Quarterly Financial Report for the Quarter Ended, September 30, 2011

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

• Table of Contents

A) Introduction

Justice Mandate

The Mission of the Department of Justice is to support the Minister of Justice in working to ensure that Canada is a just and law abiding society with an accessible, efficient and fair system of justice; provide high-quality legal services and counsel to the government and to client departments and agencies; and promote respect for rights and freedoms, the law and the Constitution.

The Department of Justice is headed by the Minister of Justice and Attorney General of Canada. The responsibilities associated with the dual role of Minister of Justice and Attorney General are set out in the Department of Justice Act and some 49 other Acts of Parliament. The Department of Justice fulfills three distinctive roles within the Government of Canada, acting as a policy department with broad responsibilities for overseeing all matters relating to the administration of justice that fall within the federal domain; a provider of a range of legal advisory, litigation and legislative services to government departments and agencies; and a central agency responsible for supporting the Minister in advising Cabinet on all legal matters.

Further information on the mandate, roles, responsibilities and programs of the Department can be found in the Department of Justice 2011-2012 Main Estimates, available on the following website: www.tbs-sct.gc.ca/est-pre/20112012/me-bpd/docs/me-bpd-eng.pdf.

This quarterly financial report:

• should be read in conjunction with the 2011-2012 Main Estimates and Supplementary Estimates A;
• has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board; and
• has been reviewed and commented on by the Departmental Audit Committee (DAC) but has not been subject to an external audit or review.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. 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 and Supplementary Estimates for the 2011-2012 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

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 that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

B) 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 the decrease in actual expenditures for the quarter ended September 30. It is noted that, as the primary legal services provider to other government departments and agencies, the Department has the authority to collect and spend revenue from legal services provided to other government departments and agencies. For the purposes of this report, these revenues are referenced as “Net Vote Authorities” or “Revenues netted against expenditures”.

Graph 1 outlines the Department’s gross and net budgetary authorities and expenditures.

As of September 30, 2011 the Department had a total of $1,066.1 million of authorities including Net Vote Authority compared to $951.6 million as of September 30, 2010. Taking into consideration revenues netted against expenditures, the Department’s net budgetary authorities for the same period were $776.1 million in 2011-2012 and $736.6 million in 2010-2011.

In addition, the Department’s total gross expenditures as of September 30, 2011 were $339.9 million compared to $343.3 million at the same period in 2010-2011. For both fiscal years, taking into consideration the amounts of revenues the Department received as of September 30^th ($111.5 million in 2011-2012 and $33.3 million in 2010-2011), total net expenditures were $227.8 million and $309.9 million respectively.

Significant Changes to Authorities

When compared to the second quarter of the previous fiscal year, the total net budgetary authorities available for the year had increased by $39.5 million compared to the same quarter last year, from $736.6 million to $776.1 million. As of this quarter, the Department realized increases of $16.7 million in Vote 1 – Net operating expenditures, $16.2 million in Statutory authorities and $6.6 million in Vote 5 – Grants and contributions.

As per the Statement of Authorities for the period ending September 30^th 2011, major factors contributing to the net increase in total authorities available of $39.5 million are listed below:

For the second quarter (July 1^st to September 30^th 2011):

• Vote 1 – Operating expenditures authority increased in the second quarter due to the receipt of the Operating Budget Carry Forward in the amount of $23.6 million.

For the first quarter (April 1^st to June 30^th 2011):

• Of the total Budgetary statutory authorities increase of $16.2 million, $12.0 million was associated with the increase in revenue authorities. The remaining $4.2 million increase was associated with the Employee Benefit Plans rate adjustments (from 17% to 18%) as per Treasury Board direction, and changes to program funding;
• $9.7 million increase in authorities as a result of the renewal of the Funding to manage immigration cases involving classified information under Division 9 of the Immigration and Refugee Protection Act;
• $4.6 million increase in authorities as a result of the renewal of Canada’s War Crimes initiative;
• $7.5 million decrease in authorities as a result of the continued implementation of the Departmental Law Practice Model which aims to equip the Department with the right mix of counsel necessary for the continued delivery of effective and efficient legal services; and
• $6.0 million decrease in authorities related to the one time funding received in early 2010-11 for government advertising programs.

In addition to the appropriations allocated to the Department through Main Estimates and Supplementary Estimates A, the Department also has Net Vote Authority (NVA), which entitles the Department to spend revenues collected from other government departments and agencies for legal advisory, litigation and legislative services provided. This authority includes an increase of $75.0 million for fiscal year 2011-2012 in response to anticipated increases in demand for legal services, for a total of $290.0 million compared to $215.0 million for the same period last year.

Significant Changes to Revenues Collected

Compared to the previous year, revenues collected in the second quarter, ending September 30, 2011, increased from $33.3 million to $111.5 million.  This represents an increase of 234.7% in total revenues collected at the end of the second quarter of this fiscal year. This change is principally attributed to the department increasing its frequency of billing and collections with client departments.

Significant Changes to Budgetary Expenditures

When compared to the second quarter of the previous fiscal year, the level of gross budgetary expenditures increased from $178.1 million to $182.8 million, or by 2.6%.

The department experienced a reduction in grants and contributions and an increase in personnel expenditures. Grants and contributions expenditures decreased by 22.0% ($4.5 million) in the second quarter of 2011-2012 mainly as a result of a delay in renewing a contribution agreement under the Youth Justice Services Program. Personnel expenditures show a net increase of 9.5% ($13.1 million) in comparison to the same period of the previous year. The Employee Benefit Plan rate increase as well as the one time Severance Pay disbursement for the Public Service Alliance of Canada (PSAC) members, have contributed to an increase in salary expenditures in the second quarter of 2011-2012. The explanation of the major variances in expenditures for this quarter compare to last year’s can be found in the following Standard Objects:

• Information: The Department of Justice had an advertising campaign in 2010-2011 called “Victims Matter”. This one time event is not reoccurring this year. The total amount spent on this campaign over the last fiscal year was approximately $5M.
• Professional and Special Services: $2.9 million was spent on Crown Agents in a major litigation case in 2010-2011 which so far has not resulted in similar expenditure for the 2011-12 fiscal year.
• Repair and maintenance: The Department is moving forward with a leasehold improvement project for 2011-12 of which $797K has been expended so far this year.

