Quarterly Financial Report - For the quarter ended September 30, 2020

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. 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 administrative services for the federal courts and internal 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 2020-21 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 9/12 Interim Estimates of its expected 2020-21 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 results 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 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 September 30, 2020, authorities available for use for the year decreased by $21,401 thousand (-23%) compared to the same quarter in 2019-20, from $95,091 thousand to $73,690 thousand. The decrease of $21,401 thousand in the Authorities available for use is due to the approval of Interim Estimates versus the normal Main Estimates process. Due to the COVID-19 pandemic and limited sessions in the spring for Parliament to study supply, the Standing Orders of the House of Commons were amended to extend the study period into the fall. In the interim, CAS has received 9/12 of its expected 2020-21 Main Estimates, with its full Statutory amounts. CAS is expected to receive full supply for the 2020-21 Main Estimates in December 2020.

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.

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 section below.

Second-quarter Expenditures

As illustrated in Figure 1, second-quarter expenditures decreased by $108 thousand (-1%) compared to the same quarter in 2019-20, from $23,043 thousand to $22,935 thousand. As a result, 35% of the authorities available for use for the fiscal year were expended during the second quarter of 2020-21, this increase is mainly due to the reception of 9/12 of CAS expected 2020-21 Main Estimates, with its full Statutory amounts.

Also, year-to-date expenditures increased by $1,491 thousand (3%) compared to the same period of the previous fiscal year, from $41,225 thousand to $42,716 thousand. As a result, 58% of the authorities available for use for the fiscal year were expended as of the end of the second quarter of fiscal 2020-21, this increase is mainly due to the reception of 9/12 of CAS expected 2020-21 Main Estimates, with its full Statutory amounts.

Significant variances¹ are explained as follows:

¹ Significant variances are defined as variances by standard object that are greater than $250 thousand or 25%.

Personnel

The year-to-date expenditures related to personnel have increased by $666 thousand (2%) compared to the same period of the previous fiscal year, from $29,998 thousand to $30,664 thousand. This includes a $2,499 thousand (-15%) decrease in second quarter expenditures compared to the same quarter in 2019-20, from $17,032 thousand to $14,533 thousand. This net increase is explained by additional salary funding obtain in Budget 2019 through the specific initiatives detailed in the ‘’Significant Changes to Authorities’’ section and timing variations due to Phoenix.

Transportation and telecommunications

The year-to-date expenditures related to transportation and telecommunications decreased by $298 thousand (-29%) compared to the same period of the previous fiscal year, from $1,032 thousand to $734 thousand. This includes a $130 thousand (-21%) decrease in second quarter expenditures compared to the same quarter in 2019-20, from $606 thousand to $476 thousand. The decrease was mainly driven by the COVID-19 pandemic and measures in place to combat the spread of the virus, including travel bans. The decrease is partially offset by an increase attributable to the telecommunication services.

Information

The year-to-date information expenditures increased by $32 thousand (17%) compared to the same period of the previous fiscal year, from $183 thousand to $215 thousand. This includes a $37 thousand (56%) increase in second quarter expenditures compared to the same quarter in 2019-20, from $66 thousand to $103 thousand. The increase was mainly due to the COVID-19 pandemic and measures put in place resulting in an increase in electronic subscriptions and data access services.

Professional and special services

The year-to-date expenditures related to professional and special services decreased by $2,223 thousand (-39%) compared to the same period of the previous fiscal year, from $5,759 thousand to $3,536 thousand. This includes a $1,068 thousand (-34%) decrease in second quarter expenditures compared to the same quarter in 2019-20 from $3,103 thousand to $2,035 thousand. This decrease was mainly driven by the COVID-19 pandemic and measures to combat the spread of the virus. Due to telework and the operations reduced to critical services, the impact was mainly on protection services, business services, translation services, training and educational services, and hospitality.

Rentals

The year-to-date expenditures related to rentals increased by $217 thousand (13%) compared to the same period of the previous fiscal year, from $1,644 thousand to $1,861 thousand. This includes a $236 thousand (31%) increase in the second quarter compared to the same quarter of the previous fiscal year, from $752 thousand to $988 thousand. This increase was mainly due to timing variations related to the processing of the expenditures between quarters for 2020-21 rental of office buildings as well as license and maintenance fees for application software.

