Quarterly Financial Report for the Quarter Ended, June 30, 2012
Statement outlining results, risks and significant changes in operations, personnel and programs
Table of Contents
- 1. Introduction
- 2. Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results
- 3. Risks and Uncertainties
- 4. Significant Changes in Relation to Operations, Personnel and Programs
- 5. Budget 2012 Implementation
- 6. Statement of Authorities (unaudited)
- 7. Departmental Budgetary Expenditures by Standard Object (unaudited)
- 8. Glossary
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 2012-2013 Main Estimates as well as Canada’s Economic Action Plan 2012 (Budget 2012); the Department has not received any Supplementary Estimates (A) funding during this fiscal year. 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 2012-2013 Main Estimates, available on the following Web site: http://www.tbs-sct.gc.ca/est-pre/20122013/me-bpd/me-bpd-eng.pdf
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 and Supplementary Estimates for the 2012-2013 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 that 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 the Budget 2012 could not be reflected in the 2012-2013 Main Estimates.
In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.
1.3 Department of Justice Financial Structure
The Department of Justice financial structure is comprised of several budgetary authorities:
- Vote 1—Operating Expenditures;
- Vote 5—Grants and Contributions; and
- Statutory authorities related to contributions to the Employee Benefit Plan (EBP) and salaries and motor car allowances for the Minister of Justice and Attorney General of Canada.
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 obtained authority in the last quarter of 2011-2012 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 in actual expenditures for the quarter ended June 30, 2012. 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, 2011, and June 30, 2012
For the period ending June 30, authorities provided to the Department included Main Estimates.
The Department’s total gross expenditures as of June 30, 2012 were $152.3 million compared to $157.2 million as of June 30, 2011. Excluding $22.3 million in revenues the Department received as of June 30, 2012 and $0.8 million received as of June 30, 2011, total net expenditures were $130.0 million and $156.4 million respectively.
2.1 Significant Changes to Authorities
(Refer to attached table in Section 5: Statement of Authorities)
When compared to the first quarter of the previous fiscal year, the total net budgetary authorities available for 2012-2013 were reduced by $57.8 million, from $752.4 million to $694.6 million (see Table 1). This reduction comprises:
- $28.2 million in Vote 1—Operating Expenditures:
- Decrease of $18.3 million in fiscal year 2012-2013 due to the transfer of IT services to Shared Services Canada in accordance with the Government’s plan to centralize such services;
- Decrease of $5.1 million as a result of the end of funding to manage immigration cases involving classified information under Division 9 of the Immigration and Refugee Protection Act;
- Decrease of $2.4 million as a result of the end of funding for the Aboriginal Justice Strategy;
- Decrease of $1.2 million associated with the end of funding for the Strengthening the Justice System through Legal Aid program; and
- Decrease of $1.2 million for other adjustments, each less than $1.0 million.
- $26.9 million in Vote 5—Grants and Contributions (G&C):
- Decrease of $13.2 million associated with the end of funding for the Strengthening the Justice System through Legal Aid program;
- Decrease of $9.6 million due to the end of funding for the Aboriginal Justice Strategy;
- Decrease of $3.8 million due to completion of funding to manage immigration cases involving classified information under Division 9 of the Immigration and Refugee Protection Act; and
- Decrease of $0.3 million for other adjustments, each less than $1.0 million.
- $2.7 million in budgetary statutory authorities:
- Decrease of $1.7 million to reflect the reduction of EBP rates from 18 percent to 17.6 percent;
- Decrease of $1.5 million to reflect the funding transferred during fiscal year 2011-2012 to Shared Services Canada; and
- The remainder is a result of changes to EBP following changes in level of funding of various Department activities.
2.2 Significant Changes to Revenues Collected
(Refer to attached table in Section 5: Statement of Authorities)
Compared to the previous year, revenues collected in the first quarter ending June 30, 2012 increased from $0.8 million to $22.3 million. This increase is largely the result of a monthly billing system implemented as part of the Department’s Cost Recovery Process Improvement Project (CRPI). Undertaken during fiscal year 2011-2012, the CRPI enabled more timely collection of revenues and further promotes good management and fiscal accountability (see Section 4).
2.3 Significant Changes to Budgetary Expenditures
(Refer to attached table in Section 6: Departmental Budgetary Expenditures by Standard Object)
First-quarter gross budgetary expenditures decreased from $157.2 million in 2011-2012 to $152.3 million in 2012-2013. This reduction is primarily comprised of:
- A decrease of $4.4 million in grants and contributions expenditures due largely to the end of the Aboriginal Justice Strategy funding in 2011-2012; and
- Variances associated with the following standard objects:
- Transportation and communications: a decrease of $1.7 million as funding and expenditures were transferred to Shared Services Canada for resources and personnel supporting email, data centres and networks, and associated internal services; and
- Professional and special services: an increase of $1.1 million in contracts for finalization of the CRPI project and to support implementation of departmental cost reduction strategies.
The total net budgetary expenditures recorded in the quarter ending June30, 2012 decreased by $26.4 million, from $156.4 million to $130.0 million. This is due largely to increased revenues collected from clients in the first quarter.
A significant and increasing risk for legal service delivery concerns uncertainty around funding from clients. The Department’s funding for legal services is based heavily on cost recovery from client organizations. Consequently, Justice Canada carries the salary and operating liability of maintaining capacity to support clients now and in the future. 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. Beyond financial implications, the Department’s future delivery capacity could be negatively impacted.