The total net budgetary expenditures recorded in the quarter ending September 30, 2011, show a reduction $73.4 million, from $144.8 million to $71.3 million. This is principally attributed to the sizeable increase in collected revenues from $33.3 million in 2010-11 to $111.5 million in 2011-12.

C) Risks and Uncertainties

This Quarterly Financial Report reflects the results of the current fiscal period in relation to the Main Estimates, for which full supply was released on June 27, 2011, and the Supplementary Estimates A authorities. The Department had no requirements for the Supplementary Estimates B.

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-2011 levels for the fiscal years 2011-2012 and 2012-2013. Given the Department’s reliance on cost recovery and the associated fiscal restraint identified in Budget 2010, there is a risk that other government departments and agencies reduce requests for and funding associated with legal services from the Department of Justice. This is significant as the Department of Justice carries the salary and operating liability in providing legal services in an environment where future demands for legal services and revenues are uncertain.

Risk Drivers:

• The Department relies on cost recovery from other government departments and agencies (over $290 million per year);
• In response to cost containment and cost reduction measures outlined in Budget 2010, other government departments and agencies are seeking to reduce their operational costs, including those for legal services; and
• Given this fiscal environment, other government departments and agencies are interested in reducing expenditures despite a heightened demand for legal services.

Justice Canada is continuously reviewing various options to mitigate these constraints in funding. Impacts on departmental activities have been managed through the following actions and mitigation strategies:

• Achieving efficiencies and flexibilities in the management and delivery of legal services to other government departments; more specifically through the application of the departmental Law Practice Model which aims to align legal services workforce to files based on complexity and risk.
• Assisting other government departments and agencies in finding sound ways of lowering their call for legal services; and
• Raising awareness of the costs of legal services through regular communications between senior departmental officials.

Budget 2011 launched a comprehensive one-year Strategic and Operating Review restraint exercise across all of government. This 2011-2012 review will focus on improving the efficiency and effectiveness of government operations and programs. It is expected that savings as a result of the Strategic and Operating Review will be recorded in Budget 2012 and that budgets will be reduced for fiscal years 2012-2013 and thereafter. However, at this time, the nature and extent of any reductions are not known.

D) Significant changes in relation to operations, personnel and programs

Law Practice Model

The Department continues to implement the Law Practice Model, an initiative that aims to equip the Department with the right mix of counsel necessary to continue to deliver effective and efficient legal services.

Approval by Senior Officials

Approved by:

Ottawa, Canada

 

Statement of Authorities (unaudited)
(In thousands of dollars)

	Fiscal year 2011-2012			Fiscal year 2010-2011
	Total available for use for the year ending March 31, 2012	Used during the quarter ended September 30, 2011	Year to date used at quarter end	Total available for use for the year ending March 31, 2011	Used during the quarter ended September 30, 2010	Year to date used at quarter end
Vote 1 - Operating expenditures	587,450	146,070	274,124	495,783	140,866	277,177
Less: Revenues netted against expenditures	(290,000)	(111,450)	(112,214)	(215,000)	(33,300)	(33,380)
Net Vote 1 operating expenditures	297,450	34,620	161,910	280,783	107,566	243,797
Vote 5 - Grants and contributions	395,699	16,001	24,411	389,095	20,506	32,681
Budgetary statutory authorities	82,912	20,726	41,451	66,711	16,709	33,431
TOTAL AUTHORITIES	776,061	71,347	227,772	736,589	144,781	309,909

 

Departmental budgetary expenditures by Standard Object (unaudited)
(In thousands of dollars)

	Fiscal year 2011-2012			Fiscal year 2010-2011
Expenditures	Planned expenditures for the year ending March 31, 2012	Expended during the quarter ended September  30, 2011	Year to date used at quarter end	Planned expenditures for the year ending March 31, 2011	Expended during the quarter ended September  30, 2010	Year to date used at quarter end
Personnel	547,587	150,503	287,860	473,565	137,429	276,680
Transportation and communications	25,368	3,542	6,854	19,607	3,856	7,415
Information	4,603	686	1,229	3,945	1,260	1,942
Professional and special services	59,038	6,617	11,735	40,823	10,683	16,680
Rentals	2,065	1,016	1,990	1,791	1,325	2,082
Repair and maintenance	8,963	2,176	2,609	2,830	713	1,591
Utilities, materials and supplies	6,715	1,249	1,849	5,134	1,101	1,862
Acquisition of land, buildings and works	350	870	0	0	0	0
Acquisition of machinery and equipment	15,673	359	1,229	11,308	1,022	2,090
Transfer payments	395,699	16,001	24,411	389,095	20,506	32,681
Other subsidies and payments	0	137	220	3,491	186	266
Total gross budgetary expenditures	1,066,061	182,797	339,986	951,589	178,081	343,289
Less revenues netted against expenditures Revenues	(290,000)	(111,450)	(112,214)	(215,000)	(33,300)	(33,380)
Total revenues netted against expenditures	(290,000)	(111,450)	(112,214)	(215,000)	(33,300)	(33,380)
TOTAL NET BUDGETARY EXPENDITURES	776,061	71,347	227,772	736,589	144,781	309,909

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