Quarterly Financial Report - For the period ending September 30, 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 September 30, 2015, the RCMP had $2,787.0 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 statutory adjustments and $8.2 million related to the proceeds collected from the disposal of Crown assets, as displayed in Graph 1: Comparison of Total Budgetary Authorities below.

Total authorities have decreased by $34.4 million, when compared to the previous year, which includes a year-over-year decrease of $73.8 million in Vote 1 – Operating expenditures, $14.3 million increase in Vote 5 – Capital expenditures, $16.7 million increase in Vote 10 – Grants and contributions, together with a $8.4 million increase in Budgetary statutory authorities.

Graph 1: Comparison of Total Budgetary Authorities as of September 30, 2014 and September 30, 2015 (in millions of dollars)

Graph 1: Comparison of Total Budgetary Authorities as of September 30, 2014 and September 30, 2015 (in millions of dollars)
Comparison of Total Budgetary Authorities as of September 30, 2014 and September 30, 2015 (in millions of dollars)
2014-15 2015-16
Main Estimates $2,626 $2,630
Supplementary Estimates (A) $0 $49
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 $10 $8
Total $2,821 $2,786

There are two primary factors behind the total decrease in authorities at the end of the second quarter when compared to the same time last year. First, the Operating Budget Carry Forward is $75.9 million less than last year. This is offset by the inclusion of $49.4 million related to the 2015-16 Supplementary Estimates (A).

2.1.1 Variance in Vote 1 – Net Operating expenditure authorities

The decrease of $73.8 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 and $39.7 million in the 2015-16 Main Estimates for a transfer to Shared Services Canada. This is offset by funding received in the 2015-16 Supplementary Estimates (A) of $42 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 $14.3 million when compared to the second quarter of 2014-15. This is as a result of an overall increase in the 2015-16 Main Estimates of $15.5 million and the inclusion of $6.9 million in the 2015-16 Supplementary Estimates (A). The Main Estimates included an increase of $11 million related to the reinstatement of funding to the RCMP's base for a one-time transfer to 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, $6.9 million was allocated to the RCMP as a result of 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.

2.1.3 Variance in Vote 10 – Grants and contributions

The increase of $16.7 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 $8.4 million is primarily 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.

Table 1: Authorities Available for use (in thousands of dollars)
Authorities 2015-16 2014-15 Variance %
Vote 1- Net Operating expenditures 1,830,397 1,904,247 (73,850) -4%
Vote 5 - Capital expenditures 306,136 291,867 14,269 5%
Vote 10 - Grants and contributions 180,352 163,636 16,716 10%
Budgetary statutory authorities 470,097 461,673 8,424 2%
Total Authorities 2,786,982 2,821,423 (34,441) -1%

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The RCMP has spent approximately 45% of its authorities at the end of the second 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 second quarter by 2% when compared to the previous year. A year to date comparison of gross expenditures reflects a decrease of $22.8 million or a 1% 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 September 30, 2014 and September 30, 2015 (in millions of dollars and percentage)

Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2014 and September 30, 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 $2,821 $2,786
Net expenditures for the quarter $1,281 (45%) $1,254 (45%)
2.2.1 Variance by Transportation and Communication

Transportation and Communication costs have increased by $9.0 million which is largely attributed to relocation expenditures. Relocation has increased significantly within Contract Policing due to the demand for police officers in contract divisions. Relocation costs have also increased at the RCMP Training Academy (Depot) related to an increased requirement for facilitators, together with relocation of a larger number of graduates.

2.2.2 Variance by Rentals

Rentals have decreased by $5.2 million which is largely attributed to timing related to the receipt of invoices from PWGSC.

2.2.3 Variance by Purchased Repair and Maintenance

Purchased repair and maintenance expenditures have decreased by $11.2 million when compared to 2014-15. This is primarily a result of a change in service provider under contract by PWGSC (previously SNC Lavalin) and the ramping up of repair and maintenance activities under the new contract. In spite of this delay, overall repairs and maintenance expenditures in 2015-16 are expected to be in line with previous years.

2.2.4 Variance by Acquisition of Machinery and Equipment

The $6.6 million decrease in expenditures is largely reflected under communications equipment systems and security equipment. The timing of major procurement and invoice processing has led to the current decrease, however this is expected to regularize in the coming months. There is also a year-over-year decrease related to a reduction in closed circuit video equipment purchases. In spite of this current year-over-year reduction in expenditures, National Radio Services are expecting an increase in expenditures by year end related to equipment required for the Alberta First Responder Radio Communication System (AFFRCS).

2.2.5 Variance by Transfer Payment

Transfer payment expenditures are $9.3 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. There is also an increase of $7.0 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.

2.2.6 Variance by Other subsidies and payments

A $6.6 million decrease in year-over-year expenditures for other subsidies and payments is related to the timing of items being cleared from suspense account, the one-time transition payment for pay in arrears and claims and compensation settlements. The timing issues are caused by $8.3 million in expenditures related to revenue within the Interdepartmental Settlement suspense account, which has already been cleared in the third quarter. In addition, the remaining decrease is due to a one-time transition payment of $13.7 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 *
Standard Objects 2015-16 2014-15 Variance %
Personnel 1,538,769 1,553,325 (14,556) -1%
Transportation and communications 103,912 94,867 9,045 10%
Information 1,668 1,132 536 47%
Professional and special services 158,587 157,903 684 0%
Rentals 32,830 38,016 (5,186) -14%
Repair and maintenance 24,906 36,108 (11,202) -31%
Utilities, materials and supplies 53,391 51,762 1,629 3%
Acquisition of land, buildings and works 24,141 24,024 117 0%
Acquisition of machinery and equipment 62,392 68,945 (6,553) -10%
Transfer payments 88,350 79,042 9,308 12%
Other subsidies and payments 41,237 47,882 (6,645) -14%
Total gross budgetary expenditures 2,130,183 2,153,006 (22,823) -1%
Less: Vote Netted Revenue 876,539 871,905 4,634 1%
Total net budgetary expenditures 1,253,644 1,281,101 (27,457) -2%

3. Risks and Uncertainties

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

The RCMP is funded through annual appropriations; as a result, operations are impacted by any changes in funding approved through Parliament. There is significant ongoing pressure on the RCMP's appropriations as the Government of Canada reviews spending and resource allocations, including the most recent examples;

  • 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, 2013 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.

