Quarterly Financial Report for the Quarter Ended December 31, 2013 - Revised
Statement outlining results, risks and significant changes in operations, personnel and programs
Date: March 14, 2014
Location: Section 6, Statement of Authorities (unaudited), Used during the quarter ended December 31, 2013, Vote 1 - Operating expenditures.
Revision: "Vote 1 - Operating expenditures" $386,878 thousands replaces "Vote 1 – Operating expenditures" $368,878 thousands.
Rational for the revision: Original amount reported contained a typing error (number inversion).
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 2013–14 Main Estimates, Supplementary Estimates (B) 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 and Supplementary Estimates (B) 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.
Additional funding was sought by the Department of Justice through the 2012-13 Supplementary Estimates (B). The department received this additional authority net of the planned savings or other amounts transferred by Treasury Board authority to a frozen allotment.
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 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 increases in resources available for the year and net changes in actual expenditures for the quarter ended December 31, 2013. Graph 1 outlines the Department's gross and net budgetary authorities and expenditures.
Graph 1: Comparison of Budgetary Authorities and Expenditures as of December 31, 2012, and December 31, 2013
* Decimal rounding resulted in $0.1M discrepancy for the total gross budgetary expenditures as of December 31, 2013.
For both periods ending December 31, 2013 and December 31, 2012, authorities provided to the Department included Main Estimates, Supplementary Estimates (B) and Treasury Board Central Votes. The Department had no items in Supplementary Estimates (A) in either fiscal year.
Central Votes as of the end of the third quarter of the fiscal year 2013-14 amounted to $90.1 million and included: $15.5 million in Compensation Adjustments, $50.0 million in Paylist Requirements, and $24.6 million in Operating Budget Carry Forward.
For the corresponding period of the fiscal year 2012-13, authorities provided from Central Votes to the Department, in addition to Main Estimates and Supplementary Estimates (B), included $11.0 million in Paylist Requirements and $27.3 million Operating Budget Carry Forward.
The Department's year-to-date total gross expenditures as of December 31, 2013 were $594.4 million compared to $490.1 million as of December 31, 2012. The increase in spending to date, totalling $104.3 million, can be explained by:
- an increase of $57.9 million in personnel costs, primarily associated with ratification of various collective agreements, including increases in compensation ($14.7 million) and severance payments ($41.3 million);
- an increase of $49.4 million in the processing of transfer payments associated with departmental grants and contributions. The majority of the increase is due to an accelerated timing of payments to provinces and Territories for Legal Aid Systems and for Youth Justice Services which occurred this year but not last year (see section 2.3 for more detailed explanation);
- an increase of $1.3 million in the acquisition of furnishings to refit office spaces required to comply with the new government Workplace 2.0 policy, an outcome of the Government of Canada initiative aimed at creating healthier, more engaging and productive workplace to better serve Canadians;
- a reduction of $1.9 million in spending for professional and special services, mainly due to decreased use of consultants;
- a cumulative reduction of $2.4 million in other expenditures not exceeding $1.0 million each.
For the period ending December 31, 2013, total net expenditures were $408.4 million (excluding $185.9 million in revenues against $594.4 million in gross expenditures). Total net expenditures for the period ending December 31, 2012 were $294.9 million (excluding $195.2 million in revenues against $490.1 million in gross expenditures).
2.1 Significant Changes to Authorities
(See also Statement of Authorities table in Section 6.)
When compared to the third quarter of the previous fiscal year, the total net budgetary Authorities available for 2013–14 increased by $2.9 million, from $755.6 million to $758.5 million. This increase comprises:
- Increase of $42.1 million in Vote 1 Operating Expenditures, explained by:
- Increase of $39.0 million in Treasury Board reimbursement from Central Votes, primarily associated with severance payments following the ratification of various collective agreements (Paylist Requirements);
- Increase of $17.9 million in Compensation Adjustments for adjustments made to terms and conditions of service or employment of the federal public administration as a result of collective bargaining;
- Increase of $1.3 million in funding to enhance activities, pursuant to the Protecting Canada's Immigration System Act, related to the cessation and vacation of refugee status;
- Decrease of $0.4 million, part of the Economic Action Plan 2013 measures to reduce departmental Travel, Hospitality and Conferences expenses costs;
- Decrease of $0.9 million for other adjustments, each under $1.0 million;
- Decrease of $1.3 million due to reduced level of Funding for the Aboriginal Justice Strategy in the current fiscal year;
- Decrease of $2.7 million in the amount of the Operating Budget Carry Forward (OBCF) in the fiscal year 2013-14 from the preceding fiscal year when compared to the amount carried into the previous fiscal year;
- Decrease of $10.8 million associated with the implementation of savings measures announced in Budget 2012.
