Departmental Quarterly Financial Report

April - June 2021

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended June 30, 2021

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.

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 for the 2021-22 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, 2021.

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 2021-22 as compared to last fiscal year.

In the midst of a global pandemic, VAC maintained its commitment to meeting the needs of all Veterans and providing the benefits and services our clients so rightly deserve. Despite the impact COVID-19 has had on the current environment, the Department continued to deliver benefits and services to our Veterans and their families.

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, 2021 for the Department.

2.1 Statement of Authorities

2.1.1 Changes in Fiscal Year-to-Date Authorities Available

As at June 30, 2021, total authorities available (i.e. budget) at quarter end were $2,266M (56.3%) more when compared to amounts available at the same quarter-end the previous year, from $4,025M in 2020-21 to $6,291M in 2021-22. Much of this increase can be attributed to the fact that full supply of Main Estimates in 2020-21 was not received until December. Full supply is normally received by the end of the first quarter, however, 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 into the Fall.

Another factor contributing to the increase in authorities for 2021-22 is an increased requirement for client healthcare services and financial benefit programs. These requirements are updated through the annual Quasi Statutory forecasting exercise and based on client demand, eligibility and departmental productivity.

2.1.2 Changes in Year-to-Date Expenditures

Year-to-date expenditures for Veterans Affairs Canada are $182M more (15.7% increase) when compared to the same timeframe in 2020-21. This increase over the first quarter of 2020-21 can be explained by variances detailed below.

Vote 1 - Operating Expenditures – increase of $44.1M

• Much of the increase is due to increased 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.
• The increase is also attributed to increase usage from clients for health services as COVID-19 restrictions are lifted.

Vote 5 - Grant and Contribution - increase of $148.8M

• This increase in spending can be contributed 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.
• This increase in spending is also due to the cumulative increase in monthly clients who are accessing benefits, specifically those relating to the Pension for Life (PFL) suite of programs.

Budgetary Statutory authorities – decrease of $10.8M, due to a one-time processing of accounting entries made in 2020-21 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 127,981 as of March 31, 2021, to 140,557 as of March 31, 2022) and a decrease in the number of War Service Veterans and survivors (forecast to decrease from 42,424 as of March 31, 2021, to 37,501 as of March 31, 2022).

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.

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:
   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:
   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:
   1. Working closely with partners to ensure efforts are well aligned; and
   2. Exploring additional opportunities for sound research and data to inform direction.
4. Maintaining Core Services During the COVID-19 Global Pandemic: To reduce risks associated with maintaining operations during the pandemic, Veterans Affairs Canada is:
   1. Continuing to be vigilant in monitoring the potential evolving impacts of COVID 19 in order to be prepared and agile to ensure the effective delivery of programs and services.
   2. Continuing to enable remote working for all employees and maintain a flexible approach to work hours during COVID-19.

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

Personnel

The first quarter saw significant changes at the senior management level. At the end of May, Walter J. Natynczyk,General (Retired) retired from the public service. Paul Ledwell was appointed Deputy Minister of Veterans Affairs effective May 25, 2021.

Mandate/Budget Commitments

Service Excellence

Veterans Affairs Canada received funding to enable the Department to deliver on its Service Excellence proposal. This funding enables the Department to deliver on its top priority – reducing disability benefit wait times for Veterans. This funding enables faster decisions, reduce wait times for disability benefits, and ensure case management services for Veterans who need this support. This funding covers new teams focused solely on reducing the existing backlog and improving wait times for disability benefits.

Commemorative Activities

As we moved into the new 2021/22 fiscal year, the world remained in the grip of the global pandemic, the Government of Canada stood committed to remembering and honouring the sacrifices and achievements of all those who served for liberation and freedom.COVID19 restrictions remained in place however, and Veterans Affairs Canada worked to promote and organize smaller ceremonies across Canada. These ceremonies included:

• Wreath laying ceremonies in cities in Canada and in France to mark the anniversary of the Battle of Vimy Ridge.
• Ceremonies to mark the 70th Anniversary of the Battle of Kapyong during the Korean War.
• Ceremonies to mark the 76th Anniversary for VE Day and the Liberation of the Netherlands.
• Ceremony to commemorate the Battle of Normandy and the 77th Anniversary of the D-Day Landings at Juno Beach.

5. Approvals by Senior Officials

Original signed by:

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II. Financial Statements

* 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 received full supply for the 2020-21 Main Estimates in December 2020.

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

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* 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 received full supply for the 2020-21 Main Estimates in December 2020.

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