Quarterly Financial Report, For the Quarter ended December 31, 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 Reports as of June 30, 2015 and September 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 and Supplementary Estimates (B), for which full supply was released on December 11, 2015Footnote 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 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 December 31, 2015 and December 31, 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 $2,454,724 and the year to date net expenditures as $1,638,552 for the third quarter ending December 31, 2015. In 2014-2015, the net budgetary authorities were $2,495,617 for the third quarter ending December 31, 2014 and the year to date net expenditures were $1,830,028.

Significant Changes to Authorities

As reflected in the Statement of Authorities for the period ending December 31, 2015, CSC has seen a decrease in total net authorities of $40.9 million or 1.6% for the current fiscal year compared to the previous fiscal year.

Operating Vote

CSC's Operating Vote decreased by $27.2 million or 1.4% compared to the authorities at the end of December 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 for serious drug offenders;
  • A decrease of $2.8 million for signed Collective Agreements;
  • A decrease of $1.9 million related to the transfer to the Canada School of Public Service;
  • A decrease of $0.6 million due to funding received in 2014-15 through Supplementary Estimates (B) for Federal Contaminated Sites Action Plan (FCSAP); and
  • A decrease of $0.3 million related to miscellaneous adjustments.

Capital Vote

CSC's Capital Vote decreased by $20.1 million or 7.8 % compared to the authorities at the end of December 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;
  • An increase of $8.9 million in capital through Supplementary Estimates (A) for the 2014 Federal Infrastructure Initiative; and
  • An increase of $5.2 million related to funding transferred in 2014-15 through Supplementary Estimates (B) to the Royal Canadian Mounted Police (RCMP) to support the renovation and fit-up of "B" Block living unit.

Budgetary Statutory Authorities

CSC's Budgetary Statutory Authorities increased by $6.4 million or 2.7% mainly due to the net increase to the allocation of the employer's share of the Employee Benefit Plan (EBP) costs.

Explanation of Significant Variances from Previous Year Expenditures

Compared with the previous year, the total year to date net budgetary expenditures decreased by $191.4 million or 10.5% due to the following factors:

  • Personnel expenditures decrease is mainly due to the severance pay liquidation of $90 million in 2014-15 related to the signing of the collective agreement with the Union of Canadian Correctional Officers in November 2013 and the implementation of saving measures to achieve administrative efficiencies within National Headquarter and Regional Headquarters organizational structures;
  • Other subsidies and payments expenditures also decreased mainly due to a one-time transition amount of $51.5 million as at quarter three of 2014-2015 compared to $0.4 million as at quarter three of 2015-2016 for implementing "salary payment in arrears" by the Government of Canada; and
  • Acquisition of land, buildings and works decrease is mainly due to reduced requirements related to the completion of the construction of new living units.

When compared to the same period in the previous fiscal year, the total net budgetary expenditures in the third quarter ending December 31, 2015 has decreased by $26.9 million or 4.6%. The net decrease is mainly due to the following:

  • Personnel expenditures decrease is mainly due to the implementation of saving measures to achieve administrative efficiencies within National Headquarter and Regional Headquarters organizational structures; and
  • Acquisition of land, buildings and works decrease is mainly due to reduced requirements related to the completion of the construction of new living units.
(in millions of dollars)
Departmental Budgetary Expenditures Year To
Date
Quarter Over Quarter
Total Net Budgetary Expenditures 2014-2015 1,830.0 582.2
Total Net Budgetary Expenditures 2015-2016 1,638.6 555.3
Variance (191.4) (26.9)
Explanation of Variances by Standard Object    
(122.0) (14.7)
(49.5) (0.5)
  • Acquisition of land, buildings and worksFootnote 4
(17.2) (13.0)
  • Other
(2.7) 1.3
Total (191.4) (26.9)

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 third 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
February 18, 2016

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 December 31, 2015 Year to date used at quarter-end 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
Vote 1 – Operating Expenditures 1,971,315 449,986 1,363,714 1,998,525 463,054 1,536,007
Vote 5 – Capital Expenditures 237,465 40,305 89,395 257,579 55,916 111,231
Budgetary Statutory Authorities
CORCAN Gross Expenditures 79,462 20,941 56,548 88,829 19,060 54,898
CORCAN Gross Revenues (79,462) (17,219) (54,761) (88,829) (15,746) (50,803)
CORCAN Net Expenditures (Revenues)** - 3,722 1,787 - 3,314 4,095
Contributions to employee benefit plans
244,798 61,199 183,598
237,417 59,353 178,063
Refunds of previous years revenue - 1 1 - 4 32
Spending of proceeds from the disposal of surplus Crown assets 1,146 51 57 2,096 598 600
Total Budgetary Authorities 2,454,724 555,264 1,638,552 2,495,617 582,239 1,830,028
Non-Budgetary Authorities 45 - 1 45 - -
Total Authorities 2,454,769 555,264 1,638,553 2,495,662 582,239 1,830,028

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
December 31, 2015
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2015
Expended during the quarter ended
December 31, 2014
Year to date used at quarter-end
Personnel 1,783,233 402,825 1,236,752 1,802,660 417,541 1,358,673
Transportation and communications 25,486 5,274 13,718 28,861 6,165 17,165
Information 615 171 386 710 170 429
Professional and special services 284,716 64,975 191,767 271,272 73,087 198,939
Rentals 21,011 9,393 13,687 17,354 4,800 14,672
Repair and maintenance 17,286 9,643 16,376 19,485 5,841 12,664
Utilities, materials and supplies 117,694 28,473 84,976 106,775 29,176 79,755
Acquisition of land, buildings and works* 200,739 29,486 68,386 242,998 42,460 85,596
Acquisition of machinery and equipment* 37, 872 8,412 16,048 16,677 8,792 17,751
Transfer payments 5,962 3,504 5,807 4,982 167 290
Other subsidies and payments 39,572 10,327 45,410 72,672 9,786 94,897
Total Gross Budgetary Expenditures 2,534,186 572,483 1,693,313 2,584,446 597,985 1,880,831
Less Revenues Netted Against Expenditures
CORCAN (79,462) (17,219) (54,761) (88,829) (15,746) (50,803)
Total Net Budgetary Expenditures 2,454,724 555,264 1,638,552 2,495,617 582,239 1,830,028

* 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

Released through Orders in Council P.C. 2015-1294

Return to footnote 2 referrer

Footnote 3

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

Return to footnote 3 referrerReturn to footnote 3a 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