Quarterly Financial Report - For the quarter ended June 30, 2013

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

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 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.

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.

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) 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.

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

Statement of Authorities

For the period ending June 30, 2013, the RCMP had $2,763.1 million in total authorities available for use, as reflected in Annex A: Statement of authorities (unaudited). This amount includes the Main Estimates, $5.7 million related to the proceeds collected from the disposal of Crown assets and Supplementary Estimates (A), which reduced the RCMP's authorities by $710 thousand for a transfer to External Review Committee, as displayed in Graph 1: Comparison of total Budgetary Authorities below.

Total authorities have increased by $165.2 million, when compared to the previous year. This change includes an increase of $374.3 million in Vote 45 – Operating expenditures and offset by $302.9 million in Vote Netted Revenue for a Net Operating expenditures increase of $71.4 million, $36.8 million increase in Vote 50 – Capital expenditures, $12.5 million increase in Vote 55 – Grants and contributions and $44.5 million increase in Budgetary statutory authorities.

Graph 1: Comparison of total Budgetary Authorities as of June 30, 2012 and June 30, 2013 (in millions of dollars)
Graph 1 - Link to long description after the image
Graph 1: Comparison of total Budgetary Authorities as of June 30, 2012 and June 30, 2013 (in millions of dollars)
2012-13 2013-14
Main Estimates $2,554 $2,758
Supplementary Estimates (A) $38
Proceeds from Disposal of Crown Assets $6 $6
Total $2,598 $2,764

As published in the 2013-14 Report on Plans and Priorities, significant funding associated with the Policing Services Agreements (PSAs) expired in the 2012-13 Main Estimates pending their renewal. On April 1, 2012, the renewed PSAs with the contract provinces, territories and municipalities came into effect for another 20 years. The 2013-14 Main Estimates provided the RCMP with the renewed funding required in 2013-14 to deliver the services requested by contracting provinces, territories and municipalities, inclusive of modest service increases in certain jurisdictions. This constitutes the primary reason for the increase in total authorities in the first quarter of 2013-14.

Variance in Vote 45 – Net Operating expenditures

The increase of $71.4 million in Vote 45 – Net Operating expenditures, reflected in Table 1: Authorities Available for Use, is mainly related to the $204.1 million received in the 2013-14 Main Estimates for the renewed PSA for the contract policing program, this increase was offset in the 2013-14 Main Estimates by the Budget 2012 reduction of $84.1 million and the transfer from Public Safety and Emergency Preparedness for the First Nations Community Policing Services funding of $41 million was received in Supplementary Estimates (A) in 2012-13, where as the RCMP will receive this funding in Supplementary Estimates (B) in 2013-14.

Variance in Vote 50 – Capital expenditures

The year over year change to the 2013-14 Main Estimates encompasses the first quarter increase to the Vote 50 – Capital expenditures of $36.8 million. The contract policing program received $71.7 million for the renewed PSAs and this funding was offset by sunset funding related to the RCMP Training Academy and Pacific Patrol Vessels. The Pacific Patrol Vessel project has been cancelled and the RCMP has requested to carry forward 2012-13 funding for the RCMP Training Academy through the Capital Budget Carry Forward to meet project timelines.

Variance in Vote 55 – Grants and contributions

The increase in Vote 55 – 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.

Variance in Budgetary statutory authorities

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.

Table 1: Authorities Available for Use (In thousands of dollars) Footnote 1
Authorities 2013-14 2012-13 Variance %
Vote 45 - Net Operating expenditures 1,866,380 1,794,924 71,456 4%
Vote 50 - Capital expenditures 267,613 230,812 36,801 16%
Vote 55 - Grants and contributions 144,974 132,498 12,476 9%
Budgetary statutory authorities 484,101 439,625 44,476 10%
Total Authorities 2,763,068 2,597,859 165,209 6%

Statement of Departmental Budgetary Expenditures by Standard Object

The RCMP has spent approximately 24% of its authorities at the end of the first quarter, compared with 25% 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.

The Annex B: Departmental budgetary expenditures by standard object (unaudited) shows Net expenditures used during the first quarter being approximately 3% higher than the previous year; this is a result of revenues being slightly lower than Q1 in 2012-13. A year to date comparison of gross expenditures reflects a decrease of $40.1 million in 2013-14 over 2012-13. 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 June 30, 2012 and June 30, 2013 (in millions of dollars and percentage)
Graph 2 - Link to long description after the image
Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of June 30, 2012 and June 30, 2013 (in millions of dollars and percentage)
2012-13 2013-14
Total Budgetary Authorities $2,598 $2,763
Net Expenditures for the quarter ending June 30 $644
(25%)
$666
(24%)
Variance by Revenue

Vote netted revenue collected during the first quarter of 2013-14 is down 15% over the same quarter last year and is due to the timing of collections, as approximately $70 million was received in the second quarter of 2013-14 whereas these revenues were collected in the first quarter of 2012-13. This timing difference was slightly offset by the increase in the actual amount billed to the contract provinces, territories and municipalities with respect to the renewed PSAs. Revenue collected by year-end for 2013-14 is expected to be higher than 2012-13.

