Quarterly Financial Report - For the quarter ended September 30, 2015

Statement outlining results, risks and significant changes in operations, personnel and programs

Introduction

This quarterly report should be read in conjunction with the Main Estimates and the previous quarterly report 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 2015-16 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 2015-16 Main Estimates. 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 (YTD) results

Significant Changes to Authorities available for use for the year

As at September 30, 2015, authorities available for use for the year decreased by $4,296 thousand (-6%) compared to the same quarter in 2014-15, from $70,634 thousand to $66,338 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 decrease in authorities is partly due to a $3,395 thousand decrease in funding related to the Division 9 proceedings under the Immigration and Refugee Protection Act (Balanced Refugee Reform Act) that sunset in March 2015. Renewed funding has not yet been received as of the end of the second quarter. There was also a $593 thousand decrease in funding for the implementation of Bill C-11, An Act to amend the Immigration and Refugee Protection Act and the Federal Courts Act. Related funding is included within the Main Estimates; however, its release is contingent upon the appointment of judges. There have been four judicial appointments to date, including two appointments made in May 2015.

Also, the 2015-16 operating budget carry-forward funding was $199 thousand less than in 2014-15. Furthermore, a $152 thousand decrease in authorities is attributable to adjustments to CAS’ contributions to employee benefit plans as per central agency direction.

Other minor changes resulted in a $43 thousand net increase in authorities.

Significant Changes to Expenditures

Figure 1 presents current and prior fiscal year expenditures compared to annual authorities, as of the end of the second quarter. These results are discussed in the following sections.

Figure 1 – Second-quarter Expenditures Compared to Annual Authorities

Second-quarter Expenditures

As illustrated in Figure 1, second-quarter expenditures increased by $1,148 thousand (7%) compared to the same quarter in 2014-15, from $16,014 thousand to $17,162 thousand. As a result, 26% of the authorities available for use for the year were expended during the second quarter of 2015-16, compared to 23% in the same quarter of 2014-15.

The increase in second-quarter expenditures is largely due to an $802 thousand (43%) increase related to professional and special services compared to the same quarter in 2014-15, from $1,857 thousand to $2,659 thousand. This is mainly attributable to the timing of translation services, as well as increases in commissionaire services and other professional services.

Also, there was a $147 thousand (67%) increase in rental expenditures compared to the same quarter in 2014-15, from $218 thousand to $365 thousand. This variance is mainly attributable to timing variations related to the processing of expenditures between quarters for the rental of office buildings and informatics equipment.

Additionally, there was a $106 thousand (10,600%) increase in the acquisition of land, building and works, from $1 thousand to $107 thousand, as well as a $103 thousand (24%) increase in utilities, materials and supplies, from $430 thousand to $533 thousand. The increase in the acquisition of land, building and works is due to leasehold improvements. The increase in utilities, materials and supplies is mainly due to increases in printed matter, as well as office and stationary supplies.

Furthermore, there was an $80 thousand (229%) increase in information, from $35 thousand to $115 thousand, as well as a $68 thousand (128%) increase in purchased repair and maintenance, from $53 thousand to $121 thousand. The increase in information is mainly due to an increase in printing services, advertising services, and electronic subscriptions and publications. The increase in purchased repair and maintenance is due to increases in the repair of buildings and machinery and equipment.

The above increases were partly offset by a $147 thousand (-40%) decrease in the acquisition of machinery and equipment, from $370 thousand to $223 thousand, as well as an $83 thousand (-108%) decrease in other subsidies and payments, from $77 thousand to -$6 thousand. The decrease in the acquisition of machinery and equipment is mainly due to the timing of expenditures related to information technology (IT) and security activities and initiatives. The decrease in other subsidies and payments is mainly due to improvements in the timely clearing of interdepartmental settlements.

Minor variations in the timing of the delivery of goods and services account for the remaining $72 thousand increase in second-quarter expenditures in the current year compared to the same quarter in the previous fiscal year.

