Correctional Service Canada
Quarterly Financial Report

For the Quarter ended June 30, 2012

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Table of Contents

Introduction

This quarterly report has been prepared by management 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 as well as Canada's Economic Action Plan 2012 (Budget 2012). This report has not been subject to an external audit or review.

Correctional Service Canada (CSC), as part of the criminal justice system and respecting the rule of law, contributes to public safety by actively encouraging and assisting offenders to become law-abiding citizens, while exercising reasonable, safe, secure and humane control. It delivers its mandate under four major program activities. A summary description of CSC's program activities can be found in Part II of the Main Estimates.

CSC contributes to public safety by administering court-imposed sentences for offenders sentenced to two years or more. This involves managing institutions of various security levels and supervising offenders on different forms of conditional release, while assisting them to become law-abiding citizens. CSC also administers post-sentence supervision of offenders with Long Term Supervision Orders for up to ten years.

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 department, consistent with the Main Estimates and Supplementary Estimates A for the 2012-2013 fiscal year, for which full supply was released on June 29, 20121. 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.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates, i.e., these authorities do not take into consideration any effect from the Deficit Reduction Action Plan.

In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

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 End and Fiscal Year to Date (YTD) Results

Authorities Analysis

As reflected in the attached Statement of Authorities, as of June 30, 2012, CSC has seen an increase in total authorities of $44.2 million for the current fiscal year compared to the previous fiscal year. This represents a 1.5% increase over the total authorities available as of June 30, 2011. It should be noted that these authorities do not take into consideration any effect from the Deficit Reduction Action Plan.

The following table summarizes the variances in total authorities by vote between June 30, 2011 and June 30, 2012:

(in millions of dollars)
  Operating Expenditures
(Vote 25)
Capital Expenditures
(Vote 30)
Budgetary Statutory Authorities Total
Truth in Sentencing Act 171.8 2.4 - 174.2
Tackling Violent Crime Act 3.8 - - 3.8
Budget 2008 Integrity Funding 4.7 - - 4.7
National Capital, Accommodation and Operations Plan (48.6) - - (48.6)
Shared Services Canada (32.8) (10.5) - (43.3)
2009 Strategic Review (1.6) (39.7) - (41.3)
Reprofiling to future years - (13.3) - (13.3)
Other 1.7 - - 1.7
Budgetary Statutory Authorities - - 6.3 6.3
Total 99.0 (61.1) 6.3 44.2

Of the net increase in total authorities reflected in the Statement of Authorities, $174.2 million ($171.8 million in operating funding and $2.4 million in capital funding) was received in relation to the implementation of the Truth in Sentencing Act, and $3.8 million for the Tackling Violent Crime Act, where increases in both individual sentence length and the numbers of federal offenders is expected.

These changes will result in CSC accommodating and supervising an increase in the current offender population.

However, it was announced that CSC will be reducing its reference levels by approximately $1.48 billion over the period of 2011-2012 to 2017-2018 given that the forecasted growth in the inmate population did not materialize as originally forecasted.

As part of the Budget 2008 Integrity Funding from the 2010-2011 Annual Reference Level Update, $4.7 million of the Operating vote was reprofiled from previous years to 2012-13.

The $48.6 million decrease for the National Capital, Accommodation & Operations Plan relates to offender programs and specific accommodation measures. These measures are based on funding formulae driven by variations in population levels both incarcerated and in the community, as well as changes to the types of offender.

CSC decreased its reference level by $43.3 million ($32.8 million in operating funding and $10.5 million in capital funding) due to the transfer of some IT responsibilities to Shared Services Canada (SSC).SSC was established by an Order in Council to pool existing resources from across government in order to consolidate and transform IT infrastructure for the Government of Canada.

Funding has been reduced by $41.3 million ($1.6 million in Operating and $39.7 million in Capital) as a result of the 2009 Strategic Review.

There was a $13.3 million decrease in CSC's capital vote reference levels due to reprofiling of capital funds to future years.

The Budgetary Statutory Authority increase of $6.3 million is primarily due to CSC's allocation of the employer's share of the Employee Benefit Plan (EBP).

Quarterly Expenditures Analysis

Compared to the first quarter of the previous fiscal year, total net budgetary expenditures have increased by $26.7 million (5.4%).

Operating expenditures in the first quarter have increased by $34.2 million over the same period last year. Salary and overtime increased by $16.8 million2 due to an increase in the number of employees resulting from recruitment activities undertaken as part of the implementation of new legislation. There was also an increase of $19.1 million in professional and special services expenditures. This increase is due to a modification in the Correctional and Training fee invoicing process between CSC and CORCAN that resulted in a difference in timing of expenditure. The Correctional and Training fee's purpose is to offset salary and operating costs that cannot be recovered by CORCAN through the sale of goods and services due to the correctional environment in which it operates. As of June 30, 2012, CORCAN had invoiced the full amount for the 2012-2013 Correctional and Training fee whereas in 2011-2012 CORCAN had invoiced CSC throughout the year. This also explains the $12.2 million increase in CORCAN's gross revenue as compared to the same period last year.

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. Within this context, specific financial risks relative to the first quarter include the following:

Budget 2010 Cost Containment Measures will require CSC to internally finance, on a permanent basis, the costs of wage increases resulting from current and future collective agreements negotiated between 2010-11 and 2012-13. For the current year, CSC will absorb internally an estimated amount of $17.4 million relating to salary increases.