Variance by Personnel

Personnel expenditures rose by $50 million over the same quarter last year. The majority of the difference relates to the normalizing of the timing of expenditures for the RCMP's share of Employer contributions to the Canada Pension Plan and Employment Insurance being reflected in first quarter of 2013-14 versus the second quarter of 2012-13. Additionally, the liquidation of severance pay, as a result of the elimination of the accumulation of severance benefits for the voluntary resignation and retirement for RCMP employees, is approximately $17 million higher in 2013-14. It is expected that the liquidation of severance pay for 2013-14 will be significantly lower as the majority of RCMP employees received their liquidation payments in 2012-13.

When the year over year variances related to timing of expenditures for Employer contributions and the liquidation of severance pay are removed, 2013-14 personnel expenditures are consistent with 2012-13.

Variance by Transfer Payment

Transfer payments expenditures decreased by $17 million in 2013-14 as compared to 2012-13, this variance 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 of 2012-13 versus the billings normally being reflected in the second quarter.

Variance by Other subsidies and payments

Also, like the Transfer Payments, the decrease in year over year expenditures for Other subsidies and payments is related timing. Last year, there was $59 million in expenditures related to employee benefit plans for Members and Public Servants temporarily posted to items in suspense pending identification and coding, which occurred in the second quarter. In 2013-14, these employee benefit plan costs have been coded to the appropriate accounts in the first quarter.

Table 2: Expended by Standard Object at Quarter End (in thousands of dollars) Footnote 1
Standard Objects 2013-14 2012-13 Variance %
Personnel 780,783 730,724 50,060 6%
Transportation and communications 40,411 42,552 (2,141) -5%
Information 354 316 38 11%
Professional and special services 63,848 67,704 (3,856) -6%
Rentals 16,509 16,786 (277) -2%
Repair and maintenance 12,938 10,907 2,031 16%
Utilities, materials and supplies 23,938 23,883 54 0%
Acquisition of land, buildings and works 2,793 5,842 (3,049) -109%
Acquisition of machinery and equipment 19,580 25,173 (5,594) -29%
Transfer payments 35,561 52,665 (17,104) -48%
Other subsidies and payments 10,921 71,218 (60,297) -552%
Less: Vote Netted Revenue 342,079 403,966 (61,886) -18%
Total net budgetary expenditures 665,557 643,805 21,752 3%

Risks and uncertainties

The Departmental QFR reflects the results of the current fiscal period in relation to the Main Estimates, Supplementary Estimates (A), for which supply was released on June 5, 2013.

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. There will continue to be ongoing pressure on the RCMP's appropriations 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.

As previously noted, the RCMP faces other financial challenges in 2013-14 due to a number of budget announcements:

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. In 2013-14, a frozen allotment will be established by Treasury Board in departmental votes and used as Funds Available to offset any appropriations to be received in either Supplementary Estimates (B) or (C). In future years, this reduction will be reflected in the subsequent Main Estimates.

Lastly, the RCMP continues to take measures to address the rapidly changing economic climate. Recruitment of cadets at the RCMP is being adjusted as demand for increased policing services from our contract partners softens due to economic considerations. This measure, along with other budgetary restrictions, has been put in place to mitigate the impact of these realities.

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 achieved Budget 2012 savings of $44.4 million in 2012-13. Savings increased to $89.1 million for 2013-14 and will result in on-going savings of $195.2 million in 2014-15 (inclusive of employee benefit plan costs). These savings will be accomplished with minimal impacts on direct policing operations.

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.

In fiscal year 2013-14 some of the 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) and, 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.
  • 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.
  • 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 fiscal year 2013-14.
  • Additional savings will be derived from operational support initiatives that enhance service delivery models within Criminal Intelligence, Technical Operations and the Canadian Police College. It also includes restructuring the process of querying criminal records and police information databases, as well as savings within the Canadian Firearms Program.

As of Q1 2013-14, most projects are on track and internal reallocation strategies are being developed to bridge any anticipated delays in achieving targeted savings in 2014-15.

Significant changes in relation to operations, personnel and programs

Operations

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).

Personnel

There has been no significant change in relation to personnel in the first quarter of 2013-14.

