Quarterly Financial Report - For the period ending September 30, 2018
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 for 2018-19, as well as Budget 2018. 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 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 2018-19 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 September 30, 2018, the RCMP had $3,715.9 million in total authorities available for use, as reflected in Annex A: Statement of Authorities. This amount includes the Main Estimates, transfer from Treasury Board (TB) Central Vote 40 - Budget 2018 implementation, Operating Budget Carry Forward, Capital Budget Carry Forward and proceeds collected from the disposal of Crown assets, as displayed in Graph 1: Comparison of Total Budgetary Authorities below.
Total authorities have increased by $648.1 million, when compared to the previous year, which includes a year-over-year increase of $612.7 million in Vote 1 – Operating expenditures, a $30.1 million increase in Vote 10 – Grants and contribution and a $24.6 million increase in Budgetary statutory authorities. These increases are partially offset by a decrease of $19.3 million in Vote 5 – Capital expenditures. The overall increase is primarily related to the net increase of $658.1 million in the 2018-19 Main Estimates, an increase of $10.0 million related to Budget 2018 item received through a transfer from TB Central Vote 40 and an increase of $1.5 million in the proceeds collected from the disposal of Crown assets. Part of this increase is offset by a decrease of $21.0 million in Operating and Capital Budget Carry Forward.
Graph 1: Comparison of Total Budgetary Authorities as of September 30, 2017 and September 30, 2018 (in millions of dollars)
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Comparison of Total Budgetary Authorities as of September 30, 2017 and September 30, 2018 (in millions of dollars)
Comparison of Total Budgetary Authorities as of September 30, 2017 and September 30, 2018 (in millions of dollars) 2018-19 2017-18 Main Estimates $3,541 $2,883 TB Vote 40 – Budget Implementation $10 $0 TB Vote 25 – Operating Budget Carry Forward $100 $140 TB Vote 33 – Capital Budget Carry Forward $56 $37 Proceeds from Disposal of Crown Assets $9 $8 Totals $3,716 $3,068
| Authorities | 2018-19 | 2017-18 | Variance | % |
|---|---|---|---|---|
| Vote 1 - Net Operating expenditures | 2,640,617 | 2,027,954 | 612,664 | 30% |
| Vote 5 - Capital expenditures | 345,781 | 365,073 | (19,293) | (5%) |
| Vote 10 - Grants and contributions | 253,673 | 223,573 | 30,100 | 13% |
| Budgetary statutory authorities | 475,923 | 451,345 | 24,578 | 5% |
| Total Authorities | 3,715,994 | 3,067,945 | 648,049 | 21% |
For more information on the authority changes impacting the RCMP we would direct the reader to our 2018-19 Main Estimates.
2.1.1 Variance in Vote 1 – Net Operating expenditure authorities
The increase of $612.7 million in Vote 1 – Net Operating expenditures, reflected in Table 1: Authorities Available for Use, is due to a year-over-year increase in the 2018-19 Main Estimates as compared to the previous year and is partially offset by a decrease in Operating Budget Carry Forward. The increase is primarily related to a new funding model for the Contract Policing program ($500.1 million). This one-time, fiscally-neutral technical adjustment increase in appropriations will be largely offset by an equal increase in non-respendable non-taxable revenue to be deposited in the Consolidated Revenue Fund. The overall federal portion of the cost to deliver contract policing services remains consistent with prior year increases. The increase is also related to funding for the 2018 G7 Summit in Charlevoix, Quebec ($126.9 million) and negotiated salary adjustments for RCMP regular members, Civilian Members and Public Service employees ($61.8 million). These increases are partially offset by sunsetting funding related to the Merlo-Davidson class action settlement agreement ($63.7 million) and Canada's Migrant Smuggling Enforcement Strategy ($3.7 million). The decrease in Operating Budget Carry Forward is related to the fact that the organization in 2018-19 as apposed to 2017-18 did not seek to carry forward lapsed funding in both the regular allotment and Contract Policing program.
2.1.2 Variance in Vote 5 – Capital expenditure authorities
Capital authorities have decreased by $19.3 million when compared to the second quarter of 2017-18 as a result of an overall decrease in the 2018-19 Main Estimates and partially offset by an increase in Capital Budget Carry Forward. The decrease is primarily due to six reduction in funding level related to: funding received to maintain and upgrade federal infrastructure assets ($21.7 million); replacing the RCMP National Forensic Laboratory Services facilities ($6.1 million); the National Operation Center (NOC) ($5.8 million); funding for the RCMP's Contract Policing program ($4.9 million); funding to expand biometric screening in Canada's immigration system ($1.2 million); and funding for the security infrastructure of the Rideau Cottage official residence ($1.2 million). These decreases are partially offset by an increase in funding to implement and administer a federal framework to legalize and regulate Cannabis ($2.5 million).
2.1.3 Variance in Vote 10 – Grants and contributions
The increase of $30.1 million in Grants and contributions authorities is related to changes in the 2018-19 Main Estimates for projected costs of the grant to compensate members of the RCMP for injuries received in the performance of their duties. The increase is as a result of a higher number of Members receiving disability pension awards and the indexation of disability pension benefits.
