Quarterly Financial Report, For the Quarter ended September 30, 2019 (revised)
Location: Organizational Budgetary Expenditures by Standard Object (unaudited), Planned expenditures for the year ending March 31, 2020
Revision: "Acquisition of machinery and equipment planned expenditures $61,484 thousands" replaces "Acquisition of machinery and equipment planned expenditures $61,528 thousands".
Rationale for the revision: Original amount reported was not correct.
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 the Quarterly Financial Report for the quarter ended June 30, 2019.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 and the Departmental Plan 2018-2019.
Basis of Presentation
Management using an expenditure basis of accounting has prepared this quarterly report. The accompanying Statement of Authorities includes CSC’s spending authorities granted by Parliament and those used by the organization, consistent with the Main Estimates for the 2019-2020 fiscal year for which full supply was released on June 28, 2019Endnote i. 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 results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.
CSC has an active Revolving Fund (CORCAN) that 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 September 30, 2019 and September 30, 2018 for CSC’s combined operating, capital and budgetary statutory authorities.
Budgetary Authorities and Net Budgetary Expenditures
This graph depicts the net budgetary authorities as $2,550,537 thousand and the year to date net expenditures as $1,169,470 thousand for the second quarter ending September 30, 2019. In 2018-2019, the net budgetary authorities were $2,494,706 thousand for the second quarter ending September 30, 2018 and the year to date net expenditures were $1,151,575 thousand.
Significant Changes to Authorities
CSC’s 2019-20 Main Estimates include $95.0M under Vote 10 for funding approved through Budget 2019 for “Support for the Correctional Service of Canada”, to support CSC’s existing operations. Funding approved through Vote 10 has not yet been transferred to CSC and is not yet available for use. Therefore, Vote 10 has been excluded from the budgetary authorities presented here and in the Statement of Authorities.
As reflected in the Statement of Authorities for the period ending September 30, 2019, CSC has seen a increase in total authorities of $55.8 million or 2.2% for the current fiscal year compared to the previous fiscal year.
CSC’s Operating Vote increased by $93.3 million or 4.6% compared to the authorities at the end of September 2018, which is attributed to the net effect of the following items:
- An increase of $53.2 million in operating budget carry forward as compared to the previous year;
- An increase of $27.6 million related the funded portion of Collective Agreement increases;
- An increase of $7.9 million to cover incremental expenditures due to changes in offender population volumes and price fluctuations;
- An increase of $6.2 million related to funding for Vulnerable Offenders, an item of Budget 2017;
- An increase of $4.3 million to further support the mental health needs of inmates and to support the reopening of the penitentiary farms at Joyceville and Collins Bay institutions (Budget 2018);
- An increase of $3.5 million in operating budget carry forward due to the Transforming Federal Corrections Initiative;
- An increase of $0.3 million in funding due to the Modernization of the Program and Administrative Services (PA);
- A decrease of $9.5 million due to reallocation of funds to modernize and enhance Government digital services (Budget 2018);
- A decrease of $0.1 million in funding for the Federal Contaminated Sites Action Plan Initiative;
- A decrease of $0.1 million in funding for the Greening Government Fund Initiative.
CSC’s Capital Vote decreased by $43.7 million or -18.3% compared to the authorities at the end of September 2018, which is attributed to the following items:
- A decrease of $42.4 million in the capital budget carry forward as compared to the previous year;
- A decrease of $1.3M million for CSC’s contribution to the Financial Management Transformation Initiative.
Budgetary Statutory Authorities
CSC’s budgetary statutory authorities increased by $6.2 million or 2.7% compared to September 2018, which is related to increased employer contributions to the Employee Benefit Plan as a result of increases in personnel expenses associated with the items described above, as well as proceeds from the disposal of surplus Crown assets.
Explanation of Significant Variances from Previous Year Expenditures
Compared with the previous fiscal year, the total year to date net budgetary expenditures increased by $17.9 million or 1.55 % mainly due to the following factors:
- Personnel expenditures increased by $10.3 million primarily due to:
- An increase of $3.8 million due to increased rates of pay for salaries in the current fiscal year compared to the previous fiscal year as a result of the signing and implementation of various collective agreements;
- A decrease of $1.6 million due to fewer retroactive payments processed during the current fiscal year compared to the prior fiscal year;
- An increase of $4.1 million for other salary expenses including increased payments to casual and part-time staff;
- An increase of $4.5 million related to increased overtime expenses;
- An increase of $1.6 million due to increased other allowances and benefits.
- Professional and special services increased by $5.5 million primarily due to:
- An increase of $3.3 million for correctional and training fees to CORCAN as a result of increased responsibilities for training related to the management of farms and indigenous employment;
- A decrease of $1.6 million related to payments to Public Services and Procurement Canada for contractors security clearances;
- An increase of $2.8 million in welfare services due to an increase in requirements for beds in Community Residential Facilities.
- Utilities, materials and supplies increased by $7.8 million primarily due to:
- An increase of $5.6 million related to price changes and increased requirements of the offender population related to medication;
- An increase of $1.5 million due to increased purchases of uniforms for correctional officers as CSC had more officer recruits this year compared to last year;
- A decrease of $1.6 million in payment of footwear allowance which is paid every second year.
- Acquisition of land, buildings and works increased by a net $2.1 million as a result of decreased spending on the New Sewage Lagoon at Stony Mountain as the project was completed in 2018-2019, and increased spending in 2019-2020 on projects at Saskatchewan Penitentiary, Drumheller Institution and Cowansville Institution.
- Acquisition of machinery and equipment expenditures decreased by $10.5 million primarily due to:
- A decrease of $7.1 million due to the fact that more vehicles required replacement during 2018-2019;
- A decrease of $3.2 million mainly attributable to perimeter security projects that were completed in 2018.
- A net increase of $1.7 million in CORCAN’s revenues due to:
- A decrease of $5.4 million due to decreased manufacturing sales;
- An increase of $2.7 million for services revenues due to increased construction projects this fiscal year; and
- An increase of $3.3 million in correctional and training fees due to increased responsibilities for training related to the management of farms and indigenous employment.
|Organizational Budgetary Expenditures||Year Over Year||Quarter Over Quarter|
|Total Net Budgetary Expenditures 2018-2019||1,151.6||602.9|
|Total Net Budgetary Expenditures 2019-2020||1,169.5||629.7|
|Explanation of Variances by Standard Object|
|Professional and special services||5.5||(7.1)|
|Utilities, materials and supplies||7.8||0.5|
|Acquisition of land, buildings and works||2.1||1.5|
|Acquisition of machinery and equipment||(10.5)||(5.5)|
|Other Standard Objects||4.4||6.5|
Risks and Uncertainties
CSC’s Departmental Plan 2019-20 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 was required 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. Given that salaries represent a significant portion of CSC’s expenditures, this freeze and other government-wide spending reduction exercises have resulted in significant financial pressures.
CSC continues to review its operations to address the budgetary constraints resulting from the operating budget freeze. The department has undertaken a comprehensive two-year review to:
- identify potential efficiencies and reallocation opportunities,
- make further investments to mitigate operational and financial risks,
- ensure resource levels are sufficient for CSC to meet its legislated mandate, and
- continue to deliver results for Canadians and stabilize its financial position into the future.
CSC continues to experience ongoing issues related to the Phoenix Pay System. Given the complexity of our workforce coupled with the operational nature of our organization, CSC has experienced a significantly high number of pay related issues. CSC is continuously working internally and with external stakeholders to resolve these issues.
CSC’s specific risks, as outlined in CSC’s Plans at a glance and operating context, 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 inability to implement its mandate and ensure the financial sustainability of the organization, 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. This includes receiving program integrity funding in the last quarter of 2017-2018, the third quarter of 2018-2019, and through Budget 2019, along with additional anticipated funding in the future until such time as the comprehensive review is completed.
Significant Changes in Relation to Operations, Personnel and Programs
CSC sought incremental funding to implement Transforming Federal Corrections (TFC), a strategy to eliminate the practice of segregation and to transform federal corrections through investments in proactive diagnosis, targeted intervention and treatment of inmates needs.
The TFC Memorandum to Cabinet was approved in September 2018 and funding was approved by Treasury Board Minister in May 2019. Funding approved through the Treasury Board Submission began in the 2019-20 fiscal year, and will gradually increase over the following five years until it finally stabilizes in fiscal year 2024-25 going forward.
Approvals by Senior OfficialsApproved by:
Original Signed By
Chief Financial Officer
Original Signed By
November 22 2019
Statement of Authorities (unaudited)
|Fiscal Year 2019-2020||Fiscal Year 2018-2019|
|Total available for use for the year ending March 31, 2020*||Used during the quarter ended September 30, 2019||Year to date used at quarter-end||Total available for use for the year ending March 31, 2019*||Used during the quarter ended September 30, 2018||Year to date used at quarter-end|
|Vote 1 - Operating Expenditures||2,119,891||528,362||996,510||2,026,626||506,702||973,040|
|Vote 5 - Capital Expenditures||194,811||45,756||61,596||238,494||52,286||73,779|
|CORCAN Gross Expenditures||124,339||29,020||54,697||108,355||26,510||49,329|
|CORCAN Gross Revenues||(124,339)||(32,007)||(60,508)||(108,355)||(39,775)||(58,832)|
|CORCAN Net Expenditures (Revenues)||-||(2,987)||(5,811)||-||(13,265)||(9,503)|
|Contributions to employee benefit plans||234,335||58,583||117,167||228,278||57,069||114,139|
|Refunds of previous years revenue||-||-||109||109|
|Spending of proceeds from the disposal of surplus Crown assets||1,500||7||8||1,308||11||11|
|Total Budgetary Authorities||2,550,537||629,721||1,169,470||2,494,706||602,912||1,151,575|
|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)
|Fiscal Year 2019-2020||Fiscal Year 2018-2019|
|Planned expenditures for the year ending March 31, 2020||Expended during the quarter ended September 30, 2019||Year to date used at quarter-end||Planned expenditures for the year ending March 31, 2019||Expended during the quarter ended September 30, 2018||Year to date used at quarter-end|
|Transportation and communications||24,632||7,108||11,810||24,502||5,918||10,676|
|Professional and special services||326,782||101,390||158,016||293,299||108,492||152,549|
|Repair and maintenance||23,873||9,908||13,220||23,035||8,211||12,154|
|Utilities, materials and supplies||120,982||30,930||62,430||130,516||30,467||54,615|
|Acquisition of land, buildings and works*||130,127||36,654||48,342||149,941||35,136||46,220|
|Acquisition of machinery and equipment*||61,484||6,059||8,207||85,198||11,602||18,700|
|Other subsidies and payments||87,171||32,071||51,322||93,379||30,953||51,179|
|Total Gross Budgetary Expenditures||2,674,876||661,728||1,229,978||2,603,061||642,687||1,210,407|
|Total Net Budgetary Expenditures||2,550,537||629,721||1,169,470||2,494,706||602,912||1,151,575|
|* These are mainly Vote 5 (Capital) expenditures
**Amounts re-classified to conform to current quarter presentation.
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