Quarterly Financial Report for the Quarter Ended June 30, 2014

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

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 2014-15 Main Estimates as well as Canada’s Economic Action Plan (Budgets 2014, 2013 and 2012). The Department had no items in the 2014-2015 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 50 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 the federal departments and agencies.

Further information on the mandate, roles, responsibilities and programs of the Department can be found in the Department of Justice 2014-15 Main Estimates, available at: http://www.tbs-sct.gc.ca/ems-sgd/me-bpd/20142015/me-bpd-eng.pdf#page=205

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 2014-15 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.

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 June 30, 2014. 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, 2013, and June 30, 2014
($Millions)

Graph 1: Comparison of Budgetary Authorities and Expenditures as of June 30, 2013, and June 30, 2014
Graph 1 - Text equivalent

The bar graph shows the Department’s net budgetary authorities and net vote authorities for the quarter ending June 30 for fiscal years 2013-2014 and 2014-2015. It also shows the Department’s net budgetary expenditures and the revenues netted against expenditures for the same period.

Net budgetary authorities and net vote authorities totalled $630.6 M and $296.2 M, respectively, at June 30, 2014, for total budgetary authorities of $926.8 M. For the same period in the previous fiscal year, net budgetary authorities and net vote authorities totalled $657.5 M and $296.2 M, respectively, combining for total budgetary authorities of $953.7 M.

Net budgetary expenditures and revenues netted against expenditures for the period ending June 30, 2014 were $148.1 M and $30.6 M, respectively, for total budgetary expenditures of $178.7 M. For the same period in the previous fiscal year, net budgetary expenditures and revenues netted against expenditures totalled $131.0 M and $36.1 M, respectively, for a total of $167.2 M.

For the period ending June 30, authorities provided to the Department included only Main Estimates. The Department had no items in Supplementary Estimates (A) as of the end of the first quarter in either fiscal year.

2.1 Significant Changes to Authorities

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

When compared to the first quarter of the previous fiscal year, the total net budgetary Authorities available for 2014-15 were reduced by $26.9 million, from $657.5 million to $630.6 million. This reduction comprises:

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 ended June 30 of 2013-14 and 2014-15, the Department’s NVA remained unchanged at $296.2 million.

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 first quarter ending June 30, 2014 decreased from $36.1 million to $30.6 million. This reduction of $5.5 million can be explained by Justice receiving the interdepartmental codes from other government organizations at a later time in this quarter compared to the first quarter of the previous year, which resulted in a delay of the billing and, subsequently, revenue recovery.

2.3 Significant Changes to Budgetary Expenditures

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

First quarter gross budgetary expenditures increased from $167.2 million in 2013-14 to $178.7 million in 2014-15. This increase of $11.5 million in gross expenditures consists primarily of variances associated with the following standard objects:

As mentioned in Section 2.2, the Department experienced a $5.5 million decrease in revenues collected for legal services, from $36.1 million in 2013-14 to $30.6 million during the current quarter. Consequently, when revenues collected are netted against gross budgetary expenditures, net budgetary expenditures increased by $17.1 million from $131.0 million in 2013-14 to $148.1 million in the corresponding period of 2014-15.

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 Budgets 2012, 2013 and 2014. 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.

In addition, as part of the Government’s commitment to ensuring taxpayer dollars are spent effectively and efficiently, a review of legal services (LSR) was undertaken in 2013-14. The LSR was aimed at managing the demand for legal services in order to rein in the growth of spending and ensuring those services are fiscally sustainable in the long term.

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

The Change Management Office was established in June 2014 to connect the work of numerous change initiatives in the Department, including Destination 2020 and the Innovation Council.

On June 5, 2014, Daniel Therrien was appointed Canada’s Privacy Commissioner. Mr. Therrien had held the position of Assistant Deputy Attorney General of the Public Safety, Defence and Immigration Portfolio since 2008.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that have been implemented in order to refocus government activities and programs; make it easier for Canadians and businesses to deal with their government; and, modernize, reduce and stream-line back office operations.

