Quarterly Financial Report - For the period ending December 31, 2013
- Highlights of fiscal quarter and fiscal year to date results
- Risks and uncertainties
- Budget 2012 implementation
- Significant changes in relation to operations, personnel and programs
- Annex A: Statement of authorities (unaudited)
- Annex B: Departmental budgetary expenditures by standard object (unaudited)
Statement outlining results, risks and significant changes in operations, personnel and program
This quarterly financial report (QFR) 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. The report should be read in conjunction with the Main Estimates and Supplementary Estimates for 2013-14, as well as Canada's Economic Action Plan 2013 (Budget 2013). The quarterly report has not been subject to an external audit or review.
The Minister of Public Safety and Emergency Preparedness is the minister responsible for the Royal Canadian Mounted Police (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 Part II of the Estimates.
1.2 Basis of Presentation
This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the RCMP's spending authorities granted by Parliament and those used by the department consistent with the Main Estimates and Supplementary Estimates (A) and (B) for the 2013-14 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 were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013-14, the changes to departmental authorities were reflected in the 2013-14 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 RCMP 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.
2. Highlights of fiscal quarter and fiscal year to date (YTD) results
2.1 Statement of Authorities
For the period ending December 31, 2013, the RCMP had $3,020.5 million in total authorities available for use, as reflected in Annex A: Statement of Authorities, which is $247.8 million or 8% lower than same period last year, as displayed in Graph 1: Comparison of total Budgetary Authorities below. This year-over-year change is primarily driven by the RCMP absorbing the eligible paylist expenditures within existing reference levels in 2013-14, as compared to 2012-13 where the RCMP sought reimbursement in the amount of $273.8 million through TB Central Vote transfers. In addition, there is a timing difference in the receipt of funding that the RCMP receives annually from Public Safety in support of delivering policing services to First Nations communities. In 2012-13, the RCMP had received $42.8 million from Public Safety at the third quarter, whereas in 2013-14 the RCMP has received $25 million with an expected $16.7 million to be transferred in Supplementary Estimates (C), for a total transfer of $41.7 million. This is partially offset by a year-over-year increase in the Operating Budget Carry Forward (OBCF) in 2013-14 as compared to 2012-13.
Graph 1: Comparison of total Budgetary Authorities as of December 31, 2012 and December 31, 2013
(in millions of dollars)
|Supplementary Estimates (A)||$38||-$1|
|Supplementary Estimates (B)||$221||$31|
|TB Vote 15 - Compensation Adjustments||$1||$1|
|TB Vote 25 - Operating Budget Carry Forward||$101||$154|
|TB Vote 30 - Paylist Expenditures||$274||$0|
|TB Vote 33 - Capital Budget Carry Forward||$69||$67|
|Proceeds from Disposal of Crown Assets||$10||$9|
2.1.1 Variance in Vote 45 - Net Operating expenditures (decrease of $299.8 million)
The Operating expenditures authorities reflected in Table 1: Authorities Available for Use, decreased by $299.8 million from 2012-13 to 2013-14 as a result of the funding decisions relative to the reimbursement of eligible paylist expenditures and timing of funding adjustments and amounts from one year to the next. The major contributors are as follows:
- In 2013-14
- Operating Budget Carry Forward is $53.1 million higher in 2013-14 when compared to 2012-13. In 2012-13, the RCMP received $101.2 million through TB Central Vote transfer, whereas in 2013-14 the RCMP received $154.3 million in funding.
- In 2012-13
- The reimbursement of eligible paylist expenditures accounted for $273.8 million in authorities at the end of the third quarter in 2012-13 through TB Central Vote transfers. In 2013-14, the RCMP has incurred significantly less paylist expenditures and thus, has elected not to bring in any funding to offset these expenditures.
- Transfer from Public Safety and Emergency Preparedness for the First Nations Community Policing Service of $42.8 million (funding of $25 million has been received in the third quarter of 2013-14, however there is an additional $16.7 million expected through the 2013-14 Supplementary Estimates (C) which will be captured in 4th quarter authorities).
