Departmental Quarterly Financial Report

April - June 2020

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended June 30, 2020

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 Estimates and Supplementary Estimates as well as Budget 2019.

A summary description of Veterans Affairs Canada’s (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 Estimates and Supplementary Estimates for the 2020-21 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.

The Department 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.

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

This section highlights the significant elements that contributed to the changes in Authorities available (i.e. budget) for the fiscal year, as well as the year-to-date expenditures for the quarter ended June 30, 2020.

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, are paid as they apply for benefits. Consistent with previous fiscal years, current departmental forecasts are predicting higher program payment expenditures by the end of 2020-21 as compared to last fiscal year (i.e. 2019-20).

The following tables provide a comparison of the authorities available for use and the expenditures for the quarters ending June 30, 2020 and June 30, 2019 for the Department.

2.1 Statement of Authorities

2.1.1 Changes in Fiscal Year-to-Date Authorities Available

Table 1: Changes in year-to-date Authorities Available for the Year Ending March 31, 2021 (in thousands of dollars):

Authorities (year-to-date as at quarter end)	2020-2021	2019-2020	Variance ($)	Variance (%)
Vote 1 – Operating Expenditures	943,559	1,137,328	(193,769)	(17.0)
Vote 5 – Grants and Contributions	3,033,466	3,212,716	(179,250)	(5.6)
Budgetary Statutory Authorities	47,531	38,114	9,417	24.7
Total Authorities	$4,024,556	$4,388,158	$(363,602)	(8.3%)

As at June 30, 2020, total authorities available (i.e. budget) at quarter end were $364M (8.3%) less when compared to amounts available at the same quarter-end the previous year, from $4,388M in 2019-20 to $4,025M in 2020-21.  This decrease in available authorities for use is mostly attributed to the reduced supply of the Main Estimates.  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 supply period in to the Fall.  Veterans Affairs Canada is expected to receive full supply for the 2020-21 Main Estimates in December 2020 for a total budget for the fiscal year of $5.2B.

VAC received additional funding during the first quarter of 2020-21 through Supplementary Estimates (A).  Funding of $87.7M was received for service delivery including case management, and to process benefit applications (funds are frozen until approval of a Treasury Board submission).

2.1.2 Changes in Year-to-Date Expenditures

Table 2: Changes in year-to-date Expenditures used as of June 30, 2019 and June 30, 2020 (in thousands of dollars)

Expenditures (year-to-date as at quarter end)	2020-2021	2019-2020	Variance ($)	Variance (%)
Vote 1 – Operating Expenditures	205,308	217,204	(11,896)	(5.5)
Vote 5 – Grants and Contributions	930,394	833,882	96,512	11.6
Budgetary Statutory Authorities	21,793	9,458	12,335	130
Total Expenditures	$1,157,495	$1,060,544	$96,951	9.1%

Year-to-date expenditures for Veterans Affairs Canada are $97M more (9.1% increase) when compared to the same timeframe in 2019-20. This increase over the first quarter of 2019-20 can be explained by variances detailed below.

Vote 1 - Operating Expenditures – decrease of $11.9M

• Much of the decrease is attributed to COVID-19 measures which decreased demand from clients for certain health services provided during the first Quarter
• Decrease in spending related to event management fees associated with overseas events which were postponed due to COVID-19 measures.
• Decrease in spending on travel due to COVID-19 measures.
• These decreases were partially offset by an increase in spending in Personnel primarily attributed to the continued efforts to reduce the backlog and improve the delivery of services and programs to Veterans and their families.

Vote 5 - Grant and Contribution - increase of $96.5M

• This increase in spending is primarily due to the continued increase in processing capacity as the department continues to reduce the backlog and improve the delivery of services and programs to Veterans and their families, especially those relating to the Pension for Life (PFL) suite of programs
• In addition, the department has seen an increase in the number of Veterans choosing lump sum payments over monthly for the new Pain and Suffering Compensation Benefit.

Budgetary Statutory authorities – increase of $12.3M, due to the timing and processing of accounting entries for prior years accounts receivable

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 112,977 as of March 31, 2019, to 119,300 as of March 31, 2020) and a decrease in the number of War Service Veterans and survivors (forecast to decrease from 58,828 as of March 31, 2019, to 52,100 as of March 31, 2020). Despite the slight decrease in overall Veterans and recipients of VAC benefits, recent program enhancements have increased the demand on Veterans Well-being Act programs and benefits.

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 operates in a dynamic and complex environment characterized by internal and external drivers of change. The Department employs integrated risk management tools to proactively and systematically recognize, understand, accommodate and capitalize on new challenges and opportunities, with a focus on results. In addition, the Department has effective internal control systems in place, proportionate to the risks being managed.

As such, the Department’s executive-level committees, the Assistant Deputy Minister level Senior Management Committee and the Director General level Corporate Policy and Planning Management Committee serve as forums where the Deputy Head ensures that Senior Department Managers are aware of their financial management responsibilities, have the tools to enable these responsibilities, and manage the financial performance within their areas of responsibilities. In addition, these committees recommend and prioritize the department’s investment opportunities, based on Integrated Business Plans (IBPs), to ensure their alignment with departmental and Government of Canada expected results. The IBPs also support the development of integrated program and corporate risk registers and enable resource capacity planning for the Department.

