Quarterly Financial Report for the quarter ended June 30, 2020

• Quarterly Financial Reports

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 Results
  • 2.1. Significant Changes to Authorities
  • 2.2. Significant Changes to Budgetary Expenditures and Revenues
• 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 and manner prescribed by the Treasury Board. The report should be read in conjunction with the 2019-20 and 2020-21 Main Estimates, 2019-20 Budget Implementation Vote, as well as 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

Established in 1868, the Department of Justice Canada (the Department) supports the dual roles of the Minister of Justice and the Attorney General of Canada. Under the Department of Justice Act, the Minister is the legal advisor to Cabinet and ensures that the administration of public affairs is in accordance with the law. The Minister of Justice is responsible for matters connected with the administration of justice that fall within federal jurisdiction and fulfils this responsibility by developing policies, laws, and programs to strengthen the national framework.

Under the Department of Justice Act, the Attorney General of Canada is the chief law officer of the Crown. The Attorney General provides legal services to the government and its departments and agencies. These services include the provision of legal advice, the conduct of litigation and the drafting of legislation and regulations. The Attorney General represents the Crown and not individual departments or agencies. Therefore, the Attorney General seeks to protect interests for the whole of government when providing legal advice and conducting litigation.

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 June 30, 2020. Graph 1 outlines the Department’s gross and net budgetary authorities and expenditures.

Graph 1: Comparison of Budgetary Authorities and Expenditures as of June 30, 2020 and June 30, 2019

Text version: Graph 1: Comparison of Budgetary Authorities and Expenditures as of June 30, 2020 and June 30, 2019

The bar graph shows the Department’s net budgetary authorities and net vote authorities for the quarter ending June 30 for fiscal years 2020-21 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 $667.6M and $245.3M, respectively, on June 30, 2020, for total budgetary authorities of $912.9M. For the same period in the previous fiscal year, net budgetary authorities and net vote authorities totaled $738.4M and $327.0M, respectively, combining for total budgetary authorities of $1,065.4M.

Net budgetary expenditures and revenues earned for the period ending June 30, 2020 were $137.5M and $48.3M, respectively, for total budgetary expenditures of $185.8M. For the same period in the previous fiscal year, net budgetary expenditures and revenues earned totaled $150.9M and $23.9M, respectively, for a total of $174.8M.

For both periods ending June 30, authorities provided to the Department included: Main Estimates 2019-20, Main Estimates 2020-21 Interim Supply^{Footnote *} and funding received from the 2019-20 Budget Implementation Vote for new measures announced in Budget 2018 and Budget 2019.

2.1. Significant Changes to Authorities

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

When compared to the first quarter of the previous fiscal year, the total net budgetary authorities available for 2020-21 decreased by $70.8 million, from $738.4 million in 2019-20 to $667.6 million in 2020-21. This comprises:

• A net decrease of $48.9 million in Vote 1 - Operating Expenditures:
  • A decrease of $67.4 million:
    • $65.6 million in the authorities available for use is explainable by the fact that the Department did not receive its full supply from Main Estimates in the first quarter (please refer to Section 2 for more details);
    • $0.6 million for the sunsetting of the funding for the Action Plan to address Family Violence and Violent Crimes Against Aboriginal Women and Girls;
    • $0.5 million for the sunsetting of some temporary funding in support of legislative and non-legislative measures to implement the Canadian Victims Bill of Rights; and,
    • $0.7 million for other minor adjustments.
  • An increase of $18.5 million:
    • $12.6 million in compensation adjustments for various collective agreements;
    • $3.7 million for Bringing Innovation to Regulations to strengthen the Government’s capacity to draft legislation and regulatory changes needed to modernize regulations (Budget 2019);
    • $1.3 million for Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime (Budget 2019); and,
    • $0.9 million for other minor adjustments.
• A net decrease of 22.1 million in Vote 5 - Grants and Contributions:
  • A decrease of $46.7 million:
    • $35.9 million in the authorities available for use is explainable by the fact that the Department did not receive its full supply from Main Estimates in the first quarter (please refer to Section 2 for more details);
    • $6.2 million for the sunsetting of funding to support culturally-responsive victim services as well as Family Information Liaison Units for families of missing and murdered Indigenous women and girls. The funding has been renewed and was announced by the Government in the 2019 Fall Economic Update, but will be accessed later this fiscal year by the Department through an Estimates process;
    • $2.1 million for the sunsetting of funding in support of non-legislative measures to address prostitution;
    • $1.2 million for the sunsetting of temporary funding in support of legislative and non-legislative measures to implement the Canadian Victims Bill of Rights; and,
    • $1.3 million for the sunsetting of funding for the Action Plan to address Family Violence and Violent Crimes against Aboriginal Women and Girls.
  • An increase of $24.6 million:
    • $12.0 million to the provinces and territories to assist in the operation of Criminal Legal Aid (Budget 2016);
    • $10.5 million to Provide Legal Support and Awareness to Address Sexual Harassment in the Workplace (Budget 2018);
    • $1.5 million to Support Renewed Legal Relationships with Indigenous Peoples (Call to Action 50) by supporting Indigenous Law Institutes (Budget 2019); and,
    • $0.6 million to Enhance the Integrity of Canada’s Borders and Asylum System (Budget 2019) through the Immigration and Refugee Legal Aid Program.
• A net increase of $0.2 million in budgetary statutory authorities:
  • An increase of $3.7 million:
    • $2.1 million in compensation adjustments for various collective agreements;
    • $1.2 million for Bringing Innovation to Regulations to strengthen the Government’s capacity to draft legislation and regulatory changes needed to modernize regulations (Budget 2019); and,
    • $0.4 million for other minor adjustments.
  • A decrease of $3.5 million in funding to reflect the decrease in Employee Benefit Plan (EBP) rates as prescribed by the Treasury Board Secretariat.

