Quarterly Financial Report for the Quarter Ended September 30, 2014
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 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:
- 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.
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 September 30, 2014. Graph 1 outlines the Department’s gross and net budgetary authorities and expenditures.
For the period ending September 30, authorities provided to the Department included Main Estimates and Treasury Board Centrally Managed Votes. The Department had no items in Supplementary Estimates as of the end of the second quarter in either fiscal year.
2.1 Significant Changes to Authorities
(See also Statement of Authorities table in Section 6.)
When compared to the second quarter of the previous fiscal year, the total net budgetary Authorities available for 2014-15 were reduced by $1.9 millionFootnote 1, from $657.5 million to $655.6 million. This reduction comprises:
- Increase of $26.0 million in Vote 1—Operating Expenditures:
- Decrease of $7.2 million due to the sunsetting of the Families Experiencing Separation and Divorce initiativeFootnote 2;
- Decrease of $5.1 million associated with the implementation of the Deficit Reduction Action Plan as announced in Budget 2012;
- Decrease of $2.6 million due to sunsetting of the Comprehensive land claims and self-government negotiations in British Columbia policy;
- Decrease of $1.4 million transfer of IT services to Shared Services Canada for the Procurement – Workplace Technology Device software;
- Decrease of $1.2 million due to sunsetting of the funding for the renewal of Legal Aid funding to the provinces and territories for the delivery of the Immigration and Refugee legal aid and for the management of Court-ordered Counsel in Federal ProsecutionsFootnote 3;
- Decrease of $1.2 million for other adjustments, each under $0.5 million;
- Increase of $1.3 million for other items, each under $1.0 million;
- Increase of $18.3 million as a result of a ratification of various collective agreements;
- Increase of $25.1 million due to the receipt of the Operating Budget Carry Forward from the preceding fiscal year.
- Reduction of $24.2 million in Vote 5—Grants and Contributions (G&C):
- Decrease of $16.0 million due to sunsetting of Families Experiencing Separation and Divorce initiativeFootnote 4;
- Decrease of $13.2 million due to sunsetting of the funding for the renewal of Legal Aid funding to the provinces and territories for the delivery of the Immigration and Refugee legal aid and for the management of Court-ordered Counsel in Federal ProsecutionsFootnote 5;
- Increase of $1.4 million due to enhanced funding to enhance the Victims Fund to expand the reach of the Federal Victims Strategy;
- Increase of $3.6 million due to funding under the new Roadmap for Canada's Linguistic Duality 2013-2018 for Access to Justice in Both Official Languages.
- Reduction of $3.6 million in budgetary statutory authorities:
- Decrease of $4.2 million related to the reduction of EBP rates from 17.4 percent to 16.5 percent, as prescribed by Treasury Board Secretariat;
- Decrease of $3.1 million in EBP for various items under $1.0 million each; and
- Increase of $3.7 million in EBP as a result of a ratification of various collective agreements.
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 September 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 second quarter ending September 30, 2014 increased from $78.1 million to $86.5 million. This increase of $8.4 million can be explained by fluctuations in legal services demand, first quarter billings recognized in the second quarter due to late receipt of interdepartmental codes and efficiency improvements related to the Cost Recovery Improvement Initiative (CRPI) billing system.
2.3 Significant Changes to Budgetary Expenditures
(See also Departmental Budgetary Expenditures by Standard Object table in Section 7.)
Second quarter gross budgetary expenditures decreased from $196.3 million in 2013-14 to $184.3 million in 2014-15. This decrease of $12.0 million in gross expenditures consists primarily of variances associated with the following standard objects:
- Personnel: a reduction of $35.8 million mainly related to:
- a reduction of $30.5 million in severance payments largely associated with the ratification of various collective agreements which includes increases in compensation and severance pay, and a cash payout based on employees’ length of service and received in lieu of severance pay on retirement, according to changes to the terms and conditions of the collective agreement;
- a reduction of $4.5 million in salary expenditures due to a general decrease in workforce size;
- a reduction of $0.9 million in Employee Benefit Plan (EBP) related to the reduction of EBP rates from 17.4 percent to 16.5 percent, prescribed by Treasury Board Secretariat; and
- an increase of $0.1 million in miscellaneous items each under $0.1 million.
- Transfer payments: an increase of $21.6 million due to timing differences in issuing interim payments and offset by a multi-year agreement that has yet to be ratified by recipients.
- An offsetting increase of $2.3 million for the remaining expenditure types, each under $0.5 million.
As mentioned in Section 2.2, the Department experienced an $8.4 million increase in revenues collected for legal services, from $78.1 million in 2013-14 to $86.5 million during the current quarter. Consequently, when revenues collected are netted against gross budgetary expenditures, net budgetary expenditures decreased by $20.3 million from $118.2 million in 2013-14 to $97.9 million in the corresponding period of 2014-15.
3. Risks and Uncertainties
In its role as a service provider to federal departments and agencies, the Department must maintain appropriate delivery capacity to meet legal needs. This capacity is largely contingent on the recovery of costs from clients. Risk may be created as clients adjust priorities, particularly if there are unanticipated changes in the volume or nature of their legal service requests.
To address this risk, the Department continued to focus on improvements to its cost recovery and forecasting practices. The Department also focused on client engagement, including sharing information on the effective management of legal risks, the triggers and costs of litigation, and the appropriate role of legal counsel. The Department continued joint planning with clients to ensure that legal resources are properly aligned with government priorities. Finally, as part of the Government’s commitment to better and more effectively managing resources on an ongoing basis, a horizontal review of legal services was undertaken in 2013-14 to improve the delivery of legal services government-wide, with a view to managing the demand for legal services and ensuring the fiscal sustainability of those services in the long term.
4. Significant Changes in Relation to Operations, Personnel and Programs
On July 11, 2014, Lori Sterling was appointed Deputy Minister of Labour. Mrs. Sterling had held the position of Associate Deputy Minister at the Department of Justice since 2012.
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:
- Streamlining internal services by consolidating the delivery of Communications, Human Resources, Finance and other administrative and management services. New organizational structures have been created and are being implemented. New work processes have been developed in each of the functional areas with a view to maximizing efficiency 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 has resulted in finding and putting in place greater efficiencies which have resulted in greater savings;
- Partnering with other government departments to achieve mutually satisfactory organizational redesign and a focus on streamlining legal services delivery;
- Creating centres of legal expertise in some areas of law to increase efficiency, and implementing cost effective legal services processes and practices;
- 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 teleconferencing/video conferencing in order to increase the effectiveness and efficiency of programs and services delivery in today’s fast-paced communication environment.
The Department successfully met its Budget 2012 financial and human resource reduction commitments in 2012-2013 and 2013-2014. As of September 30, 2014, the Department is on target to meet its overall financial and human resource commitments as well as its transformation commitments by March 31, 2015.
Approval by Senior Officials
Original signed by William F. Pentney
November 26, 2014
William F. Pentney
Deputy Minister of Justice and
Deputy Attorney General of Canada
Original signed by Marie-Josée Thivierge
November 26, 2014
Assistant Deputy Minister
Management Sector, and
Chief Financial Officer
6. Statement of Authorities (unaudited)
|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 September 30, 2014Table note **||Year to date used at quarter end||Total available for use for the year ending March 31, 2014Table note ***||Used during the quarter ended September 30, 2013||Year to date used at quarter end|
|Vote 1 - Operating expenditures||558,114||126,655||279,864||532,186||159,268||298,018|
|Less: Revenues netted against expenditures||(296,200)||(86,450)||(117,088)||(296,200)||(78,115)||(114,240)|
|Net Vote 1 operating expenditures||261,914||40,205||162,776||235,986||81,153||183,778|
|Vote 5 - Grants and contributions||317,485||38,623||45,099||341,635||17,055||25,503|
|Contributions to employee benefit plans||76,161||19,041||38,081||79,777||19,944||39,888|
|Minister of Justice and Attorney General of Canada - Salary and motor car allowance||80||20||40||79||20||40|
|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||4||4||0||20||24|
|Budgetary statutory authorities||76,244||19,065||38,125||79,858||19,984||39,952|
- Table note 1
Includes only Authorities available for use and granted by Parliament at quarter end.
- Table note 2
Differences may arise due to rounding.
- Table note 3
Includes only Authorities available for use and granted by Parliament at quarter end.
7. Departmental Budgetary Expenditures by Standard Object (unaudited)
|Fiscal year 2014-2015||Fiscal year 2013-2014|
|Planned expenditures for the year ending March 31, 2015||Expended during the quarter ended September 30, 2014||Year to date used at quarter end||Planned expenditures for the year ending March 31, 2014||Expended during the quarter ended September 30, 2013||Year to date used at quarter end|
|Transportation and communications||13,621||1,728||2,617||11,980||1,517||2,905|
|Professional and special services||45,423||6,736||11,388||32,997||6,278||10,741|
|Repair and maintenance||8,512||733||1,242||6,955||236||1,021|
|Utilities, materials and supplies||5,459||946||1,496||3,955||952||1,438|
|Acquisition of land, buildings and works||0||0||0||0||0||0|
|Acquisition of machinery and equipment||11,555||410||720||7,382||518||728|
|Other subsidies and payments||2,039||978||18,316||2,504||104||227|
|Total gross budgetary expenditures||951,843||184,343||363,088||953,679||196,307||363,473|
|Less revenues netted against expenditures
|Total revenues netted against expenditures||(296,200)||(86,450)||(117,088)||(296,200)||(78,115)||(114,240)|
|TOTAL NET BUDGETARY EXPENDITURES||655,643||97,893||246,000||657,479||118,192||249,233|
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.
- 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.
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