July - September 2016

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended September 30, 2016

1. Introduction

This quarterly report has been prepared by management 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 and Supplementary Estimates as well as Economic Action Plan 2015 and 2016 (Budget 2015 and Budget 2016).

A summary description of Veterans Affairs Canada's (VAC) (sometimes referred to in this Report as "VAC") program activities can be found in Part II of the Main Estimates.

Basis of Presentation

This quarterly report has been prepared using an expenditure basis of accounting. The accompanying Statement of Authorities includes VAC’s spending authorities granted by Parliament and those used by the Department, consistent with the Main and Supplementary Estimates for the 2016–17 fiscal year. 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 monies 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.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

As part of the departmental performance reporting process, VAC prepares its annual departmental financial statements on a full accrual basis in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector. However, the spending authorities voted by Parliament remain on an expenditure basis.

The quarterly report has not been subject to an external audit but has been reviewed by the Departmental Audit Committee.

2. Highlights of Fiscal Quarter and Fiscal Year to-Date (YTD) Results

Statement of Authorities

Overall, VAC’s authorities reflect the changing demographic profile and changing needs of the men, women, and families the Department serves. This is evidenced by an increase in the number of modern-day Veterans and survivors (forecast to increase from 97,558 in 2015–16 to 102,400 in 2016–17) accessing programs under the New Veterans Charter and a decrease in the number of War Service Veterans and survivors (forecast to decrease from 85,111 in 2015–16 to 76,000 in 2016–17) accessing the Department's traditional programs. Despite the slight decrease in overall Veterans and recipients of VAC benefits, recent program enhancements have increased the demand on New Veterans Charter programs and benefits.

As at September 30, 2016, total authorities available (i.e. budget) for the year have increased by $81.6M (2.3%) compared to the same quarter of the previous year, from $3,556.1M to $3,637.7M. This increase is the result of a $70.4M increase in Vote 5, Grants and Contributions and a $16.2M increase in Operating Expenditures. This is partially offset by a $5.1M decrease in statutory authorities related to employee benefit costs.

Total authorities used (i.e. expenditures) during the second quarter of 2016–17 are $55.3M (6.4%) more when compared to the same three-month period of 2015–16, from $864.6M to $919.9M. A break-down in the spending for the second quarter of 2016–17 indicates that Grants and Contributions spending increased by $11.8M, Operating expenditures increased by $42.4 and the statutory authorities increased by $1.2M.

Figure 1 - Second Quarter and Year-to-date Expenditures Compared to Budget

Figure 1 - Second Quarter and Year-to-date Expenditures Compared to Budget

Figure 1 - Second Quarter and Year-to-date Expenditures Compared to Budget

Fiscal Year	Net Budgetary Authorities	Expenditures for the Quarter ended September 30	YTD Expenditures
2015-2016	3556	865	1706
2016-2017	3638	920	1858

As a result of the Government’s expenditure management cycle, there are often fluctuations by quarter and between fiscal years when comparing budgets and expenditures. This is primarily a result of the quasi-statutory nature of the Department’s programs, which are demand-driven and based on need and entitlement. In other words, Veterans who meet the eligibility criteria for VAC’s programs must be paid when they apply for benefits.

Statement of Departmental Budgetary Expenditures by Standard Object

When analyzed by Standard Object, expenditures in the second quarter are generally consistent in comparison with prior-year spending. The three largest variances include:

• An increase of $27.8M in Utility, Materials and Supplies which relates primarily to an increase in requirements for health services for Veterans such as prescription drugs.
• An increase of $16.1M in Personnel services which relates primarily to increased staffing for case management and disability benefit program to support recent program enhancements.
• An increase of $11.8M in Transfer Payments (i.e. grants and contributions) related to an increase in the number of modern-day Veterans and individuals accessing programs under the New Veterans Charter.

3. Risks and Uncertainties

VAC is dedicated to enhancing the health and well-being of Veterans and their families and recognizes that its success in fulfilling this mandate is directly related to the effective management of risk. Sound risk management equips the Department to respond proactively to change and uncertainty by using risk-based information to support effective decision-making, resource allocation, and, ultimately, better results for Canadians. Additionally, it can lead to effective service delivery, better project management, and an increase in value for money.

VAC continues to manage through effective engagement across the Department. As such, the Department’s executive-level committee (Senior Management Committee) recommends overall direction for financial management and control, and the Corporate Management Committee ensures alignment of investments with departmental strategies and other initiatives. Each branch is required to have an Integrated Business Plan that has been approved by the Senior Management Committee to confirm that it has a plan in place to address the financial requirements of the branch.

Additionally, the Deputy Minister’s Advisory Committee (DMAC) provides an advisory function for senior departmental officials as well as performing an important oversight role in ensuring that Budget 2015 and Budget 2016 commitments are met. DMAC was established, in the context of Budget 2015 decisions to improve service delivery, to support VAC and the Department of National Defence (DND) in advancing a “Veteran-centric” approach to the protection and care of Veterans.

This integrated risk management process ultimately supports the Department in meeting its financial objectives. Further information on risks facing the Department and the steps taken to mitigate them can be found in the 2016–17 Report on Plans and Priorities.

4. Significant Changes in Relation to Operations, Personnel and Programs

There were no changes at the senior management level during the second quarter of this fiscal year.

During the second quarter of 2016-17, VAC continued to staff new positions in order to meet the commitments to enhance the delivery of Veterans’ services and benefits by increasing full-time equivalent staff complement in case management and disability benefits processing, re-open district offices and implement changes to Disability Awards and Allowances (DA), Earnings Loss Benefit (ELB), and Permanent Impairment Allowance (PIA).

A new permanent Operational Stress Injury (OSI) clinic located in Dartmouth, Nova Scotia marked its official opening in June and became fully operational in the second quarter.

