts and to avoid over/under billing. Clients under the $200K threshold continue to be billed for services rendered on a monthly basis and based on actual services rendered.  Overall, this should provide more cost certainty to clients regarding their planned legal services, and facilitate discussions between Justice representatives and their clients in relation to the needs and use of legal services. It also allows for planning and decision-making based on sound knowledge of business processes and cost drivers.

In addition, the Department of Justice has implemented a small reorganisation to support better integration, consistency and continuous improvement in how it delivers its mandate. These organizational changes will help deliver better results and support a culture of continuous change and innovation by:

  • establishing clearer lines of accountability;
  • providing coherent, consistent and integrated services and advice, through a whole-of-Justice approach;
  • allowing greater flexibility in the use of resources;
  • enabling continuous improvement and innovation;
  • building increased analytical and strategic strength;
  • ensuring employees contribute at their highest added value;
  • leveraging technology to improve collaboration, openness and integration.

Effective July 4th, 2016, the Deputy Minister appointed Johanne Bernard as the new Assistant Deputy Minister of the Management and Chief Financial Officer Sector of the Department of Justice.

Approval by Senior Officials

Approved by:

Original signed by William F. Pentney, Q.C.
August, 2016




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

Original signed by Johanne Bernard, CPA, CMA
August, 2016




Johanne Bernard, CPA, CMA
Assistant Deputy Minister and Chief Financial Officer
Management and Chief Financial Officer Sector


Ottawa, Canada

5. Statement of Authorities (unaudited)

Department of Justice
For the quarter ended June 30, 2016
Statement of Authorities (unaudited)
(In thousands of dollars)
  Fiscal year 2016-2017 Fiscal year 2015-2016
Planned expenditures for the year ending March 31, 2017* Expended during the quarter ended June 30, 2016 Year to date used at quarter end Planned expenditures for the year ending March 31, 2016* Expended during the quarter ended June 30, 2015 Year to date used at quarter end
Vote 1 - Operating expenditures 531,200 123,723 123,723 538,625 128,296 128,296
Less: Revenues netted against expenditures (296,200) (41,510) (41,510) (296,200) (46,596) (46,596)
Net Vote 1 operating expenditures 235,000 82,213 82,213 242,425 81,700 81,700
Vote 5 - Grants and contributions 365,234 10,815 10,815 356,225 10,446 10,446
Contributions to employee benefit plans 78,543 19,636 19,636 77,116 19,272 19,272
Minister of Justice and Attorney General of Canada - Salary and motor car allowance 84 7 7 82 21 21
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 0 0 0 0 0
Budgetary statutory authorities 78,629 19,643 19,643 77,201 19,293 19,293
TOTAL AUTHORITIES 678,863 112,671 112,671 675,851 111,439 111,439
  • * Includes only Authorities available for use and granted by Parliament at quarter end.

6. Departmental Budgetary Expenditures by Standard Object (unaudited)

Department of Justice
For the quarter ended June 30, 2016
Departmental Budgetary Expenditures by Standard Object (unaudited)
(In thousands of dollars)
  Fiscal year 2016-2017 Fiscal year 2015-2016
Planned expenditures for the year ending March 31, 2017* Expended during the quarter ended June 30, 2016 Year to date used at quarter end Planned expenditures for the year ending March 31, 2016* Expended during the quarter ended June 30, 2015 Year to date used at quarter end
Expenditures
Personnel
535,275 134,041 134,041 536,195 138,730 138,730
Transportation and communications
7,732 1,593 1,593 9,463 1,423 1,423
Information
3,308 430 430 3,439 491 491
Professional and special services
38,158 4,701 4,701 40,168 4,454 4,454
Rentals
6,237 912 912 6,588 578 578
Repair and maintenance
5,964 192 192 5,411 247 247
Utilities, materials and supplies
4,648 602 602 4,779 652 652
Acquisition of land, buildings and works
0 0 0 0 0 0
Acquisition of machinery and equipment
6,028 401 401 8,121 494 494
Transfer payments
365,234 10,815 10,815 356,225 10,446 10,446
Other subsidies and payments
2,479 494 494 1,662 520 520
Total gross budgetary expenditures 975,063 154,181 154,181 972,051 158,035 158,035
Less revenues netted against expenditures
(Revenues)
(296,200) (41,510) (41,510) (296,200) (46,596) (46,596)
Total revenues netted against expenditures (296,200) (41,510) (41,510) (296,200) (46,596) (46,596)
TOTAL NET BUDGETARY EXPENDITURES 678,863 112,671 112,671 675,851 111,439 111,439
  • * Includes only Authorities available for use and granted by Parliament at quarter end.

7. Glossary

Authorities

Spending authorities are approvals from Parliament for individual government organizations to spend up to specific amounts. Spending 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.

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 from the provision of legal and internal services within government.

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 goods or services 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.)

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.

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