Increased concerns around terrorism and extremism, changing demographics, population growth and rapid technological advancements place increasing demands on policing resources. The RCMP 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) which will be responsible for all matters relating to the physical security throughout the Parliamentary Precinct and the grounds of Parliament Hill. Royal Assent was received on June 23, 2015. The integrated security force brings together the RCMP, the House of Commons and the Senate protective services. A Director of PPS, who will be a serving RCMP member, will lead the integrated security operations. 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.

5.2 Personnel

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

5.3 Programs

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

Approved by:

Bob Paulson,
Commissioner
(Ottawa, Canada)
Date Signed: November 10, 2015

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

Annex A: Statement of Authorities (unaudited) - For the quarter ended September 30, 2015

Fiscal year 2015-2016 (In thousand of dollars)
Total available for use for the year ending March 31, 2016 Footnote * Used during the quarter ended September 30, 2015 Year to date used at quarter-end
Gross Operating expenditures 3,655,026 932,546 1,751,300
Less: Vote Netted Revenues 1,824,630 473,952 876,539
Vote 1 - Net Operating expenditures 1,830,397 458,594 874,761
Vote 5 - Capital expenditures 306,136 49,217 74,226
Vote 10 - Grants and contributions 180,352 40,525 80,718
Pensions and other employee benefits - Members of the Force 377,047 80,585 180,806
Contributions to employee benefit plans (public servants) 71,805 17,941 35,881
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 13,000 2,632 5,332
Refunds of amounts credited to revenues in previous years 122 129
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 8,245 1,059 1,791
Court Awards
Statutory Authorities 470,097 102,339 223,939
Total budgetary authorities 2,786,982 650,675 1,253,644
Fiscal year 2014-2015 (In thousand of dollars)
Total available for use for the year ending March 31, 2015 Footnote * Used during the quarter ended September 30, 2014 Year to date used at quarter-end
Gross Operating expenditures 3,738,952 879,451 1,763,876
Less: Vote Netted Revenues 1,834,705 467,738 871,905
Vote 1 - Net Operating expenditures 1,904,247 411,713 891,971
Vote 5 - Capital expenditures 291,867 55,878 81,926
Vote 10 - Grants and contributions 163,636 36,659 73,221
Pensions and other employee benefits - Members of the Force 350,845 72,245 178,822
Contributions to employee benefit plans (public servants) 87,587 21,830 43,659
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 13,000 2,870 5,821
Refunds of amounts credited to revenues in previous years 16 26
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 10,241 2,127 4,610
Court Awards 1,044 1,045
Statutory Authorities 461,673 100,132 233,983
Total budgetary authorities 2,821,423 604,382 1,281,101

Annex B: Departmental budgetary expenditures by standard object (unaudited) - For the quarter ended September 30, 2015

Fiscal year 2015-2016 (In thousand of dollars)
Planned expenditures for the year ending March 31, 2016 Expended during the quarter ended September 30, 2015 Year to date used at quarter-end
Expenditures:
Personnel 3,120,269 774,664 1,538,769
Transportation and communications 166,355 50,732 103,912
Information 3,373 1,366 1,668
Professional and special services 415,596 101,519 158,587
Rentals 85,322 19,258 32,830
Repair and maintenance 88,259 14,178 24,906
Utilities, materials and supplies 116,986 28,706 53,391
Acquisition of land, buildings and works 86,003 18,885 24,141
Acquisition of machinery and equipment 261,060 35,427 62,392
Transfer payments 193,352 43,157 88,350
Other subsidies and payments 75,037 36,735 41,237
Total gross budgetary expenditures 4,611,611 1,124,627 2,130,183
Less Revenues netted against expenditures:
Vote Netted Revenues 1,824,630 473,952 876,539
Total Revenues netted against expenditures: 1,824,630 473,952 876,539
Total net budgetary expenditures 2,786,982 650,675 1,253,644
Fiscal year 2014-2015 (In thousand of dollars)
Planned expenditures for the year ending March 31, 2015 Expended during the quarter ended September 30, 2014 Year to date used at quarter-end
Expenditures:
Personnel 3,093,644 775,272 1,553,325
Transportation and communications 211,842 52,440 94,867
Information 3,826 725 1,132
Professional and special services 439,292 94,013 157,903
Rentals 90,889 19,449 38,016
Repair and maintenance 83,837 22,842 36,108
Utilities, materials and supplies 116,838 28,128 51,762
Acquisition of land, buildings and works 102,557 16,163 24,024
Acquisition of machinery and equipment 264,121 43,670 68,945
Transfer payments 176,636 26,029 79,042
Other subsidies and payments 72,647 (6,611) 47,882
Total gross budgetary expenditures 4,656,128 1,072,120 2,153,006
Less Revenues netted against expenditures:
Vote Netted Revenues 1,834,705 467,738 871,905
Total Revenues netted against expenditures: 1,834,705 467,738 871,905
Total net budgetary expenditures 2,821,423 604,382 1,281,101
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