Quarterly Financial Report, For the Quarter ended December 31, 2020

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 the Quarterly Financial Reports for the quarters ended June 30, 2020 and September 30, 2020. 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 2020-2021 Departmental Plan.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. 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 2020-2021 fiscal year for which a first interim supply was released March 17, 2020Endnote i, a second interim supply was released June 26, 2020Endnote ii, and final supply was released December 14, 2020Endnote iii. 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 Department. 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, 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 $20.0 million at any time. Through Supplementary Estimates (A), 2020–2021Endnote iv, this limit was increased from a previous amount of $5.0 million. This increase was requested as a consequence of reduced sales and operations resulting from the COVID-19 pandemic.

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 December 31, 2020 and December 31, 2019 for CSC’s combined operating, capital and budgetary statutory authorities.

This graph depicts the net budgetary authorities
Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

This graph depicts the budgetary authorities as $2,795,126 thousand and the year to date net budgetary expenditures as $1,842,102 thousand for the third quarter ending December 31, 2020. In 2019-2020, the budgetary authorities were $2,646,533 thousand for the third quarter ending December 31, 2019 and the year to date net budgetary expenditures were $1,816,847 thousand.

Significant Changes to Authorities

As reflected in the Statement of Authorities for the period ending December 31, 2020, CSC has seen an increase in total authorities of $148.6 million or 5.6% for the current fiscal year compared to the previous fiscal year.

Operating Vote

CSC’s Operating Vote increased by $123.1 million or 5.6% compared to the authorities at the end of December 2019, which is attributed to the net effect of the following items:

  • An increase of $121.7 million in funding for Support for the Correctional Service of Canada (Budget 2020). In 2019-2020, a corresponding amount of $95.0 million was approved through Budget 2019 but included in CSC’s authorities during the last quarter of the 2019-20 financial year;
  • An increase of $8.8 million in quasi-statutory funding related to changes in prices and volume of goods and services being procured;
  • An increase of $6.5 million in funding related to Transforming Federal Corrections (Bill C-83);
  • An increase of $2.7 million due to a conversion of personnel budget to other operating budget;
  • An increase of $0.9 million in the funding received to date from Treasury Board’s Vote 30 for Paylist Requirements reimbursements of maternity allowances and severance payments;
  • An increase of $0.5 million in funding for the Federal Contaminated Sites Action Plan;
  • A decrease of $4.9 million for Fiscal Dividend (Budget 2018);
  • A decrease of $4.8 million in funding from the Operating Budget Carry Forward;
  • A decrease of $4.1 million in operating funding related to an internal transfer to adjust authorities to meet the common definition of the capital expenditures vote for cloud computing servicesFootnote 1;
  • A decrease of $3.0 million in operating funding related to an internal transfer to adjust authorities to where funding will be required in relation to the Offender Management System Modernization ProjectFootnote 1;
  • A decrease of $0.6 million related to funding for Addressing the Needs of Vulnerable Offenders (Budget 2017); and
  • A decrease of $0.6 million related to funding for Mental Health for Offenders and CORCAN Farms (Budget 2018).

Capital Vote

CSC’s Capital Vote increased by $21.7 million or 11.6% compared to the authorities at the end of December 2019, which is attributed to the net effect of the following items:

  • An increase of $14.6 million in funding from the capital budget carry forward;
  • An increase of $4.1 million in capital funding related to an internal transfer to adjust authorities to meet the common definition of the capital expenditures vote for cloud computing servicesFootnote 1;
  • An increase of $3.0 million in capital funding related to an internal transfer to adjust authorities to where funding will be required in relation to the Offender Management System Modernization ProjectFootnote 1; and
  • A decrease of $0.01 million for contributions for the Back Office Transformation initiative.

Budgetary Statutory Authorities

CSC’s budgetary statutory authorities increased by $3.8 million or 1.6% compared to December 2019, which is related to the department’s allocation of the employer’s share of the employee benefit plan, as well as proceeds from the disposal of surplus Crown assets.

CORCAN Drawdown Authority

CORCAN’s existing drawdown authority was increased from $5.0 million to a new limit of $20.0 million. This was requested as a consequence of reduced sales and operations resulting from the COVID-19 pandemic and was approved through Supplementary Estimates (A), 2020–2021.