Programs

There has been no significant change in relation to programs in the first quarter of 2013-14.

Approved by:

Bob Paulson,
Commissioner
Ottawa, Canada
August 16, 2013

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

Annex A: Statement of authorities (unaudited) - For the quarter ended June 30, 2013

Fiscal Year 2013-2014 (in thousands of dollars) Footnote 1
Total available for use for the year ending March 31, 2014 Footnote 2 Used during the quarter ended June 30, 2013 Year to date used at quarter-end
Gross Operating expenditures 3,720,895 829,457 829,457
Less: Vote Netted Revenues 1,854,515 342,079 342,079
Vote 45 - Net Operating expenditures 1,866,380 487,378 487,378
Vote 50 - Capital expenditures 267,613 15,847 15,847
Vote 55 - Grants and contributions 144,974 32,404 32,404
Pensions and other employee benefits - Members of the Force 371,520 103,389 103,389
Contributions to employee benefit plans (public servants) 92,880 23,220 23,220
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 14,000 3,157 3,157
Refunds of amounts credited to revenues in previous years 0 162 162
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 5,701 0 0
Court Awards 0 0 0
Statutory Authorities 484,101 129,929 129,929
Total budgetary authorities 2,763,067 665,557 665,557
Fiscal Year 2012-2013 (in thousands of dollars) Footnote 1
Total available for use for the year ending March 31, 2013 Footnote 2, Footnote 3 Used during the quarter ended June 30, 2012 Year to date used at quarter-end
Gross Operating expenditures 3,346,574 909,667 909,667
Less: Vote Netted Revenues 1,551,649 403,966 403,966
Vote 45 - Net Operating expenditures 1,794,924 505,701 505,701
Vote 50 - Capital expenditures 230,812 17,862 17,862
Vote 55 - Grants and contributions 132,498 28,688 28,688
Pensions and other employee benefits - Members of the Force 332,791 65,642 65,642
Contributions to employee benefit plans (public servants) 83,198 20,799 20,799
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 17,500 3,667 3,667
Refunds of amounts credited to revenues in previous years 0 55 55
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 6,137 1,033 1,033
Court Awards 0 355 355
Statutory Authorities 439,625 91,552 91,552
Total budgetary authorities 2,597,859 643,804 643,804

Annex B: Departmental budgetary expenditures by standard object (unaudited) - For the quarter ended June 30, 2013

Fiscal Year 2013-2014 (in thousands of dollars) Footnote 1
Planned expenditures for the year ending March 31, 2014 Expended during the quarter ended June 30, 2013 Year to date used at quarter-end
Expenditures:
Personnel 3,133,573 780,783 780,783
Transportation and communications 225,815 40,411 40,411
Information 4,793 354 354
Professional and special services 397,263 63,848 63,848
Rentals 85,808 16,509 16,509
Repair and maintenance 87,517 12,938 12,938
Utilities, materials and supplies 117,958 23,938 23,938
Acquisition of land, buildings and works 86,035 2,793 2,793
Acquisition of machinery and equipment 249,170 19,580 19,580
Transfer payments 158,974 35,561 35,561
Other subsidies and payments 70,676 10,921 10,921
Total gross budgetary expenditures 4,617,582 1,007,636 1,007,636
Less Revenues netted against expenditures:
Vote Netted Revenues 1,854,515 342,079 342,079
Total Revenues netted against expenditures: 1,854,515 342,079 342,079
Total net budgetary expenditures 2,763,067 665,557 665,557
Fiscal Year 2012-2013 (in thousands of dollars) Footnote 1
Planned expenditures for the year ending March 31, 2013 Footnote 4 Expended during the quarter ended June 30, 2012 Year to date used at quarter-end
Expenditures:
Personnel 2,795,175 730,724 730,724
Transportation and communications 215,827 42,552 42,552
Information 5,292 316 316
Professional and special services 338,627 67,704 67,704
Rentals 77,285 16,786 16,786
Repair and maintenance 84,991 10,907 10,907
Utilities, materials and supplies 108,230 23,883 23,883
Acquisition of land, buildings and works 73,285 5,842 5,842
Acquisition of machinery and equipment 234,208 25,173 25,173
Transfer payments 149,998 52,665 52,665
Other subsidies and payments 66,590 71,218 71,218
Total gross budgetary expenditures 4,149,508 1,047,770 1,047,770
Less Revenues netted against expenditures:
Vote Netted Revenues 1,551,649 403,966 403,966
Total Revenues netted against expenditures: 1,551,649 403,966 403,966
Total net budgetary expenditures 2,597,859 643,804 643,804
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