Key risks currently being managed by the Department include:

1. Maintaining Core Services: To avoid the risk of not providing timely, high quality core services and benefits to Veterans and their families while simultaneously implementing several new initiatives and programs from multiple federal budgets, Veterans Affairs is monitoring and mitigating the risks through:
   1. Refining internal processes to improve efficiency;
   2. Increasing the use of automation;
   3. Recruiting, training, motivating and retaining employees; and
   4. Maintaining a reasonable case manager to client ratio.
2. Fulfilling Mandate Letter Commitments: To prevent the risk of not fully implementing remaining mandate commitments, given the volume and complexity of commitments made to Veterans, Veterans Affairs Canada is mitigating the risk through:
   1. Reporting progress internally and through canada.ca;
   2. Increasing the use of automation; and
   3. Recruiting, training, motivating and retaining employees.
3. Achieving and Demonstrating Results: To avert the risk of not fully meeting planned targets, given that responsibility for Veterans' well-being is shared with multiple jurisdictions, other government departments, and individual Veterans, Veterans Affairs Canada is mitigating the risks through:
   1. Working closely with partners to ensure efforts are well aligned; and
   2. Exploring additional opportunities for sound research and data to inform direction.

The Department monitors these risks through the Departmental Results Framework and internal performance reports. Tracking performance in these areas enables timely adjustments and ensure risks are being effectively mitigated.

In response to the global pandemic (COVID-19), the Government of Canada is also monitoring risks in various areas, including: Governance, Business Continuity Planning and Emergency Preparedness, IT Systems and Security, Information Management and Privacy, Finance and Workforce Health. VAC is also monitoring additional risks resulting from the pandemic which could impact our ability to meet Veterans expectations, manage workforce capacity and create delays in hiring/onboarding staff.

Additionally, the Departmental Audit Committee provides an important advisory function as part of the Department’s governance structure for risk. It provides objective advice and recommendations to the Deputy Head regarding the sufficiency, quality and adequacy of the Department's risk management process.

This integrated risk management process ultimately supports the Department in meeting its objectives. Further information on risks facing the Department and the steps taken to mitigate them can be found on VAC's website.

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

Mandate/Budget Commitments

Service Excellence:

Veterans Affairs Canada received additional funding during the quarter to enable the Department to deliver on its Service Excellence proposal (Budget 2020). This funding will enable the Department to deliver on its top priority – reducing disability benefit wait times for Veterans. It will enable faster decisions, reduce wait times for disability benefits, and ensure case management services for Veterans who need this support. This funding will cover new teams focused solely on reducing the existing backlog and improving wait times for disability benefits. In addition, the Department will also explore innovative measures to more efficiently process future applications.

The Chronic Pain Centre of Excellence for Canadian Veterans (Centre of Excellence):

The Chronic Pain Centre of Excellence for Canadian Veterans (Centre of Excellence) was officially launched on May 4^th, 2020 at McMaster University’s Faculty of Health Sciences. The Centre of Excellence is a national research institution that works with Veterans and their families. The Centre will build a knowledge system and develop evidence-based pain management therapies that will shape the future of Veteran-first chronic pain management. Equipped with this research, the Centre of Excellence will provide training and education to care teams across the country. This will allow Veterans access to evidence-based, high-quality pain management services closer to home. Budget 2019 announced $20.1 million in funding over five years for Veterans Affairs Canada, with $5 million annually per year ongoing to establish the Centre, in order to conduct research into innovative pain management therapies. The Centre’s research will be shared with a network of academic institutions as well as university and community-based clinics across Canada.

Commemorative Activities

In the midst of a global pandemic, VAC’s Commemoration Division, working with its internal and external partners, moved all the elements of a traditional commemorative event online to mark the 75^th anniversary of the Liberation of the Netherlands and VE-Day. This was the first time a completely virtual commemorative ceremony had been attempted by VAC. A 30-minute bilingual production featuring historical content, statements from the Governor General, the Prime Minister, the Minister of Veterans Affairs and Associate Minister of National Defence, the Ambassador of the Kingdom of the Netherlands to Canada, a blessing from the Chaplain General, an Indigenous blessing, pledges by Veterans and youth, and ceremonial support from DND was streamed on the Canada Remembers Facebook page on May 8 (VE-Day). The event attracted a world-wide audience, with a reach of 1,205,388 and total views of 138,166.

VAC provided support to the Korean Veterans Association Unit 7 in Ottawa to host an event to mark the 70^th Anniversary of the start of the Korean War on June 21, 2020.

5. Approvals by Senior Officials

Original signed by:

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II. Financial Statements

Statement of Authorities

* Includes only Authorities available for use and granted by Parliament at quarter-end. Includes $44M in Budget 2019 measures approved by Treasury Board.

*Authorities available for use and granted by Parliament at quarter-end. 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 supply period in to the Fall. Veterans Affairs Canada is expected to receive full supply for the 2020-21 Main Estimates in December 2020.

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Departmental Budgetary Expenditures by Standard Object (unaudited)

* Includes only Authorities available for use and granted by Parliament at quarter-end. Includes $44M in Budget 2019 measures approved by Treasury Board.

* Includes only Authorities available for use and granted by Parliament at quarter-end. 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 supply period in to the Fall. Veterans Affairs Canada is expected to receive full supply for the 2020-21 Main Estimates in December 2020.