Quarterly Financial Report - For the period ending September 30, 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, the Operating Budget Carry Forward and Capital Budget Carry Forward 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 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 September 30, 2017, the RCMP had $3,067.9 million in total authorities available for use, as reflected in Annex A: Statement of Authorities. This amount includes the Main Estimates, Operating Budget Carry Forward, Capital Budget Carry Forward and $7.8 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 $212.8 million, when compared to the previous year, which includes a year-over-year increase of $130.6 million in Vote 1 – Operating expenditures, $94.0 million increase in Vote 5 – Capital expenditures and a $28.6 million increase in Vote 10 – Grants and contribution. These increases are partially offset by a decrease of $40.4 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. Part of this increase is offset by a decrease of 1.1 million in the proceeds collected from the disposal of Crown assets and a minor decrease of $0.7 million related to the in-year statutory adjustments.
Graph 1: Comparison of Total Budgetary Authorities as of September 30, 2016 and September 30, 2017 (in millions of dollars)
Comparison of Total Budgetary Authorities as of September 30, 2016 and September 30, 2017 (in millions of dollars)
|TB Vote 25 – Operating Budget Carry Forward||$140||$62|
|TB Vote 33 – Capital Budget Carry Forward||$37||$24|
|In-year Statutory Adjustments||$0||$1|
|Proceeds from Disposal of Crown Assets||$8||$9|
2.1.1 Variance in Vote 1 – Net Operating expenditure authorities
The increase of $130.6 million in Vote 1 – Net Operating expenditures, reflected in Table 1: Authorities Available for Use, is due to a year-over-year increase of $78.1 million in Operating Budget Carry Forward and an increase of $52.5 million in the 2017-18 Main Estimates as compared to the previous year. 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, a vote transfer from Operating Expenditures to Capital Expenditures for the implementation of a common definition for the capital expenditure vote ($7.7 million), a sunset of funding to support security on Parliament Hill ($1.8 million) and a transfer to Treasury Board Secretariat to implement the new labour relations regime ($1.4 million).
2.1.2 Variance in Vote 5 – Capital expenditure authorities
Capital authorities have increased by $94.0 million when compared to the second 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. 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 $28.6 million in Vote 10 – Grants and contributions is 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 $40.4 million is related to a decrease of $38.6 million in the 2017-18 Main Estimates and is primarily associated to the decrease in Employee Benefit Plan costs due to a change in the rate used to calculate Employee Benefit Plan costs government wide. The decrease is also attributable to a decrease of $1.1 million in the proceeds collected from the disposal of Crown assets and a minor decrease of $0.7 million related to the in-year statutory adjustments.
|Vote 1 - Net Operating expenditures||2,027,954||1,897,309||130,645||7%|
|Vote 5 - Capital expenditures||365,073||271,116||93,957||35%|
|Vote 10 - Grants and contributions||223,573||194,973||28,600||15%|
|Budgetary statutory authorities||451,345||491,778||(40,433)||(8%)|
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 56% of its authorities at the end of the second quarter, compared with 44% 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 second quarter of 2017-18 being 37% higher than the previous year; this is a result of revenue collection being significantly lower than 2016-17 as well as Personnel being higher in 2017-18. A year-to-date comparison of gross expenditures reflects an increase of $287.5 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 September 30, 2016 and September 30, 2017 (in millions of dollars and percentage)
Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2016 and September 30, 2017 (in millions of dollars and percentage)
|Total Budgetary Authorities||$3,068||$2,855|
|Net expenditures for the quarter||$1,721 (56%)||$1,254 (44%)|
2.2.1 Variance by Revenue
Vote netted revenue collected in 2017-18 is lower by $179.1 million (or 19%) over the same period last year. The decrease is related to timing of invoice processing in Contract Policing Services. The final revenue collection for 2017-18 is anticipated to have a year-over-year increase of 3% as compared to 2016-17.
2.2.2 Variance by Personnel
Personnel expenditures are $235.9 million (or 15%) 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 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 due to increased operational requirements.
