Quarterly Financial Report, For the Quarter ended December 31, 2014

Introduction

This quarterly report has been prepared by management of Correctional Service of Canada (CSC) 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 Quarterly Financial Reports as of June 30, 2014 and September 30, 2014. This report has not been subject to an external audit or review.

The purpose of the federal correctional system, as defined by law, is to contribute to the maintenance of a just, peaceful and safe society by carrying out sentences imposed by courts through the safe and humane custody and supervision of offenders; and by assisting the rehabilitation of offenders and their reintegration into the community as law-abiding citizens through the provision of programs in penitentiaries and in the community (Corrections and Conditional Release Act, s.3). A summary description of CSC's programs can be found in Part II of the Main Estimates.

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 organization, consistent with the Main Estimates, and Supplementary Estimates A for the 2014-2015 fiscal year, for which full supply was released on June 20, 2014 Footnote 1 and Supplementary Estimates B, for which full supply was released on December 17, 2014Footnote 2. 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 monies 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.

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) which is included in the statutory votes 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 and Fiscal Year to Date Results

The following graph provides a comparison of the net budgetary authorities and expenditures as of December 31, 2014 and December 31, 2013 for CSC's combined Operating, Capital and Budgetary Statutory Authorities.

Net Budgetary Authorities and Expenditures

graph: Net Budgetary Authorities and Expenditures

Net Budgetary Authorities and Expenditures

This graph depicts the net budgetary authorities as $2,495,617 and the year to date net expenditures as $1,830,028 for the third quarter ending December 31, 2014. In 2013-2014, the net budgetary authorities were $2,835,028 for the third quarter ending December 31, 2013 and the year to date net expenditures were $1,818,857.

Significant Changes to Authorities

As reflected in the Statement of Authorities for the period ending December 31, 2014, CSC has seen a reduction in total net authorities of $339.4 million for the current fiscal year compared to the previous fiscal year. This represents a 12.0% decrease over the total net authorities available as at December 31, 2013.

Operating Vote

CSC's Operating Vote decreased by $144.9 million or 6.8% compared to the authorities at the end of December 2013, which is attributed to the net effect of the following items:

  • An increase of $49.2 million related to transfer from Capital to Operating Vote due to the implementation of the common definition of Capital Assets defined in Treasury Board Accounting Standard 3.1;
  • An increase of $23.4 million for Collective Agreements;
  • A decrease of $111.5 million (excluding employee benefit plan (EBP) of $13.7 million) related to savings identified as part of Budget 2012 (Canada's Economic Action Plan);
  • A decrease of $55.0 million due to a lower Operating Budget Carry Forward in 2014-2015 compared to the previous fiscal year;
  • A decrease of $31.0 million to offset the additional EBP costs (Statutory authorities) as a result of a transfer from non-personnel Operating budget to Personnel budget for realignment based on historical trends;
  • A decrease of $13.9 million for reimbursement of Paylist Requirements (e.g., payment of severance benefits, parental benefits, etc.). In previous years, funding was confirmed by Treasury Board Secretariat by the end of the third quarter while in 2014-2015, funding will be confirmed in the last quarter; and
  • A decrease of $6.1 million related to miscellaneous adjustments.

Capital Vote

CSC's Capital Vote decreased by $199.3 million or 43.6% compared to the authorities at the end of December 2013, which is attributed to the net effect of the following items:

  • Through CSC's 2013-2018 Accommodation Plan, funding has been reduced by $122.1 million. As part of the plan, CSC's reference levels were reduced by $125.9 million associated with the return of funds related to projected inmate population growth which has not materialized and an increase of $3.8 million was provided to address the ongoing capitalized maintenance requirements of existing and planned additional units within existing institutions;
  • A decrease of $49.2 million related to transfer from Capital to Operating Vote due to the implementation of the common definition of Capital Assets defined in Treasury Board Accounting Standard 3.1;
  • A decrease of $23.2 million due to a lower Capital Budget Carry Forward in 2014-2015 compared to the previous year; and
  • A decrease of $4.8 million due to transfers to the Royal Canadian Mounted Police to support renovations at the Regina Training Academy. In 2014-2015, CSC transferred $5.2 million compared to $0.4 million in 2013-2014.

Budgetary Statutory Authorities

CSC's Budgetary Statutory Authorities increased by $4.8 million mainly due to the net increase in the EBP costs associated with the change in personnel costs as noted above.

Explanations of Significant Variances from Previous Year Expenditures

Compared with the previous year, the total year to date net budgetary expenditures increased by $11.1 million or 0.6% due to multiple factors:

  • Personnel expenditures increased mainly due to the severance pay liquidation in quarter one related to the signing of the collective agreement with the Union of Canadian Correctional Officers;
  • Other subsidies and payments expenditures also increased due to a one-time transition amount of $51.6 million for implementing 'salary payment in arrears' by the Government of Canada; and
  • Acquisition of land, buildings and works expenditures decreased due to the completion of several new living unit constructions in the previous fiscal year.

With respect to the same comparison, the total net budgetary expenditures in the third quarter ending December 31, 2014 have decreased by $64.7 million or 10.0%. The net decrease is mainly due to the following:

  • Acquisition of land, buildings and works expenditures decreased due to the completion of several new living unit constructions in the previous fiscal year; and
  • Personnel expenditures decreased compared to the same period in the previous fiscal year mainly due to a reduction in overtime expenditures.
(in millions of dollars)
Departmental Budgetary Expenditures Year To
Date
Quarter Over
Quarter
Total Net Budgetary Expenditures 2013-2014 1,818.9 646.9
Total Net Budgetary Expenditures 2014-2015 1,830.0 582.2
Variance 11.1 (64.7)
Explanation of Variances by Standard Object
80.4 (13.1)
  • Acquisition of land, buildings and works Footnote 4
(111.9) (46.2)
48.6 1.8
  • Other
(6.0) (7.2)

Total

11.1 (64.7)

Risks and Uncertainties

CSC's Report on Plans and Priorities (RPP) identifies the current risk environment and CSC's key risk areas to the achievement of its strategic outcomes.

