Quarterly Financial Report - For the quarter ended December 31, 2016
Statement outlining results, risks and significant changes in operations, personnel and programs
This quarterly report should be read in conjunction with the Main Estimates, Supplementary Estimates and previous quarterly reports for the current fiscal year. It has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by Treasury Board. This quarterly report has not been subject to an external audit or review.
The role of the Courts Administration Service (CAS) is to provide effective and efficient registry, judicial and corporate services to the Federal Court of Appeal, the Federal Court, the Court Martial Appeal Court of Canada and the Tax Court of Canada. Further details on CAS’ programs can be found in the 2016-17 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 CAS’ spending authorities granted by Parliament and those used by the organization consistent with the Main Estimates and Supplementary Estimates for the 2016-17 fiscal year. This quarterly report has been prepared using a prescribed 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.
CAS uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.
Highlights of fiscal quarter and fiscal year-to-date results
Significant changes to authorities available for use for the fiscal year
As illustrated in the Statement of Authorities and the Departmental Budgetary Expenditures by Standard Object tables at the end of this report, as at December 31, 2016, authorities available for use for the year increased by $1,405 thousand (2%) compared to the same period in 2015-16, from $74,763 thousand to $76,168 thousand. As a result of the Government expenditure management cycle and certain conditions imposed by Central Agencies, there are often significant fluctuations by quarter between authorities received and the timing of expenditures realized.
This increase in authorities is partly due to $1,325 thousand in funding received in Budget 2016 to invest in information technology (IT) infrastructure upgrades to safeguard the efficiency of the federal court system. Also, $911 thousand was received in Budget 2016 to relocate the Quebec City Federal Courts facility, thereby ensuring continued Federal Courts presence in Quebec City. In addition, contributions to employee benefit plans related to funding received for enhancements to physical and IT security for the Federal Courts, as well as funding for Division 9 proceedings under the Immigration and Refugee Protection Act (Balanced Refugee Reform Act) had not yet been received as of the third quarter of 2015-16 but are included in 2016-17 authorities, which resulted in a further increase of $521 thousand. Furthermore, compensation for collective bargaining increases of $113 thousand was received in 2016-17.
The above increases were partly offset by a $916 thousand decrease between the 2016-17 and 2015-16 operating budget carry-forward funding. Also, a $532 thousand decrease is related to Economic Action Plan 2014 Act, No. 2, which transferred the jurisdiction for payment of prothonotaries’ salaries, pensions, benefits and other administrative arrangements to the Office of the Commissioner for Federal Judicial Affairs Canada. In 2015-16, associated funding was frozen and this funding was removed from CAS’ 2016-17 reference levels.
Other minor changes resulted in a net decrease of $17 thousand in authorities.
Significant changes to expenditures
The table of Departmental Budgetary Expenditures by Standard Object at the end of this report provides a comparison by standard object between the current and previous fiscal year for third quarter expenditures and year-to-date expenditures.
Figure 1 presents current and prior fiscal year expenditures compared to annual authorities, as of the end of the third quarter.
Figure 1 – Expenditures compared to annual authorities
Description of the image
At the end of the third quarter of 2016-17, authorities totalled $76,168 thousand compared to $74,763 thousand at the end of the same quarter of 2015-16.
During the first quarter of 2016-17, expenditures totalled $16,510 thousand compared to $14,839 thousand during the first quarter of 2015-16.
During of the second quarter of 2016-17, expenditures totalled $16,532 thousand compared to $17,162 thousand during the second quarter of 2015-16.
During the third quarter of 2016-17, expenditures totalled $18,038 thousand compared to $18,014 thousand during the third quarter of 2015-16.
Note: The sum of the quarterly expenditures for fiscal year 2015-16 does not reconcile with the total year-to-date expenditures amount of $50,014 thousand due to rounding.
As illustrated in Figure 1, third quarter expenditures increased slightly by $24 thousand (0%) compared to the same quarter in 2015-16, from $18,014 thousand to $18,038 thousand. As a result, 24% of the authorities available for use for the fiscal year were expended during the third quarter of 2016-17, consistent with 2015-16.
Also, year-to-date expenditures increased by $1,066 thousand (2%) compared to the same period of the previous fiscal year, from $50,014 thousand to $51,080 thousand. As a result, 67% of the authorities available for use for the fiscal year were expended as of the end of the third quarter of fiscal 2016-17, consistent with 2015-16.
