Quarterly Financial Report, For the Quarter ended September 30, 2016

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 and Supplementary Estimates. 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 safe 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 which full supply was released on June 23, 2016Footnote 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 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 (YTD) Results

The following graph provides a comparison of the net budgetary authorities and expenditures as of September 30, 2016 and September 30, 2015 for CSC's combined Operating, Capital and Budgetary Statutory Authorities.

Net Budgetary Authorities and Expenditures

This graph depicts the net budgetary authorities

Net Budgetary Authorities and Expenditures

This graph depicts the net budgetary authorities as $2,460,380 and the year to date net expenditures as $1,070,005 for the second quarter ending September 30, 2016. In 2015-2016, the net budgetary authorities were $2,454,500 for the second quarter ending September 30, 2015 and the year to date net expenditures were $1,083,288.

Significant Changes to Authorities

As reflected in the Statement of Authorities for the period ending September 30, 2016, CSC has seen an increase in total net authorities of $5.9 million or 0.24% for the current fiscal year compared to the previous fiscal year.

Operating Vote

CSC's Operating Vote increased by $5.0 million or 0.3% compared to the authorities at the end of September 2015, which is attributed to the net effect of the following items:

  • A net increase of $8.2 million for the Operating Budget Carry Forward compared to prior fiscal year;
  • An increase of $1.1 million related to the implementation of the Canadian Victims Bill of Rights;
  • A decrease of $2.1 million related to an increase in CSC's contribution to the Canada School of Public Service under its new service delivery model (CSC's contribution in 2016-2017 is $4.1 million compared to $2.0 million in 2015-2016);
  • A decrease of $1.0 million related to the Federal Contaminated Sites Action Plan;
  • A decrease of $1.0 million related to the National Infrastructure Contribution Program due to adjustment to reprofiling of funds in previous year; and
  • A net decrease of $0.2 million related to miscellaneous adjustments.

Capital Vote

CSC's Capital Vote decreased by $6.1 million or 2.6% compared to the authorities at the end of September 2015 which is attributed to the net effect of the following items:

  • A decrease of $8.9 million for Supplementary Estimates (A) received in 2015-2016 related to the 2014 Federal Infrastructure Initiative;
  • A net decrease of $0.6 million related to miscellaneous adjustments;
  • A net decrease of $6.0 million for the Capital Budget Carry Forward compared to prior fiscal year;
  • An increase of $5.1 million in capital investments mainly due to reprofiling of funds in previous years; and
  • An increase of $4.3 million from the Accelerated Infrastructure Program.

Budgetary Statutory Authorities

CSC's Budgetary Statutory Authorities increased by $7.0 million or 2.8% mainly due to the department's allocation of the employer's share of the Employee Benefit Plan 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 $13.3 million or 1.2% due to multiple factors:

  • Professional and special services increased mainly due to the requirement to record advance payments to the Department of Justice following the implementation of a new funding and billing model for legal services effective April 1, 2016. This variance can further be explained by the budget transfer of CSC's Vocational and Community Employment Coordinators to CORCAN, as well as a modification in the Correctional and Training feeFootnote 2 invoicing process between CSC and CORCAN that resulted in a difference in the timing of expenditures. Furthermore, this explains a net increase of $9.9 million in CORCAN's revenues netted against expenditures as compared to the same period last year;
  • Personnel expenditures decreased 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 expenditures decreased as a result of timing differences with interdepartmental invoicing for CSC's portion of various construction projects.

When compared to the same period in the previous fiscal year, the total net budgetary expenditures in the second quarter ending September 30, 2016 has increased by $10.9 million or 1.8%. The net increase is mainly due to the implementation of a new funding and billing model for legal services with the Department of Justice, a modification in the Correctional and Training feeFootnote 2a invoicing process between CSC and CORCAN which resulted in a net increase in CORCAN's revenues netted against expenditures.

(in millions of dollars)
Departmental Budgetary Expenditures Year To
Date
Quarter Over
Quarter
Total Net Budgetary Expenditures 2015-2016 1,083.3 577.7
Total Net Budgetary Expenditures 2016-2017 1,070.0 588.6
Variance (13.3) 10.9
Explanation of Variances by Standard Object
Professional and special services Footnote 3 18.5 19.8
PersonnelFootnote 3a (15.2) 1.6
Acquisition of land, buildings and worksFootnote 4 (10.1) (8.1)
Revenues netted against expenditures (9.9) (10.9)
Other 3.4 8.5
Total (13.3) 10.9

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 (2014-2015 and 2015-2016), 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 2016-2017, 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 handle risk-related challenges, ensure operational sustainability and fulfill its mandate.

