Quarterly Financial Report for the Quarter Ended September 30, 2018

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 and manner prescribed by the Treasury Board. The report should be read in conjunction with the 2017-18 and 2018-19 Main Estimates, 2017-18 Supplementary Estimates, as well as Budget 2018. 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 in her responsibilities for 53 statutes 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; Indigenous 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 and regulations.

1.2. Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. 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. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

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.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements, which are part of the Departmental Results Report process. However, the spending authorities voted by Parliament remain on an expenditure basis.

Although the Department has implemented a new advanced billing process, revenues are reported when they are netted against expenditures rather than when they are collected, to ensure consistency of presentation and comparability with prior year reports.

1.3. Department of Justice Financial Structure

The Department of Justice financial structure is comprised of the following 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 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.

The primary recipients of the Department’s Vote 5 (Grants and Contributions) are Provincial and Territorial governments. Approximately 76% of the Vote 5 funding is cost-shared with these recipients. These cost-shared agreements are usually accounted for in the last quarter of the fiscal year.

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 ended September 30, 2018. 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, 2017, and September 30, 2018
(in millions)

Graph 1: Comparison of Budgetary Authorities and Expenditures as of September 30, 2017, and September 30, 2018

Graph 1 - Text Version

The bar graph shows the Department’s net budgetary authorities and net vote authorities for the quarter ending September 30 for fiscal years 2017-18 and 2018-19. It also shows the Department’s net budgetary expenditures and the revenues earned for the same period.

Net budgetary authorities and net vote authorities totaled $755.0M and $296.2M, respectively, at September 30, 2018, for total budgetary authorities of $1,051.2M.  For the same period in the previous fiscal year, net budgetary authorities and net vote authorities totaled $728.4M and $296.2M, respectively, combining for total budgetary authorities of $1,024.6M.

Net budgetary expenditures and revenues earned for the period ending September 30, 2018 were $297.5M and $87.2M, respectively, for total budgetary expenditures of $384.7M.  For the same period in the previous fiscal year, net budgetary expenditures and revenues earned totaled $276.6M and $84.9M, respectively, for a total of $361.5M.

For the period ending September 30, 2018, authorities provided to the Department included the Main Estimates, the 2017-18 Year End Operating Budget Carry Forward, the funding received from TBS for Compensation Adjustments related to newly approved collective agreements and the funding received to date from the Budget Implementation Vote for new measures approved in Budget 2018. With the reform of the estimates process, Supplementary Estimates A is postponed until December and would be included in the Quarterly Financial Report for the quarter ending December 31, 2018.

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 authoritiesFootnote 1 available for 2018-19 are higher by $26.6 million, from $728.4 million in 2017-18 to $755.0 million in 2018-19. This increase comprises:

In addition to the appropriations allocated to the Department through Main Estimates, the Department also has Vote-Netted Revenue authority. This authority allows the Department to collect revenues and offset expenditures in the same fiscal year related to the provision of internal support services, as well as mandatory legal services to government departments and agencies. For both respective quarters ending September 30 of 2017-18 and 2018-19, the Department’s Vote-Netted Revenue remained unchanged at $296.2 million.

2.2. Significant Changes to Budgetary Expenditures and Revenues

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

Total year-to-date net budgetary expenditures increased from $276.6 million in 2017-18 to $297.5 million in 2018-19. This increase of $20.9 million consists of variances associated with the following:

3. Risks and Uncertainties

The legal service demands that the Department is called upon to meet may evolve, depending on the priorities clients pursue, their level of tolerance towards legal risk, and their choices about when to engage the Department of Justice. Meeting these evolving demands is made more challenging as clients seek to contain spending on legal services.

Unanticipated changes in the volume or nature of legal service requests, as well as changes in law practice management, could impact the Department’s ability to deliver effective and fiscally sustainable services. Should the containment or reduction of legal services expenditures not be properly planned, the Department could face unanticipated imbalances between expenditures and revenues. Moreover, as the Department balances legal service delivery capacity to respond to current demands, it may have limited capacity to respond to any future surges in demands (in either volume or complexity).

The Department has improved its financial forecasting practices and continues to collaborate with client departments. This collaboration includes joint planning to meet government priorities and manage risks in a cost-effective manner. The Department also continues to make improvements to its cost recovery processes to effectively mitigate financial risks.

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

There have been no significant changes in relation to operations, personnel and programs.