Repair and maintenance

The year-to-date expenditures related to repair and maintenance decreased by $21 thousand (-20%) compared to the same period of the previous fiscal year, from $105 thousand to $84 thousand. This includes a $75 thousand (-93%) decrease in second quarter expenditures compared to the same quarter in 2019-20, from $81 thousand to $6 thousand. The decrease was mainly attributable to decreases in repairs of communications and networking equipment, other equipment, and repair of office buildings.

Utilities, materials and supplies

The year-to-date expenditures related to utilities, materials and supplies increased by $672 thousand (50%) compared to the same period of the previous fiscal year, from $1,350 thousand to $2,022 thousand. This includes a $872 thousand (152%) increase in second quarter expenditures compared to the same quarter in 2019-20, from $574 thousand to $1,446 thousand. The increase was mainly due to the COVID-19 pandemic and measures put in place resulting in an increase in miscellaneous manufactured articles like personal protection equipment, safety glasses and acrylic shields.

Acquisition of land building and works

The year-to-date expenditures related to acquisition of land building and works increased by $2,586 thousand (853%) compared to the same period of the previous fiscal year, from $303 thousand to $2,889 thousand. This increase was mainly driven by the leasehold improvements for reconfiguration of office buildings.

Remaining expenditures (acquisition of machinery and equipment, and other subsidies and payments)

For the remaining expenditures, the variances are immaterial and relate mainly to timing of the delivery of goods and services.

Risks and Uncertainties

Funding

Due to the COVID-19 pandemic and limited sessions in the spring for Parliament to study supply, the Standing Orders of the House of Commons were amended to extend the study period into the fall. During the first quarter of the fiscal year 2020-21, CAS has received 9/12 of its expected 2020-21 Main Estimates, with its full Statutory amounts. CAS is expected to receive full supply for the 2020-21 Main Estimates in December 2020.

The majority of non-personnel expenses incurred by CAS are contracted costs for services supporting the judicial process, court hearings, court security and e-court. They include translation services, protection services, informatics services, court reporters, transcripts, deputy judges, court ushers and court facility rental. These costs are mostly driven by the number, type and duration of hearings conducted in any given year, which are non-discretionary and limit the organization's financial flexibility.

In addition, CAS obtained off-cycle funding to implement a modern Courts and Registry Management System, funding received to date cover the definition phase.  As explained in the Risk Management Mitigation Strategies, CAS has received on-going funding to address many other areas of concerns.

Risk Management

The outbreak of the Coronavirus disease “COVID-19” pandemic has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, include the implementation of travel bans, self-imposed quarantine periods and social distancing. During the quarter, CAS supported the courts in providing critical services. The duration and global impact of the COVID-19 outbreak are unknown at this time. As a result, it is not possible to reliably estimate the full length and severity of the impacts on CAS financial position and financial results in future periods.

CAS has implemented various strategies to address the risks arising from its program integrity issues and COVID-19, including reorganizing and realigning services, reallocating resources, establishing priorities and regular reassessment while seeking efficiencies wherever possible. CAS has developed an efficient Enterprise Risk Management (ERM) process which includes management participation at the organization’s highest levels. The ERM process allows management to identify, evaluate and mitigate key risks to achieving its mandate and organizational priorities, and drives resource allocation accordingly.

The Chief Justices and CAS have initiated discussions with government officials regarding a potential funding model more appropriate to the context of judicial independence. In the meantime, CAS has been able to secure additional funding through the budgetary process to address a number of specific pressures, including program integrity.

Significant changes in relation to operations, personnel and programs

Since its establishment in 2003, CAS has strived to provide timely and efficient service in support of the four Courts while safeguarding judicial independence, a cornerstone of the Canadian judicial system and our democracy. However, the distinct requirements of each Court and the evolving and ongoing demands by Canadians and the legal community for increased availability of e-services and translation continue to pose considerable challenges for CAS in meeting its core responsibilities with the limited available resources.

The priority placed on technology-enabled courts, as well as the continued security of the Courts and their members warrant that they be recognized as programs in themselves. As such, in 2018–19, CAS’s Departmental Results Framework brings significant changes in relation to its programs and will now include e-courts and court security, in addition to the judicial and registry programs. This will effectively respond to the current, unique needs of the Courts and allow CAS to better measure and report on results in these areas. This change will represent a reduction in internal services and a corresponding increase in administration services for the federal courts, due to the realignment of security and e-courts resources.

Approval by Senior Officials

Approved by:

(Ottawa, Canada)
(October 30, 2020)

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

Groupings can change between quarters due to materiality of initiatives.

Amounts may not balance with other public documents due to rounding.

Date modified:

2021-12-15