Quarterly Financial Report, For the Quarter ended September 30, 2011

Introduction

This quarterly report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This quarterly report should be read in conjunction with the Main Estimates, Supplementary Estimates and the Quarterly Financial Report as of June 30, 2011. This report has not been subject to an external audit or review.

Correctional Service Canada (CSC), as part of the criminal justice system and respecting the rule of law, contributes to public safety by actively encouraging and assisting offenders to become law-abiding citizens, while exercising reasonable, safe, secure and humane control. It delivers its mandate under four major program activities. A summary description of CSC’s program activities can be found in Part II of the Main Estimates.

CSC contributes to public safety by administering court-imposed sentences for offenders sentenced to two years or more. This involves managing institutions of various security levels and supervising offenders on different forms of conditional release, while assisting them to become law-abiding citizens. CSC also administers post-sentence supervision of offenders with Long Term Supervision Orders for up to ten years.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the CSC’s spending authorities granted by Parliament and those used by the department, consistent with the Main Estimates and Supplementary Estimates A for the 2011-2012 fiscal year, for which full supply was released on June 27, 2011. 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.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

CSC uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

CSC has an active Revolving Fund (CORCAN) that is included in the budgetary statutory authorities of the enclosed Statement of Authorities. CORCAN's purpose is to aid in the safe reintegration of offenders into Canadian society by providing employment and training opportunities to offenders incarcerated in federal penitentiaries and, for brief periods of time, after they are released into the community. CORCAN has a continuing, non-lapsing authority from Parliament to make payments out of the Consolidated Revenue Fund (CRF) for working capital, capital acquisitions and temporary financing of accumulated operating deficits, the total of which is not to exceed $5.0 million at any time.

Highlights of Fiscal Quarter End and Fiscal Year to Date (YTD) Results

Authorities Analysis

As reflected in the attached Statement of Authorities, as of September 30, 2011, CSC has seen an increase in total authorities of 23.5% ($588.8 million) compared to the previous year.

The following table summarizes the variances:

(in millions of dollars)
Authorities Variances Total
Vote 25 – Operating Expenditures   310.3 

Truth in Sentencing Act

234.9   

National Capital, Accommodation and Operations Plan

33.7   

Tackling Violent Crime Act

19.6   

Operating Budget Carry-forward

12.0   

Paylist Requirement

8.3   

Other

1.8   
Vote 30 – Capital Expenditures   234.7 

Truth in Sentencing Act

223.1   

Strategic Review Capital Reallocation

(15.4)  

Reprofiling to future years

(27.3)  

Capital Budget Carry-forward

54.5   

Other

(0.2)  
Budgetary Statutory Authorities   43.8 
Total   588.8 

Of the $588.8 million overall increase, $514.2 million was reflected in the first quarterly report of 2011-2012. The additional items since June have been highlighted.

Of the net increase in total authorities reflected in the Statement of Authorities, $458.0 million ($234.9 million in operating funding and $223.1 million in capital funding) was received in relation to the implementation of the Truth in Sentencing Act, and $19.6 million for the Tackling Violent Crime Act, which will increase both individual sentence length and the numbers of federal offenders. These changes will result in CSC accommodating and supervising a significant increase to the current offender population.

The Budgetary Statutory Authority increased $44.0 million in the first quarter. This was related to CSC’s allocation of the employer’s share of the Employee Benefit Plan (EBP) and the disposal of crown assets. At the end of the second quarter, the Budgetary Statutory Authority increase is $43.8 million. The $0.2 million variance is due to the disposal of crown assets.

CSC received an increase of $33.7 million for the National Capital, Accommodation & Operations Plan. The increase is related to offender programs and specific accommodation measures, which are based on funding formulae driven by variations in population levels both incarcerated and in the community, as well as changes to the types of offender.

Funding for capital expenditures has been reduced by $15.4 million as a result of the 2009 Strategic Review.

There was a $27.3 million decrease in CSC’s capital vote reference levels due to reprofiling of capital funds to future years.

The other increases in the second quarter include the Operating Budget Carry-forward, the Capital Budget Carry-forward, and adjustments related to personnel costs identified as Paylist Requirements.