In the 2013 Speech from the Throne, the Government of Canada announced it will freeze the overall federal operating budget. Consequently, CSC will have to fund internally the increases in salary resulting from collective agreements that take effect during this frozen period (2014-2015 and 2015-2016), and the resulting ongoing impacts of those adjustments. CSC continues to review its operation to address the budgetary constraints resulting from the operating budget freeze.

Significant Changes in Relation to Operations, Personnel and Programs

During the third quarter of 2014-2015, there have been no significant changes in relation to operations, personnel and programs.

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that are being implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

CSC is doing its part to support the federal government's return to a balanced budget, reduce the deficit, and deliver on its commitments to Canadians. Budget 2012 announced that CSC will achieve savings of $85.5 million in 2012-2013, $170.2 million in 2013-2014, and ongoing savings of $295.4 million by 2014-2015. The organization has achieved these cost savings by pursuing the implementation of measures to increase offender accountability, achieve administrative efficiencies, streamline operations and program delivery, and close three institutions (Kingston Penitentiary and the Regional Treatment Centre in Ontario and Leclerc Institution in Quebec were all closed in September 2013). Although delays have been encountered for a few initiatives, interim mitigation strategies have been implemented to achieve the savings as planned.

The initiatives arising from Budget 2012 will further enable CSC to focus resources on the organization's key priorities and core mandate, while at the same time ensuring the organization will continue delivering strong public safety results for Canadians.

Approvals by Senior Officials

Liette Dumas-Sluyter, CPA, CMA
Chief Financial Officer

Don Head, Commissioner
Ottawa, Canada
February 16, 2015

Statement of Authorities (unaudited)

(in thousands of dollars)
Expenditures Fiscal Year 2014-2015 Fiscal Year 2013-2014
Total available for use for the year ending
March 31, 2015*
Used during the quarter ended December 31, 2014 Year to date used at quarter-end Total available for use for the year ending
March 31, 2014*
Used during the quarter ended December 31, 2013 Year to date used at quarter-end
Vote 1 – Operating Expenditures 1,998,525 463,054 1,536,007 2,143,426 481,611 1,409,539
Vote 5 – Capital Expenditures 257,579 55,916 111,231 456,921 101,965 227,138
Budgetary Statutory Authorities
CORCAN Gross Expenditures 88,829 19,060 54,898 87,201 20,416 58,005
CORCAN Gross Revenues (88,829) (15,746) (50,803) (87,201) (15,901) (51,214)
CORCAN Net Expenditures (Revenues) - 3,314 4,095 - 4,515 6,791
Contributions to employee benefit plans

237,417
59,353
178,063
233,117 58,279 174,837
Refunds of previous years revenue - 4 32      
Spending of proceeds from the disposal of surplus Crown assets 2,096 598 600 1,564 552 552
Total Budgetary Authorities 2,495,617 582,239 1,830,028 2,835,028 646,922 1,818,857
Non-Budgetary Authorities 45 - - 43 - -
Total Authorities 2,495,662 582,239 1,830,028 2,835,071 646,922 1,818,857

More information is available on the following page.
* Includes only Authorities available for use and granted by Parliament at quarter-end.

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)
Expenditures Fiscal Year 2014-2015 Fiscal Year 2013-2014
Planned expenditures for the year ending
March 31, 2015
Expended during the quarter ended
December 31, 2014
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2014
Expended during
the quarter ended
December 31, 2013
Year to date used at quarter-end
Personnel 1,802,660 417,541 1,358,673 1,750,651 430,678 1,278,307
Transportation and communications 28,861 6,165 17,165 59,715 8,596 21,269
Information 710 170 429 1,931 223 534
Professional and special services 271,272 73,087 198,939 355,914 76,949 201,960
Rentals 17,354 4,800 14,672 16,847 5,658 13,994
Repair and maintenance 19,485 5,841 12,664 46,326 6,778 14,833
Utilities, materials and supplies 106,775 29,176 79,755 149,888 29,032 78,161
Acquisition of land, buildings and works* 242,998 42,460 85,596 382,101 88,622 197,546
Acquisition of machinery and equipment* 16,677 8,792 17,751 76,384 8,164 16,909
Transfer payments 4,982 167 290 957 114 265
Other subsidies and payments 72,672 9,786 94,897 81,515 8,009 46,293
Total Gross Budgetary Expenditures 2,584,446 597,985 1,880,831 2,922,229 662,823 1,870,071
Less Revenues Netted Against Expenditures
CORCAN (88,829) (15,746) (50,803) (87,201) (15,901) (51,214)
Total Net Budgetary Expenditures 2,495,617 582,239 1,830,028 2,835,028 646,922 1,818,857

* These are mainly Vote 5 (Capital) expenditures

Footnotes

Footnote 1

Released through Orders in Council P.C. 2014-0837 and P.C. 2014-0838.

Return to footnote 1 referrer

Footnote 2

Released through Orders in Council P.C. 2014-1491.

Return to footnote 2 referrer

Footnote 3

The variances mainly explain the increase in Vote 1 – Operating Expenditures as presented in the Statement of Authorities.

Return to footnote 3 referrerReturn to footnote 3b referrer


Footnote 4

The variances mainly explain the decrease in Vote 5 – Capital Expenditures as presented in the Statement of Authorities.

Return to footnote 4 referrer