Quarterly Financial Report - For the quarter ended June 30, 2015

Table of contents

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 and Supplementary Estimates (A) 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 June 30, 2015, the RCMP had $2,686.6 million in total authorities available for use, as reflected in Annex A: Statement of Authorities. This amount includes the Main Estimates, Supplementary Estimates A and $7.2 million related to the proceeds collected from the disposal of Crown assets, as displayed in Graph 1: Comparison of Total Budgetary Authorities below.

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

Description of graph in tabular format follows.

Graph 1: Comparison of Total Budgetary Authorities as of September 30, 2013 and September 30, 2014 (in millions of dollars)
Comparison of Total Budgetary Authorities as of June 30, 2014 and June 30, 2015 (in millions of dollars)
2014-15 2015-16
Main Estimates $2,626 $2,630
Supplementary Estimates (A) $0 $49
Proceeds from Disposal of Crown Assets $7 $7
Total $2,633 $2,686

Total authorities have increased by $54.0 million, when compared to the previous year, which includes a year-over-year increase of $2.0 million in Vote 1 - Operating expenditures, $22.4 million increase in Vote 5 - Capital expenditures, $16.7 million increase in Vote 10 - Grants and contributions, together with a $12.8 million increase in Budgetary statutory authorities. The increase is significantly related to the inclusion of Supplementary Estimates A of $49.4 million in 2015-16 and an overall net increase of $4.1 million in the 2015-16 Main Estimates when compared to last year.

2.1.1 Variance in Vote 1 - Net Operating expenditures

The increase of $2.0 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 $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 $42M, $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 expenditures

Capital authorities have increased by $22.4 million when compared to the first quarter of 2014-15. This is as a result of an overall increase in the 2015-16 Main Estimates of $15.5M 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.

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 $12.8 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) Footnote 1
Authorities 2015-16 2014-15 Variance %
Vote 1- Net Operating expenditures 1,768,319 1,766,280 2,039 0%
Vote 5 - Capital expenditures 268,898 246,470 22,428 9%
Vote 10 - Grants and contributions 180,352 163,636 16,716 10%
Budgetary statutory authorities 469,038 456,237 12,801 3%

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The RCMP has spent approximately 22% of its authorities at the end of the first quarter, compared with 26% 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.

Table 2: Expenditures by Standard Object at Quarter End shows net expenditures used during the first quarter being approximately 11% lower than the previous year; this is a result of an overall reduction of expenditures in the current fiscal year. A year to date comparison of gross expenditures reflects a decrease of $75.3 million or a 7% 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 June 30, 2014 and June 30, 2015 (in millions of dollars and percentage)

Description of graph in tabular format follows.

Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2013 and September 30, 2014
Comparison of Total Budgetary Authorities and Net Expenditures as of June 30, 2014 and June 30, 2015 (in millions of dollars and percentage)
2014-15 2015-16
Total Budgetary Authorities $2,633 $2,686
Net expenditures for the year to date $677 (26%) $603 (22%)
2.2.1 Variance by Personnel

Personnel expenditures have decreased by $13.9 million as compared to the first quarter expenditures in 2014-15. This reduction results from a decrease in employers contribution to the Employee Benefit Plans in the first quarter and a year-over-year decrease related to the liquidation of severance. These decreases are offset by modest increases to regular and extra duty pay.

2.2.2 Variance by Transportation and Communication

Transportation and Communication costs have increased by $10.8 million which is largely attributed to travel and relocation expenditures. Travel has increased significantly in Federal Policing, both domestically and internationally, in support of fulfilling its core mandate including operational travel for national security areas for such things as increased expenditures related to Parliament Hill, Prime Minister's Protection Detail, as well as for increased liaison officers for missions abroad. Relocation expenditures have increased within Contract Policing due to the demand for police officers in contract provinces, most significantly in Alberta and British Columbia. In addition, within Contract Policing there is a timing difference in terms of processing expense claims related to 2014-15, however, overall travel in 2015-16 is forecasted to be in line with 2014-15 final expenditures.

2.2.3 Variance by Professional and Special Services

Professional and Special Services have decreased by $6.8 million which is largely attributed to timing and the planned reduction of expenditures within property management contracted services in HQ. The reduction has been off-set by various minor increases throughout professional and special services.

2.2.4 Variance by Rentals

Rentals have decreased by $5.0 million which is partly attributed to timing related to the receipt of invoices from PWGSC for pooled housing costs. Also a correcting entry will be reflected in the 2nd quarter reporting which will off-set the year-over-year decrease by $1.2 million.

2.2.5 Variance by Purchased Repair and Maintenance

Purchased repair and maintenance have decreased by $2.5 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.

2.2.6 Variance by Acquisition of Land, Buildings, and Works

The $2.6 million decrease in expenditures is largely due to decreased spending for the RCMP Training Academy refurbishment. The RCMP Training Academy project is scheduled for completion in the summer of 2015 which aligns to the reduction of expenditures compared to 2014-15. The reduction is off-set by the acquisition of housing under contract policing in 2015-16.

2.2.7 Variance by Transfer Payment

Transfer payment expenditures are $7.8 million lower in 2015-16 as compared to 2014-15 and can be attributed to process changes and timing. The process change with Veterans Affairs Canada (VAC) for health service costs for members has caused an $11.2 million decrease due to the timing of the prepayments year-over-year. This decrease is offset by an increase of approximately $3.5 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.

