Quarterly Financial Report - For the period ending December 31, 2016

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 for 2016-17, as well as Budget 2016. 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 (B), the Operating Budget Carry Forward and Capital Budget Carry Forward for the 2016-17 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, 2016, the RCMP had $3,024.8 million in total authorities available for use, as reflected in Annex A: Statement of Authorities. This amount includes the Main Estimates, Supplementary Estimates (B), TB Vote 25 – Operating Budget Carry Forward, TB Vote 30 – Paylist Requirements, TB Vote 33 – Capital Budget Carry Forward, in-year statutory adjustments and $9.9 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 increased by $236.6 million, when compared to the previous year, which includes a year-over-year decrease of $8.4 million in Vote 5 – Capital expenditures, $195.9 million increase in Vote 1 – Operating expenditures, $27.7 million increase in Vote 10 – Grants and contribution, together with a $21.4 million increase in Budgetary statutory authorities.

The overall increase is primarily due to an increase of $135.6 million in Supplementary Estimates (B). Due to the change in Government, the Supplementary Estimates (B) were deferred to Supplementary Estimates (C) in fiscal year 2015-16. As such, no funding was sought through the 2015-16 Supplementary Estimates (B). The increase is also attributed to a net increase of $129.3 million in the 2016-17 Main Estimates, an increase of $33.1 million in Paylist Requirements and minor increases in Proceeds from Disposal of Crown Assets ($0.4 million) and in-year statutory adjustments ($1.0 million). These increases are partially offset by a decrease of $49.4 million due to the timing and content of Supplementary Estimates. The RCMP's 2015-16 Supplementary Estimates (A) was $49.4 million whereas in 2016-17 the RCMP did not have a Supplementary Estimates (A) submission. In addition, the total Operating and Capital Budget Carry Forward funding has decreased by $13.2 million in 2016-17 when compared to 2015-16.

Graph 1: Comparison of Total Budgetary Authorities as of December 31, 2015 and December 31, 2016 (in millions of dollars)

Graph 1: Comparison of Total Budgetary Authorities as of December 31, 2015 and December 31, 2016 (in millions of dollars)
Comparison of Total Budgetary Authorities as of December 31, 2015 and December 31, 2016 (in millions of dollars)
2016-17 2015-16
Main Estimates $2,759 $2,630
Supplementary Estimates (A) $49
Supplementary Estimates (B) $136
TB Vote 25 - Operating Budget Carry Forward $62 $62
TB Vote 30 - Paylist Requirements $33
TB Vote 33 - Capital Budget Carry Forward $24 $37
In-year Statutory Adjustments $1
Proceeds from Disposal of Crown Assets $10 $10
2.1.1 Variance in Vote 1 – Net Operating expenditure authorities

The increase of $195.9 million in Vote 1 – Net Operating expenditures, reflected in Table 1: Authorities Available for Use, is mainly related to a year-over-year increase of $109.3 million in the 2016-17 Main Estimates, primarily for the Capital Vote Definition Transfers from the Capital expenditures to the Operating expenditures ($49.2 million), funding for the federal costs of Contract Policing Services for all contract jurisdictions ($37.4 million), funding for additional investigative resources to counter-terrorism ($18.1 million) and funding to advance Phase II of Canada's Cyber Security Strategy ($5.0 million). The increase is also attributable to an increase of $95.9 million in the 2016-17 Supplementary Estimates (B) which is primarily related to funding for the settlement of class action lawsuits against the RCMP ($57.0 million) and a transfer from Public Safety and Emergency Preparedness for the First Nations Community Policing Service ($41.3 million). In addition, an increase of $33.1 million in Paylist Requirements is due to timing of funding received. Paylist reimbursement was not requested until year-end in fiscal year 2015-16. These increases are offset by funding received in the 2015-16 Supplementary Estimates (A) of $42.1M, $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 decreased by $8.4 million when compared to the third quarter of 2015-16. This is as a result of an overall decrease in the 2016-17 Main Estimates of $15.2M primarily due to the Capital Vote Definition Transfers ($49.2 million). The decrease is partially offset by funding received from various TB submissions. In addition, the Capital Budget Carry Forward amount has decreased by $12.9 million as compared to 2015-16. The decrease is primarily due to less carry forward funding requested by Contract Policing Program. The overall decrease in Capital authorities is also attributed to the timing and content of the Supplementary Estimates. In 2015-16 Supplementary Estimates (A), $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; however, the RCMP did not have a Supplementary Estimates (A) submission in 2016-17. These decreases are offset by an increase of $26.6 million in the 2016-17 Supplementary Estimates (B) mainly related to funding to maintain and upgrade federal infrastructure assets ($24.6 million) as announced in Budget 2016, whereas the RCMP did not receive any funding from the Supplementary Estimates (B) in 2015-16 as the Estimates were deferred to Supplementary Estimates (C).

