Quarterly Financial Report for the Quarter Ended December 31, 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 and 2018-19 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 an 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 also has the authority to spend revenues collected for providing internal administrative support services to other government departments. In departmental reporting, these revenues offset total departmental authorities and expenditures.

The primary recipients of the Department’s Vote 5 (Grants and Contributions) are Provincial and Territorial governments. Approximately 75% 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, and as a result, a large proportion of expenditures in Vote 5 tend to occur in the fourth quarter.

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 December 31, 2018. 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, 2018, and December 31, 2017
(in millions)

Graph 1: Comparison of Budgetary Authorities and Expenditures as of December 31, 2018, and December 31, 2017

Graph 1 - Text Version

The bar graph shows the Department’s net budgetary authorities and net vote authorities for the quarter ending December 31 for fiscal years 2018-19 and 2017-18. 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 $801.8M and $327.0M, respectively, at December 31, 2018, for total budgetary authorities of $1,128.8M. For the same period in the previous fiscal year, net budgetary authorities and net vote authorities totaled $734.8M and $296.2M, respectively, combining for total budgetary authorities of $1,031.0M.

Net budgetary expenditures and revenues earned for the period ending December 31, 2018 were $397.3M and $221.3M, respectively, for total budgetary expenditures of $618.6M. For the same period in the previous fiscal year, net budgetary expenditures and revenues earned totaled $343.8M and $197.5M, respectively, for a total of $541.3M.

For both periods ending December 31, authorities provided to the Department included: the Main Estimates; the Supplementary Estimates A; the Year End Operating Budget Carry Forward; the funding received from TBS for Compensation Adjustments related to recently approved collective agreements; and the funding received to date from the 2018-2019 Budget Implementation Vote for new measures approved in Budget 2018.

For quarters ending December 31, the Department’s Vote-Netted Revenue increased from $296.2 million in 2017-18 to $327.0 million in 2018-19 to account for increases in salary costs due to the recently approved collective agreements, and an increase in demand for legal services.

2.1. Significant Changes to Authorities

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

When compared to the third quarter of the previous fiscal year, the total net budgetary authoritiesFootnote 1 available for 2018-19 increased by $67.0 million, from $734.8 million in 2017-18 to $801.8 million in 2018-19. This increase comprises:

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 $343.8 million in 2017-18 to $397.3 million in 2018-19. This increase of $53.5 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

On January 14, 2019, the Honourable David Lametti was appointed by the Prime Minister as the new Minister of Justice and Attorney General of Canada.

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
March 1, 2019

5. Statement of Authorities (unaudited)

Department of Justice
Quarterly Financial Report
For the quarter ended December 31, 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 December 31, 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 December 31, 2017 Year to date used at quarter end
Vote 1 - Gross Operating expenditures 643,885 149,003 456,414 568,414 138,793 405,500
Less: Revenues netted against expenditures (327,000) (134,074) (221,298) (296,200) (112,678) (197,537)
Net Vote 1 - Net Operating expenditures 316,885 14,929 235,116 272,214 26,115 207,963
Vote 5 - Grants and contributions 406,607 67,429 109,983 390,315 23,185 82,159
Contributions to employee benefit plans 78,234 17,369 52,106 72,177 17,864 53,594
Minister of Justice and Attorney General of Canada - Salary and motor car allowance 86 21 64 84 22 64
Spending of proceeds from the disposal of surplus Crown assets 4 0 0 5 0 0
Budgetary statutory authorities 78,324 17,390 52,170 72,266 17,886 53,658
Total authorities 801,816 99,748 397,269 734,795 67,186 343,780
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 Q2 and Q3 is generally explained by the receipt of the Supplementary Estimates A and funding for this fiscal year for Compensation Adjustments regarding recently approved collective agreements.

6. Departmental Budgetary Expenditures by Standard Object (unaudited)

Department of Justice
Quarterly Financial Report
For the quarter ended December 31, 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 December 31, 2018 Year to date used at quarter end Planned expenditures for the year ending March 31, 2018Table note ii Expended during the quarter ended December 31, 2017 Year to date used at quarter end
Expenditures
Personnel
 619,776 146,288 459,185 537,898 140,271 415,207
Transportation and communications
 11,708 2,217 5,980 11,386 1,906 4,715
Information
 4,122 740 1,670 4,332 728 1,661
Professional and special services
 49,032 8,753 21,048 49,901 9,329 20,816
Rentals
 10,711 1,350 4,504 9,490 1,379 5,351
Repair and maintenance
 4,579 1,351 3,236 5,949 1,586 2,179
Utilities, materials and supplies
 5,381 823 2,271 5,924 936 2,459
Acquisition of machinery and equipment
 6,944 2,657 4,362 7,258 261 1,744
Transfer payments
 406,607 67,429 109,983 390,315 23,185 82,159
Other subsidies and payments
 9,956 2,214 6,328 8,542 283 5,026
Total gross budgetary expenditures 1,128,816 233,822 618,567 1,030,995 179,864 541,317
Less revenues netted against expenditures
(Revenues)		 (327,000) (134,074) (221,298) (296,200) (112,678) (197,537)
Total net budgetary expenditures 801,816 99,748 397,269 734,795 67,186 343,780
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.