To mitigate this risk, the Department has made improvements to its cost recovery and forecasting processes. The Department also continues to work with clients to help them effectively manage their legal risks and find sound ways to lower their demand for legal services. This has included working in collaboration with an interdepartmental advisory committee to advance the development of reference material for federal managers to improve their understanding of the triggers and costs associated with litigation.
Associate Deputy Minister Yves Côté retired from the Public Service effective June 30, 2012.
On June 29, 2012, the Prime Minister announced the appointment of two Associate Deputy Ministers for the Department of Justice:
- Pierre Legault, appointed Associate Deputy Minister of Justice effective July 3, 2012.
- Lori Sterling, appointed Associate Deputy Minister of Justice effective July 30, 2012.
Cost Recovery Process Improvement Project
Beginning April 1, 2012, the CRPI changed the process by which the Department recovers funds for legal services provided to client departments. The process now integrates case management and financial systems, standardizing the invoicing and collection process of legal services. The Department will review, analyse and adjust the process as necessary during this period of transition.
5. Budget 2012 Implementation
This section provides an overview of the savings measures announced in Budget 2012.
The Department of Justice is committed to achieving savings of $67.5M over the three-year implementation period, which equates to approximately 10 percent of the department’s A-base budget. Effective April 1, 2013, the Youth Justice Services Funding Program will be funded at a level of $141.7M annually. Overall, Grants and Contributions spending will be reduced by $38.8 million by 2013-2014. A further reduction of $28.7 million will be made in operating funding.
Justice initiatives to achieve these operational savings include:
- Streamlining internal services by consolidating delivery of Communications, Human Resources, Finance and other administrative and management services;
- Streamlining delivery of legal services to government departments by consolidating some Legal Services Units that report to the same Minister;
- Increasing efficiency by creating and expanding centres of legal expertise in some areas of law; and
- Modernizing operations by moving to electronic information sources.
Approximately 6.5 percent of the Department’s current workforce is expected to be reduced over the three-year implementation period. The Department is making every effort to find positions for as many priority and affected employees as possible. To facilitate this, a Priority Placement Unit and a Workforce Management Board were established on April 30, 2012.
There are financial uncertainties in so far as reductions being made in other departments may have a further impact on the Department of Justice.
Approval by Senior Officials
Original signed by Myles J. Kirvan
August 27, 2012
Myles J. Kirvan
Original signed by Daniel Schnob
August 27, 2012
Chief Financial Officer
6. Statement of Authorities (unaudited)
|Fiscal year 2012-2013||Fiscal year 2011-2012|
|Total available for use for the year ending March 31, 2013*||Used during the quarter ended June 30, 2012||Year to date used at quarter end||Total available for use for the year ending March 31, 2012||Used during the quarter ended June 30, 2011||Year to date used at quarter end|
|Vote 1 - Operating expenditures||535,593||128,275||128,275||563,812||128,054||128,054|
|Less: Revenues netted against expenditures||(290,000)||(22,337)||(22,337)||(290,000)||(764)||(764)|
|Net Vote 1 operating expenditures||245,593||105,938||105,938||273,812||127,290||127,290|
|Vote 5 - Grants and contributions||368,799||4,001||4,001||395,699||8,410||8,410|
|Budgetary statutory authorities||80,167||20,060||20,060||82,912||20,725||20,725|
* Total available for use does not reflect measures announced in Budget 2012.
7. Departmental budgetary expenditures by Standard Object (unaudited)
|Fiscal year 2012-2013||Fiscal year 2011-2012|
|Expenditures||Planned expenditures for the year ending March 31, 2013*||Expended during the quarter ended June 30, 2012||Year to date used at quarter end||Planned expenditures for the year ending March 31, 2012||Expended during the quarter ended June 30, 2011||Year to date used at quarter end|
|Transportation and communications||14,599||1,605||1,605||20,483||3,312||3,312|
|Professional and special services||37,056||6,232||6,232||47,670||5,118||5,118|
|Repair and maintenance||6,227||686||686||7,237||433||433|
|Utilities, materials and supplies||4,223||724||724||5,422||600||600|
|Acquisition of land, buildings and works||0||0||0||350||0||0|
|Acquisition of machinery and equipment||7,979||305||305||12,590||359||359|
|Other subsidies and payments||2,826||159||159||0||83||83|
|Total gross budgetary expenditures||984,559||152,336||152,336||1,042,423||157,189||157,189|
|Less revenues netted against expenditures
|Total revenues netted against expenditures||(290,000)||(22,337)||(22,337)||(290,000)||(764)||(764)|
|TOTAL NET BUDGETARY EXPENDITURES||694,559||129,999||129,999||752,423||156,425||156,425|
* Planned expenditures do not reflect measures announced in Budget 2012.
Expenditure authorities are approvals from Parliament for individual government organizations to spend up to specific amounts. Expenditure authority is provided in two ways:
- Annual Appropriation Acts that specify the amounts and broad purposes for which funds can be spent; and
- Other specific statutes that authorize payments and set out the amounts and time periods for those payments.
Relates to the coexistence and interaction of two legal systems or legal traditions in a given legal framework— in Canada, Quebec civil law and Canadian common law, taking into account the 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.
- 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 will be 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 from the provision of legal and internal services within government.
- Special purpose financial reporting framework
The Quarterly Financial Report requirements and structure is 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.
- 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 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 exceed $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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