Explanation of Significant Variances from Previous Year Expenditures

Compared with the previous fiscal year, the total year to date net budgetary expenditures increased by $25.3 million or 1.4%, mainly due to the following factors:

  • Personnel expenditures increased by $31.5 million primarily due to:
    • An increase of $28.9 million in salary:
      • An increase of $20.8 million due to the hiring of new employees for the implementation of Transforming Federal Corrections (Bill C-83) and increased rates of pay for salaries compared to the previous fiscal year;
      • An increase of $8.1 million due to the additional hiring of temporary employees to adapt to the impacts of COVID-19;
    • An increase of $14.4 million in overtime expenses mainly due to the COVID-19 response;
    • An increase of $5.0 million for payments to the Workers’ Compensation Board, resulting from a delay in invoicing last year;
    • A decrease of $11.5 million in the employer’s contributions to the employee benefit plan, which will be adjusted at year-end based on total salary expenditures; and
    • A decrease of $5.3 million for other supplementary personnel costs related to reduced staffing activities at CSC, mainly caused by a decline in new appointments and staff departures between departments due to COVID-19.
  • Transportation and communications expenditures decreased by $11.8 million primarily due to:
    • A decrease of $9.3 million in travel in relation to COVID-19 restrictions. Public servant travel expenditures decreased by $8.1 million, while non-public servant travel expenditures decreased by $1.2 million; and
    • A decrease of $2.5 million in relocation costs due to COVID-19, caused by a reduction in the recruitment of Correctional Officers and other relocations.
  • Professional and special services decreased by $2.0 million primarily due to:
    • An increase of $1.7 million in information technology and telecommunications consultants for various projects;
    • An increase of $1.7 million in legal services;
    • A decrease of $4.2 million in expenditures resulting from reduced funding in support of CORCAN activities. In 2020-21, there were no funds received for farms (Budget 2018) and there was a reduction of funding for the Indigenous Offender Employment Initiative (Budget 2017);
    • A decrease of $1.2 million due to the following impacts of COVID-19:
      • An increase of $2.2 million in contracted building cleaning services;
      • An increase of $1.4 million to reimburse CORCAN for expenditures incurred due to the pandemic;
      • An increase of $0.7 million in information technology and telecommunication consultants;
      • A decrease of $4.1 million in training. Inmate training decreased by $3.4 million, while employee training decreased by $0.8 million;
      • A decrease of $0.7 million in health care services / specialists due to work orders which were stopped; and
      • A decrease of $0.7 million in Corps Commissionaire expenditures, mainly associated with delayed constructions projects.
  • Rentals decreased by $1.8 million primarily due to delays in receiving invoices compared to last year:
    • A decrease of $1.0 million in license and maintenance fees; and
    • A decrease of $0.8 million in the rental of office buildings, as well as industrial and commercial buildings.
  • Repair and maintenance decreased by $4.1 million primarily due to delays in building maintenance work, due to COVID-19 restrictions.
  • Utilities, materials and supplies increased by $32.9 million primarily due to:
    • An increase of $33.0 million due to the following impacts of COVID-19:
      • An increase of $32.0 million in medical supplies, including personal protective equipment (PPE) purchases;
      • An increase of $2.0 million for food due to price increases and changes in the methods of delivery of meals to inmates;
      • An increase of $1.9 million in cleaning products;
      • A decrease of $1.5 million in personal goods, such as uniforms and other clothing due to the reduction of recruitment of Correctional Officers;
      • A decrease of $1.1 million in expenditures for gasoline, diesel fuel and light fuel oil; and
      • A decrease of $0.3 million in utilities, caused by the reduction of electricity expenditures;
    • An increase of $1.7 million in allowances for footwear, which is paid every second year; and
    • A decrease of $1.8 million in the purchase of Hepatitis C medication, as inventory levels were adequate at mid-year.
  • Acquisition of land, buildings and works decreased by $61.4 million primarily due to construction projects that were stopped or delayed, in response to COVID-19 measures.
  • Acquisition of machinery and equipment increased by $0.6 million primarily due to:
    • An increase of $2.4 million due to the replacement of many vehicles and the accompanying configurations costs;
    • An increase of $2.2 million for laptops and other Information Technology equipment, to allow the organization to meet requirements during the pandemic; and
    • A decrease of $4.0 million in other equipment and parts due to electronic security systems projects which have been delayed because of COVID-19.
  • Other subsidies and payments increased by $26.7 million primarily due to:
    • An increase of $22.5 million for the payment of court orders for $22.2 million and the payment of an out of court settlement for $0.3 million;
    • An increase of $14.0 million for payments to the Workers’ Compensation Board, resulting from a delay in invoicing last year;
    • An increase of $4.0 million in miscellaneous expenditures resulting from COVID-19 measures;
    • A decrease of $9.7 million due to the changes in CORCAN inventory resulting from the COVID-19 pandemic situation;
    • A decrease of $4.0 million associated with salary overpayment corrections; and
    • A decrease of $0.1 million in salary emergency advances.
  • A net decrease of $15.5 million in CORCAN’s revenues due to the impacts of COVID-19.
(in millions of dollars)
Organizational Budgetary Expenditures Year Over Year Quarter Over Quarter
Total Net Budgetary Expenditures 2019-2020 1,816.8 647.4
Total Net Budgetary Expenditures 2020-2021 1,842.1 635.6
Variance 25.3 (11.8)
Explanation of Variances by Standard Object
Personnel 31.5 (2.1)
Transportation and communications (11.8) (5.5)
Professional and special services (2.0) 11.7
Rentals (1.8) (2.7)
Repair and maintenance (4.1) (1.0)
Utilities, materials and supplies 32.9 4.4
Acquisition of land, buildings and works (61.4) (21.7)
Acquisition of machinery and equipment 0.6 (4.2)
Other subsidies and payments 26.7 5.7
CORCAN revenues 15.5 3.8
Other standard objects (0.8) (0.2)
Total 25.3 (11.8)

