Quarterly Financial Report - For the quarter ended September 30, 2016 Revised
Statement outlining results, risks and significant changes in operations, personnel and programs
Date: December 19, 2016
Location: Statement of Authorities (unaudited), Used during the quarter ended September 30, 2015, Vote 1 – Operating expenditures
Revision: “Vote 1 – Operating expenditures 15,497 thousand” replaces “Vote 1 – Operating expenditures 15,479 thousand”
Rationale for the revision:The original amount posted was incorrect because the last two digits of the number were transposed. The amount is being revised to align with the Quarterly Financial Report for the quarter ended September 30, 2015. No other amounts in the Statement of Authorities were impacted.
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 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 2016-17 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 illustrated in the Statement of Authorities and the Departmental Budgetary Expenditures by Standard Object table at the end of this report, as at September 30, 2016, authorities available for use for the year increased by $7,478 thousand (11%) compared to the same period in 2015-16, from $66,338 thousand to $73,816 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 $4,471 thousand in funding received in Budget 2015 for enhancements to physical and information technology (IT) security for the Federal Courts. Also, an increase of $3,957 thousand is due to renewed funding related to the Division 9 proceedings under the Immigration and Refugee Protection Act (Balanced Refugee Reform Act). The renewed funding had not yet been received as of the end of the second quarter of the previous fiscal year. These two sources of funding resulted in a further increase of $521 thousand in contributions to employee benefit plans.
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 $23 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 second 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 second quarter.
Figure 1 – Expenditures Compared to Annual Authorities
Description of the image
Figure 1 – Expenditures Compared to Annual Authorities
At the end of the second quarter of 2016-17, authorities totalled $73,816 thousand compared to $66,338 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 same 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.
As illustrated in Figure 1, second quarter expenditures decreased by $630 thousand (-4%) compared to the same quarter in 2015-16, from $17,162 thousand to $16,532 thousand. As a result, 22% of the authorities available for use for the year were expended during the second quarter of 2016-17, compared to 26% in the same quarter of 2015-16.
Also, year-to-date expenditures increased by $1,041 thousand (3%) compared to the same period of the previous fiscal year, from $32,001 thousand to $33,042 thousand. As a result, 45% of the authorities available for use for the fiscal year were expended as of the end of the second quarter of fiscal 2016-17, compared to 48% during the same period of 2015-16.
Significant variances1 are explained as follows:
Year-to-date personnel expenditures increased by $1,223 thousand (5%) compared to same period of the previous fiscal year, from $24,145 thousand to $25,368 thousand. This included a $255 thousand (2%) increase in second quarter expenditures compared to the same quarter in 2015-16, from $12,384 thousand to $12,639 thousand. The increases in year-to-date and second quarter personnel expenditures were principally driven by an increase in salaries and employer contributions to employee benefit plans due to an increase in full time equivalents.
Professional and special services:
Year-to-date professional and special services decreased by $674 thousand (-17%) compared to the same period of the previous fiscal year, from $3,990 thousand to $3,316 thousand. This included a decrease in second quarter expenditures of $765 thousand (-29%) compared to the same quarter in 2015-16, from $2,659 thousand to $1,894 thousand. The decreases in year-to-date and second 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 IT and telecommunications consultants.
Acquisition of machinery and equipment:
Year-to-date expenditures related to the acquisition of machinery and equipment increased by $567 thousand (168%) compared to the same period of the previous fiscal year, from $337 thousand to $904 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.
Acquisition of land, building and works:
Year-to-date expenditures related to the acquisition of land, building and works decreased by $73 thousand (-68%) compared to the same period of the previous fiscal year, from $107 thousand to $34 thousand. This included a decrease in second quarter expenditures of $77 thousand (-72%) compared to the same quarter in 2015-16, from $107 thousand to $30 thousand. The year-to-date and second quarter decreases in the acquisition of land, building and works were related to timing variations related to the processing of expenditures between quarters for leasehold improvements.
Repair and maintenance:
Year-to-date expenditures related to repair and maintenance increased by $96 thousand (67%) compared to the same period of the previous fiscal year, from $143 thousand to $239 thousand. This included a $34 thousand (28%) increase in second quarter expenditures, from $121 thousand to $155 thousand. The increases in year-to-date and second quarter repair and maintenance expenditures were driven by an increase in the repair and maintenance of office buildings. The year-to-date increase was also driven by an increase in communications and networking equipment maintenance related to IT projects and initiatives.
Information expenditures decreased by $43 thousand (-38%) in the second quarter compared to the same quarter of the previous fiscal year, from $115 thousand to $72 thousand. This decrease was mainly due to decreases in advertising and printing services. The year-to-date variance in information expenditures compared to the same period of the previous fiscal year was not material.
Other subsidies and payments:
Year-to-date expenditures related to other subsidies and payments decreased by $13 thousand
(-68%) compared to the same period of the previous fiscal year, from $19 thousand to $6 thousand. This included a decrease of $8 thousand (-133%) in second quarter expenditures compared to the same quarter in 2015-16, from -$6 thousand to -$14 thousand. This decrease is mainly due to timing variations related to the processing of expenditures between quarters for interdepartmental settlements and refunds of amounts credited to revenues in prior years.
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 second 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 proposes to provide up to $2.6 million over two years on a cash basis to help relocate the Quebec City Federal Courts facility, thereby ensuring continued Federal Courts presence in Quebec City. Funding authorities will be sought through Supplementary Estimates later this fiscal year.
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
(November 24, 2016)
|Fiscal year 2016-17||Fiscal year 2015-16|
|Total available for use for the year ending March 31, 20171||Used during the quarter ended September 30, 2016||Year-to-date used at quarter-end||Total available for use for the year ending March 31, 20161||Used during the quarter ended September 30, 2015||Year-to-date used at quarter-end|
|Vote 1 – Operating expenditures||66,660||14,742||29,462||59,697||15,497||28,676|
|Contributions to employee benefit plans||7,152||1,788||3,576||6,632||1,658||3,316|
|Spending of proceeds from the disposal of surplus Crown assets||-||-||-||-||-||-|
|Refunds of amounts credited to revenues in previous years||4||2||4||9||7||9|
|Total budgetary authorities||73,816||16,532||33,042||66,338||17,162||32,001|
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 September 30, 2016||Year-to-date used at quarter-end||Planned expenditures for the year ending March 31, 2016||Expended during the quarter ended September 30, 2015||Year-to-date used at quarter-end|
|Transportation and communications||2,844||706||1,216||2,634||661||1,122|
|Professional and special services||11,824||1,894||3,316||9,927||2,659||3,990|
|Purchased repair and maintenance||1,333||155||239||437||121||143|
|Utilities, materials and supplies||2,335||495||1,010||1,979||533||1,068|
|Acquisition of land, building and works||370||30||34||703||107||107|
|Acquisition of machinery and equipment||3,371||273||904||2,582||223||337|
|Other subsidies and payments||4||-14||6||14||-6||19|
|Total budgetary expenditures||73,816||16,532||33,042||66,338||17,162||32,001|
1 Significant variances are defined as variances by standard object that are greater than $250 thousand or 25%.
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