July - September 2011

I. Quarterly Report Statement
II. Financial Statements
- Statement of Authorities (unaudited)
- Departmental Budgetary Expenditures by Standard Object (unaudited)

I. Quarterly Report Statement

Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended September 30, 2011

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 program activities can be found in Part II of the 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 Veterans Affairs Canada’s spending authorities granted by Parliament and those used by the Department, consistent with the Main Estimates for the 2011-2012 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, Veterans Affairs Canada 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 or review.

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

Statement of Authorities

Veterans Affairs Canada’s authorities available for use have not changed during this quarter and therefore are the same as reported in Quarter One.

The Statement of Authorities illustrates that expenditures during the second quarter of 2011-12 are approximately $42 million (5%) greater than at the end of the same quarter in 2010-2011. However in both fiscal years, the Department expended approximately 25% of its annual budget during the second quarter. Year to date expenditures are also comparable with 50% of authorities available for use expended as at the end of the second quarter.

Statement of Departmental Budgetary Expenditures by Standard Object

Total planned gross expenditures are the same as reported at the end of Quarter One. Consistent with the previous year, year-to-date spending as at the end of Q2 represents 50% of expenditures recorded.

The Statement of Departmental Budgetary Expenditures by Standard Object illustrates that expenditures in the second quarter are $42 million greater than in the same quarter last year. Personnel expenditures increased by $29 million. This increase is primarily attributable to severance payouts to employees per negotiated settlements related to collective bargaining. Treatment benefits paid under the New Veterans Charter increased by $3 million based on the $20.8 million increase in professional and special services and an offsetting decrease of $17.8 million in utilities, materials and supplies. Repairs and maintenance decreased by $1.8 million as a result of a decline in computer and special equipment repair. There was also a $12.9M increase in transfer payments primarily related to increased client benefits paid through VAC’s grant and contribution programs.

3. Risks and Uncertainties

Veterans Affairs Canada is funded through voted parliamentary spending authorities and statutory authorities for operating expenditures and transfer payments. The Department serves traditional Veterans from the Second World War and the Korean War, serving members and Veterans (former members) of the Canadian Forces (CF), the Royal Canadian Mounted Police (RCMP) and certain civilians as well as eligible family members (survivors and dependants). Delivering departmental programs and services may depend on several risk factors such as the number of men and women injured in the line of duty and the severity of those injuries, the rising cost of health care for both an aging clientele and/or clients with multiple needs.

Veterans Affairs Canada is also a knowledge-based organization and as such, relies on its talented and committed workforce to continue delivering programs and services.

During the second quarter, the Department continued implementation of its five-year transformation plan to deliver more timely and effective services to our aging traditional Veterans, and to the ever-increasing number of modern-day Veterans. However, with the results of the Administrative Services Review announced during Quarter Two, the Department learned that some of its resources designated to undertake key information technology (IT) initiatives will transfer to the new Shared Services Canada. This introduces a risk that the Department will not be able to deliver on the original specifications of the foundational IT projects approved by government in June 2011. This risk is being mitigated through regular communication and collaboration between senior management within Veterans Affairs Canada, Shared Services Canada and Treasury Board Secretariat (Program Sector and Chief Information Officer Branch). These efforts are helping ensure roles and responsibilities are clear, that there is an appropriate division of resources to complete the necessary work, and that the ongoing savings, as committed, are realized. The outcome of any such resource transfers will have an impact on the Department’s existing and future year reference levels.

The Department’s funding fluctuates from year to year due to the demand-driven nature of its programs. This fluctuation creates a risk that funding levels will not be sufficient to meet program demand. To mitigate this risk, the Department prepares an annual client and expenditure forecast. This forecast is the key source of information used to request reference level adjustments in-year, and to re-establish three year adjustments in accordance with the government’s planning cycle. To further ensure the accuracy of its forecasts, the Department engaged an independent third-party to validate its costing methodology and key assumptions. In addition to the third-party forecast, the government’s larger budget planning process is built to accommodate fluctuations, also helping mitigate any risk of insufficient funds to meet program demand.

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

A number of transformation initiatives were implemented during the Quarter ending September 30, 2011. However, the majority of effort expended throughout the period related to the implementation of early phases of significant, multi-phase initiatives. Some examples of change occurring over this period include but are not limited to, digitization of medical records from Library and Archives Canada; business process re-engineering exercises; additional delegated authority to front line staff, as well as implementation of automated batch mailing processes for Veterans Independence Program annual follow-up forms and letters.

Approved by:

_______________________________
Suzanne Tining, Deputy Minister
Charlottetown, PE
November 29, 2011

_______________________________
Heather Parry, Chief Financial Officer
Charlottetown, PE
November 29, 2011

II. Financial Statements

Statement of Authorities (unaudited)

Statement of Authorities - Quarterly Financial Report for the Quarter Ended September 30, 2010
Fiscal year 2010-2011
(in thousands of dollars)	Total available for use for the year ending March 31, 2011^*	Used during the quarter ended September 30, 2010	Year to date used at quarter-end
Vote 1 - Net Operating expenditures	930,168	226,097	438,208
Vote 05 - Grants and Contributions	2,432,508	615,083	1,239,589
Budgetary statutory authorities	39,968	10,063	20,015
Total Budgetary authorities	3,402,644	851,243	1,697,812
Non-budgetary authorities	-	(1)	(2)
Total Authorities	3,402,644	851,242	1,697,810

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

Statement of Authorities - Quarterly Financial Report for the Quarter Ended September 30, 2011
Fiscal year 2011-2012
(in thousands of dollars)	Total available for use for the year ended March 31, 2012^*	Used during the quarter ended September 30, 2011	Year to date used at quarter-end
Vote 1 - Net Operating expenditures	924,832	254,636	471,738
Vote 05 - Grants and Contributions	2,556,168	628,048	1,274,113
Budgetary statutory authorities	42,195	10,567	21,070
Total Budgetary authorities	3,523,195	893,251	1,766,921
Non-budgetary authorities	-	-	(1)
Total Authorities	3,523,195	893,251	1,766,920