2.1.3 Variance in Vote 10 – Grants and contributions

The increase of $27.7 million in Vote 10 – Grants and contributions is related to a year-over-year increase in the 2016-17 Main Estimates and the 2016-17 Supplementary Estimates (B). It is 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 $21.4 million is primarily related to an increase in the 2016-17 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 2016-17 2015-16 Variance %
Vote 1 - Net Operating expenditures 2,026,302 1,830,397 195,905 11%
Vote 5 - Capital expenditures 297,738 306,136 (8,398) -3%
Vote 10 - Grants and contributions 208,073 180,352 27,721 15%
Budgetary statutory authorities 492,716 471,326 21,390 5%
Total Authorities 3,024,830 2,788,210 236,620 8%

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

The RCMP has spent approximately 69% of its authorities at the end of the third quarter, compared with 74% 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 overall increase of expenditures in 2016-17 compared to 2015-16 is partially offset by the increase in revenue collection resulting a net increase of $26.6 million (or 1%). 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, 2015 and December 31, 2016 (in millions of dollars and percentage)

Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of December 31, 2015 and December 31, 2016 (in millions of dollars and percentage)
Comparison of Total Budgetary Authorities and Net Expenditures as of December 31, 2015 and December 31, 2016 (in millions of dollars and percentage)
2016-17 2015-16
Total Budgetary Authorities $3,025 $2,788
Net expenditures for the quarter $2,078 (69%) $2,051 (74%)
2.2.1 Variance by Revenue

Vote netted revenue collected in 2016-17 is higher by $52.0 million (or 4%) over the same period last year, which is attributed to an increase of $54.6 million in Contract Policing Services. The increased revenue collection is related to Alberta First Responder Radio Communication System (AFRRCS) as well as overall growth in the program.

2.2.2 Variance by Information

Information related costs have decreased by $1.0 million (or 40%) as compared to the third quarter expenditures in 2015-16. The decrease is primarily due to costs in regards to the Government advertising initiative for which a one-year funding of $6.0 million was approved in 2015-16.

2.2.3 Variance by Professional and Special Services

Professional and Special Services have increased by $45.1 million (or 17%) when compared to 2015-16. The increase is largely due to an increase of $24.1 million in relation to the first annual Systems Operating Lease and Maintenance payment that was made to the Province of Alberta for the Alberta First Responder Radio Communication System (AFRRCS). Treasury Board provided ongoing funding to support this project as part of the 2015-16 Contract Policing TB Submission. Annual payments of $24.1M are to be paid to the Province of Alberta around October and November moving forward and the RCMP will in turn be recovering approximately 70% of these costs from the Province each year as part of the third quarter invoicing process. The increase is also due to an increase of $12.7M in Real Property Management to cover the costs for the WorkPlace 2.0 project. Public Services and Procurement Canada (PSPC) expected a sizeable reduction in the RCMP's space envelope as a result of both Deficit Reduction Action Plan (DRAP) and Workplace 2.0 Initiative. The majority of the anticipated reduction in the RCMP's space requirements has not been achievable. As such, the RCMP is now required to pay for that space. In addition, health costs for regular members and pensioners have gone up by $3.7 million which is due to standard growth and timing of payments. The balance of the increase is spread across the department.

2.2.4 Variance by Repair and Maintenance

Repair and Maintenance costs have increased by $7.0 million representing a year-over-year increase of 15%. Of this, $5.3 million is related to Depot Works and Betterment and other Federal Infrastructure Initiative projects in "Depot" Division. The increase is also attributed to an increase of $1.5 million in Contract Policing Program which is primarily related to the Real Property Life Cycle costs in the detachments.