Over the budget’s three-year implementation period, which includes the 2012-13, 2013-14 and 2014-15 fiscal years, the Department of Justice committed to achieving overall financial savings of $67.5 million.

Justice’s initiatives to achieve these savings include:

The Department successfully met its Budget 2012 financial and human resource reduction commitments in 2012-2013 and 2013-2014. As of June 30, 2014, the Department is on target to fully meet its overall financial and human resource commitments as well as its transformation commitments by March 31, 2015.

Approval by Senior Officials

Approved by:

Original signed by William F. Pentney
August 28, 2014

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

Original signed by Marie-Josée Thivierge
August 28, 2014

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 June 30, 2014
Statement of Authorities (unaudited)
(In thousands of dollars)
Fiscal year 2014-2015 Fiscal year 2013-2014
Total available for use for the year ending March 31, 2015Table note * Used during the quarter ended June 30, 2014 Year to date used at quarter end Total available for use for the year ending March 31, 2014Table note * Used during the quarter ended June 30, 2013 Year to date used at quarter end
Vote 1 - Operating expenditures 533,062 153,209 153,209 532,185 138,750 138,750
Less: Revenues netted against expenditures (296,200) (30,638) (30,638) (296,200) (36,125) (36,125)
Net Vote 1 operating expenditures 236,862 122,571 122,571 235,985 102,625 102,625
Vote 5 - Grants and contributions 317,485 6,476 6,476 341,635 8,448 8,448
Contributions to employee benefit plans 76,161 19,040 19,040 79,777 19,944 19,944
Minister of Justice and Attorney General of Canada - Salary and motor car allowance 80 20 20 79 20 20
Spending of proceeds from the disposal of surplus Crown assets 3 0 0 2 0 0
Refunds of amounts credited to revenues in previous years 0 0 0 0 4 4
Budgetary statutory authorities 76,244 19,060 19,060 79,858 19,968 19,968
TOTAL AUTHORITIES 630,591 148,107 148,107 657,478 131,041 131,041
Table note 1

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

Return to table note * referrer

7. Departmental Budgetary Expenditures by Standard Object (unaudited)

Department of Justice
For the quarter ended June 30, 2014
Departmental Budgetary Expenditures by Standard Object (unaudited)
(In thousands of dollars)
Fiscal year 2014-2015 Fiscal year 2013-2014
Planned expenditures for the year ending March 31, 2015 Expended during the quarter ended June 30, 2014 Year to date used at quarter end Planned expenditures for the year ending March 31, 2014 Expended during the quarter ended June 30, 2013 Year to date used at quarter end
Expenditures
Personnel 537,825 146,647 146,647 538,343 149,479 149,479
Transportation and communications 10,086 889 889 11,980 1,388 1,388
Information 2,601 335 335 4,342 458 458
Professional and special services 33,634 4,652 4,652 32,997 4,463 4,463
Rentals 4,748 1,039 1,039 3,585 1,326 1,326
Repair and maintenance 6,303 509 509 6,955 785 785
Utilities, materials and supplies 4,042 550 550 3,955 486 486
Acquisition of land, buildings and works 0 0 0 0 0 0
Acquisition of machinery and equipment 8,557 310 310 7,382 210 210
Transfer payments 317,485 6,476 6,476 341,635 8,448 8,448
Other subsidies and payments 1,510 17,338 17,338 2,504 123 123
Total gross budgetary expenditures 926,791 178,745 178,745 953,678 167,166 167,166
Less revenues netted against expenditures
(Revenues)		 (296,200) (30,638) (30,638) (296,200) (36,125) (36,125)
Total revenues netted against expenditures (296,200) (30,638) (30,638) (296,200) (36,125) (36,125)
TOTAL NET BUDGETARY EXPENDITURES 630,591 148,107 148,107 657,478 131,041 131,041

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.