Quarterly Financial Report - For the period ending December 31, 2017
Statement outlining results, risks and significant changes in operations, personnel and program
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 2017-18, as well as Budget 2017. The quarterly report has not been subject to an external audit or review.
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 Main 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, paylist expenditures reimbursement and compensation adjustments for the 2017-18 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 money 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 results reporting process. However, the spending authorities voted by Parliament remain on a cash expenditure basis.
2. Highlights of the fiscal quarter and fiscal year-to-date (YTD) results
2.1 Statement of Authorities
For the period ending December 31, 2017, the RCMP had $3,348.6 million in total authorities available for use, as reflected in Annex A: Statement of Authorities. This amount includes the Main Estimates, Supplementary Estimates (B), Compensation Adjustments, Operating Budget Carry Forward, reimbursement of Paylist expenditures, Capital Budget Carry Forward and $11.1 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 $323.8 million, when compared to the previous year, which includes a year-over-year increase of $245.6 million in Vote 1 – Operating expenditures, $77.3 million increase in Vote 5 – Capital expenditures and a $20.5 million increase in Vote 10 – Grants and contribution. These increases are partially offset by a decrease of $19.7 million in Budgetary statutory authorities. The overall increase is primarily related to the net increase of $123.2 million in the 2017-18 Main Estimates and an increase of $91.4 million in Operating and Capital Budget Carry Forward. The increase is also attributed to a net increase of $70.0 million in compensation adjustments, an increase of $33.9 million in the Supplementary Estimates (B), an increase of $4.8 million in Paylist Requirements and an increase of $1.2 million in Proceeds from Disposal of Crown Assets. This increase is offset by a minor decrease of $0.7 million related to the in-year statutory adjustments.
Graph 1: Comparison of Total Budgetary Authorities as of December 31, 2016 and December 31, 2017 (in millions of dollars)
Comparison of Total Budgetary Authorities as of December 31, 2016 and December 31, 2017 (in millions of dollars)
|Supplementary Estimates (B)||$170||$136|
|TB Vote 15 – Compensation Adjustments||$70||$0|
|TB Vote 25 – Operating Budget Carry Forward||$140||$62|
|TB Vote 30 – Paylist Requirements||$38||$33|
|TB Vote 33 – Capital Budget Carry Forward||$37||$24|
|In-year Statutory Adjustments||$0||$1|
|Proceeds from Disposal of Crown Assets||$11||$10|
2.1.1 Variance in Vote 1 – Net Operating expenditure authorities
The increase of $245.7 million in Vote 1 – Net Operating expenditures, reflected in Table 1: Authorities Available for Use, is due to a year-over-year increase of $78.2 million in Operating Budget Carry Forward, an increase of $70.0 million related to compensation adjustments, an increase of $52.5 million in Main Estimates, an increase of $40.2 million in Supplementary Estimates (B) and an increase of $4.8 million in reimbursement of paylist requirements. The compensation increase is related to new collective agreements signed during this fiscal year for Public Service employees and pay matched civilian members as well as approved increase to regular member's compensation. The increase in Main Estimates is primarily related to funding for the settlement of class action lawsuits against the RCMP ($64.1 million) and funding for additional investigative resources to counter-terrorism ($7.2 million). These increases are partially offset by a reduction in Professional Services, Travel and Advertising ($8.1 million) as announced in Budget 2016 and a vote transfer from Operating Expenditures to Capital Expenditures for the implementation of a common definition for the capital expenditure vote ($7.7 million). Finally, the increase in Supplementary Estimates (B) is mainly attributable to funding for compensation adjustments for RCMP members ($60.1 million).
2.1.2 Variance in Vote 5 – Capital expenditure authorities
Capital authorities have increased by $77.3 million when compared to the third quarter of 2016-17 as a result of an increase of $13.3 million in Capital Budget Carry Forward and an overall increase of $80.7 million in the 2017-18 Main Estimates. This increase is offset by a decrease of $16.7 million in the 2017-18 Supplementary Estimates (B) as compared to 2016-17 Supplementary Estimates (B). The increase in Main Estimates is primarily due to the $46.7 million in funding received to maintain and upgrade federal infrastructure assets, $29.2 million in funding to replace the RCMP National Forensic Laboratory Services facilities, $8.7 million increase resulting from two reprofile requests related to National Operation Center (NOC) and $7.7 million related to the implementation of common definition vote transfer. These increases are partially offset by a sunset of funding related to various projects of detachments in Quebec and Ontario (Federal Infrastructure) ($11.2 million).
2.1.3 Variance in Vote 10 – Grants and contributions
The increase of $20.5 million in Vote 10 – Grants and contributions is mainly related to a year-over-year increase in the 2017-18 Main Estimates which is attributed 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 decrease in budgetary statutory authorities of $19.7 million primarily relates to decreases in Employee Benefit Plan costs resulting from in-year adjustments ($0.7 million) and a change in the rate used to calculate Employee Benefit Plans costs ($38.6 million). These decreases are offset by a year over year increase of $18.4 million related to Employee Benefit Plan in Supplementary Estimates (B) and a $1.2 million increase in the proceeds collected from the disposal of Crown assets.
|Vote 1 - Net Operating expenditures||2,271,932||2,026,302||245,629||12%|
|Vote 5 - Capital expenditures||375,079||297,738||77,341||26%|
|Vote 10 - Grants and contributions||228,573||208,073||20,500||10%|
|Budgetary statutory authorities||473,038||492,716||(19,678)||(4%)|
For more information on the authority changes impacting the RCMP we would direct the reader to our 2017-18 Main Estimates.
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, compared with 69% 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 that the net expenditures used during the third quarter of 2017-18 being 19% higher than the previous year; this is a result of Personnel being higher in 2017-18. A year-to-date comparison of gross expenditures reflects an increase of $438.5 million or 13% in 2017-18 over 2016-17. 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, 2016 and December 31, 2017 (in millions of dollars and percentage)
Comparison of Total Budgetary Authorities and Net Expenditures as of December 31, 2016 and December 31, 2017 (in millions of dollars and percentage)
|Total Budgetary Authorities||$3,349||$3,025|
|Net expenditures for the quarter||$2,477 (74%)||$2,078 (69%)|
2.2.1 Variance by Revenue
Vote netted revenue collected in 2017-18 is higher by $39.6 million (or 3%) over the same period last year. The increase in revenue collection is due to the increased salary costs, incremental growth and other operational requirements in Contract Policing Services.
2.2.2 Variance by Personnel
Personnel expenditures are $310.5 million (or 13%) higher when compared to 2016-17. The increase is primarily due to the higher basic salary and retroactive salary costs and higher employer contributions to pension and other employee benefits for regular members as a result of the approved regular member pay package. The basic salary and retroactive salary costs for the RCMP Public Service employees and Civilian Members are also higher as new collective agreements have been signed between the Treasury Board of Canada and a majority of the bargaining agents. In addition, the RCMP has experienced an increase in overtime costs which is attributable to higher retroactive overtime payments from prior years. The increase is also driven by higher operational requirements related to different incidents and events such as forest fires in British Columbia; protests in Muskrat Falls, Labrador; 150 Canada Day celebrations and asylum seekers.
2.2.3 Variance by Transportation and Telecommunications
Transportation and Telecommunications costs have increased by $18.0 million (or 11%) when compared to 2016-17. An increase of $12.1 million in Travel is due to higher training travel costs and operational requirements related to the 2018 G7 Summit, forest fires in British Columbia and other national security and peacekeeping missions. An increase of $10.0 million in Travel Advances is partially offset by a decrease of $5.8 million in Relocation costs. The shift of expenditures is a result of relocation services being performed by the RCMP as opposed to a third party. In previous years, the relocation-related costs were directly posted to Relocation, whereas in the new process, the costs are coded to Travel Advances first and then transferred to Relocation when actual expenditures incurred. The variance is partly due to timing of processing and clearing the claims, as well as improved data quality. It is also be explained in part by a recent major revision to the Relocation Directive, that saw some increased relocation benefits being approved for a retroactive application. The balance of increase is spread across the organization.
2.2.4 Variance by Rentals
Rental costs have increased by $25.8 million representing a year-over-year increase of 37%. This variance is primarily due to timing of the annual Systems Operating Lease and Maintenance payments. These payments were made to the Province of Alberta in the third quarter this fiscal year for the Alberta First Responders Radio Communication System, whereas they were made in the fourth quarter in 2016-17 due to delays associated with finalizing the agreement.
