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July - September 2012

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended September 30, 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 Estimates and Supplementary Estimates as well as Canada’s Economic Action Plan 2012 (Budget 2012).

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 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 will be 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 second quarter of the current fiscal year, total authorities available for the year increased by $11.8 million (or 0.3%), compared to the first quarter of fiscal year 2012-13; from $3,568 billion to $3,579.8 billion. This increase was related to the operating budget carry-forward.

As at September 30, 2012, total authorities available for the year have increased by $56.6 million (1.6%) compared to the same quarter of the previous year (from $3,523.2 million to $3,579.8 million). This net increase is the result of an $88.4 million increase in Vote 5, Grants and contributions, a $30.3 million decrease in Vote 1, Operating expenditures, and a $1.5 million decrease in statutory authorities. Authorities used during the second quarter of 2012-13 are $50.6 million (5.7%) less when compared with the same quarter of 2011-12; decreasing from $893.3 million to $842.6 million as per the Statement of Authorities table. This represents 23.5% of total expenditures compared to 25.4% recorded for the same quarter in 2011-12. 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 second quarter of 2012-13 were generally consistent with prior year spending trends. The major variances include:

  • A decrease of $31.2 million in the Personnel category attributed to:
    • A decrease in severance benefits due to the cessation and payout of the benefit in the second quarter of 2011-12;
    • A decrease in salary from the transfer of personnel to Shared Services Canada;
    • A decrease in salary due to transformation activities and retirements; and
    • A decrease in Ste. Anne’s Hospital salary expenditures.
  • A decrease of $54.1 million in the Professional and special services category is partially offset by an increase of $43.8 million in the Utilities, materials and supplies category. The remaining decrease of $10.4 million is a result of the decreasing need for long term care and health-related benefits due to a reduction in the number of War Service Veterans and individuals accessing the Department’s traditional programs. This net decrease is consistent with planned spending for 2012-13 in these categories, as well as the year to date decrease of $18 million. (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 $6.7 million net decrease in transfer payments (i.e. Grants and contributions) related to a decrease in the number of War Service Veterans and individuals accessing the Department’s traditional programs, partially offset by an increase in the number of modern-day Veterans and individuals accessing programs under the New Veterans Charter.

3. Risks and Uncertainties

VAC’s integrated risk management approach is designed to address potential risks in any area or level within the Department in order to provide reasonable assurance that corporate objectives, desired outcomes and financial plans are achieved and associated risks are mitigated proactively and appropriately. To realize this, VAC’s corporate risk approach identifies and assesses the most significant corporate risks and uncertainties including potential impacts to the department’s financial plan for the current year and during each quarter.

Risks are managed, monitored and updated on a quarterly basis which aligns with the quarterly financial reporting cycle. This allows for key risks, as well as important supporting information, to be considered and assessed. The process for the corporate risk quarterly reporting activity involves Directors General from across the Department reviewing, updating, and presenting current risk information to their Risk Management Board colleagues. Robust discussions around emerging risks, progress, shared responsibility, interconnectivity, and influences on business, project and financial planning and reporting occurs. Members discuss in detail the supporting information to the corporate risks for which they are the Office of Primary Interest or the Office of Secondary Interest(i.e. links to program activity architecture, drivers, consequences, mitigations, financial implications and action plans) and finally present and defend the proposed ratings. As part of the quarterly review, this information is presented to the Senior Management Committee for review and approval.

During the quarterly review, which aligns with the Q2 Quarterly Financial Report, VAC identified, validated and considered any potential financial impacts on the Department’s ability to meet financial pressures, operational demands as well as the needs of Veterans, CF members, and their families. To ensure successful management of these uncertainties, senior management accountability is formally assigned and frequent monitoring and reporting is required.

From a financial perspective, the demand-driven nature of VAC’s client programs causes the Department’s funding requirements to fluctuate from year to year. However, 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. This process mitigates 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 VAC. 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

Three significant changes in personnel were made during the last quarter. Mary Chaput was appointed Deputy Minister of Veterans Affairs Canada effective July 16, 2012. Prior to this appointment, she served as Associate Deputy Minister of the Department. On this same date, Anne Marie Smart was appointed Associate Deputy Minister of Veterans Affairs Canada. Prior to this, she was Assistant Secretary to the Cabinet, Communications and Consultations with the Privy Council Office from 2007 to 2011, then Special Advisor, Communications and Consultations, from January 2012. In addition, Lieutenant-General Walter Semianiw joined Veterans Affairs Canada effective July 23, 2012 on a 6-month special assignment serving as Assistant Deputy Minister of Policy, Communications and Commemoration. LGen. Semianiw is currently Commander of Canada Command, the organization charged with focusing the Canadian Forces on the defence and protection of Canada as its first priority. He replaces James Gilbert, who left the Department to join the Department of Human Resources and Skills Development Canada as Assistant Deputy Minister of Public Affairs and Stakeholder Relations.

Veterans Affairs Canada’s five-year Transformation Agenda, or “Cutting Red Tape for Veterans” initiative to fundamentally change how the Department does business will 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 VAC’s service delivery network capacity, fund communications initiatives, as well as to enhance VAC’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. Although the majority of initiatives to transform services are both multi-year and multi-phased, the Department did implement further significant changes this quarter including the following initiatives:

July 26, 2012: Veterans and their families can obtain general information regarding VAC programs and services through Service Canada’s Internet, telephone and in-person service channels. They can also now submit and get help completing VAC disability benefits and Veterans Independence Program (VIP) applications, and submit supporting documentation, at any Service Canada Centre across Canada. This is in addition to services available via VAC’s existing service channels.

September 21, 2012: The Helmets to Hardhats program website was launched, which links veterans to careers in the skilled trades as they move out of the military. VAC is partnered with this organization, which supports the Department’s overall plan to cut red tape by strengthening partnerships with DND and others to better anticipate the needs of CF members transitioning to civilian life.

Other related activities this quarter include the release of change management learning tools for VAC staff.

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.

As of September 30, the Department’s authorities had not yet been adjusted to reflect Budget 2012 savings. This will occur later in the fiscal year. 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 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. Savings will increase to $15.9 million in 2013-14 and $34.8 million in fiscal year 2014-15.

Budget 2012 also notes that changes will be made to eliminate duplication and overlap between Veterans Affairs Canada and the Department of National Defence to better serve Veterans and Canadian Forces members.

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.

Approved by:

Mary Chaput, Deputy Minister
Charlottetown, PE
November 26, 2012

Charlotte Stewart, A/Chief Financial Officer
Charlottetown, PE
November 26, 2012

II. Financial Statements

Statement of Authorities (unaudited)

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 ending
 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 5 - 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

* 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, 2012
Fiscal year 2012-2013
(in thousands of dollars) Total available for use for the year ended
March 31, 2013**
Used during the quarter ended
September 30, 2012
Year to date used at quarter-end
Vote 1  - Net Operating expenditures 894,544 211,073 402,877
Vote 5 - Grants and Contributions 2,644,593 621,384 1,269,314
Budgetary statutory authorities 40,661 10,162 20,293
Total Budgetary authorities 3,579,798 842,619 1,692,484
Non-budgetary authorities      
Total Authorities 3,579,798 842,619 1,692,484

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

** Total available for use does not reflect measures announced in Budget 2012. Includes only Authorities available for use and granted by Parliament at quarter-end

Departmental Budgetary Expenditures by Standard Object (unaudited)

Quarterly Financial Report for the Quarter Ended September 30, 2011 by Standard Object
Fiscal year 2011-2012
Expenditures
(in thousands of dollars)
Planned expenditures for the year ending
March 31, 2012
Expended during the quarter ended
September 30, 2011
Year to date used at quarter-end
01 Personnel 274,886 104,245 178,201
02 Transportation and communications 36,176 8,035 14,359
03 Information 3,947 385 435
04 Professional and special services 376,102 108,712 203,779
05 Rentals 6,488 1,443 2,733
06 Repair and maintenance 12,040 1,317 5,140
07 Utilities, materials and supplies 234,621 33,195 68,020
08 Acquisition of land, buildings and works 4,283 401 1,266
09 Acquisition of machinery and equipment 2,287 659 1,015
10 Transfer payments 2,556,365 628,048 1,274,113
11 Public debt charges      
12 Other subsidies and payments 16,000 6,811 17,860
Total gross budgetary expenditures 3,523,195 893,251 1,766,921
Less Revenues netted against expenditures
Total Revenues netted against expenditures:
Total net budgetary expenditures 3,523,195 893,251 1,766,921
Quarterly Financial Report for the Quarter Ended September 30, 2012 by Standard Object
Fiscal year 2012-2013
Expenditures
(in thousands of dollars)
Planned expenditures for the year ending
 March 31, 2013*
Expended during the quarter ended
September 30, 2012
Year to date used at quarter-end
01 Personnel 273,379 73,057 141,505
02 Transportation and communications 43,769 5,488 10,925
03 Information 5,448 472 540
04 Professional and special services 371,231 54,583 175,542
05 Rentals 8,885 3,025 3,146
06 Repair and maintenance 13,573 1,130 2,845
07 Utilities, materials and supplies 208,970 76,970 78,124
08 Acquisition of land, buildings and works 3,701 641 1,175
09 Acquisition of machinery and equipment 6,052 1,594 1,785
10 Transfer payments 2,644,790 621,384 1,269,314
11 Public debt charges      
12 Other subsidies and payments   4,275 7,583
Total gross budgetary expenditures 3,579,798 842,619 1,692,484
Less Revenues netted against expenditures
Total Revenues netted against expenditures:      
Total net budgetary expenditures 3,579,798 842,619 1,692,484

*Planned expenditures do not reflect measures announced in Budget 2012

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