Departmental Quarterly Financial Reports October - December 2012
I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended December 31, 2012
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 Canada’s Economic Action Plan 2012 (Budget 2012).
A summary description of Veterans Affairs Canada (VAC)’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 and Supplementary Estimates for the 2012-13 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.
As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result, the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.In fiscal year 2012-13, frozen allotments have been established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.
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
During the third quarter of the current fiscal year, total authorities available for the year increased by $25.5 million (or 0.7%), compared to the second quarter of fiscal year 2012-13, from $3,579.8 million to $3,605.3 million. Of this amount, $18.8 million was received through Supplementary Estimates (B), the majority of which related to additional funding for the Earnings Loss and Canadian Forces Income Support Programs to end the deduction of Veterans’ disability pensions from other program benefits. The remaining $6.7 million consisted of transfers from Treasury Board related to employee benefits and allowances. These overall adjustments resulted in a $9.4 million increase in Vote 1, Operating Expenditures and a $16.1 million increase in Vote 5, Grants and Contributions.
As of December 31, 2012, total authorities available for the year have decreased by $25.6 million (0.7%) compared to the same quarter of the previous year (from $3,631.0 million to $3,605.3 million). This net decrease is the result of the following:
- a $97.4 million decrease in Vote 1 - Operating, attributed to the cessation of the Agent Orange ex gratia payments program, a decrease in severance payments, a decrease in healthcare benefits paid to traditional Veterans as a result of declining numbers and a transfer of funding to Shared Services Canada;
- a $73.3 million increase in Vote 5 - Grants and Contributions, primarily related to increased funding for the New Veterans Charter programs, offset by decreases in VAC’s traditional Veteran programs; and
- a $1.5 million decrease in statutory authorities.
Authorities used during the third quarter of 2012-13 are $25 million (3%) more when compared with the same quarter of 2011-12; increasing from $836.9 million to $861.9 million as per the Statement of Authorities table. This represents 23.9% of total funds available and is consistent with the same quarter in 2011-12 (23.1%). As a result of the Government expenditure management cycle, there are often fluctuations by quarter and between fiscal years when comparing authorities received and actual expenditures. Also, due to the quasi-statutory nature of the Department’s programs—demand-driven and based on need and entitlement—the Department has little control over the timing of payments.
Statement of Departmental Budgetary Expenditures by Standard Object
When analyzed by Standard Object, expenditures in the third quarter of 2012-13 were generally consistent with prior year spending trends. The major variances include:
- A $43.1 million net increase 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, offset by a decrease in the number of War Service Veterans and individuals accessing the Department’s traditional programs. The Department continues to see an increase in the number of Veterans benefiting from the New Veterans Charter programs, while at the same time a reduction in some of the Department’s traditional programs. This reduction is the result of the sad reality that, at an average age of 88, traditional War Service Veterans are passing away.
- An increase of $18.5 million in the Utilities, Materials and Supplies category is partially offset by a decrease of $15.4 million in the Professional and Special Services category. (Note - The variance between the Utilities, Materials and Supplies category and the Professional and Special Services category will be reconciled after an appropriate re-allocation of expenditures.)
- A decrease of $14.3 million in the Other Subsidies and Payments category resulting from the cessation of the ex gratia payments program related to the health effects of Agent Orange use at CFB Gagetown, which ended December 30, 2011.
3. Risks and Uncertainties
At Veterans Affairs Canada, integrated risk management is a fundamental underpinning of management and overall decision making. The identification of risks provides decision makers with an opportunity to consider the uncertainties and challenges related to their decisions, and identify how they could address those uncertainties before proceeding.
Veterans Affairs Canada’s corporate risks and uncertainties, including financial impacts to the Department’s financial plan, are identified and assessed by senior managers who take into consideration the organization’s priorities as well as the internal and external context in which the Department operates. In turn, the existing risks inform priority setting activities. This approach occurs on a quarterly basis which aligns with the quarterly financial reporting cycle.
From a financial perspective, the demand-driven nature of Veterans Affairs Canada’s programs causes the Department’s funding requirements to fluctuate from year to year. The Department is able to request in-year adjustments to ensure Veterans receive the benefits to which they are entitled. The required authority for these adjustments is subject to parliamentary approval. These in-year adjustments mitigate any risk of insufficient funds to meet program demand.
Planned spending levels beyond next fiscal year, as shown in the Department’s 2012-13 Report on Plans and Priorities, are based in part on base reference levels established in 2007 which generally understate planned spending and are not reflective of the changing demographic profile and needs of those served by Veterans Affairs Canada. These planned spending figures are updated each year, as noted above, to ensure that benefits for Veterans, their families and other individuals are not affected.
4. Significant Changes in Relation to Operations, Personnel and Programs
One significant change in personnel occurred during the quarter. Heather Parry, Assistant Deputy Minister of Human Resources and Corporate Services Branch (and Chief Financial Officer) retired from the Public Service. Charlotte Stewart, Director General Service Delivery and Program Management Division, assumed this position on an interim basis.