In September 2011, CSC received notification that the requested Operating Budget Carry-forward of $49.7 million had been transferred. This represents an increase of $12.0 million over the Operating Budget Carry-forward received last year. The Operating Budget Carry-forward included $17.2 million of personnel related expenses such as severance pay and parental benefits that were cash-managed by CSC when Parliament was prorogued and for which Treasury Board subsequently provided funding.

CSC also received a Capital Budget Carry-forward of $54.5 million. No Capital Budget Carry-forward was requested last year.

CSC received $8.3 million to offset Paylist Requirements. These are personnel costs resulting from newly negotiated contracts. These funds relate to contract increases for the period that predates the Expenditure Restraint Act and the Cost Containment Measures.

Quarterly Expenditures Analysis

Compared to the second quarter of the previous fiscal year, total net budgetary expenditures have increased by $99.8 million (17.7%), resulting in a total year-to-date increase of $134.1 million. The implementation of the Truth in Sentencing Act and the Tackling Violent Crime Act resulted in an increase of $34.3 million in the first quarter of 2011-2012 over the same period in 2010-2011, primarily due to increased expenditures in personnel and acquisition of land, buildings and works. This trend continued in the second quarter of 2011-2012.

Operating expenditures in the second quarter have increased by $64.6 million over the same period of last year.  Salaries and overtime expenditures increased by $58.1 millionFootnote 1 and is a result of the increased staffing relating to the implementation of the legislation. There was a $5.9 million increase in training fees between CSC and CORCAN over the same period last year. This increase is reflected in the professional and special services category and is mainly due to a difference between this year and last year in the timing of invoices between CORCAN and CSC.

Capital expenditures increased by $28.0 million, which is mainly attributable to improvements to and construction of infrastructure ($27.2 million in the acquisition of land, buildings and works) to support the projected increase in the offender population.

The Budgetary Statutory Authority increase is primarily related to the Employee Benefit Plan (EBP) ($10.8 millionFootnote 2). This expenditure is charged monthly by the Treasury Board Secretariat based on an annual projection of personnel expenditures.

Risks and Uncertainties

As a result of legislative changes, the number of inmates in CSC’s custody has grown and is expected to significantly increase over the next few years. This growth will exert significant pressure on CSC’s already ageing infrastructure and requires the construction geared towards increased capacity. To mitigate this risk, CSC has established an Infrastructure Renewal Team. This team is working with operational sites, regions, and sectors at National Headquarters to ensure appropriate levels of staff, accommodation space and other resources are in place to allow for effective case management, program delivery, and community supervision as the population increases.

Separate from the increased funding noted under the Authorities Analysis section, Budget 2010 stipulated that the operating budgets of departments would remain frozen at their 2010-2011 levels for the fiscal years 2011-2012 and 2012-2013. In the last two years, CSC has implemented measures to address these constraints, such as:

  • introducing new staff deployment standards for Correctional Officers and computerized roster systems to ensure efficient staffing levels in federal institutions, resulting in a significant reduction in overtime expenditures;
  • improving integrated human resource and business planning methods to improve the accuracy of forecasts for future staffing, recruitment, and essential training needs;
  • implementing a more focused approach to reducing travel and hospitality expenditures; and,
  • piloting an innovative Integrated Correctional Program Model that will reduce redundancies and overlap between some of the programs offered to offenders, leading to efficiencies in program delivery.

Further, in line with the objectives defined in Budget 2010, any increase in funding required as the result of a new collective agreement will be absorbed within current funding levels as part of the mitigation strategies outlined above. It should be noted that the collective agreement with the Union of Canadian Correctional Officers expired as of May 31, 2010. This group represents 41% of CSC’s employees, and therefore, a new collective agreement could result in a significant financial pressure on CSC.

Significant Changes in Relation to Operations, Personnel and Programs

Although CSC has received additional funding due to legislation changes, there have been no significant changes in relation to mandated operations, personnel, and programs over the same period last year.