Significant variances1 are explained as follows:
Year-to-date personnel expenditures increased by $1,616 thousand (4%) compared to same period of the previous fiscal year, from $36,737 thousand to $38,353 thousand. This included a $391 thousand (3%) increase in third quarter expenditures compared to the same quarter in 2015-16, from $12,593 thousand to $12,984 thousand. The increases in year-to-date and third quarter personnel expenditures were principally driven by an increase in salaries, other allowances and benefits, as well as employer contributions to employee benefit plans due to an increase in full time equivalents. A number of tentative collective agreements have been reached in fiscal year 2016-17; however, they have yet to be ratified and signed. As a result, there is no financial impact as of December 31, 2016.
Professional and special services:
Year-to-date professional and special services decreased by $1,141 thousand (-18%) compared to the same period of the previous fiscal year, from $6,463 thousand to $5,322 thousand. This included a decrease in third quarter expenditures of $467 thousand (-19%) compared to the same quarter in 2015-16, from $2,473 thousand to $2,006 thousand. The decreases in year-to-date and third quarter professional and special services expenditures were mainly attributable to timing variations related to the processing of expenditures between quarters for translation services, partly offset by an increase in protection services. The year-to-date decrease was also partly offset by increases in IT and telecommunications consultants, as well as business services.
Repair and maintenance:
Year-to-date expenditures related to repair and maintenance increased by $397 thousand (173%) compared to the same period of the previous fiscal year, from $230 thousand to $627 thousand. This included a $301 thousand (346%) increase in third quarter expenditures, from $87 thousand to $388 thousand. The increases in year-to-date and third quarter repair and maintenance expenditures were driven by an increase in the repair and maintenance of office equipment. The year-to-date increase was also driven by an increase in communications and networking equipment maintenance related to IT projects and initiatives.
Transportation and communications:
Year-to-date transportation and communications expenditures increased by $221 thousand (13%) compared to the same period of the previous fiscal year, from $1,684 thousand to $1,905 thousand. This included an increase in third quarter expenditures of $127 thousand (23%) compared to the same quarter in 2015-16, from $562 thousand to $689 thousand. The increases in year-to-date and third quarter transportation and communications expenditures were largely driven by an increase in postage and freight.
Acquisition of machinery and equipment:
Year-to-date expenditures related to the acquisition of machinery and equipment increased by $162 thousand (12%) compared to the same period of the previous fiscal year, from $1,366 thousand to $1,528 thousand. The majority of this increase stemmed from the first quarter. This increase was mainly driven by timing variations related to the processing of expenditures between quarters for the purchase of informatics equipment and parts for IT-related projects and initiatives. Third quarter expenditures decreased by $405 thousand (-39%) compared to the same quarter in 2015-16, from $1,029 thousand to $624 thousand. This decrease was mainly due to a decrease in informatics equipment and parts, partly offset by an increase in office equipment and furniture.
Acquisition of land, building and works:
Year-to-date expenditures related to the acquisition of land, building and works decreased by $40 thousand (-27%) compared to the same period of the previous fiscal year, from $150 thousand to $110 thousand. This decrease is related to timing variations related to the processing of expenditures between quarters for leasehold improvements. Third quarter expenditures increased by $33 thousand (77%) compared to the same quarter in 2015-16, from $43 thousand to $76 thousand.
Year-to-date expenditures related to rentals were almost consistent with the same period of the previous fiscal year. However, third quarter expenditures increased by $135 thousand (33%) compared to the same quarter in 2015-16, from $404 thousand to $539 thousand. This increase is due to timing variations related to the processing of expenditures between quarters for rental of buildings, partly offset by timing variations related to the processing of expenditures between quarters for rental of informatics equipment.
Other subsidies and payments:
Year-to-date expenditures related to other subsidies and payments decreased by $63 thousand (-70%) compared to the same period of the previous fiscal year, from $90 thousand to $27 thousand. This included a decrease of $50 thousand (-70%) in third quarter expenditures compared to the same quarter in 2015-16, from $71 thousand to $21 thousand. This decrease is mainly due to the cost sharing program for PeopleSoft onboarding costs in 2015-16, as well timing variations related to the processing of expenditures between quarters for interdepartmental settlements.