The first of nine offices to be re-opened, located in Corner Brook, Newfoundland, was re-opened in July 2016. Other offices to be re-opened are located in Charlottetown, PE; Sydney, NS; Windsor and Thunder Bay, ON; Saskatoon, SK; Brandon, MB; and, Prince George and Kelowna, BC. A tenth office will open in Surrey, BC, and outreach will be expanded to Veterans in the territories.

5. Approvals by Senior Officials

Original signed by:

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II. Financial Statements

Statement of Authorities (unaudited)

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended September 30, 2015
Statement of Authorities (unaudited)
Fiscal year 2015–16

(in thousands of dollars)	Total available for use for the year ending March 31, 2016*	Used during the quarter ended September 30, 2015	Year to date used at quarter-end
Vote 1  - Net Operating expenditures	863,733	187,222	371,888
Vote 5 - Grants and Contributions	2,655,148	670,529	1,320,044
Statutory Authority - Minister's Salary and Motor Car Allowance	82	21	41
Statutory Authority – Court Award – Crown Liability and Proceeding Act	0	10	10
Statutory Authority – Refunds of Previous Years Revenue	0	0	17
Statutory Authority – Spending of Amounts Equivalent to Proceeds from Disposal of Surplus Moveable Crown Assets	0	15	15
Statutory Authority – Contributions to Employee Benefit Plans – Program	36,942	6,762	13,524
Statutory Authority – Veterans Insurance Actuarial Liability Adjustment	175	0	0
Statutory Authority – Returned Soldiers Insurance Actuarial Liability Adjustment	10	0	0
Statutory Authority – Re-establishment credits under Section 8 of the War Services Grants Act	2	0	0
Statutory Authority – Repayments under Section 15 of the War Services Grants Act	10	0	0
Total Statutory	37,221	6,808	13,607
Total Budgetary Authorities	3,556,102	864,559	1,705,539
Non-Budgetary Authorities	0	0	0
Total Authorities	3,556,102	864,559	1,705,539

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

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended September 30, 2016
Statement of Authorities
Fiscal year 2016–17

(in thousands of dollars)	Total available for use for the year ended March 31, 2017*	Used during the quarter ended September 30, 2016	Year to date used at quarter-end
Vote 1  - Net Operating expenditures	879,912	229,594	439,255
Vote 5 - Grants and Contributions	2,725,592	682,308	1,402,409
Statutory Authority - Minister's Salary and Motor Car Allowance	84	35	42
Statutory Authority – Court Award – Crown Liability and Proceeding Act	0	3	3
Statutory Authority – Refunds of Previous Years Revenue	0	2	32
Statutory Authority – Spending of Amounts Equivalent to Proceeds from Disposal of Surplus Moveable Crown Assets	0	6	6
Statutory Authority – Contributions to Employee Benefit Plans – Program	31,891	7,972	15,945
Statutory Authority – Veterans Insurance Actuarial Liability Adjustment	175	0	0
Statutory Authority – Returned Soldiers Insurance Actuarial Liability Adjustment	10	0	0
Statutory Authority – Re-establishment credits under Section 8 of the War Services Grants Act	2	0	0
Statutory Authority – Repayments under Section 15 of the War Services Grants Act	10	0	0
Total Statutory	32,172	8,018	16,028
Total Budgetary Authorities	3,637,676	919,920	1,857,692
Non-Budgetary Authorities	0	0	0
Total Authorities	3,637,676	919,920	1,857,692

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

Departmental Budgetary Expenditures by Standard Object (unaudited)

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended September 30, 2015
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2015–16

Expenditures (in thousands of dollars)	Planned expenditures for the year ending March 31, 2016	Expended during the quarter ended September 30, 2015	Year to date used at quarter-end
01 Personnel	252,163	56,041	122,917
02 Transportation and communications	28,557	6,268	10,995
03 Information	5,495	188	249
04 Professional and special services	401,821	99,697	179,929
05 Rentals	7,112	1,121	2,129
06 Repair and maintenance	7,758	442	1,166
07 Utilities, materials and supplies	187,507	24,848	60,241
08 Acquisition of land, buildings and works	1,939	0	0
09 Acquisition of machinery and equipment	3,233	756	793
10 Transfer payments	2,655,345	670,529	1,320,044
11 Public debt charges	0	0	0
12 Other subsidies and payments	5,172	4,667	7,076
Total gross budgetary expenditures	3,556,102	864,559	1,705,539
Less revenues netted against expenditures	0	0	0
Total revenues netted against expenditures	0	0	0
Total net budgetary expenditures	3,556,102	864,559	1,705,539

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended September 30, 2016
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2016–17

Expenditures (in thousands of dollars)	Planned expenditures for the year ending March 31, 2017	Expended during the quarter ended September 30, 2016	Year to date used at quarter-end
01 Personnel	241,734	72,109	150,027
02 Transportation and communications	29,073	7,071	12,813
03 Information	5,617	138	201
04 Professional and special services	417,616	100,966	182,262
05 Rentals	7,268	1,070	2,149
06 Repair and maintenance	6,608	595	4,108
07 Utilities, materials and supplies	194,720	52,619	95,932
08 Acquisition of land, buildings and works	1,652	1,047	1,047
09 Acquisition of machinery and equipment	2,313	562	649
10 Transfer payments	2,725,789	682,308	1,402,409
11 Public debt charges	0	0	0
12 Other subsidies and payments	5,286	1,435	6,095
Total gross budgetary expenditures	3,637,676	919,920	1,857,692
Less revenues netted against expenditures	0	0	0
Total revenues netted against expenditures	0	0	0
Total net budgetary expenditures	3,637,676	919,920	1,857,692