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Departmental Quarterly Financial Report

October - December 2019

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended December 31, 2019

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 Budget 2018 and Budget 2019.

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 VAC’s spending authorities granted by Parliament and those used by the Department, consistent with the Main Estimates and Supplementary Estimates for the 2019-20 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.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. 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

Overall, VAC’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 and survivors (forecast to increase from 112,977 as of March 31, 2019, to 119,300 as of March 31, 2020) and a decrease in the number of War Service Veterans and survivors (forecast to decrease from 58,828 as of March 31, 2019, to 52,100 as of March 31, 2020). Despite the slight decrease in overall Veterans and recipients of VAC benefits, recent program enhancements have increased the demand on Veterans Well-being Act programs and benefits.

Fiscal Year to-Date

As at December 31, 2019, total authorities available (i.e. budget) at quarter-end increased by $786M (17.6%) compared to amounts available at the same quarter end of the previous year, from $4,475M to $5,261M.  This increase is the result of a $180M increase in Vote 1, Operating Expenditures, a $603M increase in Vote 5, Grants and Contributions, and a $3M increase in Statutory expenditures. $44M of the departmental budget increase relates to Budget 2019 measures to support Veterans as they transition to post-service life, to recognize Métis Veterans, to Commemorate Canada’s Veterans and to support research on Military and Veterans Health. 

In addition, VAC’s authorities increased during the third quarter of 2019-20 through supplementary estimates related to the following:

  • Funding for demand-driven programs and services which provide support to eligible Veterans and their Families - $676.9M
  • Toth class action settlement agreement  - $101.1M
  • Indexation of Disability Pensions - $65.1M
  • Continued implementation of PFL initiative - $14.5M

Total authorities used (i.e. expenditures) at quarter-end are $3,584M, which is an increase of $129M (3.7%) when compared to authorities used at the same quarter end of the previous year of $3,455M. This increase is primarily attributed to expenditures related to the items listed above.

Fiscal Quarter

Total authorities used (i.e. expenditures) during the third quarter of 2019-20 are $1,302M, which is $104M (8.7%) more when compared to the same three-month period of 2018-19 of $1,198M. A break-down of the spending for the third quarter of 2019-20, in comparison to the same quarter in 2018-19, indicates that spending on Operating Expenditures (Vote 1) increased by $6M, primarily attributed to increased demand for Veterans benefits and services, and the continued efforts to reduce the backlog and improve the delivery of services and programs to Veterans and their families particularly through the implementation of the new Pension for Life initiative. Grant and Contribution (Vote 5) spending increased by $97M, primarily attributed to payments made during the quarter relating to the correction of indexation of Disability Pension, as well as increased demand for programs relating to the Pension for Life (PFL) suite of programs. Spending on statutory authorities increased approximately $1.6M due to increase in employee benefit costs.

Figure 1 - Third Quarter and Year-to-date Expenditures Compared to Budget

Comparison of Net Budgetary Authorities and Expenditures for the Quarter Ended December 31, 2018 and December 31, 2019 (in millions of dollars)
Fiscal Years 2018-2019 2019-2020
Net Budgetary Authorities 4,475 5,261
Expenditures for the Quarter ended December 31 1,198 1,302
Year to date Expenditures 3,455 3,584

As a result of the Government’s expenditure management cycle, there are often fluctuations by quarter and between fiscal years when comparing budgets and expenditures. This is primarily a result of the quasi-statutory nature of the Department’s programs, which are demand-driven and based on need and entitlement. In other words, Veterans who meet the eligibility criteria for VAC’s programs are paid as they apply for benefits. Consistent with previous fiscal years, current departmental forecasts are predicting higher program payment expenditures by the end of 2019-20 as compared to last fiscal year (i.e. 2018-19).

Statement of Departmental Budgetary Expenditures by Standard Object

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

  • An increase of $11M in Professional and Special Services which relates primarily to increased demand for certain types of treatment benefits and health services for Veterans.   
  • A decrease of $15M in Utilities, Materials, and Supplies primarily related to spending relating to Other Health Related Services. Expenditures are artificially low due to a hold back on billings from a third party provider as they undergo an accounting system change within their organization.  Expenditures are expected to increase in the coming months.
  • An increase of $97M in Transfer Payments which, as noted above, is primarily attributed to payments made during the quarter relating to the correction of indexation of Disability Pension program, as well as increased demand for programs relating to the Pension for Life (PFL) suite of programs.
  • An increase of $9M in Personnel primarily attributed to continued efforts to reduce the backlog and improve the delivery of services and programs to Veterans and their families, particularly through the implementation of the new Pension for Life initiative.

*Note: Professional and Special Services includes support for health care and treatment benefits, as well as, external contractors to support departmental operations.

3. Risks and Uncertainties

VAC is dedicated to enhancing the health and well-being of Veterans and their families and recognizes that its success in fulfilling this mandate is directly related to the effective management of risk. Sound risk management equips the Department to respond proactively to change and uncertainty by using risk-based information to support effective decision-making, resource allocation, and ultimately, better results for Canadians. Additionally, it can lead to effective service delivery, better project management, and an increase in value for money.