2.2.5 Variance by Acquisition of Land, Buildings, and Works
Acquisitions of Land, Buildings and Works expenditures have decreased by $10.7 million (or 18%) when compared to 2016-17. A decrease of $19.5 million is due to timing and payment requirements for the construction of operational building and a decrease of $3.6 million is due to completion of a few projects and timing issues for the on-going projects. These decreases are partially offset by an increase of $12.4 million as a result of higher expenditures associated with the Vancouver Forensic Laboratory relocation project.
2.2.6 Variance by Acquisition of machinery and equipment
Acquisition of machinery and equipment expenditures have increased by $20.5 million (or 21%) which is largely due to timing of vehicle and fit up equipment purchases ($14.4 million). Vehicles and fit up equipment are purchased as bulk orders and the purchases happen at different periods throughout the year. The higher costs are also driven by costs associated with the installation of new radio systems in the Provinces of Alberta and New Brunswick ($4.3 million). In addition, the costs have increased due to the purchase of investigational equipment in British Columbia ($1.2 million).
2.2.7 Variance by Transfer Payments
Transfer Payments expenditures are $22.8 million (or 16%) higher in 2017-18 as compared to 2016-17. It is primarily due to an increase of $22.1 million in 2017-18 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
Other subsidies and payments expenditures are $50.9 million (or 130%) higher in 2017-18 when compared to 2016-17. The increase is primarily due to an increase of $19.7 million resulting from timing of items being cleared from suspense accounts, and an increase of $17.5 million is related to the class action lawsuit settlement and a various legal settlements. Additional increase of $4.6 million in salary overpayments is due to the Phoenix pay system, and an increase of $1.9 million is due to timing issue of payments to Public Services and Procurement Canada (PSPC) for payment in lieu of taxes. The balance of increase is spread across the department.
|Transportation and telecommunications||178,473||160,490||17,983||11%|
|Professional and special services||300,036||307,336||(7,300)||(2%)|
|Repair and maintenance||57,410||52,467||4,943||9%|
|Utilities, materials and supplies||91,793||88,709||3,084||3%|
|Acquisition of land, buildings and works||48,945||59,637||(10,692)||(18%)|
|Acquisition of machinery and equipment||119,505||99,003||20,502||21%|
|Other subsidies and payments||90,083||39,165||50,918||130%|
|Total gross budgetary expenditures||3,774,188||3,335,641||438,547||13%|
|Less: Vote Netted Revenue||1,297,399||1,257,784||39,615||3%|
|Total net budgetary expenditures||2,476,789||2,077,857||398,932||19%|
3. Risks and uncertainties
The Departmental QFR reflects the results of the current fiscal period in relation to the Main Estimates, Supplementary Estimates (B), the Operating Budget Carry Forward and the Capital Budget Carry Forward, paylist expenditures reimbursement and compensation adjustments.
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. It also receives VNR authorities to bill Parliamentary Protective Service (PPS) for the provision of security services throughout the Parliamentary precinct and the grounds of Parliament Hill.
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 and to provide for certain other measures) received Royal Assent on June 19, 2017. As a result, the Public Service Labour Relations Act was renamed the Federal Public Sector Labour Relations Act (FPSLRA), and the Public Service Labour Relations and Employment Board was renamed the Federal Public Sector Labour Relations and Employment Board (FPSLREB). Since May 17, 2016, regular members and reservists have been free to support or join any employee organization they believe is best suited to represent them. The organization is not considered an official bargaining agent unless it is certified through the FPSLEB's certification process. Treasury Board (as the employer) and RCMP Member Labour Relations are currently working through the certification process to respond to the applications received from employee organizations. Once an employee organization has been certified by FPSLREB, the union would obtain the right to bargain collectively on behalf of the members and it would have exclusive rights to represent members with respect to all workplace issues.
Bill C-7 did not include civilian members as they will eventually be deemed to be appointed under the Public Service Employment Act (PSEA). It has been decided that the deeming of RCMP civilian members and their transfer to the Phoenix pay system will be put on hold until further notice. The original deeming date of April 26, 2018 has been extended to a date yet to be determined by the Treasury Board. The RCMP will continue working with Treasury Board of Canada Secretariat and Pubic Services and Procurement Canada to determine next steps and ensuring civilian members can be integrated into Phoenix pay system seamlessly.
