Departmental Quarterly Financial Reports
October - December 2015

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended December 31, 2015

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 Economic Action Plan 2014 and 2015 (Budget 2014 and Budget 2015).

A summary description of Veterans Affairs Canada’s (sometimes referred to in this Report as "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 2015–16 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 but has been reviewed by the Departmental Audit Committee.

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

Statement of Authorities

As of December 31, 2015, total authorities available for the year have decreased by $43.0 million (approximately 1.2%) compared to December 31, 2014 ($3,599 million to $3,556 million). This decrease is the result of a $33.3 million decrease in Vote 5, Grants and Contributions, $7.9 million decrease in statutory authorities and a $1.8 million decrease in Operating Expenditures. It is important to note that this decrease in total authorities is only temporary, and once Supplementary Estimates (C) are tabled for 2015–16 the Department’s total authorities will increase over the 2014–15 fiscal year.

As of December 31, 2015, total authorities used during the third quarter of 2015–16 are $75.7 million (9.1%) more when compared to the same three-month period of 2014–15, from $828.5 million to $904.2 million. A breakdown in the spending for 2015–16 indicates that Grants and Contributions spending increased by $68.4 million, Operating expenditures increased by $9.3M and the statutory authorities decreased by $2.0 million.

Overall, Veterans Affairs Canada's authorities reflect the changing demographic profile and changing needs of the Veterans and families the Department serves. This is evidenced by an increase in the number of modern-day Veterans and survivors (forecast to increase from 92,748 in 2014–15 to 99,800 in 2015–16) accessing programs under the New Veterans Charter and a decrease in the number of War Service Veterans and survivors (forecast to decrease from 94,585 in 2014–15 to 85,100 in 2015–16) accessing the Department's traditional programs.

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:

• A net increase of $68.4 million in transfer payments (i.e. Grants and Contributions) mostly attributed to an increase in Disability Award expenditures ($70.5 million) due to increased staffing and business process improvements in order to improve the timeliness of service delivery i.e. render decisions on benefits and process payments faster.
• An increase of $18.6 million in the Utilities, Materials and Supplies category, partially offset by a decrease of $7.4 million within the Professional and Special Services category. The overall increase relates primarily to a timing difference of when Health Services (e.g. treatment benefits, long-term care, etc) transactions are posted to the financial system as well as increased demand for some of these services.
• A decrease of $4.6 million in Other Subsidies and Payments attributed primarily to a timing difference of when payments relating to Ste. Anne’s Hospital are processed. In addition, this standard object includes temporary suspense accounts which had a higher balance in the third quarter of 2014–15 than 2015–16. Any amounts in these temporary suspense accounts are reallocated to other standard objects before the end of the fiscal year.

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 pro-actively.

The corporate risks consider impacts to the Department’s financial plan and are identified and assessed with senior management and key staff from across the Department. Risks and supporting information from various departmental resources such as the Departmental Project Management Committee and Privacy Impact Assessments are collected and monitored. The review of the Department's risks also aligns with the quarterly financial reporting cycle.

VAC currently has three key risks that are being monitored. These risks include:

• The Department may have difficulty managing the growth required to fulfill the new government's many mandate commitments to Veterans;
• Despite the broad range of Veterans programs and services available, some CAF members may not transition successfully from military to civilian life; and
• Given the volume of commitments made for Veterans, the Department may have difficulty addressing all the commitments at the same time.

The Department has developed risk response strategies and is mitigating these risks by ensuring adequate human resource availability, streamlining processes where feasible, working collaboratively with partners and other government departments, and prioritizing initiatives for a phased in approach.

Regular and detailed monitoring of the Department’s finances by senior management and the Chief Financial Officer attestation role also help to ensure that corporate 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

On November 4^th, 2015, the Honourable Kent Hehr was sworn in as the Minister of Veterans Affairs and Associate Minister of National Defence.

Service Excellence for Veterans:

• As of the end of the 3^rd quarter, the Department has hired approximately 150 new frontline staff across the country. The number of new staff hired will continue to grow as the Government fulfils its promise to provide better service to Veterans.

Commemoration:

• On November 5^th, 2015, Minister Hehr participated in the 20^th annual ceremony of remembrance in the Senate Chambers marking the start of Veterans Week which is celebrated every year from November 5^th -11^th. The theme of the ceremony was “100 years – In Flanders Fields”. The annual commemorative ceremony invites Veterans and currently serving Canadian Armed Forces personnel to help with the official launch of this important week, raising awareness of remembrance initiatives and bolstering continued support for Canada’s Veterans.
• Throughout the first half of November 2015, remembrance activities, both domestic and abroad, took place to recognize the contribution Veterans have made and to honour those who made the ultimate sacrifice on behalf of Canada.
• On November 26^th, 2015, the Minister, accompanied by Canadian Veterans Murdoch and Linda Jardine, presented the Jake Gaudaur Veterans’ Award to Jeff Perrett, Offensive Tackle for the Montréal Alouettes. Named after Jake Gaudaur, the CFL’s longest serving commissioner and distinguished Second World War Veteran, the award is presented annually to a Canadian CFL player who best demonstrates the attributes of Canadian Veterans in times of war, military conflict, and peace.

Original signed by:

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II. Financial Statements

Statement of Authorities (unaudited)

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended December 31, 2014
STATEMENT OF AUTHORITIES (unaudited)
Fiscal year 2014–15

(in thousands of dollars)	Total available for use for the year ending March 31, 2015*	Used during the quarter ended December 31, 2014	Year to date used at quarter-end
Vote 1 - Net Operating expenditures	875,252	198,798	576,421
Vote 5 - Grants and Contributions	2,688,404	620,896	1,881,026
Statutory Authority - Minister's Salary and Motor Car Allowance	80	20	60
Statutory Authority – Court Award – Crown Liability and Proceeding Act	0	0	1
Statutory Authority – Refunds of Previous Years Revenue	0	1	44
Disposal of Surplus Moveable Crown Assets	0	15	15
Statutory Authority – Contributions to Employee Benefit Plans – Program	35,261	8,815	26,445
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	3,599,194	828,545	2,484,012
Non-Budgetary Authorities	0	0	0
Total Authorities	3,599,194	828,545	2,484,012

* 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, 2015
STATEMENT OF AUTHORITIES (unaudited)
Fiscal year 2015–16

(in thousands of dollars)	Total available for use for the year ended March 31, 2016*	Used during the quarter ended December 31, 2015	Year to date used at quarter-end
Vote 1 - Net Operating expenditures	873,423	208,067	579,955
Vote 5 - Grants and Contributions	2,655,148	689,339	2,009,383
Statutory Authority - Minister's Salary and Motor Car Allowance	82	14	55
Statutory Authority – Court Award – Crown Liability and Proceeding Act	0	2	12
Statutory Authority – Refunds of Previous Years Revenue	0	0	17
Statutory Authority – Spending of Amounts Equivalent to Proceeds from Disposal of Surplus Moveable Crown Assets	0	1	16
Statutory Authority – Contributions to Employee Benefit Plans – Program	27,363	6,762	20,286
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	3,556,213	904,185	2,609,724
Non-Budgetary Authorities	0	0	0
Total Authorities	3,556,213	904,185	2,609,724

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

Departmental Budgetary Expenditures by Standard Object (unaudited)

Veterans Affairs Canada
Quarterly Financial Report for the Quarter Ended December 31, 2014
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2014–15

Expenditures (in thousands of dollars)	Planned expenditures for the year ending March 31, 2015*	Expended during the quarter ended December 31, 2014	Year to date used at quarter-end
01 Personnel	249,525	64,968	194,356
02 Transportation and communications	29,451	5,873	17,158
03 Information	11,218	3,848	6,360
04 Professional and special services	383,363	88,722	251,640
05 Rentals	8,343	990	3,237
06 Repair and maintenance	9,626	829	2,682
07 Utilities, materials and supplies	198,739	36,594	111,491
08 Acquisition of land, buildings and works	4,492	78	86
09 Acquisition of machinery and equipment	6,418	310	594
10 Transfer payments	2,688,601	620,896	1,881,026
11 Public debt charges	0	0	0
12 Other subsidies and payments	9,418	5,437	15,382
Total gross budgetary expenditures	3,599,194	828,545	2,484,012
Less revenues netted against expenditures	0	0	0
Total revenues netted against expenditures	0	0	0
Total net budgetary expenditures	3,599,194	828,545	2,484,012

* 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, 2015
Departmental budgetary expenditures by Standard Object (unaudited)
Fiscal year 2015–16

Expenditures (in thousands of dollars)	Planned expenditures for the year ending March 31, 2016*	Expended during the quarter ended December 31, 2015	Year to date used at quarter-end
01 Personnel	260,268	64,558	187,475
02 Transportation and communications	29,012	7,172	18,167
03 Information	5,583	1,708	1,957
04 Professional and special services	393,526	81,322	261,251
05 Rentals	7,226	2,200	4,329
06 Repair and maintenance	7,882	1,375	2,541
07 Utilities, materials and supplies	183,861	55,193	115,434
08 Acquisition of land, buildings and works	1,971	210	210
09 Acquisition of machinery and equipment	3,284	265	1,058
10 Transfer payments	2,655,345	689,339	2,009,383
11 Public debt charges	0	0	0
12 Other subsidies and payments	8,255	843	7,919
Total gross budgetary expenditures	3,556,213	904,185	2,609,724
Less revenues netted against expenditures	0	0	0
Total revenues netted against expenditures	0	0	0
Total net budgetary expenditures	3,556,213	904,185	2,609,724

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