VAC operates in a dynamic and complex environment characterized by internal and external drivers of change. The Department employs integrated risk management tools to proactively and systematically recognize, understand, accommodate and capitalize on new challenges and opportunities, with a focus on results. In addition, the Department has effective internal control systems in place, proportionate to the risks being managed.

As such, the Department’s executive-level committees, the Assistant Deputy Minister level Senior Management Committee and the Director General level Corporate Policy and Planning Management Committee serve as forums where the Deputy Head ensures that Senior Department Managers are aware of their financial management responsibilities, have the tools to enable these responsibilities, and manage the financial performance within their areas of responsibilities. In addition, these committees recommend and prioritize the department’s investment opportunities, based on Integrated Business Plans (IBPs), to ensure their alignment with departmental and Government of Canada expected results. The IBPs also support the development of integrated program and corporate risk registers and enable resource capacity planning for the Department.

Key risks currently being managed by the Department include:

  1. Maintaining Core Services: To avoid the risk of not providing timely, high quality core services and benefits to Veterans and their families while simultaneously implementing several new initiatives and programs from multiple federal budgets, Veterans Affairs Canada is monitoring and mitigating the risks through:
    1. Refining internal processes to improve efficiency;
    2. Increasing the use of automation;
    3. Recruiting, training, motivating and retaining employees; and
    4. Maintaining a reasonable case manager to client ratio.
  2. Fulfilling Mandate Letter Commitments: To prevent the risk of not fully implementing remaining mandate commitments, given the volume and complexity of commitments made to Veterans, Veterans Affairs Canada is mitigating the risk through:
    1. Reporting progress internally and through canada.ca;
    2. Increasing the use of automation; and
    3. Recruiting, training, motivating and retaining employees.
  3. Achieving and Demonstrating Results: To avert the risk of not fully meeting planned targets, given that responsibility for Veterans' well-being is shared with multiple jurisdictions, other government departments, and individual Veterans, Veterans Affairs Canada is mitigating the risks through:
    1. Working closely with partners to ensure efforts are well aligned; and
    2. Exploring additional opportunities for sound research and data to inform direction.

The Department monitors these risks through the Departmental Results Framework and internal performance reports. Tracking performance in these areas enables timely adjustments and ensure risks are being effectively mitigated.

Additionally, the Departmental Audit Committee provides an important advisory function as part of the Department’s governance structure for risk. It provides objective advice and recommendations to the Deputy Head regarding the sufficiency, quality and adequacy of the Department's risk management process.

This integrated risk management process ultimately supports the Department in meeting its objectives. Further information on risks facing the Department and the steps taken to mitigate them can be found on VAC's website.

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

Mandate/Budget Commitments

Budget 2018

Pension For Life:

Work continues on implementing Pension for Life project elements. Significant work remains for our new client relationship management system, called GCcase. While the system is currently functioning at basic operating capability, key functionality remains to be designed, developed and implemented in order to efficiently process rehabilitation and disability benefits and redress elements.

Both the Department’s structures and employees will experience a great deal of change as we continue to transition Pension for Life project elements to program operations. Lessons learned around change management which can be applied to future projects / initiatives include communicate early and often, align tone of messaging to climate, consider who delivers the key messages and the medium of delivery and the need to raise awareness on reason for change.

Considering the number of professional development opportunities resulting from Pension for Life (as well as other pending projects and initiatives), maintaining resourcing levels on the project and in core operational areas is a challenge that could have broader departmental impacts. To that end, PFL remains adequately resourced to complete our mandate.

Commemorative Activities

The Government of Canada is committed to remembering and honouring the sacrifices and achievements of Canadians, including the more than 93,000 Canadians who played an important role in the Italian Campaign. A Government of Canada delegation departed for Italy to participate in a series of events marking the 75th anniversary of the Italian Campaign from November 28th to December 6th, 2019. The delegation included Canadian Veterans of the Second World War’s Italian Campaign, their caregivers, representatives from Veterans’ and Indigenous organizations, a Silver Cross Mother, Canadian youth, and representatives of the Government of Canada. The ceremonies honoured the sacrifices and achievements of those who gave so much to help liberate and bring freedom to the country, a key chapter in the liberation of Europe.

5. Approvals by Senior Officials

Original signed by:

__________________________________

W.J. Natynczyk
General (Retired)
Deputy Minister
Ottawa, ON
February 20, 2020

__________________________________

Elizabeth M. Stuart
Rear-Admiral (Retired)
Chief Financial Officer
Charlottetown, PE
February 14, 2020


II. Financial Statements

Statement of Authorities

Veterans Affairs Canada

Quarterly Financial Report for the Quarter Ended December 31, 2018

Statment of Authorities (unaudited)