2.2.8 Variance by Other subsidies and payments

A $50.0 million decrease in year-over-year expenditures for other subsidies and payments is related to the timing of items being cleared from suspense account and the one-time transition payment for pay in arrears. The timing issues are caused by $36.0 million in expenditures in 2014-15 related to VAC disability payments temporarily posted in suspense pending identification and coding. 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: Expenditures by Standard Object at Quarter End (in thousands of dollars) Footnote 2 Footnote 3
Standard Objects 2015-16 2014-15 Variance %
Personnel 764,104 778,053 (13,949) -2%
Transportation and communications 53,180 42,427 10,753 25%
Information 302 407 (104) -26%
Professional and special services 57,068 63,890 (6,822) -11%
Rentals 13,573 18,567 (4,994) -27%
Repair and maintenance 10,728 13,266 (2,538) -19%
Utilities, materials and supplies 24,686 23,634 1,052 4%
Acquisition of land, buildings and works 5,256 7,861 (2,605) -33%
Acquisition of machinery and equipment 26,965 25,275 1,690 7%
Transfer payments 45,193 53,013 (7,820) -15%
Other subsidies and payments 4,502 54,493 (49,991) -92%
Total gross budgetary expenditures 1,005,557 1,080,886 (75,328) -7%
Less: Vote Netted Revenue 402,588 404,167 (1,579) 0%
Total net budgetary expenditures 602,969 676,719 (73,750) -11%

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 19, 2015.

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 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 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 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

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

5.2 Personnel

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

5.3 Programs

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

Approved by:

Bob Paulson,
Commissioner
(Ottawa, Canada)
August 12 2015

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

Annex A: Statement of authorities (unaudited) – For the quarter ended June 30, 2015

Fiscal year 2015-16
Total available for use for the year ending March 31, 2016 Footnote 4 Used during the quarter ended June 30, 2015 Year to date used at quarter-end
Gross Operating expenditures 3,592,949 818,753 818,753
Less: Vote Netted Revenues 1,824,630 402,588 402,588
Vote 1 - Net Operating expenditures 1,768,319 416,165 416,165
Vote 5 - Capital expenditures 268,898 25,009 25,009
Vote 10 - Grants and contributions 180,352 40,193 40,193
Pensions and other employee benefits - Members of the Force 377,046 100,221 100,221
Contributions to employee benefit plans (public servants) 71,805 17,941 17,941
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 13,000 2,700 2,700
Refunds of amounts credited to revenues in previous years 7 7
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 7,187 733 733
Court Awards 0 0
Statutory Authorities 469,038 121,602 121,602
Total budgetary authorities 2,686,607 602,969 602,969
Fiscal year 2014-2015
Total available for use for the year ending March 31, 2015 Footnote 4 Used during the quarter ended June 30, 2014 Year to date used at quarter-end
Gross Operating expenditures 3,587,877 884,425 884,425
Less: Vote Netted Revenues 1,821,597 404,167 404,167
Vote 1 - Net Operating expenditures 1,766,280 480,258 480,258
Vote 5 - Capital expenditures 246,470 26,048 26,048
Vote 10 - Grants and contributions 163,636 36,562 36,562
Pensions and other employee benefits - Members of the Force 349,272 106,577 106,577
Contributions to employee benefit plans (public servants) 87,318 21,829 21,829
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 13,000 2,951 2,951
Refunds of amounts credited to revenues in previous years 10 10
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 6,647 2,483 2,483
Court Awards 1 1
Statutory Authorities 456,237 133,851 133,851
Total budgetary authorities 2,632,623 676,719 676,719

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

Fiscal year 2015-2016
Planned expenditures for the year ending March 31, 2016 Expended during the quarter ended June 30, 2015 Year to date used at quarter-end
Expenditures:
Personnel 3,120,269 764,104 764,104
Transportation and communications 157,183 53,180 53,180
Information 3,187 302 302
Professional and special services 392,683 57,068 57,068
Rentals 80,618 13,573 13,573
Repair and maintenance 83,393 10,728 10,728
Utilities, materials and supplies 110,536 24,686 24,686
Acquisition of land, buildings and works 73,067 5,256 5,256
Acquisition of machinery and equipment 226,049 26,965 26,965
Transfer payments 193,352 45,193 45,193
Other subsidies and payments 70,900 4,502 4,502
Total gross budgetary expenditures 4,511,237 1,005,557 1,005,557
Less Revenues netted against expenditures:
Vote Netted Revenues 1,824,630 402,588 402,588
Total Revenues netted against expenditures: 1,824,630 402,588 402,588
Total net budgetary expenditures 2,686,607 602,969 602,969
Fiscal year 2014-2015
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 3,082,592 778,053 778,053
Transportation and communications 184,415 42,427 42,427
Information 3,331 407 407
Professional and special services 382,417 63,890 63,890
Rentals 79,122 18,567 18,567
Repair and maintenance 72,982 13,266 13,266
Utilities, materials and supplies 101,710 23,634 23,634
Acquisition of land, buildings and works 75,156 7,861 7,861
Acquisition of machinery and equipment 232,617 25,275 25,275
Transfer payments 176,636 53,013 53,013
Other subsidies and payments 63,242 54,493 54,493
Total gross budgetary expenditures 4,454,220 1,080,886 1,080,886
Less Revenues netted against expenditures:
Vote Netted Revenues 1,821,597 404,167 404,167
Total Revenues netted against expenditures: 1,821,597 404,167 404,167
Total net budgetary expenditures 2,632,623 676,719 676,719
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