Year to date Expenditures

As illustrated in Figure 1, year to date expenditures decreased by $621 thousand (-2%) compared to the same period of the previous fiscal year, from $32,622 thousand to $32,001 thousand. As a result, 48% of the authorities available for use for the fiscal year were expended as of the end of the second quarter of fiscal 2015-16, compared to 46% during the same period of 2014-15.

This variance is largely driven by a decrease of $1,496 thousand (100%) in transition payments for implementing salary payment in arrears by the Government of Canada in 2014-15. Also, there was a smaller year to date decrease in expenditures for the acquisition of machinery and equipment of $144 thousand (-30%), from $481 thousand to $337 thousand, which is mainly due to the timing of expenditures related to IT and security activities and initiatives. As outline below, these decreases were partly offset by increases in professional and special services; rentals; the acquisition of land, building and works; information; and purchased repair and maintenance.

Year to date expenditures for professional and special services increased by $541 thousand (16%) compared to the same period of the previous fiscal year, from $3,449 thousand to $3,990 thousand. This is mainly due to the timing of translation services, as well as increases in commissionaire services and other professional services. The increases were partly offset by a decrease in IT and telecommunications consultants, which was driven by the nature and progress of ongoing projects in each fiscal year.

Also, rental expenditures increased by $225 thousand (36%), from $622 thousand to $847 thousand. This is mainly due to an increase in the rental of office buildings, attributable to timing variations related to the processing of expenditures between quarters.

Additionally, expenditures related to the acquisition of land, building and works increased by $106 thousand (10,600%), from $1 thousand to $107 thousand. As noted above, this increase is due to leasehold improvements.

Furthermore, there was a $65 thousand (41%) year to date increase in expenditures related to information, from $158 thousand to $223 thousand, as well as a $53 thousand (59%) increase in purchased repair and maintenance, from $90 thousand to $143 thousand. The increase in information is mainly due to increases in printing and advertising services, while the increase in purchased repair and maintenance is due to increases in the repair of buildings and machinery and equipment.

Minor variations in the timing of the delivery of goods and services resulted in a further $29 thousand increase in year to date expenditures.

Risks and Uncertainties

Funding

Judicial functions of the courts are a responsibility of the judiciary and impose requirements that are beyond CAS’ control. A majority of the 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 essentially non-discretionary and limit the organization's financial flexibility.

For some years, CAS has lacked the permanent funding necessary to enable the organization to fully meet its commitments and address major program integrity issues. Budget 2011 partially addressed this need, providing CAS with approximately $3 million per year for some program integrity measures. However, Budget 2014 announced that the operating budget of departments would be frozen at their 2013-14 level for the years 2014-15 and 2015-16 and as a result, CAS would not receive additional funding for salary increases resulting from newly signed collective bargaining agreements.

Historically, such funding restraints have severely limited the resources available for strategic initiatives needed to address critical risk areas and allow the organization to become more effective and efficient in its delivery of services to the judiciary and Canadians.

Risk Management

Budget 2015 addressed the program integrity issues related to physical and IT security through the provision of $19 million over five years. This includes $4.5 million in 2015-16, which will be sought through Supplementary Estimates later this fiscal year. This additional funding is for investment in physical security enhancements such as additional cameras, security personnel and screening tools that will help ensure federal courts remain secure and function properly. In addition, it will also enable IT security enhancements to further protect judicial and CAS information.

CAS has made tangible progress in addressing IT related rust-out, risks and performance. Further work in this area remains to be completed to provide an efficient and robust infrastructure to support the growing needs of the Courts and the Registries. CAS will continue to closely manage expenditures in order to invest to the extent possible in this area.

Significant changes in relation to operations, personnel and programs

With the coming into force of Bill C-43 Economic Action Plan 2014 Act, No. 2, effective December 14, 2014, the jurisdiction for payment of prothonotaries’ salaries, pensions, benefits and other administrative arrangements has been transferred to the Office for the Commissioner of Federal Judicial Affairs (FJA). As a result of this transfer, associated funding has been frozen and expenditures have been reduced.

Approval by Senior Officials

Approved by:

(Ottawa, Canada)
(November 26, 2015)

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