Fiscal Year 2018-19

(in thousands of dollars) Total available for use for the year ended March 31, 2019* Used during the quarter ended December 31, 2018 Year-to-date used at quarter-end
Vote 1 - Net Operating expenditures 1,087,444 260,285 693,612
Vote 5 - Grants and Contributions 3,351,947 929,607 2,737,906
Statutory Authority - Minister's Salary and Motor Car Allowance 86 21 65
Statutory Authority - Court Award - Crown Liability and Proceeding Act 0 9 11
Statutory Authority - Refunds of Previous Years Revenue 0 2 2
Statutory Authority – Spending of Amounts Equivalent to Proceeds from Disposal of Surplus Moveable Crown Assets 0 3 3
Statutory Authority - Contributions to Employee Benefit Plans - Program 35,643 7,802 23,407
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 Statutory 35,926 7,837 23,488
Total Budgetary authorities 4,475,317 1,197,729 3,455,006
Non-budgetary authorities 0 0 0
Total Authorities 4,475,317 1,197,729 3,455,006

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

Veterans Affairs Canada

Quarterly Financial Report for the Quarter Ended December 31, 2019

Statement of Authories (unaudited)

Fiscal Year 2019-20

(in thousands of dollars) Total available for use for the year ending March 31, 2020* Used during the quarter ended December 31, 2019 Year-to-date used at quarter-end
Vote 1 - Net Operating expenditures 1,267,174 265,788 814,125
Vote 5 - Grants and Contributions 3,954,684 1,026,596 2,741,663
Statutory Authority - Minister's Salary and Motor Car Allowance 88 22 66
Statutory Authority - Court Award - Crown Liability and Proceeding Act 0 2 18
Statutory Authority - Refunds of Previous Years Revenue 0 2 2
Statutory Authority – Spending of Amounts Equivalent to Proceeds from Disposal of Surplus Moveable Crown Assets 0 0 0
Statutory Authority - Contributions to Employee Benefit Plans - Program 38,960 9,457 28,372
Statutory Authority - Veterans Insurance Actuarial Liability Adjustment 175 0 0
Statutory Authority - Returned Soldiers Insurance Actuarial Liability Adjustment 10 0 0
Statutory Authority - Statutory Authority - Re-establishment credits under Section 8 of the War Services Grants Act 10 0 0
Statutory Authority - Repayments under Section 15 of the War Services Grants Act 2 0 0
Total Statutory 39,245 9,483 28,458
Total Budgetary authorities 5,261,103 1,301,867 3,584,246
Non-budgetary authorities 0 0 0
Total Authorities 5,261,103 1,301,867 3,584,246

*Authorities available for use and granted by Parliament at quarter-end, including $44M in Budget 2019 measures approved by Treasury Board.


Departmental Budgetary Expenditures by Standard Object (unaudited)

Veterans Affairs Canada

Quarterly Financial Report for the Quarter Ended December 31, 2018

Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal Year 2018-19

Expenditures (in thousands of dollars) Planned expenditures for the year ended March 31, 2019* Expended during the quarter ended December 31, 2018 Year-to-date used at quarter-end
01 Personnel 263,275 68,454 189,759
02 Transportation and communications 36,207 11,134 26,772
03 Information 4,337 1,439 2,494
04 Professional and special services 516,211 122,851 318,590
05 Rentals 8,807 1,635 3,673
06 Repair and maintenance 10,513 1,160 2,775
07 Utilities, materials and supplies 256,283 58,300 158,425
08 Acquisition of land, buildings and works 528 10 10
09 Acquisition of machinery and equipment 13,210 645 1,773
10 Transfer payments 3,352,144 929,607 2,737,906
11 Public debt charges 0 0 0
12 Other subsidies and payments 13,802 1,994 12,829
Total gross budgetary expenditures 4,475,317 1,197,729 3,455,006
Less Revenues netted against expenditures 0 0 0
Total Revenues netted against expenditures 0 0 0
Total net budgetary expenditures 4,475,317 1,197,729 3,455,006

Veterans Affairs Canada

Quarterly Financial Report for the Quarter Ended December 31, 2019

Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal Year 2019-20

Expenditures (in thousands of dollars) Planned expenditures for the year ending March 31, 2020** Expended during the quarter ended December 31, 2019 Year-to-date used at quarter-end
01 Personnel 298,883 77,531 216,159
02 Transportation and communications 50,203 10,630 28,948
03 Information 4,176 2,363 3,833
04 Professional and special services 521,991 133,555 335,052
05 Rentals 10,804 1,761 3,826
06 Repair and maintenance 8,544 2,663 4,138
07 Utilities, materials and supplies 306,517 43,487 150,454
08 Acquisition of land, buildings and works 7 0 0
09 Acquisition of machinery and equipment 4,848 978 1,707
10 Transfer payments 3,954,882 1,026,596 2,741,663
11 Public debt charges 0 0 0
12 Other subsidies and payments 100,248 2,303 98,466
Total gross budgetary expenditures 5,261,103 1,301,867 3,584,246
Less Revenues netted against expenditures 0 0 0
Total Revenues netted against expenditures 0 0 0
Total net budgetary expenditures 5,261,103 1,301,867 3,584,246

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

** Authorities available for use and granted by Parliament at quarter-end, including $44M in Budget 2019 measures approved by Treasury Board.

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