Quarterly Financial Report for the Quarter Ended, June 30, 2011

Statement outlining results, risks and significant changes in operations, personnel and programs

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A) Introduction

Department of Justice Mandate

The Department of Justice has the mandate to support the dual roles of the Minister of Justice and the Attorney General of Canada.

Under Canada’s federal system, the administration of justice is an area of shared jurisdiction between the federal government and the provinces. The Department supports the Minister of Justice in his responsibilities for 49 statutes and areas of federal law by ensuring a bilingual and bijural national legal framework principally within the following domains: criminal justice (including youth criminal justice), family justice, access to justice, Aboriginal justice, general public law and private international law.

The Department also supports the Attorney General as the chief law officer of the Crown, both in terms of the ongoing operations of government, as well as the development of new policies, programs and services for Canadians to support government priorities. Specifically, the Department provides legal advice to the Government and all federal government departments and agencies, represents the Crown in civil litigation and before administrative tribunals, drafts legislation and responds to all other legal needs of federal departments and agencies.

Further information on the mandate, roles, responsibilities and programs of the Department of Justice can be found in the Department’s 2011-2012 Main Estimates, available on the following Web site: www.tbs-sct.gc.ca/est-pre/20112012/me-bpd/docs/me-bpd-eng.pdf. 

This quarterly financial report:

• should be read in conjunction with the 2011-2012 Main Estimates and Supplementary Estimates A;
• 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; and
• has been reviewed by and received comments from the Departmental Audit Committee (DAC) but has not been subject to an external audit or review.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the Department’s spending authorities granted by Parliament and those used by the Department consistent with the Main Estimates and Supplementary Estimates for the 2011-2012 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 moneys 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 performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

B) Highlights of fiscal quarter and fiscal year to date (YTD) results

This section highlights the significant items that contributed to the net increase in resources available for the year and decrease in actual expenditures for the quarter ended June 30, 2011.  It is noted that as the primary legal services provider to other government departments, the Department of Justice has the authority to collect revenue from other government departments and agencies for legal services provided, and spend the revenue collected. 

Graph 1 outlines the net budgetary authorities that represent the resources available for use for the year as at the end of the quarter, net of the revenue that is expected to be collected.  As the fiscal year progresses, the gross resources available for use will increase significantly as additional revenues are collected.

Significant Changes to Authorities

As at June 30, 2011, the total authorities available for the year has increased by $15.8 million compared to the same quarter of the prior year, from $736.6 million to $752.4 million. The Department realized increases in Budgetary statutory authorities ($16.2 million) and Vote 5 – Grants and Contributions ($6.6 million), which were partially offset by a reduction in Vote 1- Net operating expenditures of $7.0 million.

As per the Statement of Authorities for the period ending June 30, 2011, below are some of the main factors contributing to the net increase in total authorities available of $15.8 million:

• Of the total Budgetary statutory authorities increase of $16.2 million, $12.0 million was associated with the increase in revenue authorities, and the remaining increase was associated with the Employee Benefit Plans rate adjustments (from 17% to 18%) as per TB direction, and changes to program funding;
• $9.7 million increase in authorities as a result of the renewal of the Funding to manage immigration cases involving classified information under Division 9 of the Immigration and Refugee Protection Act;
• $4.6 million increase in authorities as a result of the renewal of Canada’s War Crimes initiative;
• $7.5 million decrease in authorities as a result of the continued implementation of the Department’s Law Practice Model, which aims to equip the Department with the right mix of counsel to continue to deliver effective and efficient legal services in the future; and
• $6.0 million decrease in authorities related to the one-time funding received in early 2010-11 for government advertising programs.

In addition to the appropriations allocated to the Department through Main Estimates and Supplementary Estimates A, the Department also has Net Vote Authority (NVA), which entitles it to spend revenues collected from other government departments and agencies for legal advisory, litigation and legislative services provided.  In the first quarter of 2011-2012 compared to the previous year’s first quarter, the Department’s NVA increased by $75 million, from $215 million to $290 million, primarily in response to increases in demand for legal services.

Significant Changes to Gross Budgetary Expenditures

When compared to the first quarter of the previous fiscal year, total net budgetary expenditures recorded in the quarter ending June 30, 2011, show a reduction of $8.7 million, from $165.1 million to $156.4 million, as per the Table of Departmental Budgetary Expenditures by Standard Object.  The level of expenditures recorded against the budget has also decreased by 1.4% in the first quarter of 2011-2012 compared to the same quarter in 2010-2011.

Reductions occurred in grants and contributions and personnel expenditures. Grants and Contributions expenditures decreased by 30.9% ($3.8 million) in the first quarter of 2011-2012 largely due to a delay in  the renewal of a contribution agreement under the Youth Justice Services program. Personnel expenditures show a net decrease of 1.4% ($1.9 million) in comparison to the same period of the previous year. Although the Employee Benefit Plans rate increase led to an increase in salary expenditures in the first quarter of 2011-2012, the one-time retroactive salary payment related to the Law (LA) excluded group, which was recorded in the first quarter of 2010-2011, contributed to a net decrease in Personnel expenditures as at June 30, 2011.