2.2.5 Variance by Acquisition of Land, Buildings, and Works

Acquisitions of Land, Buildings and Works expenditures have increased by $20.6 million (or 53%) when compared to 2015-16. An increase of $10.2 million is related to the Federal Infrastructure Program and the Federal Infrastructure Initiative projects; and an increase of $10.0 million is due to timing issues associated with the construction costs in the provincial and territorial detachments.

2.2.6 Variance by Other Subsidies and Payments

Other subsidies and payments expenditures are $16.9 million (or 30%) lower in 2016-17 as compared to 2015-16. It is primarily due to a decrease of $12.6 million in 2016-17 related to the timing of items being cleared from suspense accounts and a decrease of $6.5 million as a result of a legal settlement paid out in 2015-16. These decreases are partially offset by increases spread across the organization.


Table 2: Expended by Standard Object at Quarter End (in thousands of dollars) Footnote 2 Footnote 3
Standard Objects 2016-17 2015-16 Variance %
Personnel 2,313,623 2,310,768 2,855 0%
Transportation and telecommunications 160,490 156,456 4,034 3%
Information 1,410 2,364 (954) -40%
Professional and special services 307,336 262,266 45,070 17%
Rentals 69,296 65,497 3,799 6%
Repair and maintenance 52,467 45,457 7,010 15%
Utilities, materials and supplies 88,709 82,741 5,968 7%
Acquisition of land, buildings and works 59,637 39,001 20,636 53%
Acquisition of machinery and equipment 99,003 101,859 (2,856) -3%
Transfer payments 144,505 134,486 10,019 7%
Other subsidies and payments 39,165 56,075 (16,910) -30%
Total gross budgetary expenditures 3,335,641 3,256,970 78,671 2%
Less: Vote Netted Revenue 1,257,784 1,205,736 52,048 4%
Total net budgetary expenditures 2,077,857 2,051,234 26,623 1%

3. Risks and uncertainties

The Departmental QFR reflects the results of the current fiscal period in relation to the Main Estimates, the Supplementary Estimates (B), Operating Budget Carry Forward and the 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) in 2015-16, the RCMP now also receives significant Vote Netted Revenue authorities related to PPS. PPS is a new entity responsible for the full protection on Parliament Hill and the VNR authority allows the RCMP to bill PPS for security services on Parliament Hill.

The RCMP received $57 million from a TB submission through the 2016-17 Supplementary Estimates (B) in the third quarter for the settlement of the Merlo and Davidson proposed class action lawsuits against the RCMP. This Submission approved $121.5 million over three fiscal year, 2016-17 to 2018-19; of this, $100 million is for compensation awards that will be paid to successful claimants and the remaining $21.5 million is for class counsel legal fees and disbursements, and to secure the services of an assessor of claims. On October 6, 2016, the RCMP announced in a media conference that a settlement agreement had been reached between the RCMP and the plaintiffs in the Merlo and Davidson lawsuits filed on behalf of female current and former regular members, civilian members and public service employees. This settlement, which is subject to approval by the Federal Court, sets out an independent claims process and compensation amounts for women who experienced gender and sexual orientation-based discrimination, bullying and harassment in the RCMP between September 16, 1974 and the date the agreement receives court approval. It is now anticipated that the claims process will commence in the new fiscal year; as a result, most of the $57 million in funding is expected to be lapsed at year-end and carried forward to next fiscal year.

On January 16, 2015, the Supreme Court of Canada determined in Mounted Police Association of Ontario (MPAO) v. Attorney General of Canada, that the exclusion of RCMP members from the definition of "employee" in the Public Service Labour Relations Act (PSLRA) and the imposition of the RCMP Staff Relations Representative Program were unconstitutional. In response, Bill C-7, An Act to amend the Public Service Labour Relations Act, the Public Service Labour Relations and Employment Board Act and other Acts, was introduced in the House of Commons on March 9, 2016. On May 30, 2016, the Bill was adopted by the House and sent to the Senate for consideration. On June 21, 2016, the Senate passed the Bill with amendments. The Government is currently reviewing the Senate amendments and is preparing a response.