Veterans Affairs Canada’s five-year Transformation Agenda or “Cutting Red Tape for Veterans” initiative will fundamentally change how the Department does business and result in profound changes unlike anything in its history. “Cutting Red Tape for Veterans” is an "invest-to-save" initiative. The upfront investment is being used to expand Veterans Affairs Canada’s service delivery network capacity, fund communications initiatives, as well as to enhance Veterans Affairs Canada’s existing information management and information technology infrastructure. Savings will be made possible through business and technological improvements, strengthened partnerships and a realignment and reduction in the size of the organization. The Department is now in Year Two of this plan. The majority of initiatives to transform services are both multi-year and multi-phased.
In the third quarter, there was activity on a number of fronts to support “Cutting Red Tape for Veterans”, including enhancements to Veteran’s online services:
- Veterans now have simpler ways to access information about benefits and services. The new My VAC Book allows users to produce a benefits brochure online that is customized to the Veteran’s own service experience, and can be printed on demand (a paper copy can be requested as well).
- With the newly enhanced My VAC Account, Veterans now have more options for self service and the ability to do business online, securely with Veterans Affairs Canada, at their convenience. The registration process for this service was simplified; what used to take two weeks now takes only a few minutes. This has increased My VAC Account users by 23%. Using this electronic service, Veterans can now securely communicate with the Department, view a description of services on a mobile device, submit and track the progress of certain applications, update contact information and see the status of decisions.
- The Veterans Benefits Navigator allows Veterans to look at policies and descriptions of services online that may apply to their unique situation. Veterans and their families have the option of browsing all programs or can select information specific to their military service, and the system will sort through the many Veterans Affairs Canada services, benefits and programs to display only the relevant items.
- Veterans and their families can now use a streamlined mail process with a single mailing address for most correspondence to the Department. Veterans Affairs Canada is further modernizing its mail processes by converting received mail to digital information, giving Veterans and Veterans Affairs Canada employees’ electronic access to files and therefore speeding up application processing and decision-making.
In addition, through the third quarter, Veterans Affairs Canada announced partnerships with other government and non-governmental organizations to support Veterans’ transitions to civilian life and efforts to find new employment:
- Veterans Affairs Canada has formally engaged the Public Service Commission to explore options regarding the priority hiring of medically released personnel of the Canadian Forces in the public service, to help Veterans transition to new careers after service.
- Veterans Affairs Canada announced its support for the Royal Canadian Legion’s partnership and financial contribution to the University of British Columbia’s Veterans Transition Program, in addition to the Government’s own contribution of $600,000 over four years to that initiative.
- Veterans Affairs Canada announced further opportunities for networking with partners through the True Patriot Love Foundation and corporate Canada to raise awareness of and create new opportunities for Veterans’ post-military careers. This includes a new Veterans Transition Advisory Council to bring together industry leaders and government and the launch of an email service (Jobs-Emplois) for the receipt and distribution of private sector job opportunities for Canadian Forces members and Veterans.
The Government ended the deduction of Veterans’ disability pensions from their Earnings Loss and Canadian Forces Income Support benefits. Work is underway to make similar changes to the War Veterans Allowance Act so that disability pensions will no longer be considered when calculating the War Veterans Allowance benefit.
Veterans Affairs Canada is also ensuring it has employees in the locations where there is the most demand from Veterans. This means some offices across the country may grow bigger while offices in some other areas will either get smaller or close. Veterans will continue to receive services and home visits from Veterans Affairs Canada staff.
Other related activities this quarter include the continued release of change management learning tools for Veterans Affairs Canada staff.
Finally, results from three public opinion research reports were published with Library and Archives Canada: Veterans’ Understanding and Awareness of Services and Benefits Offered by Veterans Affairs Canada; Canadians’ Understanding and Awareness of Services and Benefits Offered by Veterans Affairs Canada; and, Research to Assess the Effectiveness of Communication Products Designed for Canadian Forces Veterans. These will be used to inform the future development of communication products, policies and programs for Veterans and ensure programs are more responsive to Veterans’ current needs and expectations.
5. Budget 2012 Implementation
This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.
Budget 2012 re-confirmed the Government of Canada’s support to Veterans by maintaining the level of benefits while recognizing the need to modernize the Department and transform the way it does business. In addition to savings to be realized through its “Cutting Red Tape for Veterans” initiative (referred to in last quarter’s report as the Transformation Agenda), the Department will achieve Budget 2012 savings of $34.8 million on an ongoing cash basis starting in 2014-15. This will be achieved through eliminating unnecessary layers of bureaucracy and introducing new technologies which will also allow Veterans Affairs Canada to provide better and faster service to Veterans in more modern and convenient ways.
In the first year of implementation of Budget 2012, the Department will achieve savings of approximately $594 thousand. These savings were reflected through Supplementary Estimates (B). Savings will increase to $15.9 million in 2013-14 and $34.8 million in fiscal year 2014-15.
The Department is using sound project management techniques to integrate the planning, monitoring and reporting of all projects for both its “Cutting Red Tape for Veterans” initiative and Budget 2012. This ensures that the impact of any dependencies, inter-relations and risks are identified, evaluated and monitored regularly and continuously throughout the life-cycle of these projects.