Significant Changes in Relation to Operations, Personnel and Programs

Effective September 2, 2016, our Assistant Commissioner, Corporate Services and Chief Financial Officer (CFO), Liette Dumas-Sluyter retired. Denis Bombardier, Deputy Chief Financial Officer, was appointed to act in this position.

During the second quarter of 2016-2017, there have been no other significant changes in relation to operations, personnel and programs.

Approvals by Senior Officials
Approved by:

Original signed by
_______________
Denis Bombardier, CPA, CGA
A/Chief Financial Officer

Original signed by
_______________
Don Head, Commissioner

Ottawa, Canada
November 17, 2016

Statement of Authorities (unaudited)

(in thousands of dollars)
Expenditures Fiscal Year 2016-2017 Fiscal Year 2015-2016
Total available for use for the year ending
March 31, 2017*
Used during the quarter ended
September 30, 2016
Year to date used
at quarter-end
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
Vote 1 – Operating Expenditures 1,976,338 509,865 915,897 1,971,315 481,569 913,728
Vote 5 – Capital Expenditures 231,330 28,725 40,395 237,465 36,831 49,090
Budgetary Statutory Authorities
CORCAN Gross Expenditures 92,605 19,947 35,377 79,462 19,257 35,607
CORCAN Gross Revenues (92,605) (32,093) (47,464) (79,462) (21,163) (37,542)
CORCAN Net Expenditures (Revenues) - (12,146) (12,087) - (1,906) (1,935)
Contributions to employee benefit plans 251,324 61,988 125,662 244,798 61,200 122,399
Refunds of previous years revenue - 1 1 - - -
Spending of proceeds from the disposal of surplus Crown assets 1,387 131 137 922 6 6
Total Budgetary Authorities 2,460,379 588,564 1,070,005 2,454,500 577,700 1,083,288
Non-Budgetary Authorities 45 - - 45 1 1
Total Authorities 2,460,424 588,564 1,070,005 2,454,545 577,701 1,083,289

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

Organizational Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)
Expenditures Fiscal Year 2016-2017 Fiscal Year 2015-2016
Planned expenditures for the year ending
March 31, 2017
Expended during the quarter ended
September 30, 2016
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2016
Expended during the quarter ended
September 30, 2015
Year to date used at quarter-end
Personnel 1,809,991 413,651 818,683 1,783,233 412,057 833,927
Transportation and communications 18,915 5,777 9,563 25,486 5,467 8,444
Information 544 171 205 615 138 215
Professional and special services 259,200 101,178 145,304 284,716 81,384 126,792
Rentals 16,059 5,108 8,636 21,011 2,498 4,294
Repair and maintenance 20,214 6,398 8,770 17,286 5,529 6,733
Utilities, materials and supplies 123,073 33,007 53,201 117,694 33,208 56,503
Acquisition of land, buildings and works* 180,788 21,201 28,832 200,739 29,298 38,900
Acquisition of machinery and equipment* 47,229 6,890 9,373 37,648 5,686 7,636
Transfer payments 4,820 962 1,637 5,962 2,182 2,303
Other subsidies and payments 72,151 26,314 33,265 39,572 21,416 35,083
Total Gross Budgetary Expenditures 2,552,984 620,657 1,117,469 2,533,962 598,863 1,120,830
Less Revenues Netted Against Expenditures
CORCAN (92,605) (32,093) (47,464) (79,462) (21,163) (37,542)
Total Net Budgetary Expenditures 2,460,379 588,564 1,070,005 2,454,500 577,700 1,083,288

* These are mainly Vote 5 (Capital) expenditures

Footnotes

Footnote 1

Released through Orders in Council P.C. 2016-0652 and P.C. 2016-0653.

Return to footnote 1 referrer

Footnote 2

The Correctional and Training fee's purpose is to offset salary and operating costs as well as employment and employability programs that cannot be recovered by CORCAN through the sale of goods and services due to the correctional environment in which it operates.

Return to footnote 2 referrer Return to footnote 2a 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 referrer Return 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