2.1.2 Variance in Vote 50 - Capital expenditures (decrease of $4.7 million)
The Capital expenditures authorities have decreased by $4.7 million in comparison to 2012-13. The major factor in the decrease is due to the year-over-year reduction in the Capital Budget Carry Forward ($2.3M) which was received through TB Central Vote transfer in the third quarter.
2.1.3 Variance in Vote 55 - Grants and Contributions (increase of $12.6 million)
The $12.6 million increase in grants and contributions is attributable to the increase in projected costs of the grant to compensate members of the RCMP for injuries received in the performance of their duties, as a result of increases in the number of Members receiving disability pension awards and the annual increases due to the indexation of disability pension benefits.
2.1.4 Variance in Budgetary statutory authorities (increase of $44.1 million)
As previously reported in the period ending September 30th report, the augmentation in Budgetary statutory authorities is associated to the renewal of the PSAs for the contract policing program with respect to the Employee Benefit Plan costs and was offset by the decrease to the pensions under the RCMP Pension Continuation Act, as the number of remaining pensioners and survivors are decreasing and all new Members contribute under the RCMP Superannuation Act.
|Vote 45 - Net Operating expenditures||2,043,496||2,343,339||(299,843)||-13%|
|Vote 50 - Capital expenditures||336,172||340,895||(4,723)||-1%|
|Vote 55 - Grants and contributions||153,072||140,454||12,618||9%|
|Budgetary statutory authorities||487,784||443,602||44,182||10%|
2.2 Statement of Departmental Budgetary Expenditures by Standard Object
The RCMP has spent approximately 69% of its authorities at the end of the third quarter, compared with 65% in the previous year, as demonstrated in Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures below, when vote netted revenue is taken into consideration.
Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of December 31, 2012 and December 31, 2013 (in millions of dollars and percentage)
|Total Budgetary Authorities||$3,268||$3,021|
|Net Expenditures for the quarter ending||$2,123 |
Table 2: Expenditures by Standard Object at Quarter End shows net expenditures used during 2013-14 being $39.9 million lower than the previous year; this is a result of revenues being significantly lower in 2013-14. A year to date comparison of gross expenditures reflects a decrease of $178.2 million in 2013-14 over 2012-13. A detailed review by standard object emphasizes variances which are described below.
2.2.1 Variance by Revenue
Year-to-date vote netted revenue collected in 2013-14 is lower by $138.3 million over the same period last year. The variance is due to the timing of collections from policing partners. Revenue collected by year-end for 2013-14 is still expected to be slightly higher than 2012-13.
2.2.2 Variance by Personnel
Personnel expenditures are $173.4 million lower when compared to 2012-13. The majority of the decrease is directly attributable to the one-time disbursements related to the liquidation of severance pay pursuant to the elimination of the accumulation of severance benefits for voluntary resignation and retirement for RCMP members which were reflected in expenditures for the period ending December 31, 2012 representing $223.1 million. In 2013-14 liquidation of severance pay expenditures total $33.5 million at the end of the third quarter.
This decrease is offset by an increase related to higher costs for Members and Public Service pay as a result of negotiated pay increases and higher employer contributions, such as Superannuation and Employer Insurance. In addition, the RCMP has experienced increases in overtime costs in responding to emergent issues such as this summer's flooding in Alberta, police involvement during the Alberta jail strike and the recent shale gas protests in New Brunswick.
2.2.3 Variance by Transportation and Communication
Transportation and communication expenditures have decreased by 5% compared to the same period last year. Travel expenditures are $1.7 million lower than 2012-13 in line with government wide targeted efficiencies and relocation expenditures are $5.9 million lower in part due to the uncertainty created by the current fiscal climate.
2.2.4 Variance by Professional and special services
Professional and special services expenditures have decreased $25.9 million or 9% in 2013-14 as compared to 2012-13. The majority of the decrease is due to anticipated reductions in basic health care expenditures in 2013-14 due to implementation of the Health Care Modernization as part of Budget 2012 measures. Further details are provided under S.4, Budget 2012 Implementation.
2.2.5 Variance by Rentals
Rental expenditures have decreased by 11% or $6.9 million in 2013-14 as compared to 2012-13 and is primarily due to the expiry of property leases with the relocation of 'E' Division to the new headquarters building in Surrey, British Columbia.
2.2.6 Variance by Acquisition of Land, Buildings and Works
The acquisition of land, building and works expenditures have decreased by $10.4 million in 2013-14 versus 2012-13. The majority of the decrease is related to the RCMP Training Academy refurbishment, expansion and improvement capital project. In early 2013, the project, which was in the last phase, was stopped due to non-performance issues with the general contractor. The bonding company, per the terms and conditions of the contract, secured a new general contractor in August 2013. Work has resumed in September with the last phase scheduled to be completed in May 2015.
2.2.7 Variance by Transfer Payment
Transfer payment expenditures are $23.2 million higher in 2013-14 as compared to 2012-13 and can be attributed to two main factors. First, there is an increase of $10.7 million in 2013-14 related to the Grant to compensate members injured in the performance of their duties resulting from an increase in the number of members receiving disability pension awards and the annual increases due to the indexation of disability pension benefits. The other significant item is a $12.6 million timing issue with respect to the process of recording Veterans Affairs Canada quarterly advance payments that related to the fourth quarter but cleared prior to the December 31, 2013 period closing.
|Transportation and communications||125,244||131,633||(6,388)||-5%|
|Professional and special services||255,604||281,441||(25,837)||-9%|
|Repair and maintenance||57,925||46,672||11,253||24%|
|Utilities, materials and supplies||82,804||78,045||4,759||6%|
|Acquisition of land, buildings and works||26,493||36,864||(10,371)||-28%|
|Acquisition of machinery and equipment||99,983||98,442||1,541||2%|
|Other subsidies and payments||49,013||45,234||3,779||8%|
|Total gross budgetary expenditures||3,253,384||3,431,596||(178,212)||-5%|
|Less: Vote Netted Revenue||1,169,933||1,308,280||(138,347)||-11%|
|Total net budgetary expenditures||2,083,451||2,123,316||(39,865)||-2%|
3. Risks and Uncertainties
The Departmental QFR reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates (A) and (B).
The RCMP is funded through annual appropriations; as a result, operations are impacted by any changes in funding approved through Parliament. There will continue to be ongoing pressure on the RCMP's appropriations as the Government of Canada reviews spending and resource allocations, including the most recent examples;
- Budget 2010 froze the operating budgets of departments at their 2010-11 levels for fiscal years 2011-12 and 2012-13. Also departments would not be funded for wage and salary increases resulting from collective agreement negotiations concluded prior to April 1, 2013. Therefore, the RCMP Member's pay raise approved for January 2013 is permanently unfunded.
- Budget 2013 impacted the RCMP's operating budget with the announcement to further reduce travel costs by implementing modern alternatives. The RCMP is focusing on reducing non-core mandate related travel.
- The October 16th Speech from the Throne signalled the Government of Canada's commitment to continue to reduce the size and cost of government by freezing departmental operating budgets for 2014-15 and 2015-16, as well as requiring departments to absorb any collectively bargained wage increases, restrain hiring, and additional reductions to internal government spending. Further communication from central agencies on the 2013 Operating Budget Freeze reiterated continued scrutiny of operating budget authorities.
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. Recruitment of cadets by the RCMP is being adjusted as demand for increased policing services from our contract partners remains lower than expected due to their economic considerations. Although, the RCMP is seeing a reduction in demand from contract partners, the RCMP's recruitment campaigns targets are properly placed to deal with attrition.
Additionally, the RCMP can be requested to respond to emergent issues 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.
To best manage the current financial climate, the RCMP continues to pursue a financial management strategy to address its funding requirements.
4. Budget 2012 implementation
This section provides an overview of the savings measures announced in Budget 2012 intended to refocus government and programs; make it easier for Canadians and businesses to deal with their government; or, modernize and reduce the back office. The Force is realizing savings across a number of administrative and support services by modernizing, simplifying and refocusing efforts on activities that directly contribute to the organization's core policing mandate.
The RCMP achieved Budget 2012 savings of $44.4 million in 2012-13. Savings increased to $89.1 million for 2013-14 and will reach the on-going savings target of $195.2 million in 2014-15 (inclusive of employee benefit plan costs). These savings are being accomplished with minimal impacts on direct policing operations.
The period ending December 31, 2013 marks the second year of Budget 2012 implementation and the RCMP is preparing for the third and final year when its reference levels will be reduced to the full savings target of $195.2 million. Some key initiatives include:
- Health Care Modernization - The RCMP is modernizing its Health Services program through an amendment to the definition of an "insured person" under the Canada Health Act (received Royal Assent on June 29, 2012). As of April 1, 2013, basic health care coverage for regular members is now under provincial/territorial regimes. The RCMP anticipates significant reductions in basic health care expenditures in 2013-14, with full savings associated to the initiative being realized in 2014-15. Savings in expenditures is evident upon review of standard object 4, which is reflecting a $25.8 million year-over-year reduction, largely attributed to this DRAP initiative.
- Plain Clothing and Kit Upkeep Allowances - The RCMP revised the previous allowances model and instituted a new Occupational Clothing Allowance (OCA) that more efficiently targets a Regular Member's operational duties and associated clothing requirements and aligns better with allowance schemes in other police forces. The OCA came into effect April 1, 2013. A reduction in expenditures in regards to RCMP allowances indicates that the RCMP is on track to achieve targeted savings for this initiative.
- Forensic Lab Consolidation - Through this initiative, savings will be generated from administrative efficiencies, the rationalization of labour requirements and reducing infrastructure costs resulting from geographic consolidation to three labs within the current six site model. The closure of the Winnipeg and Regina labs will be finalized in 2013-14.
- Civilianization - This initiative involves the conversion of police officer positions, in administrative or operational support functions, to non-police officer classifications within the areas of strategic planning, human resource management, and IM/IT management across the organization with a particular emphasis on positions at National Headquarters. A significant portion of the savings will be realized in fiscal year 2013-14 with the remainder achieved in 2014-15 as Regular Members continue to be transitioned out of those identified positions.
Other key Budget 2012 initiatives contributing to 2013-14 reductions in expenditures include:
- Horizontal Expenditure Efficiencies - Reductions are targeted for 2013-14 in discretionary expenditures related to professional services, overtime, and stationary and supplies.
- Reduction of discretionary expenditures under the cost sharing agreements in place for the RCMP to deliver provincial, territorial, and municipal policing without impacting approved police officer levels.
- Operational support initiatives are also being undertaken to enhance service delivery models within Criminal Intelligence, Technical Operations, the Canadian Police College, and the Canadian Firearms Program, while reducing costs.
Overall, as of period ending December 31, 2013, the RCMP is on track to achieve its savings target of $195.2 million in 2014-15. A few initiatives are not materializing as originally intended and may be slightly delayed or will not individually meet their full savings target; however, strategies are in place to address any resulting shortfalls.
5. Significant changes in relation to operations, personnel and programs
5.1.1 Bill C-42: An Act to amend the Royal Canadian Mounted Police Act and to make related and consequential amendments to other Acts
The Enhancing Royal Canadian Mounted Police Accountability Act (short title) received royal assent on June 19, 2013. The act strengthens the RCMP's accountability and transparency by:
- creating an independent Civilian Review and Complaints Commission to replace the existing Commission for Public Complaints against the RCMP;
- establishing a statutory framework to enhance the transparency of criminal investigations of serious incidents involving RCMP members; and
- modernizing the RCMP's human resource management process.
The internal changes to the RCMP's human resource management process will include; restructuring the discipline system, streamlining the grievance process, modernizing human resource management authorities and systems, and reducing the number of categories of employees from three to two (Regular Members and Public Servants).
There has been no significant change in relation to personnel in the third quarter of 2013-14.
There has been no significant change in relation to programs in the third quarter of 2013-14.
Alain Duplantie, MBA, CPA, CGA
Chief Financial and Administrative Officer
Annex A: Statement of authorities (unaudited) – For the quarter ended December 31, 2013
|Total available for use for the year ending March 31, 2014 Footnote 2||Used during the quarter ended December 31, 2013||Year to date used at quarter-end|
|Gross Operating expenditures||3,898,011||934,055||2,689,441|
|Less: Vote Netted Revenues||1,854,515||348,460||1,169,933|
|Vote 45 - Net Operating expenditures||2,043,496||585,595||1,519,508|
|Vote 50 - Capital expenditures||336,172||50,117||105,131|
|Vote 55 - Grants and contributions||153,072||33,209||98,550|
|Pensions and other employee benefits - Members of the Force||371,520||97,112||277,355|
|Contributions to employee benefit plans (public servants)||92,921||23,220||69,660|
|Pensions under the Royal Canadian Mounted Police Pension Continuation Act||14,000||3,040||9,292|
|Refunds of amounts credited to revenues in previous years||0||111||476|
|Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act||9,342||1,510||3,459|
|Total budgetary authorities||3,020,524||793,931||2,083,451|
|Total available for use for the year ending March 31, 2013 Footnote 2||Used during the quarter ended December 31, 2012||Year to date used at quarter-end|
|Gross Operating expenditures||4,103,790||1,150,273||2,906,994|
|Less: Vote Netted Revenues||1,760,450||802,046||1,308,280|
|Vote 45 - Net Operating expenditures||2,343,339||348,227||1,598,714|
|Vote 50 - Capital expenditures||340,895||38,214||96,161|
|Vote 55 - Grants and contributions||140,454||29,146||86,596|
|Pensions and other employee benefits - Members of the Force||332,791||88,449||262,717|
|Contributions to employee benefit plans (public servants)||83,198||20,799||62,398|
|Pensions under the Royal Canadian Mounted Police Pension Continuation Act||17,500||3,412||10,650|
|Refunds of amounts credited to revenues in previous years||0||36||137|
|Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act||10,114||2,958||5,393|
|Total budgetary authorities||3,268,291||531,229||2,123,316|
Annex B: Departmental budgetary expenditures by standard object (unaudited) - For the quarter ended December 31, 2013
|Planned expenditures for the year ending March 31, 2014||Expended during the quarter ended December 31, 2013||Year to date used at quarter-end|
|Transportation and communications||263,745||44,474||125,244|
|Professional and special services||458,946||97,905||255,604|
|Repair and maintenance||104,749||23,248||57,925|
|Utilities, materials and supplies||139,681||29,671||82,804|
|Acquisition of land, buildings and works||143,887||14,652||26,493|
|Acquisition of machinery and equipment||274,947||43,984||99,983|
|Other subsidies and payments||82,091||23,336||49,013|
|Total gross budgetary expenditures||4,875,039||1,142,391||3,253,384|
|Less Revenues netted against expenditures:|
|Vote Netted Revenues||1,854,515||348,460||1,169,933|
|Total Revenues netted against expenditures:||1,854,515||348,460||1,169,933|
|Total net budgetary expenditures||3,020,524||793,931||2,083,451|
|Planned expenditures for the year ending March 31, 2013||Expended during the quarter ended December 31, 2012||Year to date used at quarter-end|
|Transportation and communications||275,404||43,134||131,633|
|Professional and special services||430,430||112,223||281,441|
|Repair and maintenance||110,167||19,400||46,672|
|Utilities, materials and supplies||139,878||25,964||78,045|
|Acquisition of land, buildings and works||106,024||13,866||36,864|
|Acquisition of machinery and equipment||327,512||37,064||98,442|
|Other subsidies and payments||86,042||12,753||45,234|
|Total gross budgetary expenditures||5,028,741||1,333,275||3,431,596|
|Less Revenues netted against expenditures:|
|Vote Netted Revenues||1,760,450||802,046||1,308,280|
|Total Revenues netted against expenditures:||1,760,450||802,046||1,308,280|
|Total net budgetary expenditures||3,268,291||531,229||2,123,316|
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