Quarterly Financial Report - For the quarter ended June 30, 2012

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

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Introduction

Mandate:

The Minister of Public Safety is the minister responsible for the RCMP.  The responsibilities of the RCMP are set out in section 18 of the Royal Canadian Mounted Police Act.  The RCMP’s mandate is multi-faceted, it includes preventing and investigating crime; maintaining peace and order; enforcing laws; contributing to national security; ensuring safety of state officials, visiting dignitaries and foreign missions; and providing vital operational support services to other police and law enforcement agencies within Canada and abroad.

Further information on the mandate, roles, responsibilities and programs of the RCMP can be found in the Royal Canadian Mounted Police 2012-13 Main Estimates, available on the following website: http://publiservice.tbs-sct.gc.ca/est-pre/20122013/me-bpd/docs/me-bpd-eng.pdf

• This quarterly financial report:
  • Should be read in conjunction with the 2012-13 Main Estimates, the 2012-13 Supplementary Estimates (A) as well as Canada’s Economic Action Plan 2012 (Budget 2012);
  • 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 Accounting Standard 1.3; and
  • Has not been subject to 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 Royal Canadian Mounted Police’s spending authorities granted by Parliament and those used by the department consistent with the Main Estimates and Supplementary Estimates (A) for the 2012-13 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.

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, 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 will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012.  In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

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.

The Royal Canadian Mounted Police 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 a cash expenditure basis.

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

Statement of Authorities

For the period ending June 30th 2012, the authorities’ level provided to the RCMP include both the Main Estimates and Supplementary Estimates (A); whereas the 2011-12 authorities for the same period last year only supplied the Main Estimates.  The attached Statement of Authorities reflects a net decrease of $292.8 million or 11.3% in the RCMP’s total authorities at June 30, 2012 compared to the same period in 2011-12, from $2,890.1 million to $2,597.3 million.  This net decrease is a combination of a decrease in Vote 45 - Net Operating Expenditures of $214.5 million, Vote 50 - Capital Expenditures of $48.5 million and in Budgetary Statutory authorities of $41.9 million which is offset by a slight increase in Vote 55 - Grants and Contributions of $12.1 million.  The following are the significant factors contributing to this material net decrease, specifically:

• The reduction of $206 million related to the expiry of the RCMP’s 20-year policing services agreements with provinces, territories and municipalities on March 31, 2012.  All contracting partners have signed the renewed contracts that came into effect April 1, 2012, and the RCMP will be requesting new appropriations through the Supplementary Estimates (B) for the renewal of the contract policing agreement; 
• The transfer of $143 million to Shared Services Canada to fund information technology services;
• An increase of $41 million transferred from Public Safety and Emergency Preparedness for First Nations Community Policing Services; and
• An increase of $12.7 million to meet the projected costs of the grant to compensate members’ injuries received in the performance of their duties.

Long description

Statement of Departmental Budgetary Expenditures by Standard Object

The Royal Canadian Mounted Police has spent approximately 25% of its authorities at the end of the first quarter, compared with 27% in the previous year (as demonstrated in the chart below), when vote netted revenues are taken into consideration. However, vote netted revenues collected during the first quarter of 2012-13 compared to the same quarter last fiscal year are up $185 million, which is related to the timing of payments recorded.  Overall revenue collected by year-end is expected to be consistent with revenue authorities.  When comparing year-over-year expenditures, excluding revenues received, the RCMP has spent 40% of its authorities at the end of the first quarter compared to 34% for the same period last year. 

Long description

Although overall expenditures for the first quarter were similar to the previous year, there are some significant variances by standard object which are described in detail below.

A decrease in Personnel expenditures of $24 million is due to the timing of invoices for the RCMP’s share of Employer contributions to Canada Pension Plan and Employment Insurance being reflected in the second quarter of 2012-13 versus the first quarter of 2011-12.  It is noteworthy, that Personnel expenditures currently include employees deemed to be transferred to SSC and represent approximately $6.3 million of the first quarter Personnel expenditures.  These expenditures together with associated operating costs will be transferred to SSC.

A decrease in Transportation and Communication of $7.1 million is mainly the result of an $8.4M decrease in Telecommunication costs related to the transfer of administration of information technology infrastructure services to SSC, for example cell phone billings.  Also, Travel and the associated costs have decreased by $2.5 million, which is the outcome of the mitigation the RCMP implemented to meet Budget 2010 cost containment restraints.  There has also been an increase of $3.6 million in relocation, which is likely due to a combination of factors such as; increases related to the cost and number of moves, as well as a difference in the timing of moves.

These decreases are offset by a net increase in Professional Services of $12 million, which includes engineering services, protection services, informatics services, and temporary help services.