- Reduction of $39.0 million in Vote 5—Grants and Contributions (G&C), explained by:
- Decrease of $35.6 million associated with the implementation of savings measures announced in Budget 2012;
- Decrease of $4.0 million due to sunsetting of a portion of funding of the Initiative in Support of Access to Justice in Both Official Languages;
- Increase of $0.6 million for miscellaneous items, none exceeding $0.5 million.
- Reduction of $0.2 million in budgetary statutory authorities, explained by:
- Decrease of $1.4 million in Employees Benefit Plan (EBP) funding associated with the implementation of savings measures announced in Budget 2012;
- Increase of $1.2 million in EBP funding associated with changes in level of funding for various items in 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 third quarter ending December 31, 2013 decreased from $143.0 million to $71.7 million. This reduction of $71.3 million is largely associated with a steep increase in revenue collection during the third quarter of 2012-13. Due to unforeseen issues with the newly implemented billing system, a final product of Cost Recovery Process Improvement Project (CRPI), a large portion of the second quarter billing during the fiscal year 2012-13 was delayed to the subsequent (third) quarter. In the current fiscal year no such delays have occurred and the revenue collection process has not been a subject to unusual fluctuations. As a result, year-to date amounts of revenue collected are similar as of the end of both quarters.
2.3 Significant Changes to Budgetary Expenditures
(See also Departmental Budgetary Expenditures by Standard Object table in Section 7.)
Third quarter gross budgetary expenditures increased from $172.1 million in 2012–13 to $230.9 million in 2013–14. This increase of $58.8 million is made up primarily of variances associated with the following standard objects:
- Personnel: an increase of $14.4 million is largely related to ratification of various collective agreements, which includes increases in compensation ($7.4 million) and severance payments ($5.7 million). The remaining $1.3 million relates to various items for which fluctuations in timing of payments are usual and occur as part of every day business.
- While personnel costs are increasing, the overall workforce has decreased from 2012–13 levels as part of the implementation of Budget 2012 measures.
- Transfer payments: an increase in the amount of $43.9 million, associated with the advanced processing of transfer payments for grants and contributions included:
- An increase of $32.7 million in payments for Youth Justice Services. Renewed 2013-14 payment provisions have allowed for an increased percentage of the interim payments be issued in the first three quarters of the fiscal year to alleviate the impact of Budget 2012 reductions;
- An increase of $12.3 million in payments for Legal Aid ($11.1 million) and Access to Justice ($1.2 million). In the current fiscal year the agreements were signed prior to December 31, 2013, while the agreements in the previous fiscal year were signed after December 31, 2012. Consequently, processing of these payments in the current fiscal year occurred earlier; and
- An offsetting reduction of $1.1 million due to variations in timing of processing payments for remaining initiatives. As the timing of payments often depends on the client, such variations form part of a regular business.
- Acquisition of machinery and equipment: an increase of $1.2 million during the current quarter is largely attributed to purchases of the office furnishings required for new spaces in order to comply with the new government Workplace 2.0 policy, an outcome of the Government of Canada initiative aimed at creating healthier, more engaging and productive workplace to better serve Canadians.
- The remaining reductions totalling to $0.7 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.