On October 6, 2016, the RCMP announced that a settlement agreement had been reached between the RCMP and the plaintiffs in the Merlo and Davidson lawsuits filed on behalf of current and former female regular members, civilian members and public service employees. The settlement agreement includes an independent claims process with compensation for women working, or having worked, at the RCMP who experienced harassment, bullying or discrimination based on their gender or sexual orientation during their employment from September 16, 1974 until May 30, 2017. The settlement agreement was approved by the Federal Court on May 30, 2017. The 180-day claim period began on August 12, 2017 and the claim period will close on February 8, 2018. The assessment of claims is the responsibility of an Independent Assessor appointed by the Federal Court. Compensation awards are to be paid to successful claimants as claims are assessed and any unspent funding in this fiscal year will be carried over to the next fiscal year.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. In order to assess the financial integrity issues faced by the RCMP and serve as the basis for longer term strategic recommendations to the Minister of Public Safety and Preparedness, a comprehensive resourcing review was undertaken by KPMG in fiscal year 2016-17, and a final report was completed in May 2017. The review findings are now being assessed and used by the RCMP to develop recommendations for the Minister's consideration. The RCMP will continue working with the central agencies to pursue a long-term solution to address its funding requirements.
4. Significant changes in relation to operations, personnel and programs
There has been no significant change in relation to operations in the third quarter of 2017-18.
Commissioner Bob Paulson retired from the RCMP on June 30, 2017, after over 30 years of service. A selection process to identify a new RCMP Commissioner is currently underway. In the interim, Deputy Commissioner Daniel Dubeau is filling in the role of Acting Commissioner, in accordance with Section 15 of the Royal Canadian Mounted Police Act.
There has been no significant change in relation to programs in the third quarter of 2017-18.
Approved by Senior Officials
Original signed by
Daniel Dubeau, Acting Commissioner
Original signed by
Dennis Watters, CPA, CA, CFE
Chief Financial and Administrative Officer
Date: February 19, 2018
Annex A: Statement of Authorities (unaudited)
|Total available for use for the year ending |
March 31, 2018 Footnote 4
|Used during the quarter ended |
December 31, 2017
|Year to date used at quarter-end|
|Gross Operating expenditures||4,291,071||1,086,936||3,172,251|
|Less: Vote Netted Revenues||2,019,139||528,121||1,297,399|
|Vote 1 - Net Operating expenditures||2,271,932||558,815||1,874,852|
|Vote 5 - Capital expenditures||375,079||44,874||125,685|
|Vote 10 - Grants and contributions||228,573||52,753||157,534|
|Pensions and other employee benefits - Members of the Force||377,722||74,942||253,492|
|Contributions to employee benefit plans (public servants)||74,227||17,574||52,720|
|Pensions under the Royal Canadian Mounted Police Pension Continuation Act||10,000||1,906||5,961|
|Refunds of amounts credited to revenues in previous years||0||89||268|
|Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act||11,089||5,203||6,277|
|Total budgetary authorities||3,348,622||756,156||2,476,789|
|Total available for use for the year ending March 31, 2017 Footnote 4||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|
|Total budgetary authorities||3,024,830||823,843||2,077,857|
Annex B: Departmental budgetary expenditures by standard object (unaudited)
|Expenditures||Planned expenditures for the year ending March 31, 2018||Expended during the quarter ended December 31, 2017||Year to date used at quarter-end|
|Transportation and communications||195,126||60,549||178,473|
|Professional and special services||453,829||110,492||300,036|
|Repair and maintenance||103,567||25,358||57,410|
|Utilities, materials and supplies||136,807||30,767||91,793|
|Acquisition of land, buildings and works||101,545||21,714||48,945|
|Acquisition of machinery and equipment||304,812||44,217||119,505|
|Other subsidies and payments||229,961||45,454||90,083|
|Total gross budgetary expenditures||5,367,761||1,284,277||3,774,188|
|Less Revenues netted against expenditures:|
|Vote Netted Revenues||2,019,139||528,121||1,297,399|
|Total Revenues netted against expenditures:||2,019,139||528,121||1,297,399|
|Total net budgetary expenditures||3,348,622||756,156||2,476,789|
|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|
|Transportation and communications||181,503||52,808||160,490|
|Professional and special services||462,202||112,311||307,336|
|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|
|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|
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