2.2.3 Variance by Repair and Maintenance
Repair and Maintenance costs have increased by $6.7 million representing a year-over-year increase of 26%. An increase of $3.3 million in the RCMP Depot Training Academy is due to design phase of a few large projects being completed last year and construction is starting this fiscal year, and an increase of $0.8 million is related to costs associated with the relocation of a forensic lab and upgrades to a detachment in the Northwest region. The balance is mainly due to timing of payments related to various projects.
2.2.4 Variance by Acquisition of Land, Buildings, and Works
Acquisitions of Land, Buildings and Works expenditures have decreased by $6.1 million (or 18%) when compared to 2016-17. A decrease of $11.2 million is due to timing of processing Interdepartmental Settlements by Public Services and Procurement Canada (PSPC) and a decrease of $2.0 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 $7.1 million as a result of higher expenditures associated with the Vancouver Forensic Laboratory relocation project.
2.2.5 Variance by Acquisition of machinery and equipment
Acquisition of machinery and equipment expenditures have increased by $22.3 million (or 42%) which is largely due to timing of vehicle and fit up equipment purchases ($16.9 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 due to a vehicle anti-theft program ($0.5 million) and the purchase of investigational equipment across of country ($1.2 million). The balance of increase is mainly due to timing issues related to a large payment to Shared Services Canada for the annual costs of the server network storage space, purchases of computer equipment for the ever-greening program and expenditures for the classified environment project.
2.2.6 Variance by Transfer Payments
Transfer Payments expenditures are $15.3 million (or 16%) higher in 2017-18 as compared to 2016-17. It is primarily due to an increase of $14.8 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.
2.2.7 Variance by Other subsidies and payments
Other subsidies and payments expenditures are $6.2 million (or 16%) higher in 2017-18 when compared to 2016-17. An increase of $15.4 million is due to timing issue of payments to PSPC for payment in lieu of taxes, an increase of $12.0 million in 2017-18 related to the class action lawsuit settlement, an increase of $3.6 million is the salary overpayments as a results of the Phoenix pay system and an increase of $1.6 million due to timing issue associated with the recovery of prisoner costs. These increases are partially offset by a decrease of $27.8 million which is due to the timing of items being cleared from suspense accounts.
|Transportation and telecommunications||117,924||107,682||10,242||10%|
|Professional and special services||189,544||195,025||(5,480)||(3%)|
|Repair and maintenance||32,052||25,374||6,678||26%|
|Utilities, materials and supplies||61,026||58,360||2,666||5%|
|Acquisition of land, buildings and works||27,231||33,350||(6,120)||(18%)|
|Acquisition of machinery and equipment||75,288||53,015||22,273||42%|
|Other subsidies and payments||44,629||38,393||6,236||16%|
|Total gross budgetary expenditures||2,489,911||2,202,382||287,529||13%|
|Less: Vote Netted Revenue||769,278||948,368||(179,090)||(19%)|
|Total net budgetary expenditures||1,720,633||1,254,014||466,619||37%|
3. Risks and uncertainties
The Departmental QFR reflects the results of the current fiscal period in relation to the Main Estimates, the 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. 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. This Bill establishes a new labour relations framework for the RCMP; one that will allow the employer and any future RCMP member bargaining agent to engage in meaningful discussions in good faith on topics of importance to RCMP members and reservists. The amended Federal Public Sector Labour Relations Act (formerly known as the Public Service Labour Relations Act) provides a labour relations process unique to the RCMP to allow regular members, special constable members and reservists to be represented by an employee organization of their choice, independent of RCMP management, and a process to engage in collective bargaining. Bill C-7 did not include civilian members as they will be deemed to be appointed under the Public Service Employment Act (PSEA) on April 26, 2018. Upon deeming, civilian members will be included in occupational groups with employees in the core public administration who perform the same work as civilian members. The civilian members will become part of that group's existing bargaining unit, and will be represented by the employee organization that has been certified as their unit's bargaining agent.
