Quarterly Financial Report for the Quarter Ended December 31, 2018
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. Statement of Authorities (unaudited)
- 6. Departmental Budgetary Expenditures by Standard Object (unaudited)
- 7. 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 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:
- Vote 1 - Operating Expenditures;
- Vote 5 - Grants and Contributions; and
- Statutory authorities related to contributions to the Employee Benefit Plan (EBP), salary 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 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.
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:
- Increase of $44.7 million in Vote 1- Operating Expenditures:
- Increase of $46.8 million in salary adjustments due to the ratification of collective agreements;
- A net increase of $0.1 million related to minor adjustments; and
- Decrease of $2.2 million related to the funding to support the use and protection of classified information in immigration proceedings, which was renewed at a reduced level.
- Increase of $16.3 million in Vote 5 - Grants and Contributions:
- Increase of $12.8 million for additional contribution funding for Immigration and Refugee Legal Aid;
- Increase of $3.0 million for additional contribution funding related to Criminal legal aid and Access to Justice Services in the Territories (Criminal Legal Aid component);
- Increase of $1.6 million for contribution funding to address the needs of vulnerable victims of crime; and
- Decrease of $1.1 million related to the funding to support the use and protection of classified information in immigration proceedings, which was renewed at a reduced level.
- Increase of $6.0 million in budgetary statutory authorities:
- Increase of $8.3 million related to the Employee Benefit Plan (EBP) appropriated to the Department following the change in Vote-Netted Revenue;
- Net increase of $0.1 million due to minor adjustments; and
- Decrease of $2.4 million due to a change to the Employee Benefit Plan rate.
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:
- Personnel: an increase of $44.0 million mainly related to:
- Increase of $30.9 million associated with the retroactive payments due to recently approved collective agreements;
- Increase of $13.7 million due to an increase in the workforce size and the impact of previously approved compensation increases; and
- Net decrease of $0.6 million due to minor adjustments.
- Transportation and communications: an increase of $1.3 million mostly related to business travel and relocation costs.
- Repair and maintenance: an increase of $1.1 million mainly related to leasehold improvements. This year, some projects have been completed while last year, they were only in the early phase, thus most of the expenses occurred in this fiscal year.
- Acquisition of machinery and equipment: an increase of $2.6 million mostly related to the replacement of outdated IT and office equipment.
- Transfer payments: an increase of $27.8 million mainly related to:
- Increase of $24.8 million related to multi-year agreements being renewed in 2017-18 for programs such as Canadian Family Justice System, Criminal Legal Aid and Immigration and Refugee Legal Aid. These agreements were renewed late in fiscal year 2017-18, which resulted in payments being issued later in the fiscal year, compared to this fiscal year;
- Increase of $1.7 million attributable to new funding received for vulnerable victims; and
- Increase of $1.3 million attributable to timing differences in issuing payments to recipients in the various remaining programs.
- Increase of $0.5 million for a variety of small variances in other types of expenditures.
- An off-setting increase of $23.8 million in respendable revenues earned due to retroactive billing to account for the increase costs in salary and the increase in legal services demand.
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
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
March 1, 2019
5. Statement of Authorities (unaudited)
|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|
- Table note i
Includes only Authorities available for use and granted by Parliament at quarter end.
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)
|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|
Transportation and communications
Professional and special services
Repair and maintenance
Utilities, materials and supplies
Acquisition of machinery and equipment
Other subsidies and payments
|Total gross budgetary expenditures||1,128,816||233,822||618,567||1,030,995||179,864||541,317|
|Less revenues netted against expenditures
|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.
Spending authorities are approvals from Parliament for individual government organizations to spend up to specific amounts. Spending 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.
- 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.
- 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.
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