Given the increasing demands on RCMP resources, particularly on National Security files, the RCMP is facing significant resourcing challenges. The increased concerns around terrorism and extremism, cybercrime, changing demographics, population growth and rapid technological advancements might create unforeseen operational requirements and increase the existing organizational costs. In recent years, the RCMP's reference levels have been constrained by government-wide spending reduction exercises which have resulted in significant financial pressures. To address the current financial challenges, a Resourcing Review was launched in August 2016 following award of the consulting contract through a competitive process to KPMG. The purpose of the Review is to assess the financial integrity issues faced by the RCMP, and serve as the basis for a longer term strategic recommendations to the Minister of Public Safety and Emergency Preparedness. A final report is expected to be completed by the end of this fiscal year.

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

4.1 Operations

There has been no significant change in relation to operations in the third quarter of 2016-17.

4.2 Personnel

The Chief Financial and Administrative Officer (CFAO), Deputy Commissioner Alain Duplantie retired from the RCMP in April 2016, after 36 years of service. Dennis Watters, CPA, CA, CFE has been serving as Acting CFAO in the interim. Further information will be made available once an appointment has been made.

4.3 Programs

There has been no significant change in relation to programs in the third quarter of 2016-17.

Approved by Senior Officials

Approved by:

Original signed by

Daniel Dubeau, Acting Commissioner for:
Bob Paulson,
Commissioner

Original signed by

Dennis Watters, CPA, CA, CFE
Acting Chief Financial and Administrative Officer

Ottawa, Canada

Date:


Annex A: Statement of Authorities (unaudited)

Fiscal year 2016-2017 (In thousand of dollars) Footnote 4
Total available for use for the year ending
March 31, 2017 Footnote 5
Used during the quarter ended
December 31, 2016
Year to date used at quarter-end
Gross Operating expenditures 3,959,533 942,729 2,783,840
Less: Vote Netted Revenues 1,933,231 309,416 1,257,784
Vote 1 - Net Operating expenditures 2,026,302 633,313 1,526,056
Vote 5 - Capital expenditures 297,738 56,903 119,048
Vote 10 - Grants and contributions 208,073 44,801 134,353
Pensions and other employee benefits - Members of the Force 395,891 67,059 231,094
Contributions to employee benefit plans (public servants) 75,916 18,846 56,538
Pensions under the Royal Canadian Mounted Police Pension Continuation Act 11,000 2,326 7,152
Refunds of amounts credited to revenues in previous years 0 18 1,082
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 9,909 577 2,534
Court Awards 0 0 0
Statutory Authorities 492,716 88,826 298,400
Total budgetary authorities 3,024,830 823,843 2,077,857
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 0 54 183
Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act 9,474 372 2,164
Court Awards 0 0 0
Statutory Authorities 471,326 91,303 315,243
Total budgetary authorities 2,788,210 797,590 2,051,234

Annex B: Departmental budgetary expenditures by standard object (unaudited)

Fiscal year 2016-2017 (In thousand of dollars) Footnote 6
Expenditures Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended December 31, 2016 Year to date used at quarter-end
Personnel 3,261,951 766,450 2,313,623
Transportation and communications 181,503 52,808 160,490
Information 3,249 630 1,410
Professional and special services 462,202 112,311 307,336
Rentals 99,681 23,443 69,296
Repair and maintenance 103,960 27,093 52,467
Utilities, materials and supplies 133,492 30,349 88,709
Acquisition of land, buildings and works 82,348 26,287 59,637
Acquisition of machinery and equipment 247,214 45,988 99,003
Transfer payments 219,073 47,128 144,505
Other subsidies and payments 163,388 772 39,165
Total gross budgetary expenditures 4,958,060 1,133,259 3,335,641
Less Revenues netted against expenditures:
Vote Netted Revenues 1,933,231 309,416 1,257,784
Total Revenues netted against expenditures: 1,933,231 309,416 1,257,784
Total net budgetary expenditures 3,024,830 823,843 2,077,857
Fiscal year 2015-2016 (In thousand of dollars) Footnote 6
Expenditures Planned expenditures for the year ending March 31, 2016 Expended during the quarter ended December 31, 2015 Year to date used at quarter-end
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
Date modified: