Quarterly Financial Report - For the period ending December 31, 2015

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

1. Introduction

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 2015-16, as well as Canada's Economic Action Plan 2015 (Budget 2015). The quarterly report has not been subject to an external audit or review.

1.1 Mandate

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, Supplementary Estimates (A), the Operating Budget Carry Forward and Capital Budget Carry Forward for the 2015-16 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.

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, 2015, the RCMP had $2,788.2 million in total authorities available for use, as reflected in Annex A: Statement of Authorities. This amount includes the Main Estimates, Supplementary Estimates A, TB Vote 25 – Operating Budget Carry Forward, TB Vote 33 – Capital Budget Carry Forward, in-year adjustments and $9.5 million related to the proceeds collected from the disposal of Crown assets, as displayed in Graph 1: Comparison of Total Budgetary Authorities below.

Total net authorities have decreased by $64.5 million, when compared to the previous year, which includes a year-over-year decrease of $87.9 million in Vote 1 – Operating expenditures, $5.6 million increase in Vote 5 – Capital expenditures, $13.9 million increase in Vote 10 – Grants and contributions, together with a $4.0 million increase in Budgetary statutory authorities.

Graph 1: Comparison of Total Budgetary Authorities as of December 31, 2014 and December 31, 2015 (in millions of dollars)

Graph 1: Comparison of Total Budgetary Authorities as of December 31, 2014 and December 31, 2015 (in millions of dollars)
Comparison of Total Budgetary Authorities as of December 31, 2014 and December 31, 2015 (in millions of dollars)
2014-15 2015-16
Main Estimates $2,626 $2,630
Supplementary Estimates (A) $0 $49
Supplementary Estimates (B) $26 $0
TB Vote 15 - Compensation Adjustments $2 $0
TB Vote 25 - Operating Budget Carry Forward $138 $62
TB Vote 33 - Capital Budget Carry Forward $45 $37
In-year Statutory Adjustments $2 $0
Proceeds from Disposal of Crown Assets $13 $10
Total $2,852 $2,788

There are two primary factors behind the total decrease in authorities at the end of the third quarter when compared to the same time last year. First, the total Operating and Capital Budget Carry Forwards are $84.0 million less than last year. Second, is related to the timing and content of Supplementary Estimates from one fiscal year to the next. The RCMP's 2015-16 Supplementary Estimates (A) was $49.4 million primarily related to a transfer for First Nations Community Policing Service, whereas in 2014-15 the RCMP did not have a Supplementary Estimate (A) submission. In addition, the RCMP's 2015-16 Supplementary Estimates (B) was deferred in total to Supplementary Estimates (C). The 2014-15 Supplementary Estimates (B) brought in $26 million and was reflected in the Q3 QFR for that year.

2.1.1 Variance in Vote 1 – Net Operating expenditure authorities

The decrease of $87.9 million in Vote 1 – Net Operating expenditures, reflected in Table 1: Authorities Available for Use, is mainly related to the year-over-year reduction of $75.9 million for TB Vote 25 – Operating Budget Carry Forward, $39.7 million in the 2015-16 Main Estimates for a transfer to Shared Services Canada and $12.2 million due to the timing of the 2015-16 Supplementary Estimates (B). The decrease is partially offset by funding received in the 2015-16 Supplementary Estimates (A) of $42.1 million, $41.5 million of which is for a transfer from Public Safety and Emergency Preparedness for the First Nations Community Policing Service.

2.1.2 Variance in Vote 5 – Capital expenditure authorities

Capital authorities have increased by $5.6 million when compared to the third quarter of 2014-15. This is as a result of an overall increase in the 2015-16 Main Estimates of $15.5 million primarily due to an increase of $11.0 million related to the reinstatement of funding to the RCMP's base for a one-time transfer to Public Works and Government Services Canada (PWGSC) for the fit up and special purpose space at the new RCMP headquarters facility in British Columbia which ended in 2014-15. In addition, the 2015-16 Supplementary Estimates (A) includes an amount of $6.9 million related to the Federal Infrastructure Program which provided funding for various projects at detachments in Quebec and Ontario. This is offset by $8.2 million due to the year-over-year reduction to Vote 33 – Capital Budget Carry Forward and the inclusion of $8.7 million in the 2014-15 Supplementary Estimates (B) resulting from transfer from other government departments to support renovation and fit up of shared facilities.

2.1.3 Variance in Vote 10 – Grants and contributions

The increase of $13.9 million in Vote 10 – Grants and contributions is a year-over-year increase in the 2015-16 Main Estimates mainly 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

The increase in Budgetary statutory authorities of $4.0 million is related to an increase in the 2015-16 Main Estimates and is associated to the increase in Employee Benefit Plan costs due to a change in the rate used to calculate Employee Benefit Plan costs government wide. The Proceeds from the Disposal of Crown Assets, included under statutory authorities reported in the first and second quarters were $7.2 million and $8.2 million respectively. Due to the adjustments to the proceeds revenue, the amounts for the first and second quarters should be $7.7 million and $9.0 million respectively.

Table 1: Authorities Available for use (in thousands of dollars) Footnote 1
Authorities 2015-16 2014-15 Variance %
Vote 1- Net Operating expenditures 1,830,397 1,918,308 (87,912) -5%
Vote 5 - Capital expenditures 306,136 300,548 5,588 2%
Vote 10 - Grants and contributions 180,352 166,458 13,894 8%
Budgetary statutory authorities 471,326 467,355 3,971 1%
Total Authorities 2,788,210 2,852,668 (64,458) -2%

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The RCMP has spent approximately 74% of its authorities at the end of the third quarter, when vote netted revenue is taken into consideration, which is in line with the previous year, as demonstrated in Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures below.

Table 2: Expended by Standard Object at Quarter End shows net expenditures decreased during the third quarter by 3% when compared to the previous year. A year to date comparison of gross expenditures reflects a decrease of $55.9 million or a 2% decrease in 2015-16 over 2014-15. A detailed review by standard object emphasizes some significant variances which are described below.

Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of December 31, 2014 and December 31, 2015 (in millions of dollars and percentage)

Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of December 31, 2014 and December 31, 2015 (in millions of dollars and percentage)
Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2014 and September 30, 2015 (in millions of dollars and percentage)
2014-15 2015-16
Total Budgetary Authorities $2,853 $2,788
Net expenditures for the quarter $2,121 (74%) $2,051 (74%)
2.2.1 Variance by Revenue

Vote netted revenue collected in 2015-16 is higher by $13.5 million over the same period last year, which is attributed to increases in two areas. First, Contract Policing Services is reflecting an overall net increase of $13.0 million. The increased revenue collections in municipal policing is due to normal growth in the program resulting a year-over-year increase of $28.1 million or 6%, which is offset by decreases in revenue collection under Provincial/Territorial and Aboriginal Policing, which is largely related to the timing of payments. Second, the Forensic Laboratory Services are reflecting a year-over-year increase of $11.1 million due to the timing of payments for the Biology Casework Analysis Agreements (BCAAs). The RCMP has cost sharing agreements with Provinces and Territories for the provision of DNA analysis by the RCMP. The costs to provide DNA analysis services to provinces and territories are offset through the Vote Netted Revenue authority. Last year, the agreements were late getting officially signed, therefore the payment did not get issued until the fourth quarter; whereas the full invoice was paid by the third quarter this year. These increases are offset by a decrease of $11.4 million in pension administration which is due to the close-out of Pension Administration Outsourcing Project (PAOP). Following the transition on July 2, 2014, PWGSC is now providing administrative services for the RCMP Pension Plans as well as pensioner medical and dental insurance plans. The PAOP team, which was responsible for delivery of the 5-year initiative, officially closed-out on December 31, 2014, as such no costs are incurred in 2015-16.

2.2.2 Variance by Personnel

The $42.6 million reduction in personnel in 2015-16, when compared to the previous year, is related to reductions in employer contribution to the Employee Benefit Plans (EBP) in the amount of $27.0 million. This can largely be attributed to a decrease in the monthly billing from Treasury Board of Canada Secretariat for Public Service EBP expenditures and a reduction in the pension contribution expense for members due to a decrease in the government rate. Additionally, a decrease of $9.5 million is attributed to a year-over-year reduction in paylist requirements which includes severance-related expenditures, as well as maternity and paternity costs.

2.2.3 Variance by Information

Information costs have increased by $0.5 million or 28% when compared to 2014-15. The increase is primarily due to costs in regards to the Government advertising initiative for which funding has been approved for 2015-16. The RCMP will receive $6 million for 2015-16 in support to its recruitment objectives. Funding is to be used for the advertising campaign, including the costs of production and advertisements.

2.2.4 Variance by Purchased Repair and Maintenance

Purchased repair and maintenance expenditures have decreased by $15.6 million as compared to 2014-15. This is primarily a result of a change in service provider under real property management and project delivery contracts by PWGSC. The transition from the previous service provider, SNC-Lavalin to the new service provider, Brookfield Global Integrated Solutions has caused delays in billing expenditures. In spite of this delay, overall repairs and maintenance expenditures in 2015-16 are expected to be in line with previous years.

2.2.5 Variance by Acquisition of Land, Building and Works

The $10.8 million decrease in acquisition of Land, Building and Works expenditures is driven by the timing of capital project expenditures. For example, 2014-15 had numerous projects which were in the delivery and constructions stage, such as the RCMP Training Academy Dorms and 'B' Block and TPOF Armory, which at Q3 reflected higher expenditures when compared to 2015-16.

2.2.6 Variance by Transfer Payment

Transfer payment expenditures are $15.8 million higher in 2015-16 as compared to last year at this time and can be attributed to process changes and timing. Health service costs from Veterans Affairs Canada (VAC) for members has caused a $2.3 million increase due to the timing of the prepayments year-over-year. Additionally, a $3.5 million year-over-year increase in 2015-16 is related to the Contributions payments to provinces and territories and to aboriginal and/or other communities and organizations, caused by delays in the approval of extension letters for opt-in provinces resulting in expenditures being incurred in Q3 of this fiscal year. Finally, there is an increase of $10.5 million in 2015-16 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.

2.2.7 Variance by Other subsidies and payments

A $12.9 million decrease in year-over-year expenditures for other subsidies and payments is for the most part due to a one-time transition payment of $13.9 million in 2014-15 for payment in arrears by the Government of Canada.

Table 2: Expended by Standard Object at Quarter End (in thousands of dollars) Footnote 2 Footnote 3
Standard Objects 2015-16 2014-15 Variance %
Personnel 2,310,768 2,353,406 (42,638) -2%
Transportation and communications 156,456 150,775 5,681 4%
Information 2,364 1,840 524 28%
Professional and special services 262,266 259,410 2,856 1%
Rentals 65,497 61,313 4,185 7%
Repair and maintenance 45,457 61,083 (15,626) -26%
Utilities, materials and supplies 82,741 83,787 (1,046) -1%
Acquisition of land, buildings and works 39,001 49,842 (10,841) -22%
Acquisition of machinery and equipment 101,859 103,673 (1,815) -2%
Transfer payments 134,486 118,723 15,763 13%
Other subsidies and payments 56,075 68,993 (12,918) -19%
Total gross budgetary expenditures 3,256,970 3,312,845 (55,875) -2%
Less: Vote Netted Revenue 1,205,736 1,192,211 13,525 1%
Total net budgetary expenditures 2,051,234 2,120,634 (69,400) -3%

3. Risks and Uncertainties

The Departmental QFR reflects the results of the current fiscal period in relation to the Main Estimates, Supplementary Estimates (A), Operating and Capital Budget Carry Forward.

The RCMP is funded through annual appropriations and are, therefore, impacted by any changes in funding approved through Parliament. In addition, it receives a significant portion of funding through vote netted revenue (VNR) from the provision of policing services to provinces, territories, municipalities and first nations communities, as well as from cost sharing agreements with provinces and territories for the provision of DNA analysis by the RCMP. Subsequent to the creation of the Parliamentary Protective Services (PPS), the RCMP received Vote Netted Revenue authority of $22.4 million in 2015-16. PPS is an amalgamation of the security components of the House of Commons, the Senate and the RCMP and is responsible for the full protection on Parliament Hill. The new VNR authority will allow the RCMP to bill PPS for security services on Parliament Hill.

On January 16, 2015, the Supreme Court of Canada (SCC) determined that the exclusion of RCMP members from the definition of "employee" in the Public Service Labour Relations Act (PSLRA) and the "imposition of the" Staff Relations Representative Program (SRRP) is unconstitutional. The Court ruled that RCMP members have the right to join a certified bargaining agent of their own choosing and participate in collective bargaining. The SCC originally suspended its declaration of invalidity for 12 months, to January 17, 2016 and extended it for four months to May 16, 2016, in order to give Parliament sufficient time to consider new labour regime options, as a result of the new Government and subsequent transition process. Without legislative changes by May 17, 2016 the PSLRA will apply to RCMP members and the members will have the right to organize for collective bargaining. As a result of the decision, the SRRP will be dissolved by May 17, 2016. Considering the demanding environment in which members operate, it is important they continue to receive individual support and guidance to resolve workplace issues, to this end the Member Workplace Services Program (MWSP) has been created.

The RCMP is facing significant resources challenges as government continues to review spending and resource allocations. In recent years, the RCMP's reference levels have been constrained by government-wide spending reduction exercises, including Budget 2013 which announced to further reduce travel costs by implementing modern alternatives and the October 16th, 2013 Speech from the Throne which signaled 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 the requirement for departments to absorb any collectively bargained wage increases. It should also be noted that regular member (RM) pay increases, which were up for renewal effective January 2015 are expected to be considered by the Treasury Board in the next fiscal year.

The RCMP is also facing challenges driven by increased concerns around terrorism and extremism, cybercrime, changing demographics, population growth and rapid technological advancements that are increasing demands on policing resources. The Force can be requested to respond to emergent issues anywhere in Canada and/or provide support for International Police operations at any time. 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 has established financial management strategies which will respond to short-term requirements to address its funding pressures. However, it will be necessary to seek the new government's endorsement of the way forward.

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 will realize savings across a number of administrative services by modernizing, simplifying and refocusing efforts on activities that directly contribute to the organization's core policing mandate.

The RCMP's DRAP proposal was to achieve $195.2 million in cost savings through program modernization and efficiency measures in the areas of administrative services, operational support and policing operations, which overall has been achieved, is evident in the downward trend in expenditures.

This takes into consideration a two year deferral of the Sick Leave and Disability Management portion of the Healthcare Modernization Initiative. This deferral was approved for a two year period (2014-15 and 2015-16) as the RCMP was instructed to await the establishment of the Workplace Wellness and Productivity Strategy (WPS). In addition, a few initiatives have not materialized as originally intended and will not individually meet their full savings target. Some initiatives are experiencing implementation lags, primarily due to the timing of Work Force Adjustment processes and options selected by affected employees. Mitigating strategies have been put in place to address any resulting savings shortfalls.

5. Significant changes in relation to operations, personnel and programs

5.1 Operations

Bill C-59 amended the Parliament of Canada Act to create a statutory entity called Parliamentary Protective Services (PPS). The new entity was established on June 23, 2015, to provide integrated physical security throughout the Parliamentary Precinct and the grounds of Parliament Hill. It is comprised of RCMP members assigned to PPS and former employees from the House of Commons and Senate security services. Together, they protect an open and accessible Parliament, including parliamentarians, employees, visitors and the Parliamentary Precinct buildings. This is an important step in addressing the need for greater operational coordination between security partners on Parliament Hill and keeping people and sites safe within the parliamentary precinct. As a lead of the integrated security operations, the RCMP will continue to manage their employees and provide security services to PPS.

5.2 Personnel

There has been no significant change in relation to personnel in the third quarter of 2015-16.

5.3 Programs

There has been no significant change in relation to programs in the third quarter of 2015-16.

Approved by:

Bob Paulson,
Commissioner
(Ottawa, Canada)
Date Signed: February 11, 2016

Alain Duplantie, MBA, CPA, CGA
Deputy Commissioner
Chief Financial and Administrative Officer

Annex A: Statement of Authorities (unaudited) - For the quarter ended December 31, 2015

Fiscal year 2015-2016 (In thousand of dollars) Footnote 4
Total available for use for the year ending March 31, 2016 Footnote 5 Used during the quarter ended December 31, 2015 Year to date used at quarter-end
Gross Operating expenditures 3,677,426 947,857 2,699,156
Less: Vote Netted Revenues 1,847,030 329,197 1,205,736
Vote 1 - Net Operating expenditures 1,830,397 618,660 1,493,420
Vote 5 - Capital expenditures 306,136 44,056 118,282
Vote 10 - Grants and contributions 180,352 43,571 124,289
Pensions and other employee benefits - Members of the Force 378,072 70,371 251,177
Contributions to employee benefit plans (public servants) 70,780 17,941 53,822
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 13,000 2,565 7,897
Refunds of amounts credited to revenues in previous years 54 183
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 9,474 372 2,164
Court Awards
Statutory Authorities 471,326 91,303 315,243
Total budgetary authorities 2,788,210 797,590 2,051,234

Fiscal year 2014-2015 (In thousand of dollars) Footnote 4
Total available for use for the year ending March 31, 2015 Footnote 5 Used during the quarter ended
December 31, 2014
Year to date used at quarter-end
Gross Operating expenditures 3,775,188 954,280 2,718,156
Less: Vote Netted Revenues 1,856,880 320,306 1,192,211
Vote 1 - Net Operating expenditures 1,918,308 633,974 1,525,945
Vote 5 - Capital expenditures 300,548 56,375 138,302
Vote 10 - Grants and contributions 166,458 36,885 110,106
Pensions and other employee benefits - Members of the Force 352,627 87,657 266,480
Contributions to employee benefit plans (public servants) 88,602 21,830 65,488
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 13,000 2,796 8,617
Refunds of amounts credited to revenues in previous years 7 33
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 13,126 5 4,614
Court Awards 4 1,049
Statutory Authorities 467,355 112,299 346,281
Total budgetary authorities 2,852,668 839,533 2,120,634

Annex B: Departmental budgetary expenditures by standard object (unaudited) - For the quarter ended December 31, 2015

Fiscal year 2015-2016 (In thousand of dollars) Footnote 6
Planned expenditures for the year ending March 31, 2016 Expended during the quarter ended December 31, 2015 Year to date used at quarter-end
Expenditures:
Personnel 3,136,381 771,999 2,310,768
Transportation and communications 167,406 52,544 156,456
Information 3,394 696 2,364
Professional and special services 418,220 103,679 262,266
Rentals 85,861 32,667 65,497
Repair and maintenance 88,816 20,551 45,457
Utilities, materials and supplies 117,725 29,350 82,741
Acquisition of land, buildings and works 86,353 14,860 39,001
Acquisition of machinery and equipment 262,221 39,467 101,859
Transfer payments 193,352 46,136 134,486
Other subsidies and payments 75,511 14,838 56,075
Total gross budgetary expenditures 4,635,240 1,126,787 3,256,970
Less Revenues netted against expenditures:
Vote Netted Revenues 1,847,030 329,197 1,205,736
Total Revenues netted against expenditures: 1,847,030 329,197 1,205,736
Total net budgetary expenditures 2,788,210 797,590 2,051,234
Fiscal year 2014-2015 (In thousand of dollars) Footnote 6
Planned expenditures for the year ending March 31, 2015 Expended during the quarter ended December 31, 2014 Year to date used at quarter-end
Expenditures:
Personnel 3,111,013 800,081 2,353,406
Transportation and communications 216,030 55,908 150,775
Information 3,902 709 1,840
Professional and special services 447,977 101,506 259,410
Rentals 92,686 23,297 61,313
Repair and maintenance 85,494 24,975 61,083
Utilities, materials and supplies 119,148 32,025 83,787
Acquisition of land, buildings and works 105,339 25,818 49,842
Acquisition of machinery and equipment 274,418 34,728 103,673
Transfer payments 179,458 39,681 118,723
Other subsidies and payments 74,084 21,111 68,993
Total gross budgetary expenditures 4,709,548 1,159,839 3,212,845
Less Revenues netted against expenditures:
Vote Netted Revenues 1,856,880 320,306 1,192,211
Total Revenues netted against expenditures: 1,856,880 320,306 1,192,211
Total net budgetary expenditures 2,852,668 839,533 2,120,634
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