An increase in Transfer Payments of $17 million is related to the second quarter billing for compensation to members injured in the performance of their duties from Veterans Affairs Canada (VAC) being reflected in the first quarter compared to the second quarter in the year before. 

An increase in Other subsidies and payments of $59 million reflects items temporarily in suspense pending identification and coding to the appropriate account and includes expenditures related to EBP for Members and Public Servants.

Risks and Uncertainties

The Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates (A) for which supply was released on June 29th, 2012.

The RCMP is funded through annual appropriations; as a result, operations are impacted by any changes in funding approved through Parliament. The RCMP also receives a significant portion of funding through respendable revenues from the provision of policing services to provinces, territories, municipalities and first nations communities.  With the renewal of police services agreements, the RCMP is requesting from Parliament over $300 million through Supplementary Estimates (B), the funding being sought represents approximately 40% of the total appropriation for contract policing, which is the RCMP’s largest program.  Sustainable funding will continue to be challenged as the Government of Canada is closely reviewing spending and resource allocations. 

Furthermore, the RCMP can be requested to respond anywhere in Canada and/or provide support for International Police operations at anytime.  These unforeseen operational requirements, depending on the extent of the RCMP’s involvement, can significantly increase costs, which can be mitigated either through internal allocations or requests for additional funding from Parliament.

In addition, the RCMP faces other financial challenges in 2012-13 due to the cumulative impacts of a number of budget announcements:

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-11 levels for the fiscal years 2011-12 and 2012-13 also, the Departments would not be funded for 2010-11 to 2012-13 wage and salary increases resulting from collective agreement negotiations. The RCMP had already begun taking measures in fiscal year 2009-10 to address the rapidly changing economic climate.  Recruitment of cadets at the RCMP Training Facility was substantially curtailed in anticipation of budgetary restraint federally, and softening demand for increased police services from our contract partners due to economic considerations.  This measure, along with other budgetary restrictions, had been put in place to mitigate the impact of the operating freeze.

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be 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.

The RCMP will achieve Budget 2012 savings of $44.4 million in 2012-13.  Savings will increase to $89.1 million in 2013-14 and will result in on-going savings of $195.2 million in 2014-15.  These savings will be accomplished through administrative and operational support efficiencies, while trying to minimize impacts on direct policing operations. 

The Force will reduce funding for a number of administrative services by modernizing, simplifying and refocusing efforts on activities that directly contribute to the organization’s core policing mandate.  Additional savings will be derived from operational support initiatives that enhance service delivery models within Criminal Intelligence, Technical Operations and the Canadian Police College. 

Significant changes in relation to operations, personnel and programs

Changes in Key Senior Personnel

Commissioner Bob Paulson announced on June 6, 2012 the appointment of Assistant Commissioner Alain Duplantie as the Chief Financial and Administrative Officer.

Changes in Operations

On July 23, 2012 the Senior Executive Committee (SEC) approved a new structure for Federal Policing Sub-Program Activity at National Headquarters.  The purpose of the re-engineering initiative is to allow the Force to better align resources to priorities.  It supports the RCMP’s ongoing efforts to modernize how we do business and become more efficient in fulfilling the core policing mandate. Federal Policing will be more efficient and effective; more results-driven; more focused on aggressively attacking serious and organized crime, on critical national security threats, and protective policing.

Also, a new National Division, based in the NCR has been created.  The new division, will specifically focus its work on Protective Operations and sensitive, high risk, high priority investigations which fall within the political, economic or social realms

Changes in Programs

After four years of negotiations, all police services agreements have been renewed with the contract provinces, territories and municipalities for another 20 years.  The new agreements came into effect on April 1st, 2012.  The significant change in these contracts is that the contracting partners will have more input into areas such as operational priority setting, financial accountability, oversight and leadership selection.  As a result, the RCMP is being held to a higher level of reporting in-line with the requirements of the new contract.

Approval by Senior Officials

This section is to provide the approval of Senior Officials, as required by the Policy on Financial Resource Management, Information and Reporting as follows:

Approved by:

Ottawa, Canada
August 16, 2012

Statement of Authorities (Unaudited)

For the quarter ended June 30, 2012
 (in thousands of dollars)

* Includes only Authorities available for use and granted by Parliament at quarter-end as well as a statutory authority for Proceeds from the Disposal of Crown Assets

** Total available for use does not reflect measures announced in Budget 2012

* Includes only Authorities available for use and granted by Parliament at quarter-end as well as a statutory authority for Proceeds from the Disposal of Crown Assets

** Total available for use does not reflect measures announced in Budget 2012

Departmental budgetary expenditures by Standard Object (unaudited)

For the quarter ended June 30, 2012
 (in thousands of dollars)

* Planned expenditures do not reflect measures announced in Budget 2012.