In addition, various collective agreements have expired, covering approximately 62% of CSC's workforce (mostly with the Union of Canadian Correctional Officers). New agreements could result in significant financial pressure for CSC.

CSC continues to implement measures to address the budgetary constraints resulting from the Expenditure Restraint Act, including:

  • maintaining staff deployment standards for Correctional Officers and computerized roster systems to ensure efficient staffing levels in federal institutions, resulting in a significant reduction in overtime expenditures;
  • improving integrated human resource and business planning methods to improve the accuracy of forecasts for future staffing, recruitment, and essential training needs;
  • implementing a more focused approach to reducing travel and hospitality expenditures; and,
  • piloting an innovative Integrated Correctional Program Model that will reduce redundancies and overlap between some of the programs offered to offenders, leading to efficiencies in program delivery.

Significant Changes in Relation to Operations, Personnel and Programs

As noted in the last Quarterly Financial Report of 2011-2012, CSC transferred to Shared Services Canada (SSC) the responsibility for providing email, network and data centre services. As a result of this transfer, effective April 1, 2012, CSC's total authorities were permanently reduced by $43.3 million.

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be 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.

The Correctional Service of Canada (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 2012-13, $170.2 million in 2013-14, and ongoing savings of $295.4 million by 2014-15. The organization will achieve these cost savings by implementing measures to increase offender accountability, achieve administrative efficiencies, streamline operations and program delivery, and close three institutions by 2014-15 (Kingston Penitentiary and the Regional Treatment Centre in Ontario and Leclerc Institution in Quebec).

CSC has fully achieved its target for 2012-13. For the next two fiscal years, all initiatives are on track for completion within identified timelines. CSC is actively managing the roll-out of all initiatives through regular and sustained monitoring at the local, regional and national levels, in order to ensure that implementation is proceeding on time, on plan, and on budget.

The organization is well-placed to undertake these changes, having laid a solid foundation through its Transformation Agenda. 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

Signed by:__________________

Liette Dumas-Sluyter, CMA, CIA
Chief Financial Officer

Signed by:_________________

Anne Kelly, Acting Commissioner
Ottawa, Canada
August 20, 2012


Statement of Authorities (unaudited)
Authorities Fiscal Year 2012-2013 Fiscal Year 2011-2012
(in thousands of dollars) Total available for use for the year ending
March 31, 2013* **
Used during the quarter ended June 30, 2012 Year to date used at quarter-end Total available for use for the year ending
March 31, 2012*
Used during the quarter ended June 30, 2011 Year to date used at quarter-end
Vote 25 (30) – Operating Expenditures 2,306,862 444,388 444,388 2,207,946 410,141 410,141
Vote 30 (35) – Capital Expenditures 456,432 19,674 19,674 517,519 16,748 16,748
             
Budgetary Statutory Authorities            
CORCAN Gross Expenditures 86,633 17,671 17,671 80,460 16,773 16,773
CORCAN Gross Revenues (86,633) (25,000) (25,000) (80,460) (12,821) (12,821)
CORCAN Net Expenditures (Revenues) - (7,329) (7,329) - 3,952 3,952
Other Budgetary Statutory Authorities 264,078 65,684 65,684 257,715 64,922 64,922
Total Budgetary Authorities 3,027,372 522,417 522,417 2,983,180 495,763 495,763
Non-Budgetary Authorities 46 - - 49 - -
Total Authorities 3,027,418 522,417 522,417 2,983,229 495,763 495,763

More information is available on the following page.
* Includes only Authorities that were available for use and granted by Parliament as of quarter end.
**Total available for use does not reflect measures announced in Budget 2012.

Departmental Budgetary Expenditures by Standard Object (unaudited)
Budgetary
Expenditures
Fiscal Year 2012-2013 Fiscal Year 2011-2012
(in thousands of dollars) Planned expenditures for the year ending
March 31, 2013
Expended during the quarter ended
June 30, 2012
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2012
Expended during the quarter ended
June 30, 2011
Year to date used at quarter-end
Expenditures            
Personnel 1,798,387 419,555 419,555 1,722,775 401,920 401,920
Transportation and communications 73,847 6,193 6,193 74,757 8,424 8,424
Information 2,113 151 151 2,509 180 180
Professional and special services 417,733 65,512 65,512 402,963 46,459 46,459
Rentals 20,496 2,428 2,428 15,307 1,440 1,440
Repair and maintenance 63,199 2,647 2,647 62,138 6,785 6,785
Utilities, materials and supplies 183,094 21,044 21,044 174,620 21,226 21,226
Acquisition of land, buildings and works 303,477 16,461 16,461 323,309 10,420 10,420
Acquisition of machinery and equipment 154,296 2,729 2,729 195,533 2,541 2,541
Transfer payments 1,590 - - 1,573 38 38
Other subsidies and payments 95,773 10,697 10,697 88,156 9,151 9,151
Total Gross Budgetary Expenditures 3,114,005 547,417 547,417 3,063,640 508,584 508,584
             
Less Revenues Netted Against Expenditures            
CORCAN (86,633) (25,000) (25,000) (80,460) (12,821) (12,821)
             
Total Net Budgetary Expenditures 3,027,372 522,417 522,417 2,983,180 495,763 495,763

* Planned expenditures do not reflect measures announced in Budget 2012.


1 Released through Orders in Council P.C. 2012-0956 and P.C. 2012-0957

2 The variances in salaries and overtime ($16.8 M) and in EBP ($0.8 M) represent the total variation in personnel expenditures ($17.6M).