On August 4, 2011 the Government of Canada announced the creation of Shared Services Canada. The purpose of this new organization is to streamline and consolidate in the areas of email, data centres, and networks to produce savings and reduce the government’s footprint, to strengthen security and the safety of government data to ensure Canadians are protected, and to realize economies of scale and make it more cost-effective to modernize these IT services. CSC is one of the 44 federal organizations involved in the transition to Shared Services Canada and as such there will be an effect on CSC’s operations.  As of the end of September 2011, the full impacts on CSC have not been determined and the transfer has not taken place. It is expected that further details will be provided in the next quarterly report following the transfer of the services.

Approvals by Senior Officials

Signed by_____________________

Liette Dumas-Sluyter, CMA,
Chief Financial Officer

Signed by_____________________

Don Head, Commissioner
Ottawa, Canada
November 29, 2011

 

Statement of Authorities (unaudited)

(in thousands of dollars)
  Fiscal Year 2011-2012 Fiscal Year 2010-2011
Authorities Total available for use for the year ending
March 31, 2012**
Used during the quarter ended September 30, 2011 Year to date used at quarter-end Total available for use for the year ending
March 31, 2011*
Used during the quarter ended September 30, 2010 Year to date used at quarter-end
Vote 25 (30) – Operating Expenditures 2,266,044  537,023  947,164  1,955,698  472,400  890,522 
Vote 30 (35) – Capital Expenditures 571,981  58,269  75,017  337,311  30,258  35,328 
Budgetary Statutory Authorities            
CORCAN Gross Expenditures 80,460  22,234  39,007  91,362  17,121  33,532 
CORCAN Gross Revenues (80,460) (17,912) (30,733) (91,362) (9,968) (41,339)
CORCAN Net Expenditures (Revenues) - 4,322  8,274 - 7,153  (7,807)
Other Budgetary Statutory Authorities 258,288  63,276  128,198  214,499  53,245  106,455 
Total Budgetary Authorities 3,096,313  662,890  1,158,653  2,507,508  563,056  1,024,498 
Non-Budgetary Authorities 49  (1) (1) 48  - -
Total Authorities 3,096,362  662,889  1,158,652  2,507,556  563,056  1,024,498 

More information is available on the following page.
* Includes only Authorities that were available for use and granted by Parliament as of September 30, 2010.
** Includes only Authorities that were available for use and granted by Parliament as of September 30, 2011.

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)
  Fiscal Year 2011-2012 Fiscal Year 2010-2011
Budgetary Expenditures Planned expenditures for the year ending
March 31, 2012
Expended during the quarter ended
September 30, 2011
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2011
Expended during the quarter ended
September 30, 2010
Year to date used at quarter-end
Expenditures            
Personnel 1,731,150  466,826  868,746  1,504,992  397,927  776,857 
Transportation and communications 74,757  13,664  22,088  69,826  12,067  20,866 
Information 2,509  217  397  2,433  288  421 
Professional and special services 452,685  72,213  118,672  360,036  64,348  130,986 
Rentals 15,307  4,553  5,993  12,072  3,339  4,940 
Repair and maintenance 62,138  9,797  16,582  62,510  12,932  14,679 
Utilities, materials and supplies 174,620  28,606  49,832  159,656  28,474  49,611 
Acquisition of land, buildings and works 371,276  43,546  53,966  220,463  16,313  20,064 
Acquisition of machinery and equipment 202,602  11,315  13,856  118,506  10,080  13,617 
Transfer payments 1,573  399  437  1,573  49  49 
Other subsidies and payments 88,156  29,666  38,817  86,803  27,207  33,747 
Total Gross Budgetary Expenditures 3,176,773  680,802  1,189,386  2,598,870  573,024  1,065,837 
             
Less Revenues Netted Against Expenditures            
CORCAN (80,460) (17,912) (30,733) (91,362) (9,968) (41,339)
Total Net Budgetary Expenditures 3,096,313  662,890  1,158,653  2,507,508  563,056  1,024,498 

Footnotes

Footnote 1

The variation in salaries and overtime ($58.1M) and EBP ($10.8M) represent the total variation in personnel expenditures ($68.9M).

Return to footnote 1

Footnote 2

The variation in salaries and overtime ($58.1M) and EBP ($10.8M) represent the total variation in personnel expenditures ($68.9M).

Return to footnote 2