Quarterly Financial Report, For the Quarter ended June 30, 2017

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, 2017Footnote 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 money 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 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 and Fiscal Year to Date (YTD) Results

The following graph provides a comparison of the total budgetary authorities and net budgetary expenditures as of June 30, 2017 and June 30, 2016 for CSC's combined operating, capital and budgetary statutory authorities.

Budgetary Authorities and Net Budgetary Expenditures

This graph depicts the net budgetary authorities

Budgetary Authorities and Net Budgetary Expenditures

This graph depicts the net budgetary authorities as $2,401,367 and the year to date net expenditures as $471,222 for the first quarter ending June 30, 2017. In 2016-2017, the net budgetary authorities were $2,363,44 for the first quarter ending June 30, 2016 and the year to date net expenditures were $481,441.

Significant Changes to Authorities

As reflected in the Statement of Authorities for the period ending June 30, 2017, CSC has seen an increase in total authorities of $37.9 million or 1.6% for the current fiscal year compared to the previous fiscal year.

Operating Vote

CSC's Operating Vote increased by $36.8 million or 1.9% compared to the authorities at the end of June 2016, which is attributed to the net effect of the following items:

  • An increase of $40.9 million related to the 2017-18 quasi statutory requirements;
  • An increase of $0.5 million related to 2017-18 funding of Federal Contaminated Sites Action Plan (FCSAP - Phase III);
  • An increase of $0.3 million related to Federal Infrastructure Initiative; and
  • A decrease of $4.9 million related to the Budget 2016 reduction for professional services, travel and advertising.

Capital Vote

CSC's Capital Vote increased by $23.2 million or 12.5% compared to the authorities at the end of June 2016 which is attributed to the net effect of the following items:

  • An increase of $27.5 million in capital investments mainly due to reprofiling of funds from previous years; and
  • A decrease of $4.3 million due to the Accelerated Infrastructure Program ceased funding in 2017-18.

Budgetary Statutory Authorities

CSC's budgetary statutory authorities decreased by $22.1 million or 8.8% mainly due to a decrease in the organization's allocation of the employer's share of the Employee Benefit Plan.

Explanation of Significant Variances from Previous Year Expenditures

Compared with the first quarter of the previous fiscal year, total net budgetary expenditures decreased by $10.2 million or 2.1% due to multiple factors:

  • An increase of $9.4 million in utilities, materials and supplies mainly due to timing differences in the purchase of medications for Hepatitis C drug treatments approved by Health Canada; and
  • A net increase of $16.0 million in CORCAN's revenues netted against expenditures is mainly due to timing differences in the invoicing of the Correctional and Training fee between CSC and CORCAN.
(in millions of dollars)
Organizational Budgetary Expenditures Quarter Over Quarter
Total Net Budgetary Expenditures 2016-2017 481.4
Total Net Budgetary Expenditures 2017-2018 471.2
Variance (10.2)
Explanation of Variances by Standard Object
Utilities, Materials and supplies 9.4
Revenues netted against expenditures (16.0)
Other (3.6)
Total (10.2)

Risks and Uncertainties

CSC's Departmental Plan (DP) 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 would freeze the overall federal operating budget. Consequently, CSC would have to fund the increases in salary resulting from collective agreements that took 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 DP of 2017-2018, 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

During the first quarter of 2017-2018, there have been no 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
_______________
Anne Kelly, A/Commissioner

Ottawa, Canada
August 25, 2017

Statement of Authorities (unaudited)

(in thousands of dollars)
Expenditures Fiscal Year 2017-2018 Fiscal Year 2016-2017
Total available for use for the year ending March 31, 2018* Used during the quarter ended June 30, 2017 Year to date used at quarter-end Total available for use for the year ending March 31, 2017* Used during the quarter ended June 30, 2016 Year to date used at quarter-end
Vote 1 – Operating Expenditures 1,962,343 419,021 419,021 1,925,556 406,032 406,032
Vote 5 – Capital Expenditures 208,942 9,888 9,888 185,712 11,670 11,670
Budgetary Statutory Authorities
CORCAN Gross Expenditures 120,292 16,261 16,261 92,605 15,430 15,430
CORCAN Gross Revenues (120,292) (31,336) (31,336) (92,605) (15,371) (15,371)
CORCAN Net Expenditures (Revenues) - (15,075) (15,075) - 59 59
Contributions to employee benefit plans 229,424 57,388 57,388 251,324 63,674 63,674
Spending of proceeds from the disposal of surplus Crown assets 658 - - 852 6 6
Total Budgetary Authorities 2,401,367 471,222 471,222 2,363,444 481,441 481,441
Non-Budgetary Authorities 45 - - 45 - -
Total Authorities 2,401,412 471,222 471,222 2,363,489 481,441 481,441

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 2017-2018 Fiscal Year 2016-2017
Planned expenditures for the year ending March 31, 2018 Expended during the quarter ended June 30, 2017 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended June 30, 2016 Year to date used at quarter-end
Personnel 1,740,183 405,987 405,987 1,759,208 405,032 405,032
Transportation and communications 25,465 4,196 4,196 18,915 3,786 3,786
Information 610 64 64 545 34 34
Professional and special services 298,072 43,040 43,040 259,200 44,126 44,126
Rentals 16,726 2,317 2,317 16,059 3,528 3,528
Repair and maintenance 23,460 2,332 2,332 20,214 2,372 2,372
Utilities, materials and supplies 129,360 29,578 29,578 123,073 20,194 20,194
Acquisition of land, buildings and works* 132,198 4,760 4,760 135,170 7,631 7,631
Acquisition of machinery and equipment* 72,702 3,129 3,129 46,694 2,483 2,483
Transfer payments 120 30 30 4,820 675 675
Other subsidies and payments 82,763 7,125 7,125 72,151 6,951 6,951
Total Gross Budgetary Expenditures 2,521,659 502,558 502,558 2,456,049 496,812 496,812
Less Revenues Netted Against Expenditures
CORCAN (120,292) (31,336) (31,336) (92,605) (15,371) (15,371)
Total Net Budgetary Expenditures 2,401,367 471,222 471,222 2,363,444 481,441 481,441

* These are mainly Vote 5 (Capital) expenditures

Footnotes

Footnote 1

Released through Orders in Council P.C. 2017-0971 and P.C. 2017-0972.

Return to footnote 1 referrer