Budgetary Allocation and Forecasting
APPENDIX A – CONTEXTUAL INFORMATION
Budget Allocation and Forecasting Process Description
The Department of Justice uses two sources of funding to deliver on its mandate: appropriated (A-Base) resources, which are accessed via parliamentary appropriation acts, and Net Vote Authority, which allows the Department to spend revenues collected for the provision of legal services to other government departments.
The Estimates process of the federal government provides the overall framework and timing cycle for the Department’s budgetary process. The Department’s Main Estimates identify by vote the spending authorities and amounts for the subsequent year, which Parliament will be asked to appropriate as part of an appropriation act. The culmination of the Main Estimates process is the Department’s Annual Reference Level Update (ARLU). Treasury Board (TB) finalizes the ARLU exercise by approving the reference levels. Year one of the ARLU submission forms the basis of the Main Estimates submitted to Parliament.
The Supplementary Estimates process of the federal government provides for expenses that are not included in the Main Estimates and allows for adjustments occasioned by such things as the federal government budget, transfers to and from other government departments, adjustments related to the Department’s allocation to specific government-wide initiatives, new TB project approvals. Three calls to the Supplementary Estimates occur each year: 'Supplementary A' (February), 'Supplementary B' (June), and 'Supplementary C' (October).
The Department is allowed to carry forward up to a maximum of 5% of its Operating (Vote 1) Main Estimates into the next fiscal year. These resources are the primary source of funds for the Departmental Reserve and are used to fund key departmental investments (i.e. IM/IT, Accommodations) and in-year pressures. To mitigate funding lapses in excess of this 5%, the Department has a Fall and Winter (as required) Reserve process for reallocating funds. This allows managers the flexibility to effectively use all their resources for evolving financial pressures while respecting their pledge to account and report on expenditures in a timely and accurate manner.
The TB Policy on Management, Resources and Results Structure reflects the two perceptual lenses used to view the Department’s budget. The first looks at allocations related to strategic outcomes where all funds are designated against the Department Performance Activity Architecture and is the perspective for the Annual Confirmation of Reference Levels. The second perspective relates allocations to the Department’s organizational structure and ties allocations to specific programs that the Department undertakes.
The Department’s ARLU is centrally managed by the Resource Management Division and is based upon the results of recent Treasury Board submissions and Government decisions on reductions. This information forms the basis for the notional departmental Budget Allocation Report (BAR), which identifies the Direct Report level distribution of these same resources, prior to departmental allocation/reallocation decisions. The notional BAR is used to inform Part Two of the direct reports’ business plans and is the basis upon which direct reports develop their expenditure plans for the next fiscal year.
The Department has established a formal process for calls against funds held in the Reserve that are made in the Spring and Fall (Winter as required) of the year. Reserve requests from direct reports for funds are submitted to the Department’s Financial Management Committee (Fin.Com). As the total of the funding requests typically exceed the Reserve funds available, Fin.Com prepares and recommends a prioritized list of the submissions for SMB approval.
Based on the information captured in the business plans and Spring Reserve requests, the CFO Branch annually develops a departmental Financial Strategy to inform discussions with Fin.Com and SMB. This Financial Strategy is a consolidation of the A-Base allocation, Net Vote Authority allocation, and Spring Reserve allocation processes and is approved prior to the beginning of the fiscal year. This allows the Department to allocate approximately 99% of departmental resources to program areas prior to the beginning of the fiscal year. Approximately 1% is retained to deal with funding pressures and emerging priorities, which must be dealt with internally during the year, and to mitigate the risks regarding the management of the NVA regime.
The Department has a two-tiered approach to allocating resources to direct reports. First, A-Base, Net Vote Authority, and Spring Reserve allocations to the portfolios and sectors are made prior to the beginning of the fiscal year by the Resource Management Division within the CFO Branch in accordance with the Financial Strategy approved by the SMB. Subsequently, portfolios allocate resources to regions, Litigation Branch, and Public Law Sector based on their respective business process.
The Department’s financial management position is assessed through the certified financial situation reports (FSR) received from the direct reports, which are prepared in June, August, and each month thereafter. Each FSR shows the operating budgets of the direct reports, with the actual expenditures to date as well as commitments and forecasted expenditures for the remainder of the fiscal year.
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