The Department also experienced a $71.3 million decrease in revenues collected for legal services during the third quarter, from $143.0 million in the third quarter of 2012–13 to $71.7 million during the current quarter. Consequently, when revenues collected are netted against gross budgetary expenditures, net budgetary expenditures during the third quarter increased by $130.1 million from $29.1 million in 2012–13 to $159.2 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
Original signed by William F. Pentney
February 28, 2014
William F. Pentney
Deputy Minister of Justice and
Deputy Attorney General of Canada
Original signed by Marie-Josée Thivierge
February 28, 2014
Assistant Deputy Minister
Management Sector, and
Chief Financial Officer
6. Statement of Authorities (unaudited)
|Fiscal year 2013-2014||Fiscal year 2012-2013|
|Total available for use for the year ending March 31, 2014*||Used during the quarter ended December 31, 2013||Year to date used at quarter end||Total available for use for the year ending March 31, 2013*, **||Used during the quarter ended December 31, 2012||Year to date used at quarter end|
|Vote 1 - Operating expenditures||623,244||144,000||442,018||581,154||128,976||386,878|
|Less: Revenues netted against expenditures||(296,200)||(71,696)||(185,936)||(296,200)||(143,021)||(195,220)|
|Net Vote 1 operating expenditures||327,044||72,304||256,082||284,954||(14,045)||191,658|
|Vote 5 - Grants and contributions||351,435||66,943||92,446||390,429||23,067||42,983|
|Contributions to employee benefit plans||79,924||19,945||59,833||80,089||20,022||60,067|
|Minister of Justice and Attorney General of Canada - Salary and motor car allowance||79||19||59||78||19||58|
|Spending of proceeds from the disposal of surplus Crown assets||3||0||0||3||0||0|
|Refunds of amounts credited to revenues in previous years||0||5||29||0||8||113|
|Budgetary statutory authorities||80,006||19,969||59,921||80,170||20,049||60,238|
* 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.
7. Departmental Budgetary Expenditures by Standard Object (unaudited)
|Fiscal year 2013-2014||Fiscal year 2012-2013|
|Planned expenditures for the year ending March 31, 2014||Expended during the quarter ended December 31, 2013||Year to date used at quarter end||Planned expenditures for the year ending March 31, 2013***||Expended during the quarter ended December 31, 2012||Year to date used at quarter end|
|Transportation and communications||16,018||1,925||4,830||19,522||2,439||5,830|
|Professional and special services||44,119||7,864||18,605||49,547||7,274||20,529|
|Repair and maintenance||9,300||512||1,533||8,326||723||1,696|
|Utilities, materials and supplies||5,288||866||2,304||5,647||1,100||2,693|
|Acquisition of land, buildings and works||0||0||0||166||0||0|
|Acquisition of machinery and equipment||9,871||1,597||2,325||10,507||393||1,059|
|Other subsidies and payments||3,348||259||486||3,779||415||684|
|Total gross budgetary expenditures||1,054,685||230,912||594,385||1,051,753||172,092||490,099|
|Less revenues netted against expenditures
|Total revenues netted against expenditures||(296,200)||(71,696)||(185,936)||(296,200)||(143,021)||(195,220)|
|TOTAL NET BUDGETARY EXPENDITURES||758,485||159,216||408,449||755,553||29,071||294,879|
*** 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, this relates to Quebec civil law and Canadian common law, taking into account other sources of federal law, including aboriginal rules and customs.
- Compensation Adjustments:
A Treasury Board centrally managed vote that supplements other appropriations as a result of adjustments made to terms and conditions of service or employment of the federal public administration, including members of the Royal Canadian Mounted Police and the Canadian Forces, Governor in Council appointees and Crown corporations as defined in section 83 of the Financial Administration Act.
- 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.
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.
- Workplace 2.0
A government-wide strategy introduced and championed by Public Works and Government Services Canada (PWGSC) to support the Clerk of the Privy Council's commitment to workplace renewal. Its purpose is to modernize how the public service works. The objective is to create a modern workplace that will attract, retain and enable public servants to work smarter, greener and healthier to better serve Canadians. Workplace 2.0 will accomplish this by modernizing the physical aspects of the workspace, updating policies, processes and systems that support public servants in their work, and providing new technologies that allow them to connect, collaborate and communicate across government and with Canadians.
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