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 $150.9 million in 2019-20 to $137.5 million in 2020-21. This net decrease of $13.4 million consists of changes associated with the following, which were partially affected by COVID-19:

• Personnel: an increase of $10.9 million mostly related to compensation adjustments due to the ratification of various collective agreements implemented in the third quarter of 2019-20;
• Transportation and communications: a decrease of $1.6 million mostly related to a reduction in domestic travel;
• Professional and special services: a decrease of $1.5 million mostly related to a decrease in consulting services, translations services, and training and development for staff;
• Transfer payments: an increase of $2.3 million mainly related to the timing of payments in accordance with the different contributions agreements and to the increase in spending authorities this fiscal year;
• Other subsidies and payments: an increase of $1.6 million mostly related to shared agreements with other government departments, particularly with Shared Services Canada;
• Other standard objects: a net decrease of $0.7 million attributable to minor changes in expenditures related to day-to-day operations, such as a decrease in rental expenses and printing; and,
• Revenue: an increase of $24.4 million in respendable revenues earned due to a timing difference with agreements with client departments; since agreements with clients were signed earlier in the year in 2020-21, the Department was able to recognize more revenue earned in Q1. Notwithstanding this increase, the Department is anticipating a reduction in revenue in 2020-21 related to the COVID-19 pandemic and the reduced operations of courts and tribunals.

3. Risks and Uncertainties

The COVID-19 pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. The duration and impact of the COVID-19 pandemic is unknown at this time.

There is a risk that the amount of revenues collected could be lower than the previous year. The courts across Canada have had to significantly reduce their operations, the result of which has a direct impact on the operations of the Department. A portion of the Department’s funding comes from revenues by providing services to other client departments. As a result, the Department could face unpredictable and reduced business volumes and associated reduced resources. To mitigate this risk, the Department will monitor its business volumes and its financial situation closely which will include rigorous management of revenues, expenditures, forecasting and commitment monitoring, and working closely with client departments to identify changing requirements and their impacts.

As part of the Department’s enterprise risk management function, the Department regularly monitors and identifies strategic risks that may affect the delivery of the Department’s mandate and expected results. The following risks have been identified:

Wellness Risk

The Department may not have either the capacity or capability to meet growing demand (including sudden spikes) for wellness support.

External Relationship Risk

The Department may be unable to cultivate and maintain productive relationships with particular clients, partners or stakeholders.

Data and Information Risk

The Department may not be able to appropriately capture, safeguard and leverage high quality data and information.

Cybersecurity Risk

An increased use of and reliance on technology will expose the Department to new cyber threats, losses or disruption due to attacks on, or breaches of, technological infrastructure.

Workspace of the Future Risk

The Department will not be able to afford accommodations costs, achieve GC policy objectives; provide functional work environments for employees working either from their homes or offices, and align with Justice’s business requirements.

Technological Disruption Risk

The rapid speed of innovation enabled by disruptive technologies (e.g. artificial intelligence, automation, quantum computing, and cloud storage) could outpace Justice’s policies, processes, in-house expertise, and technological infrastructure and available resources.

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:

Ottawa, Canada
August 28, 2020

5. Statement of Authorities (unaudited)

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. 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 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.

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 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.

• Quarterly Financial Reports