Immaterial variances, including minor variations in the timing of the delivery of goods and services account for the remaining variances in year-to-date and third quarter expenditures compared to the previous fiscal year.
Risks and uncertainties
The majority of non-personnel expenses incurred by CAS are contracted costs for services supporting the judicial process and court hearings. They include translation, court reporters, transcripts, and security services, and they are mostly driven by the number, type and duration of hearings conducted in any given year. These are non-discretionary and limit the organization's financial flexibility.
CAS has been facing a program integrity situation for many years, which has resulted from various ongoing pressures and has impacted CAS’ ability to deliver its core mandate while meeting legislative and policy requirements. Although it is an important priority for the courts and their users, CAS has been unable to procure and implement a modern court and registry management system to replace unreliable legacy systems and support the transition to fully electronic services. CAS also has a limited budget to respond to increases in the quantity and complexity of court cases, as well as increases in the number of self-representing litigants who require more assistance, which has impacted the resources required to support the judicial process, as well as translation costs. Furthermore, external drivers that influence costs, such as inflation and government cost-saving measures, represent additional challenges.
To address the risks arising from its program integrity issues, CAS has implemented various strategies, including reorganizing and realigning services, reallocating resources, establishing priorities and regularly reassessing them, as well as seeking efficiencies wherever possible. Having assessed a number of different financial models, CAS has determined that the only remaining viable solution is to secure additional funding. CAS received some program integrity funding in Budget 2015 specifically for physical and IT security.
Budget 2016 provided $7.9 million over five years, as well as ongoing funding, to invest in IT infrastructure upgrades to safeguard the efficiency of the federal court system. Budget 2016 also provided up to $2.6 million over two years on a cash basis to relocate the Quebec City Federal Courts facility, thereby ensuring continued Federal Courts presence in Quebec City.
CAS continues to work with central agencies to identify sources of funds to address outstanding risks.
Significant changes in relation to operations, personnel and programs
There have been no significant changes in CAS operations, personnel and programs.
Approval by Senior Officials
Original signed by
Daniel Gosselin, FCPA, FCA
Original signed by
Francine Côté, CPA, CA, CISA
Deputy Chief Administrator, Corporate Services
Chief Financial Officer
(February 24, 2017)
|Fiscal year 2016-17||Fiscal year 2015-16|
|Total available for use for the year ending
March 31, 2017 1
|Used during the quarter ended
December 31, 2016
|Year-to-date used at quarter-end||Total available
for use for the year ending
March 31, 2016 1
|Used during the quarter ended
December 31, 2015
|Year-to-date used at quarter-end|
|Vote 1 - Operating expenditures||68,978||16,247||45,709||68,122||16,355||45,031|
|Contributions to employee benefit plans||7,183||1,788||5,364||6,632||1,658||4,974|
|Spending of proceeds from the disposal of surplus Crown assets||-||-||-||-||-||-|
|Refunds of amounts credited to revenues in previous years||7||3||7||9||1||9|
|Total budgetary authorities||76,168||18,038||51,080||74,763||18,014||50,014|
1- Includes only Authorities available for use and granted by Parliament at quarter-end.
|Expenditures||Fiscal year 2016-17||Fiscal year 2015-16|
|Planned expenditures for the year ending March 31, 2017||Expended during the quarter ended December 31, 2016||Year-to-date used at quarter-end||Planned expenditures for the year ending March 31, 2016||Expended during the quarter ended December 31, 2015||Year-to-date used at quarter-end|
|Transportation and communications||2,893||689||1,905||2,775||562||1,684|
|Professional and special services||12,060||2,006||5,322||12,444||2,473||6,463|
|Purchased repair and maintenance||1,333||388||627||1,414||87||230|
|Utilities, materials and supplies||2,380||636||1,646||1,979||672||1,740|
|Acquisition of land, building and works||1,101||76||110||703||43||150|
|Acquisition of machinery and equipment||4,364||624||1,528||4,196||1,029||1,366|
|Other subsidies and payments||7||21||27||14||71||90|
|Total budgetary expenditures||76,168||18,038||51,080||74,763||18,014||50,014|
1 Significant variances are defined as variances by standard object that are greater than $250 thousand or 25%.
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