Risks and Uncertainties

CSC’s 2020-2021 Departmental Plan identifies the current risk environment and CSC’s key risk areas to the achievement of its strategic outcomes.

CSC was successful in obtaining permanent supplementary funding following the undertaking of an intensive two-year comprehensive review. The funding obtained will help to mitigate short and mid term financial pressures. However, a new financial risk has developed with the emergence of the COVID-19 pandemic. CSC is facing new challenges to ensure the health and safety of inmates, employees and the public during this pandemic, as it continues to contribute to the efforts to reduce the transmission of the virus. CSC has quickly adapted to a new reality by providing non-operational employees with the ability to telework and ensuring the delivery of services while respecting physical distancing regulations. These events have created additional pressures on CSC’s existing reference levels. In order to address this financial situation, CSC submitted a request for supplementary funding for critical operating requirements related to COVID-19 and this will be presented for approval through Supplementary Estimates (C), 2020–2021.

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 2020-2021 Departmental Plan, 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, the maintenance of public confidence in the federal correctional system, and the maintenance of a safe, secure, healthy, respectful, and collaborative working environment as established by its legal and policy obligations, mission, and values statement.

CSC has put in place risk mitigation strategies to address the stated risks. The integrated approach allows CSC to handle risk-related challenges, ensure operational sustainability to fulfill its mandate.

Significant Changes in Relation to Operations, Personnel and Programs

During the third quarter of 2020-2021, CSC has continued to feel the impact of the COVID-19 pandemic. Many of CSC’s operations were modified or temporarily suspended. Operating expenditures have seen a substantial increase from the previous year, as CSC continues to do its part to prevent the spread of the virus and manage outbreaks at several institutions. Conversely, planned capital projects that were halted at the end of the 2019-2020 fiscal year (as mandated by municipal and federal governments), have slowly restarted.

In an effort to respond to the pandemic, based on the advice of public health organizations, CSC has acquired personal protective equipment (PPE) for staff and offenders to reduce and control the spread of the virus. Furthermore, CSC has increased both its health care and purchases of cleaning materials and services as a means to ensure infection prevention and control within federal correctional institutions. Of note, demand and prices for PPE have increased significantly.

CSC is also facing additional operational and health care challenges, such as required modifications to the routines of inmates, enhanced institutional cleaning strategies, and staff usage of overtime above usual levels. In addition, CSC anticipates needing to conduct extensive virus testing to limit the infection and spread of the virus within institutions.

Under the Corrections and Conditional Release Act (CCRA), CSC has an obligation to provide essential health care to inmates. To this effect, we will be vaccinating the inmate population. We have been working closely with the Public Health Agency of Canada (PHAC). We will continue to follow the National Advisory Committee on Immunization (NACI) guidelines and work with our public health partners to support the timely allocation, distribution and administration of the vaccine for staff and offenders under our care as efficiently, equitably and effectively as possible.

CSC is Special Operating Agency (SOA), CORCAN, operates a revolving fund with authority to spend its revenues. Due to the resulting measures around COVID-19, CORCAN has been unable to operate under normal conditions. Consequently, CSC is seeking to maintain CORCAN’s increased drawdown limit set at $20.0M until such time as operations return to normal or compensating measures are implemented.