Significant Changes to Revenues Collected

Consistent with past fiscal years, the collection of revenues in the first quarter accounts for less than 1% of overall revenues anticipated for the fiscal year. As the year progresses, the rate of collections will increase significantly.  Compared to the previous year, revenues collected in the first quarter, ending June 30, 2011, increased from $0.1 million to $0.8 million.

C) Risks and Uncertainties

This Department of Justice Quarterly Financial Report reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates A for which full supply was released on June 27, 2011.

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-2011 levels for the fiscal years 2011-2012 and 2012-2013. Given the Department’s reliance on cost recovery and the associated fiscal restraint identified in Budget 2010, there is a risk that downward pressure could be placed on the funding that other government departments and agencies provide to the Department of Justice for legal services. This is significant, as the Department of Justice carries the salary and operating liability to provide legal services in an environment where client demands for legal services and revenues are evolving.

Risk drivers:

• The Department relies on cost recovery from other government departments and agencies (over $290 million per year);
• In response to cost containment and cost reduction measures outlined in Budget 2010, other government departments and agencies are seeking to reduce their operational costs, including those for legal services; and
• Given the fiscal environment, other government departments and agencies are interested in reducing expenditures despite a heightened demand for legal services.

Management is continuously reviewing various options to adjust to these funding constraints. Impacts on departmental activities have been managed through the following actions and mitigation strategies:

• Achieving efficiencies and flexibilities through continued implementation of the Law Practice Model;
• Working with other government departments and agencies to negotiate the most appropriate approaches to implement ways to reduce their call for legal services;
• Raising awareness of legal service costs; and
• Looking at ways to reduce cost structure.

D) Significant changes in relation to operations, personnel and programs

Changes in Key Senior Personnel

There have been a number of new senior appointments at the Department of Justice, including the Assistant Deputy Attorney General for the Litigation Branch, Assistant Deputy Minister for the Central Agencies Portfolio and a new Regional Director General for the Quebec Regional Office.

Changes in the Governance Structure

To facilitate departmental operations and decision making, the governance structure (committees and decision bodies) of the Department of Justice was reviewed and streamlined in the quarter ending June 30, 2011. 

Law Practice Model

As part of the gradual implementation of the Law Practice Model, the mix of counsel in the Department has been realigned, primarily through increased recruitment of junior counsel and attrition of more senior counsel.  This realignment will equip the Department to continue delivering effective and efficient legal services.

Approval by Senior Officials

Approved by:

 

 

 

Ottawa, Canada
August 19, 2011

 

Statement of Authorities (unaudited)
(In thousands of dollars)

	Fiscal year 2011-2012			Fiscal year 2010-2011
	Total available for use for the year ending March 31, 2012	Used during the quarter ended June 30, 2011	Year to date used at quarter end	Total available for use for the year ending March 31, 2011	Used during the quarter ended June 30, 2010	Year to date used at quarter end
Vote 1 - Operating expenditures	563,812	128,054	128,054	495,783	136,311	136,311
Less: Revenues netted against expenditures	(290,000)	(764)	(764)	(215,000)	(80)	(80)
Net Vote 1 operating expenditures	273,812	127,290	127,290	280,783	136,231	136,231
Vote 5 - Grants and contributions	395,699	8,410	8,410	389,095	12,175	12,175
Budgetary statutory authorities	82,912	20,725	20,725	66,711	16,722	16,722
TOTAL AUTHORITIES	752,423	156,425	156,425	736,589	165,128	165,128

 

Departmental budgetary expenditures by Standard Object (unaudited)
(In thousands of dollars)

	Fiscal year 2011-2012			Fiscal year 2010-2011
Expenditures	Planned expenditures for the year ending March 31, 2012	Expended during the quarter ended June 30, 2011	Year to date used at quarter end	Planned expenditures for the year ending March 31, 2011	Expended during the quarter ended June 30, 2010	Year to date used at quarter end
Personnel	547,588	137,357	137,357	473,565	139,251	139,251
Transportation and communications	20,483	3,312	3,312	19,607	3,559	3,559
Information	3,717	543	543	3,945	682	682
Professional and special services	47,670	5,118	5,118	40,823	5,997	5,997
Rentals	1,667	974	974	1,791	757	757
Repair and maintenance	7,237	433	433	2,830	878	878
Utilities, materials and supplies	5,422	600	600	5,134	761	761
Acquisition of land, buildings and works	350	0	0	0	0	0
Acquisition of machinery and equipment	12,590	359	359	11,308	1,068	1,068
Transfer payments	395,699	8,410	8,410	389,095	12,175	12,175
Other subsidies and payments	0	83	83	3,491	80	80
Total gross budgetary expenditures	1,042,423	157,189	157,189	951,589	165,208	165,208
Less revenues netted against expenditures Revenues	(290,000)	(764)	(764)	(215,000)	(80)	(80)
Total revenues netted against expenditures	(290,000)	(764)	(764)	(215,000)	(80)	(80)
TOTAL NET BUDGETARY EXPENDITURES	752,423	156,425	156,425	736,589	165,128	165,128

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