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 second 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 second 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: November 21, 2017
Annex A: Statement of Authorities (unaudited)
|Total available for use for the year ending |
March 31, 2018 Footnote 4
|Used during the quarter ended |
September 30, 2017
|Year to date used at quarter-end|
|Gross Operating expenditures||4,012,668||1,054,761||2,085,315|
|Less: Vote Netted Revenues||1,984,714||448,835||769,278|
|Vote 1 - Net Operating expenditures||2,027,954||605,926||1,316,037|
|Vote 5 - Capital expenditures||365,073||61,732||80,811|
|Vote 10 - Grants and contributions||223,573||52,727||104,781|
|Pensions and other employee benefits - Members of the Force||363,215||78,429||178,550|
|Contributions to employee benefit plans (public servants)||70,294||17,573||35,146|
|Pensions under the Royal Canadian Mounted Police Pension Continuation Act||10,000||1,949||4,055|
|Refunds of amounts credited to revenues in previous years||96||179|
|Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act||7,836||1,074||1,074|
|Total budgetary authorities||3,067,945||819,506||1,720,633|
|Total available for use for the year ending March 31, 2017 Footnote 4||Used during the quarter ended September 30, 2016||Year to date used at quarter-end|
|Gross Operating expenditures||3,830,540||1,003,139||1,841,111|
|Less: Vote Netted Revenues||1,933,231||458,783||948,368|
|Vote 1 - Net Operating expenditures||1,897,309||544,356||892,743|
|Vote 5 - Capital expenditures||271,116||41,270||62,145|
|Vote 10 - Grants and contributions||194,973||44,965||89,552|
|Pensions and other employee benefits - Members of the Force||395,891||78,425||164,035|
|Contributions to employee benefit plans (public servants)||75,916||18,846||37,692|
|Pensions under the Royal Canadian Mounted Police Pension Continuation Act||11,000||2,379||4,826|
|Refunds of amounts credited to revenues in previous years||1,052||1,064|
|Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act||8,971||1,957||1,957|
|Total budgetary authorities||2,855,176||733,250||1,254,014|
Annex B: Departmental budgetary expenditures by standard object (unaudited)
|Expenditures||Planned expenditures for the year ending March 31, 2018||Expended during the quarter ended September 30, 2017||Year to date used at quarter-end|
|Transportation and communications||187,553||55,588||117,924|
|Professional and special services||436,214||106,587||189,544|
|Repair and maintenance||99,547||19,597||32,052|
|Utilities, materials and supplies||131,496||32,988||61,026|
|Acquisition of land, buildings and works||98,754||23,056||27,231|
|Acquisition of machinery and equipment||295,953||52,374||75,288|
|Other subsidies and payments||222,733||22,987||44,629|
|Total gross budgetary expenditures||5,052,659||1,268,341||2,489,911|
|Less Revenues netted against expenditures:|
|Vote Netted Revenues||1,984,714||448,835||769,278|
|Total Revenues netted against expenditures:||1,984,714||448,835||769,278|
|Total net budgetary expenditures||3,067,945||819,506||1,720,633|
|Expenditures||Planned expenditures for the year ending March 31, 2017||Expended during the quarter ended September 30, 2016||Year to date used at quarter-end|
|Transportation and communications||175,109||51,399||107,682|
|Professional and special services||445,919||129,405||195,025|
|Repair and maintenance||100,297||14,993||25,374|
|Utilities, materials and supplies||128,789||31,509||58,360|
|Acquisition of land, buildings and works||74,699||24,560||33,350|
|Acquisition of machinery and equipment||226,727||32,325||53,015|
|Other subsidies and payments||102,037||36,714||38,393|
|Total gross budgetary expenditures||4,788,407||1,192,033||2,202,382|
|Less Revenues netted against expenditures:|
|Vote Netted Revenues||1,933,231||458,783||948,368|
|Total Revenues netted against expenditures:||1,933,231||458,783||948,368|
|Total net budgetary expenditures||2,855,176||733,250||1,254,014|
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