CSC received significant investments via the Fall Economic Statement (2018) to enhance mental health services for offenders, and support amendments to transform federal corrections, specifically in support of Bill C-83. Bill C-83 “An Act to amend the Corrections and Conditional Release Act and another Act” received Royal Assent on June 21, 2019. The amendments eliminate administrative and disciplinary segregation, and introduce a new correctional model including the use of structured intervention units (SIUs) for inmates who cannot be managed safely within a mainstream inmate population. CSC has started and is continuing the process of making the necessary infrastructure changes, developing policies, and hiring and training staff to operate the SIUs. Funding for these initiatives gradually increases over a period of five years and stabilizes in fiscal year 2024-2025.

There have been no changes to key senior personnel in the third quarter of 2020-2021.

Approvals by Senior Officials

Approved by:

Original Signed By
______________________________
Tony Matson,
Chief Financial Officer

Original Signed By
______________________________
Anne Kelly,
Commissioner
Ottawa, Canada
February 19, 2021

Statement of Authorities (unaudited)

(in thousands of dollars)
Fiscal year 2020-2021 Fiscal year 2019-2020
Total available for use at Q3 for the year ending March 31, 2021* Used during the quarter ended December 31, 2020 Year to date used at quarter-end Total available for use at Q3 for the year ending March 31, 2020* Used during the quarter ended December 31, 2019 Year to date used at quarter-end
Expenses
Vote 1– Net operating expenditures  2,340,532 551,934 1,633,362  2,217,404 530,449 1,526,959
Vote 5 – Capital expenditures  209,428 23,987 47,422  187,722 49,014 110,610
Budgetary statutory authorities
CORCAN gross expenditures  124,334 22,461 62,766  124,339 31,039 85,736
CORCAN revenues (124,334) (17,925) (66,729) (124,339) (21,753) (82,261)
CORCAN net expenditures (revenues)  -   4,536 (3,963)  -   9,286 3,475
Spending of proceeds from the disposal of surplus Crown assets  1,182 15 15  1,743 44 52
Refunds from previous years   1 1      
Contributions to employee benefits plans  243,984 55,088 165,265  239,664 58,584 175,751
   245,166 55,104 165,281  241,407 58,628 175,803
Total budgetary authorities  2,795,126 635,561 1,842,102  2,646,533 647,377 1,816,847
Non-budgetary authorities 45 0 (1) 45 (1) (1)
Total authorities  2,795,171 635,561 1,842,101  2,646,578 647,376 1,816,846

More information is available on the following page.

* Includes Authorities available for use and granted by Parliament at quarter-end.

Note: CORCAN’s available drawdown authority at the end of December 2020 was $20.0M, of which $7.0M was used, leaving a residual balance available of $13.0M. In comparison, at the end of December 2019, CORCAN’s drawdown authority was $5.0M, of which $4.5M was utilized, leaving a residual balance available of $0.5M.

Organizational Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)
Fiscal year 2020-2021 Fiscal year 2019-2020
Planned expenditures at Q3 for the year ending
March 31, 2021
Expended during the quarter ended December 31, 2020 Year to date used at quarter-end Planned expenditures at Q3 for the year ending
March 31, 2020
Expended during the quarter ended December 31, 2019 Year to date used at quarter-end
Expenditures
Personnel 1,912,986 462,488 1,360,982 1,851,660 464,602 1,329,500
Transportation and communications 29,374 3,439 8,936 24,631 8,975 20,785
Information 836 92 181 621 165 499
Professional and special services 438,901 97,430 241,822 435,943 85,779 243,795
Rentals 23,665 6,285 18,100 18,093 9,003 19,863
Repair and maintenance 29,727 7,142 17,287 23,873 8,138 21,358
Utilities, materials and supplies 172,040 36,062 126,954 142,597 31,631 94,061
Acquisition of land, buildings and works* 169,428 12,335 20,966 130,127 34,057 82,399
Acquisition of machinery and equipment* 36,481 9,782 22,780 56,036 13,951 22,158
Transfer payments 120 267 382 120 379 918
Other subsidies and payments 105,902 18,164 90,441 87,171 12,450 63,772
Total gross budgetary expenditures 2,919,460 653,486 1,908,831 2,770,872 669,130 1,899,108
Less revenues netted against expenditures
CORCAN (124,334) (17,925) (66,729) (124,339) (21,753) (82,261)
Total revenues netted against expenditures (124,334) (17,925) (66,729) (124,339) (21,753) (82,261)
Total net budgetary expenditures 2,795,126 635,561 1,842,102 2,646,533 647,377 1,816,847
* These are mainly Vote 5 (Capital) expenditures.
Date modified: