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October - December 2013

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended December 31, 2013

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) and Economic Action Plan 2013 (Budget 2013).

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 Veterans Affairs Canada’s spending authorities granted by Parliament and those used by the Department, consistent with the Main and Supplementary Estimates for the 2013-14 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, 2012 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 were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013-14, the changes to departmental authorities were reflected in the 2013-2014 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

As at December 31, 2013, total authorities available for the year have increased by $63.2 million (approximately 2%) compared to the same quarter of the previous year, from $3,605.3 million to $3,668.5 million. This net increase is the result of a $77.4 million increase in Vote 5, Grants and Contributions, offset by a $13.2 million decrease in Vote 1, Operating expenditures and a $1.0 million decrease in statutory authorities.

Overall, Veterans Affairs Canada’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 accessing programs under the New Veterans Charter and a decrease in the number of War Service Veterans accessing the Department’s traditional programs.

As at December 31, 2013, total authorities used during the third quarter of 2013-14 are $42.5 million (4.9%) more when compared to the same three-month period of 2012-13, from $861.9 million to $904.4 million. Spending for the third quarter of 2013-14 is in line with the changes to the Department’s authorities in that Grants and Contributions spending increased by $44.2 million and Operating expenditures decreased by $1.5 million.

Statement of Departmental Budgetary Expenditures by Standard Object

When analyzed by Standard Object, expenditures in the third quarter were generally consistent with prior-year spending trends. The largest variances include:

  • An increase of $3.5 million in personnel costs related to increased severance and workforce adjustment.
  • A decrease of $11.1 million in the Utilities, Materials and Supplies category partially offset by an increase of $6.8 million in the Professional and Special Services category stemming from health-related services provided to Veterans. (Note - The variance will be reconciled with an appropriate re-distribution of expenditures.)
  • An increase of $44 million 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;
    • regulatory changes approved earlier in the year which have simplified the Funeral and Burial Program for Canada’s Veterans and more than doubled its reimbursement rate; and
    • finalization of the transition of housekeeping and grounds-maintenance from a contribution to an upfront grant payment program.

3. Risks and Uncertainties

At VAC, integrated risk management is a key component of modern management. It ensures that risks are understood, managed, communicated and integrated into informed decision making and priority setting. Effective risk management enables decision makers to address challenges and uncertainties proactively.

VAC’s corporate risks, which consider impacts to the Department’s financial plan, are identified and assessed quarterly with senior management and key staff from across the Department. Risks and supporting information are collected, aggregated, prioritized and monitored for consideration in updating VAC’s Corporate Risk Profile, which aligns with the quarterly financial reporting cycle.

Financial impacts within this year’s quarter three Corporate Risk Profile update are primarily linked to Transformation initiatives and savings identified in Budget 2012. Regular and detailed monitoring of the Department’s finances by senior management is one of the ways these risks are being managed and mitigated. This integrated risk management process ultimately supports the Department in meeting its financial objectives.

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

One significant change in personnel occurred during the quarter. On December 23, 2013, Mr. Michel Doiron assumed the position of Assistant Deputy Minister, Service Delivery Branch. Prior to this appointment, Michel worked for Service Canada as Assistant Deputy Minister, Atlantic Region, accountable for the delivery and administration of Service Canada Programs in the region, including Employment Insurance, Canada Pension Plan, and Old Age Security. He replaces Mr. Keith Hillier, who retired from the Public Service on December 21, 2013.

As outlined in VAC’s former quarterly financial reports, Veterans Affairs Canada’s five-year Transformation Agenda or “Cutting Red Tape for Veterans” initiative continues to fundamentally change how the Department does business. The Department has completed 62% of the projects that make up the Transformation Agenda and continues to progress as planned on those that remain open.

Examples of progress that was made this quarter include:

  • Twenty CAF Bases are now electronically transferring Service Health Records to the Department of National Defence (DND) Records Disclosure Team in Ottawa who then forward to VAC in Charlottetown.
  • My VAC Account continues to undergo improvements and as of mid-December, there are four application/claim forms available within My VAC Account. These are the: Disability Application, Veterans Independence Program (VIP) Application, Career Transition Services (CTS) Application, and the health related travel reimbursement form.
  • Functionality to add Veterans not currently receiving services from the Department was implemented on October 31, 2013. This enables Veterans who do not already have a VAC file number to conduct business with the Department electronically. Between October 31, 2013 and January 4, 2014, 154 Veterans previously unknown to the Department have registered for My VAC Account.
  • As of January 4, 2014 My VAC Account has 8,309 active registrants.

During the quarter, VAC staff were highly engaged in Blueprint 2020. Following an armchair discussion with the Clerk of the Privy Council via national videoconference at the end of September, engagement sessions with staff were held across the Department which provided further opportunities for input into the Blueprint 2020 conversation. A preliminary report was provided to the Clerk of the Privy Council in mid-October.

Change Management

VAC’s enterprise-wide change management strategy is being rolled out. The initial focus is on integrating change management with project management and strengthening internal communications. Pilots will be launched early in the 4th quarter.

During this quarter, VAC implemented amendments to the Canadian Forces Members and Veterans Re-establishment and Compensation (CFMVRC) Regulations relating to the vocational rehabilitation of Veterans. This amendment removed the maximum limits and the prescriptive list of eligible training expenses; in favor of one global maximum limit ($75,800) for all Vocational Rehabilitation expenses, fees, and/or supports which have been identified in the Veteran’s individual Vocational Rehabilitation Plan. These expenses must be confirmed by a training facility as mandatory and/or required. In addition, the Government ended the deduction of Veterans’ disability pensions from the calculation of War Veterans Allowances (WVA) benefit on a go forward basis. Finally, VAC sought and received approval to adjust its in-year and future quasi-statutory program budgets in line with the changing demographic profile and needs of those served by the Department – based on its latest client and expenditure forecast which is attested to by an independent third-party on an annual basis. The required funding authority for these adjustments will be granted by Parliament during the fourth quarter. This process ensures that VAC has sufficient funding to pay benefits to Veterans, their families and other program recipients.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that are being 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 the first year of implementation, the Department achieved savings of approximately $594 thousand. Savings increased to $15.9 million this fiscal year and will result in ongoing savings of $34.8 million by 2014-15. This will be achieved through eliminating unnecessary layers of bureaucracy and introducing new technologies to provide better and faster service to Veterans in more modern and convenient ways. Budget 2012 initiatives were implemented and have been operational since January 2013.

As indicated in Section Two of this report, there is a variance of $63.2 million in the Department’s authorities between fiscal year 2012-13 and 2013-14. This is attributed primarily to the quasi-statutory nature of Veterans Affairs Canada’s programs and in part to Budget 2012 initiatives. Although there were no cuts to benefits or services for Veterans, the demand-driven nature of Veterans Affairs Canada’s programs causes the Department’s funding requirements to fluctuate each year.

The Department continues to use sound project and risk 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-relationships, and risks are identified, evaluated, and monitored regularly and continuously throughout the life-cycle of these projects. Veterans Affairs Canada is monitoring progress through project close-out and post-implementation reports which include performance measures and financial management information.

Approved by:

_________________________________
Mary Chaput, Deputy Minister
Ottawa, ON
February 25, 2014

__________________________________
Donna MacDonald, A/Chief Financial Officer
Charlottetown, PE
February 19, 2014

II. Financial Statements

Statement of Authorities (unaudited)

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended December 31, 2012
STATEMENT OF AUTHORITIES (unaudited)
Fiscal Year 2012-13
(in thousands of dollars) Total available for use for the year ending 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
Statutory Authority - Minister's Salary and Motor Car Allowance 77 19 58
Statutory Authority - Court Award – Crown Liability and Proceeding Act 0 10 5
Statutory Authority - Refunds of Previous Years Revenue 0 0 56
Statutory Authority - Spending of Amounts Equivalent to Proceeds from Disposal of Surplus Moveable Crown Assets 0 9 9
Statutory Authority - Contributions to Employee Benefit Plans – Program 40,387 10,097 30,290
Statutory Authority - Veterans Insurance Actuarial Liability Adjustment 175 0 0
Statutory Authority - Returned Soldiers Insurance Actuarial Liability Adjustment 10 0 10
Statutory Authority - Re-establishment credits under Section 8 of the War Services Grants Act 2 0 0
Statutory Authority - Repayments under Section 15 of the War Services Grants Act 10 0 0
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.

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended December 31, 2013
STATEMENT OF AUTHORITIES (unaudited)
Fiscal Year 2013-14
(in thousands of dollars) Total available for use for the year ending March 31, 2014* Used during the quarter ended December 31, 2013 Year to date used at quarter-end
Vote 1 - Net Operating expenditures 890,734 211,495 602,870
Vote 5 - Grants and Contributions 2,738,141 683,015 2,009,062
Statutory Authority - Minister's Salary and Motor Car Allowance 79 20 59
Statutory Authority - Court Award – Crown Liability and Proceeding Act 0 0 9
Statutory Authority - Refunds of Previous Years Revenue 0 1 118
Statutory Authority - Contributions to Employee Benefit Plans – Program 39,395 9,849 29,547
Statutory Authority - Veterans Insurance Actuarial Liability Adjustment 175 0 0
Statutory Authority - Returned Soldiers Insurance Actuarial Liability Adjustment 10 0 0
Statutory Authority - Re-establishment credits under Section 8 of the War Services Grants Act 2 0 0
Statutory Authority - Repayments under Section 15 of the War Services Grants Act 10 0 0
Total Budgetary authorities 3,668,546 904,380 2,641,665
Non-budgetary authorities - 0 -
Total Authorities 3,668,546 904,380 2,641,665

* 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 December 31, 2012
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2012-13
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
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.

Quarterly Financial Report for the Quarter Ended December 31, 2013
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2013-14
Expenditures
(in thousands of dollars)
Planned expenditures for the year ending March 31, 2014 Expended during the quarter ended December 31, 2013 Year to date used at quarter-end
01 Personnel 266,428 78,711 224,799
02 Transportation and communications 30,527 6,671 18,082
03 Information 8,455 1,827 2,733
04 Professional and special services 383,193 90,028 253,037
05 Rentals 7,860 1,198 4,046
06 Repair and maintenance 8,515 1,040 3,052
07 Utilities, materials and supplies 206,889 41,517 121,375
08 Acquisition of land, buildings and works 3,275 44 502
09 Acquisition of machinery and equipment 6,550 456 1,081
10 Transfer payments 2,738,339 683,015 2,009,062
11 Public debt charges 0 0 0
12 Other subsidies and payments 8,515 (127) 3,896
Total gross budgetary expenditures 3,668,546 904,380 2,641,665
Less Revenues netted against expenditures - - -
Total Revenues netted against expenditures 0 0 0
Total net budgetary expenditures 3,668,546 904,380 2,641,665
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