Quarterly Financial Report, For the Quarter ended September 30, 2015

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 Report for the quarter ended June 30, 2015. This report has not been subject to an external audit or review.

The purpose of the federal correctional system, as defined in 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 program activities 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 2015-2016 fiscal year, for which full supply was released on June 19, 2015Footnote 1. 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.

CSC uses the full accrual method of accounting to prepare and present its annual consolidated 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 (YTD) Results

The following graph provides a comparison of the net budgetary authorities and expenditures as of September 30, 2015 and September 30, 2014 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 $2,454,500 and the year to date net expenditures as $1,083,288 for the second quarter ending September 30, 2015. In 2014-2015, the net budgetary authorities were $2,475,170 for the second quarter ending September 30, 2014 and the year to date net expenditures were $1,247,789.

Significant Changes to Authorities

As reflected in the Statement of Authorities for the period ending September 30, 2015, CSC has seen a decrease in total net authorities of $20.7 million or 0.8% for the current fiscal year compared to the previous fiscal year.

Operating Vote

CSC's Operating Vote decreased by $2.0 million or 0.1% compared to the authorities at the end of September 2014, which is attributed to the net effect of the following items:

  • A decrease of $17.7 million in Operating Budget Carry Forward compared to prior fiscal year;
  • A decrease of $3.9 million for the return of funds to the fiscal framework for the requirements related to the mandatory minimum penalties;
  • A decrease of $1.2 million related to miscellaneous adjustments; and
  • An increase of $20.8 million for signed Collective Agreements.

Capital Vote

CSC's Capital Vote decreased by $25.3 million or 9.6 % compared to the authorities at the end of September 2014, which is attributed to the net effect of the following items:

  • A decrease of $26.9 million in Capital Budget Carry Forward compared to prior fiscal year;
  • A net decrease of $7.3 million in capital investments due to reduced requirements related to the completion of the construction of new units and adjustments related to reprofiling of funds from previous years; and
  • An increase of $8.9 million in capital through Supplementary Estimates A for the 2014 Federal Infrastructure Initiative.

Budgetary Statutory Authorities

CSC's Budgetary Statutory Authorities increased by $6.6 million or 2.8% mainly due to the net increase in the Employee Benefit Plan (EBP) costs associated with the change in personnel costs as noted above and the proceeds from the disposal of surplus Crown assets.

Explanation of Significant Variances from Previous Year Expenditures

Compared with the previous year, the total year to date net budgetary expenditures decreased by $164.5 million or 13.2% due to multiple factors as reported in the first quarter for 2015-16:

  • Personnel expenditures decrease is mainly due to the severance pay liquidation of $90 million related to the signing of the collective agreement with the Union of Canadian Correctional Officers in November 2013; and
  • Other subsidies and payments expenditures also decreased due to a one-time transition amount of $50.9 million as at quarter two of 2014-2015 compared to $0.3 million as at quarter two of 2015-2016 for implementing "salary payment in arrears" by the Government of Canada.

When compared to the same period in the previous fiscal year, the total net budgetary expenditures in the second quarter ending September 30, 2015 has decreased by $40.7 million or 6.6%. The net decrease is mainly due to a reduction in severance pay liquidation.

(in millions of dollars)
Departmental Budgetary Expenditures Year To
Date
Quarter Over Quarter
Total Net Budgetary Expenditures 2014-2015 1,247.8 618.4
Total Net Budgetary Expenditures 2015-2016 1,083.3 577.7
Variance (164.5) (40.7)
Explanation of Variances by Standard Object    
(107.2) (29.2)
(50.0) (6.4)
  • Other
(7.3) (5.1)
Total (164.5) (40.7)

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 the increases in salary resulting from collective agreements that take effect during the freeze period (2014-15 and 2015-16), and for the ongoing impact of those adjustments.

CSC continues to review its operation to address the budgetary constraints resulting from the operating budget freeze.

CSC's specific risks, as outlined in the RPP of 2015-16, are the increasingly diverse and evolving profile of the offender population, the maintenance of required levels of operational safety and security in institutions and the community, the ability to manage significant change related to transformation, legislative changes and fiscal constraints, the potential loss of partners delivering critical services and providing resources for offenders and the need to sustain results related to violent reoffenders.

CSC has put in place risk mitigation strategies to address the stated potential risks. The integrated approach allows CSC to manage risk-related challenges, ensure operational sustainability and fulfill its mandate.

Significant Changes in Relation to Operations, Personnel and Programs

During the second quarter of 2015-16, there have been no significant changes in relation to operations, personnel and programs.

Approvals by Senior Officials
Approved by:

 

Original signed by
____________________
Liette Dumas-Sluyter, CPA, CMA
Chief Financial Officer
Original signed by
____________________
Don Head, Commissioner

Ottawa, Canada
November 12, 2015

Statement of Authorities (unaudited)

(in thousands of dollars)
Expenditures Fiscal Year 2015-2016 Fiscal Year 2014-2015
Total available for use for the year ending
March 31, 2016*
Used during the quarter ended September 30, 2015 Year to date used at quarter-end Total available for use for the year ending
March 31, 2015*
Used during the quarter ended September 30, 2014 Year to date used at quarter-end
Vote 1 – Operating Expenditures 1,971,315 481,569 913,728 1,973,299 517,572 1,072,953
Vote 5 – Capital Expenditures 237,465 36,831 49,090 262,794 42,990 55,315
Budgetary Statutory Authorities
CORCAN Gross Expenditures 79,462 19,257 35,607 88,829 19,140 35,838
CORCAN Gross Revenues (79,462) (21,163) (37,542) (88,829) (20,732) (35,057)
CORCAN Net Expenditures (Revenues)** - (1,906) (1,935) - (1,592) 781
Contributions to employee benefit plans
244,798 61,200 122,399 237,417 59,356 118,710
Refunds of previous years revenue - - - - 28 28
Spending of proceeds from the disposal of surplus Crown assets 922 6 6 1,660 2 2
Total Budgetary Authorities 2,454,500 577,700 1,083,288 2,475,170 618,356 1,247,789
Non-Budgetary Authorities 45 1 1 45 - -
Total Authorities 2,454,545 577,701 1,083,289 2,475,215 618,356 1,247,789

More information is available on the following page.
* Includes only Authorities available for use and granted by Parliament at quarter-end.
** CORCAN has conducted a review of its operations and is expected to achieve cost savings by closing and clustering various shops and by implementing a centralized governance model.

Organizational Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)
Expenditures Fiscal Year 2015-2016 Fiscal Year 2014-2015
Planned expenditures for the year ending
March 31, 2016
Expended during the quarter ended
September 30, 2015
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2015
Expended during the quarter ended
September 30, 2014
Year to date used at quarter-end
Personnel 1,783,233 412,057 833,927 1,779,023 441,267 941,132
Transportation and communications 25,486 5,467 8,444 28,861 7,112 11,000
Information 615 138 215 710 184 259
Professional and special services 284,716 81,384 126,792 269,683 81,049 125,852
Rentals 21,011 2,498 4,294 17,354 8,007 9,872
Repair and maintenance 17,286 5,529 6,733 19,485 5,004 6,823
Utilities, materials and supplies 117,694 33,208 56,503 106,775 28,334 50,579
Acquisition of land, buildings and works* 200,739 29,298 38,900 248,212 34,065 43,136
Acquisition of machinery and equipment* 37,648 5,686 7,636 16,241 6,137 8,959
Transfer payments 5,962 2,182 2,303 4,982 123 123
Other subsidies and payments 39,572 21,416 35,083 72,673 27,806 85,111
Total Gross Budgetary Expenditures 2,533,962 598,863 1,120,830 2,563,999 639,088 1,282,846
Less Revenues Netted Against Expenditures
CORCAN (79,462) (21,163) (37,542) (88,829) (20,732) (35,057)
Total Net Budgetary Expenditures 2,454,500 577,700 1,083,288 2,475,170 618,356 1,247,789

* These are mainly Vote 5 (Capital) expenditures

Footnotes

Footnote 1

Released through Orders in Council P.C. 2015-0966 and P.C. 2015-0967.

Return to footnote 1 referrer

Footnote 2

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

Return to footnote 2 referrerReturn to footnote 2a referrer