Approval by Senior Officials

Approved by:

Me Nathalie G. Drouin, Ad. E.
Deputy Minister of Justice and
Deputy Attorney General of Canada

Johanne Bernard, CPA, CMA
Chief Financial Officer and
Assistant Deputy Minister, Management Sector

Ottawa, Canada
November 29, 2018

5. Statement of Authorities (unaudited)

Department of Justice
Quaterly Financial Report
For the quarter ended September 30, 2018
Statement of Authorities (unaudited)
(In thousands of dollars)
  Fiscal year 2018-19 Fiscal year 2017-18
Total available for use for the year ending March 31, 2019Table note i Used during the quarter ended September 30, 2018 Year to date used at quarter end Total available for use for the year ending March 31, 2018Table note i Used during the quarter ended September 30, 2017 Year to date used at quarter end
Vote 1 - Gross Operating expenditures 577,072 168,295 307,411 561,954 137,043 266,707
Less: Revenues netted against expenditures (296,200) (68,157) (87,224) (296,200) (66,054) (84,859)
Net Vote 1 - Net Operating expenditures 280,872 100,138 220,187 265,754 70,989 181,848
Vote 5 - Grants and contributions 404,557 30,867 42,554 390,315 51,126 58,974
Contributions to employee benefit plans 69,474 17,368 34,737 72,231 17,865 35,730
Minister of Justice and Attorney General of Canada - Salary and motor car allowance 86 22 43 84 21 42
Spending of proceeds from the disposal of surplus Crown assets 4 0 0 4 0 0
Budgetary statutory authorities 69,564 17,390 34,780 72,319 17,886 35,772
Total authorities 754,993 148,395 297,521 728,388 140,001 276,594
Table note i

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

Return to table note i referrer

Note: The increase in authorities between Q1 and Q2 is generally explained by the receipt of the Operating Budget Carry Forward (OBCF) specifically for this fiscal year by the receipt of Compensation Adjustments funding regarding recently approved collective agreements.

6. Departmental Budgetary Expenditures by Standard Object (unaudited)

Department of Justice
Quarterly Financial Report
For the quarter ended September 30, 2018
Departmental Budgetary Expenditures by Standard Object (unaudited)
(In thousands of dollars)
  Fiscal year 2018-2019 Fiscal year 2017-2018
Planned expenditures for the year ending March 31, 2019Table note ii Expended during the quarter ended September 30, 2018 Year to date used at quarter end Planned expenditures for the year ending March 31, 2018Table note ii Expended during the quarter ended September 30, 2017 Year to date used at quarter end
Expenditures
Personnel
 544,915 168,837 312,897 531,325 136,456 274,936
Transportation and communications
 11,592 1,975 3,763 11,411 1,573 2,809
Information
 4,082 578 930 4,342 556 933
Professional and special services
 48,550 6,932 12,295 50,008 7,251 11,487
Rentals
 10,690 1,664 3,154 9,490 3,140 3,972
Repair and maintenance
 4,570 1,653 1,885 5,962 495 593
Utilities, materials and supplies
 5,370 807 1,448 5,936 859 1,523
Acquisition of machinery and equipment
 6,930 1,259 1,705 7,257 1,222 1,483
Transfer payments
 404,557 30,867 42,554 390,315 51,126 58,974
Other subsidies and payments
 9,937 1,980 4,114 8,542 3,377 4,743
Total gross budgetary expenditures 1,051,193 216,552 384,745 1,024,588 206,055 361,453
Less revenues netted against expenditures
(Revenues)		 (296,200) (68,157) (87,224) (296,200) (66,054) (84,859)
Total net budgetary expenditures 754,993 148,395 297,521 728,388 140,001 276,594
Table note ii

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

Return to table note ii referrer

7. Glossary

Authorities:

Spending authorities are approvals from Parliament for individual government organizations to spend up to specific amounts. Spending 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.
Budget Implementation Vote:
Treasury Board Central vote for new measures or initiatives announced in the Federal Budget. The central vote facilitates timely availability of supply for Budget measures to be carried out in the upcoming fiscal year.
Compensation Adjustments:
Treasury Board Central vote that allocates supplementary funds for adjustments made to terms and conditions of service or employment of the federal public administration as a result of collective bargaining.
Deferred Revenues:
An amount received or recorded as receivable but not yet earned and meanwhile carried forward to be taken into income in future periods.
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.
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.
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.
Respendable Revenues Collected:
Represents revenues that the department has specific authority from Parliament to respend which may be comprised of deferred revenues and revenues netted against expenditures.
Respendable Revenues Earned:
Represents revenues that are recognized when they are earned (usually when services are rendered).
Special Purpose Financial Reporting Framework:
The Quarterly Financial Report requirements and structure as defined in the GC 4400 Departmental Quarterly Financial Report.
Standard Objects:
A system in accounting that classifies and summarizes records by categories, such as type of goods or services acquired, for monitoring and reporting.
Sunsetting:
The end of temporary funding.
Supplementary Estimates:
The President of the Treasury Board tables two Supplementary Estimates, in late fall and late winter, 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).
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.
Vote 5—Grants and Contributions:
A vote used when grants and/or contributions expenditures equal or exceed $5 million.
Vote-Netted Revenue:
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.