Budget 2012 initiatives were implemented through the third quarter of 2012. For example:
- Policies and programs were clarified to eliminate duplication and overlap between Veterans Affairs Canada and the Department of National Defence to better serve Veterans and Canadian Forces members.
- Red tape for low-risk, routine Veterans Independence Program review and renewal functions, as well as processing for Health Related Travel claims has been cut, leaving Veterans Affairs Canada staff to focus on more complex cases. Veterans and primary caregivers benefit from faster processing.
Approved by:
Anne Marie Smart, A/Deputy Minister
Charlottetown, PE
February 21, 2013
Charlotte Stewart, A/Chief Financial Officer
Charlottetown, PE
February 19, 2013
II. Financial Statements
Statement of Authorities (unaudited)
| (in thousands of dollars) | Total available for use for the year ending March 31, 2012* |
Used during the quarter ended December 31, 2011 |
Year to date used at quarter-end |
|---|---|---|---|
| Vote 1 - Net Operating expenditures | 1,001,401 | 230,716 | 702,454 |
| Vote 5 - Grants and Contributions | 2,587,393 | 595,690 | 1,869,803 |
| Budgetary statutory authorities | 42,194 | 10,509 | 31,579 |
| Total Budgetary authorities | 3,630,988 | 836,915 | 2,603,836 |
| Non-budgetary authorities | 0 | 0 | (2) |
| Total Authorities | 3,630,988 | 836,915 | 2,603,834 |
| (in thousands of dollars) | Total available for use for the year ended March 31, 2013* |
Used during the quarter ended December 31, 2012 |
Year to date used at quarter-end |
|---|---|---|---|
| Vote 1 - Net Operating expenditures | 903,977 | 212,947 | 615,824 |
| Vote 5 - Grants and Contributions | 2,660,687 | 638,772 | 1,908,086 |
| Budgetary statutory authorities | 40,661 | 10,135 | 30,428 |
| Total Budgetary authorities | 3,605,325 | 861,854 | 2,554,338 |
| Non-budgetary authorities | 0 | 0 | 0 |
| Total Authorities | 3,605,325 | 861,854 | 2,554,338 |
* Includes only Authorities available for use and granted by Parliament at quarter-end.
Departmental Budgetary Expenditures by Standard Object (unaudited)
| Expenditures (in thousands of dollars) |
Planned expenditures for the year ending March 31, 2012 |
Expended during the quarter ended December 31, 2011 |
Year to date used at quarter-end |
|---|---|---|---|
| 01 Personnel | 313,605 | 78,482 | 256,682 |
| 02 Transportation and communications | 36,985 | 9,617 | 23,977 |
| 03 Information | 5,086 | 1,842 | 2,277 |
| 04 Professional and special services | 385,485 | 98,673 | 302,451 |
| 05 Rentals | 10,376 | 1,349 | 4,082 |
| 06 Repair and maintenance | 12,943 | 1,160 | 6,300 |
| 07 Utilities, materials and supplies | 236,939 | 34,120 | 102,140 |
| 08 Acquisition of land, buildings and works | 14,405 | 508 | 1,774 |
| 09 Acquisition of machinery and equipment | 7,574 | 916 | 1,931 |
| 10 Transfer payments | 2,587,590 | 595,690 | 1,869,803 |
| 11 Public debt charges | 0 | 0 | 0 |
| 12 Other subsidies and payments | 20,000 | 14,558 | 32,419 |
| Total gross budgetary expenditures | 3,630,988 | 836,915 | 2,603,836 |
| Less Revenues netted against expenditures | |||
| Total Revenues netted against expenditures: | 0 | 0 | 0 |
| Total net budgetary expenditures | 3,630,988 | 836,915 | 2,603,836 |
| Expenditures (in thousands of dollars) |
Planned expenditures for the year ending March 31, 2013* |
Expended during the quarter ended December 31, 2012 |
Year to date used at quarter-end |
|---|---|---|---|
| 01 Personnel | 280,060 | 75,159 | 216,665 |
| 02 Transportation and communications | 43,768 | 6,628 | 17,553 |
| 03 Information | 5,448 | 1,806 | 2,345 |
| 04 Professional and special services | 373,984 | 83,258 | 258,801 |
| 05 Rentals | 8,885 | 1,662 | 4,807 |
| 06 Repair and maintenance | 13,573 | 676 | 3,521 |
| 07 Utilities, materials and supplies | 208,970 | 52,649 | 130,773 |
| 08 Acquisition of land, buildings and works | 3,701 | 569 | 1,744 |
| 09 Acquisition of machinery and equipment | 6,052 | 460 | 2,245 |
| 10 Transfer payments | 2,660,884 | 638,772 | 1,908,086 |
| 11 Public debt charges | 0 | 0 | 0 |
| 12 Other subsidies and payments | 0 | 215 | 7,798 |
| Total gross budgetary expenditures | 3,605,325 | 861,854 | 2,554,338 |
| Less Revenues netted against expenditures | |||
| Total Revenues netted against expenditures: | 0 | 0 | 0 |
| Total net budgetary expenditures | 3,605,325 | 861,854 | 2,554,338 |
*Planned expenditures do not reflect measures announced in Budget 2012.
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