Quarterly Financial Report for the Quarter Ended September 30, 2019
Table of Contents
- 1. Introduction
- 2. Highlights of Fiscal Quarter and Fiscal Year to Date 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 2018-19 and 2019-20 Main Estimates, as well as the Budget 2019. 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 his 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, drafts legislation and responds to the legal needs of federal departments and agencies.
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. 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 earned 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 77% of the Vote 5 funding is related to cost-shared agreements with these recipients, which are usually accounted for in the last quarter of the fiscal year. 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 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, 2019. 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, 2019 and September 30, 2018
Text version: Graph 1: Comparison of Budgetary Authorities and Expenditures as of September 30, 2019 and September 30, 2018
The bar graph shows the Department’s net budgetary authorities and net vote authorities for the quarter ending September 30 for fiscal years 2018-19 and 2019-20. 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 $761.2M and $327.0M, respectively, on September 30, 2019, for total budgetary authorities of $1,088.2M. For the same period in the previous fiscal year, net budgetary authorities and net vote authorities totaled $755.0M and $296.2M, respectively, combining for total budgetary authorities of $1,051.2M.
Net budgetary expenditures and revenues earned for the period ending September 30, 2019 were $259.8M and $131.7M, respectively, for total budgetary expenditures of $391.5M. For the same period in the previous fiscal year, net budgetary expenditures and revenues earned totaled $297.5M and $87.2M, respectively, for a total of $384.7M.
For both periods ending September 30, authorities provided to the Department included: the Main Estimates and the funding received from the Budget Implementation Votes for new measures announced in Budget 2018 and Budget 2019. In addition, in fiscal year 2018-19 the Department had received funding for compensation adjustments for ratified collective agreements.
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 2019-20 increased by $6.2 million, from $755.0 million in 2018-19 to $761.2 million in 2019-20. This comprises:
- A net decrease of $12.9 million in Vote 1- Operating Expenditures:
- A decrease of $21.2 million:
- $11.8 million in one-time compensation adjustments for various collective agreements applied retrospectively in 2018-19;
- $7.4 million in the Operating Budget Carry Forward as opposed to amounts received in 2018-19;
- $1.1 million related to a transfer to Shared Services Canada for the management of information technology (Budget 2018); and,
- $0.9 million for other minor adjustments.
- An increase of $8.3 million:
- $3.5 million for Bringing Innovation to Regulations through the Implementation of the Agri-Food and Aquaculture Sector Regulatory Review and the Health and Biosciences Sector Regulatory Review Roadmaps (Budget 2019);
- $2.4 million to support the use and protection of classified information in immigration decisions and proceedings;
- $1.2 million to support Funding to Implement Transport Canada’s Regulatory Review Roadmap to Promote Innovation and Investment in the Transportation Sector (Budget 2019);
- $1.0 million for Enhancing the Integrity of Canada’s Borders and Asylum System (Budget 2019); and,
- $0.2 million for other minor adjustments.
- A decrease of $21.2 million:
- A net increase of $11.9 million in Vote 5 - Grants and Contributions:
- An increase of $13.1 million:
- $5.0 million for Criminal Legal Aid and Access to Justice services in the Territories (Budget 2016);
- $2.8 million for the Access to Justice in both Official Languages fund related to the Action Plan for Official Languages 2018-2023 (Budget 2018);
- $2.1 million for the Victims Fund to address the needs of vulnerable victims of crime;
- $1.6 million for Giving Canadians Better Access to Public Legal Education and Information (Budget 2019);
- $0.7 million in support of Immigration and Refugee Legal Aid (Budget 2019);
- $0.5 million for Supporting Renewed Legal Relationships with Indigenous Peoples (Call to Action 50) by supporting Indigenous Law Institutes (Budget 2019); and,
- $0.4 million in various minor adjustments.
- A decrease of $1.2 million related to the sunsetting of funding for legislative and non-legislative measure to implement the Canadian Victims Bill of Rights (CVBR).
- An increase of $13.1 million:
- An increase of $7.2 million in budgetary statutory authorities related to Employee Benefit Plan contributions.
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 decreased from $297.5 million in 2018-19 to $259.7 million in 2019-20. This net decrease of $37.8 million consists of changes associated with the following:
- Personnel: a decrease of $21.4 million mostly related to one-time retroactive compensation payments for various collective agreements that occurred in 2018-19;
- Transfer payments: an increase of $29.2 million mainly related to the timing of payments in accordance with the different contributions agreements;
- Repair and maintenance: a decrease of $1.2 million mainly related to a decrease in leasehold improvements;
- Acquisition of machinery and equipment: a decrease of $0.6 million largely related to the reduction of purchases of computer equipment such as laptops;
- Other: a net increase of $0.7 million attributable to minor changes in expenditures related to day-to-day operations; and,
- Revenue: an increase of $44.5 million in respendable revenues earned due to a timing difference in the finalization of agreements with client departments and the adjustments in 2018-19 related to updated Legal Services rates.
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).
To mitigate these risks, 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.
4. Significant Changes in Relation to Operations, Personnel and Programs
Bill Kroll was appointed to the position of Chief Financial Officer and Assistant Deputy Minister of the Management Sector, and Pamela Rudiger-Prybylski was appointed Deputy Chief Financial Officer, effective September 19. In addition, Lynn Lovett was appointed to the position of Assistant Deputy Attorney General of the National Litigation Sector, effective September 30. Finally, Jodie van Dieen has been appointed to the newly created position of Counsel to the Clerk of the Privy Council and Assistant Deputy Minister, Privy Council Office (PCO) Legal Services Sector within the Department of Justice, effective September 30.
Approval by Senior Officials
Me Nathalie G. Drouin, Ad. E.
Deputy Minister of Justice and
Deputy Attorney General of Canada
Bill Kroll, CPA, CMA
Chief Financial Officer and
Assistant Deputy Minister, Management Sector
November 29, 2019
5. Statement of Authorities (unaudited)
|Fiscal Year 2019-2020||Fiscal Year 2018-2019|
|Total available for use for the year ending March 31, 2020Table note i||Used during the quarter ended September 30, 2019||Year to date used at quarter end||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|
|Vote 1 - Gross operating expenditures||594,935||139,578||281,525||577,072||168,295||307,411|
|Less: Revenues netted against expenditures||(327,000)||(107,802)||(131,710)||(296,200)||(68,157)||(87,224)|
|Net Vote 1 - Net operating expenditures||267,935||31,776||149,815||280,872||100,138||220,187|
|Vote 5 - Grants and contributions||416,467||58,028||71,776||404,557||30,867||42,554|
|Contributions to employee benefit plans||76,701||19,056||38,111||69,474||17,368||34,737|
|Minister of Justice and Attorney General of Canada - Salary and motor car allowance||88||22||44||86||22||43|
|Spending of proceeds from the disposal of surplus Crown assets||32||0||0||4||0||0|
|Budgetary statutory authorities||76,821||19,078||38,155||69,564||17,390||34,780|
- Table note i
Includes only Authorities available for use and granted by Parliament at quarter end.
6. Departmental Budgetary Expenditures by Standard Object (unaudited)
|Fiscal Year 2019-2020||Fiscal Year 2018-2019|
|Planned expenditures for the year ending March 31, 2020Table note ii||Expended during the quarter ended September 30, 2019||Year to date used at quarter end||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|
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||1,088,223||216,684||391,456||1,051,193||216,552||384,745|
|Less revenues netted against expenditures
|Total net budgetary expenditures||761,223||108,882||259,746||754,993||148,395||297,521|
- 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 Indigenous 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 Main 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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