Quarterly Financial Report for the Quarter Ended September 30, 2015

• Quarterly Financial Reports

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

Table of Contents

• 1. Introduction
  • 1.1 Justice Mandate
  • 1.2 Basis of Presentation
  • 1.3 Department of Justice Financial Structure
• 2. Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results
  • 2.1 Significant Changes to Authorities
  • 2.2 Significant Changes to Revenues Collected
  • 2.3 Significant Changes to Budgetary Expenditures
• 3. Risks and Uncertainties
• 4. Significant Changes in Relation to Operations, Personnel and Programs
• 5. Statement of Authorities (unaudited)
• 6. Departmental Budgetary Expenditures by Standard Object (unaudited)
• 7. Glossary

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 2015-16 Main Estimates, Supplementary Estimates (A), as well as the Federal Budget 2015. In addition, the Departmental Audit Committee (DAC) has reviewed the report, but no external audit or review has been conducted.

The glossary (Section 7) 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 who is responsible for 52 statutes (46 of which fall under the full responsibility of the Minister and 6 of which are co-shared) and areas of federal law by ensuring a bilingual and bijural national legal framework, principally within the following domains: criminal justice (including victims of crime and 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, and drafts legislation. http://www.tbs-sct.gc.ca/ems-sgd/me-bpd/20152016/me-bpd-eng.pdf#page=179.

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 A for the 2015-16 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 purpose 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), 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 net increase in resources available for the year and net changes in actual expenditures for the quarter ending September 30, 2015. Graph 1 outlines the Department’s gross and net budgetary authorities and expenditures.

Graph 1: Comparison of Budgetary Authorities and Expenditures as of September 30, 2014, and September 30, 2015
($Millions)

Graph 1 - Text equivalent

The bar graph shows the Department’s net budgetary authorities and net vote authorities for the quarter ending September 30 for fiscal years 2014-15 and 2015-16. 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 totaled $702.3M and $296.2 M, respectively, at September 30, 2015, for total budgetary authorities of $998.5M. For the same period in the previous fiscal year, net budgetary authorities and net vote authorities totaled $655.6M and $296.2M, respectively, combining for total budgetary authorities of $951.8M.

Net budgetary expenditures and revenues netted against expenditures for the period ending September 30, 2015 were $217.5M and $115.2M, respectively, for total budgetary expenditures of $332.7M. For the same period in the previous fiscal year, net budgetary expenditures and revenues netted against expenditures totaled $246.0M and $117.1M, respectively, for a total of $363.1M.

For the quarter ending September 30 2015, authorities provided to the Department included Main Estimates, Supplementary Estimates (A) and the Operating Budget Carry Forward (OBCF). The Department had no items in Supplementary Estimates (A) for fiscal year 2014-15.

2.1 Significant Changes to Authorities

(Please refer to the Statement of Authorities table presented in Section 5.)

When compared to the second quarter of the previous fiscal year, the total net budgetary authorities available for 2015-16 were higher by $46.7 million^{Footnote 1}, from $655.6 million to $702.3 million. This increase comprises:

• Increase of $6.9 million^{Footnote 2} in Vote 1- Operating Expenditures:
  • Increase of $6.2 million associated with the funding renewal of the Supporting Families Experiencing Separation and Divorce Initiative;
  • Increase of $2.7 million associated with the funding renewal to support comprehensive claims and self-government negotiations across Canada;
  • Increase of $1.3 million associated with the receipt of the 2014-15 OBCF, when compared to the previous fiscal year OBCF;
  • Increase of $1.2 million associated with the funding renewal for the management of the Legal Aid Programs;
  • Increase of $1.0 million associated with the funding renewal of the Aboriginal Justice Strategy;
  • Increase of $0.6 million associated with the new funding for the Violence against Aboriginal Women and Girls initiative;
  • Increase of $0.6 million following the conversion of salary to operating and maintenance funds;
  • Increase of $0.3 million associated with the end of a transfer to Foreign Affairs, Trade & Development that provided support to staff located at missions abroad;
  • Increase of $0.1 million related to sunsetting of the transfer for the 2011 Census of Population initiative;
  • Decrease of $4.5 million associated with the sunsetting funding for activities related to Division 9 of the Immigration and Refugee Protection Act (IRPA) as well as the pursuit of enhanced diplomatic assurances against torture or mistreatment in serious inadmissibility cases. In the event that additional resources are required, they will be sought through established Estimates processes (i.e. Supplementary Estimates) which will ensure that the Minister’s statutory responsibilities under IRPA Division 9 continue to be met;
  • Decrease of $1.4 million associated with the implementation of the Legal Services Review reductions;
  • Decrease of $0.6 million for other adjustments, each under $0.1 million;
  • Decrease of $0.5 million associated with a transfer to the Canada School of Public Service; and,
  • Decrease of $0.1 million associated with the transfer to Public Works and Government Services Canada for the consolidation of the pay services project.
• Increase of $38.7 million in Vote 5 - Grants and Contributions (G&C):
  • Increase of $16.0 million associated with the funding renewal of the Supporting Families Experiencing Separation and Divorce Initiative;
  • Increase of $13.2 million associated with the funding renewal for the delivery of immigration and refugee legal aid in provinces and territories and the management of court-ordered counsel in federal prosecutions.
  • Increase of $9.8 million associated with funding renewal of the Aboriginal Justice Strategy;
  • Increase of $1.8 million in new funding to support non-legislative measures to address prostitution; and,
  • Decrease of $2.1 million associated with the sunsetting funding for activities related to Division 9 of the Immigration and Refugee Protection Act as well as the pursuit of enhanced diplomatic assurances against torture or mistreatment in serious inadmissibility cases. In the event that additional resources are required, they will be sought through established Estimates processes (i.e. Supplementary Estimates) which will ensure that the Minister’s statutory responsibilities under IRPA Division 9 continue to be met.
• Increase of $1.0 million in budgetary statutory authorities:
  • Increase of $1.9 million in EBP funding associated with changes in level of funding for various items in Vote 1 – Operating Expenditures;
  • Decrease of $0.6 million in EBP funding related to the transfer of salary funds to operating and maintenance;
  • Decrease of $0.3 million in EBP funding associated with the implementation of the Legal Services Review reductions.

In addition to the appropriations allocated to the Department through Main Estimates and Supplementary Estimates A, 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 ending on September 30 of 2014-15 and 2015-16, the Department’s NVA remained unchanged at $296.2 million.

2.2 Significant Changes to Revenues Collected

(Please refer to the Statement of Authorities table presented in Section 5.)

Compared to the previous year, revenues collected in the second quarter ending on September 30, 2015 decreased from $86.4 million to $68.6 million. This decrease of $17.8 million can be explained by improved collaboration between Justice and its client departments that resulted in more revenues being collected in the first quarter this fiscal year leading to a reduction in this second quarter. Overall year-to-date total revenues collected are very similar to those of the previous fiscal year ($117.1 million in 2014-15 compared to $115.2 million in 2015-16).

2.3 Significant Changes to Budgetary Expenditures

(Please refer to the Departmental Budgetary Expenditures by Standard Object table presented in Section 6.)

Second quarter gross budgetary expenditures decreased from $184.3 million in 2014-15 to $174.6 million in 2015-16. This decrease of $9.7 million^{Footnote 3} consists of variances associated with the following:

• an increase of $1.6 million in other subsidies and payments due to the settlement of a court award;
• a decrease of $10.7 million in transfer payments during the current quarter primarily due to the timing differences in issuing payments to recipients;
• a decrease of $0.6 million for the remaining of the standard objects minor variances.

Revenues collected during the quarter (as outlined in section 2.2) served to reduce the gross budgetary expenditures. Consequently, second quarter net budgetary expenditures increased from $97.9 million in 2014-15 to $106.1 million in 2015-16.

3. Risks and Uncertainties

In its role as a provider of legal advisory, litigation and legislative services 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. As clients adjust priorities, uncertainties may arise concerning the Department’s ability to deliver effective and fiscally sustainable services, particularly if there are unanticipated changes in the volume or nature of legal service requests.

To address this risk, the Department has improved its financial forecasting practices and continued joint planning with clients. This collaboration includes sharing information on the effective management of legal risks, the triggers and costs of litigation, and the appropriate role of legal counsel. These activities have been undertaken in the context of the horizontal review of legal services, which was initiated in 2013-14 with a view to effectively managing the demand for legal services and ensuring the fiscal sustainability of those services in the long term. Based on the findings of this review, the Department is working to refine its service delivery model over a three-year period.

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.

Approval by Senior Officials

Approved by:

Ottawa, Canada

5. Statement of Authorities (unaudited)

Department of Justice
For the quarter ended September 30, 2015
Statement of Authorities (unaudited)
(In thousands of dollars)

	Fiscal year 2015-2016			Fiscal year 2014-2015
	Total available for use for the year ending March 31, 2016Table note *	Used during the quarter ended September 30, 2015	Year to date used at quarter end	Total available for use for the year ending March 31, 2015Table note **	Used during the quarter ended September 30, 2014	Year to date used at quarter end
Vote 1 - Operating expenditures	565,050	127,447	255,743	558,114	126,655	279,864
Less: Revenues netted against expenditures	(296,200)	(68,563)	(115,159)	(296,200)	(86,450)	(117,088)
Net Vote 1 operating expenditures	268,850	58,884	140,584	261,914	40,205	162,776
Vote 5 - Grants and contributions	356,225	27,905	38,351	317,485	38,623	45,099
Contributions to employee benefit plans	77,116	19,272	38,544	76,161	19,041	38,081
Minister of Justice and Attorney General of Canada - Salary and motor car allowance	82	21	41	80	20	40
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	0	0	0	4	4
Budgetary statutory authorities	77,201	19,293	38,585	76,244	19,065	38,125
TOTAL AUTHORITIES	702,276	106,082	217,520	655,643	97,893	246,000

Table note 1

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

Return to table note * referrer

Table note 2

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

Return to table note ** referrer

6. Departmental Budgetary Expenditures by Standard Object (unaudited)

7. Glossary

Authorities

Spending 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.

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 (NVA)

The authority by which the Department of Justice has permission to collect and spend revenue earned from the provision of legal and internal services within government.

Operating Budget Carry Forward (OBCF)

A 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.)

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.

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.

• Quarterly Financial Reports