2.1.4 Variance in Budgetary statutory authorities
The increase in budgetary statutory authorities of $24.6 million is primarily related to changes in the 2018-19 Main Estimates. They include an increase of $24.1 million in Employee Benefit Plan costs related to new initiatives and a change in the rate used to calculate Employee Benefit Plan costs government wide and an increase in the proceeds collected from the disposal of Crown assets ($1.5 million). These increases are offset by reduction in funding for the Pension Continuation Act (PCA) statutory grant ($1.8 million) as there are fewer recipients.
2.2 Statement of Departmental Budgetary Expenditures by Standard Object
The RCMP has spent approximately 52% of its authorities at the end of the second quarter, compared with 56% 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.
Graph 2: Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2017 and September 30, 2018 (in millions of dollars and percentage)
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Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2017 and September 30, 2018 (in millions of dollars and percentage)
Comparison of Total Budgetary Authorities and Net Expenditures as of September 30, 2017 and September 30, 2018 (in millions of dollars and percentage) 2018-19 2017-18 Total Budgetary Authorities $3,716 $3,068 Net expenditures as at September 30 $1,934 (52%) $1,721 (56%)
Table 2: Net Expenditures by standard objects at the end of the second quarter 2018-19 was at 12% or $212.9 million higher than the previous year. This variance is primarily the result of an increase in gross budgetary expenditures of $134.4 million (or 5%) from the previous, in addition to $78.5 million (or 10%) in decreased revenue collections. A detailed review by standard object emphasizes some significant variances which are described below.
| Standard Objects | 2018-19 | 2017-18 | Variance | % |
|---|---|---|---|---|
| Personnel | 1,683,735 | 1,783,084 | (99,349) | (6%) |
| Transportation and telecommunications | 129,310 | 117,924 | 11,386 | 10% |
| Information | 929 | 810 | 119 | 15% |
| Professional and special services | 220,746 | 189,544 | 31,202 | 16% |
| Rentals | 84,153 | 45,687 | 38,466 | 84% |
| Repair and maintenance | 34,600 | 32,052 | 2,548 | 8% |
| Utilities, materials and supplies | 74,627 | 61,026 | 13,601 | 22% |
| Acquisition of land, buildings and works | 37,924 | 27,231 | 10,693 | 39% |
| Acquisition of machinery and equipment | 110,031 | 75,288 | 34,743 | 46% |
| Transfer payments | 183,348 | 112,636 | 70,712 | 63% |
| Public debt charges | 375 | - | 375 | 0% |
| Other subsidies and payments | 64,575 | 44,629 | 19,946 | 45% |
| Total gross budgetary expenditures | 2,624,353 | 2,489,911 | 134,442 | 5% |
| Less: Vote Netted Revenue | 690,825 | 769,278 | (78,453) | (10%) |
| Total net budgetary expenditures | 1,933,528 | 1,720,633 | 212,895 | 12% |
2.2.1 Variance by Revenue
Vote netted revenue collected by the end of the second quarter of 2018-19 decreased by $78.5 million (or 10%) over the same period last year. This decrease is for the most part related to the change in Contract Policing revenue collection process. 2018-19 is the first year of implementation of the new Contract Policing Funding Formula, whereby revenues related to indirect costs are deposited to the Consolidated Revenue Fund instead of being re-spendable as reported in 2017-18.
2.2.2 Variance by Personnel
Personnel expenditures are $99.3 million (or 6%) lower when compared to 2017-18. The decrease is primarily due to retroactive salary payments that occurred in the first quarter of 2017-18, in addition to an associated decrease of $19 million for employee benefit plan costs. This significant decrease was partially offset by the ongoing impact of the new rates of pay and increased overtime and extra duty pay costs for security related to the G7 Summit, in Charlevoix Quebec.
2.2.3 Variance by Information
Information expenditures increased by $0.1 M (or 15%) over 2017-18 and is mainly due to differences in the timing of expenditures and increased production of Police Community Relations publications.
2.2.4 Variance by Professional and special services
Professional and Special Services have increased by $31.2 million (or 16%) when compared to 2017-18. The increase is primarily due to an increase $7.8 million in expenditures related to the G7 Summit, increased expenditures of $5 million for Information Management and Information Technology projects as well as $3.7 million due to timing and billing of radio services. Additionally health costs for regular members and pensioners have increased by $3.3 million. The remaining increases can be attributed to invoicing timing differences, as well as incremental professional services in support of the administration of the Merlo-Davidson class action settlement agreement.
2.2.5 Variance by Rentals
Rentals have increased by $38.5 million (or 84%) when compared to 2017-18. This increase is primarily due to increased costs incurred for security costs related to the G7 Summit.
2.2.6 Variance by Utilities, materials and supplies
Utilities, Materials and Supplies have increased by $13.6 million (or 22%) in comparison to 2017-18. This is mainly due to increased costs of $6.2 million incurred for security related to the G7 Summit, and increased fuel expenditures of $5.3 million. The remaining variance is attributed for the most part to timing differences of invoices throughout the organization.
2.2.7 Variance by Acquisition of machinery and equipment
Acquisitions of Land, Buildings and Works expenditures have increased by $10.7 million (or 39%) when compared to 2017-18. This increase primarily relates to $8.5 million for the construction of the new Vancouver laboratory. The remaining variance is largely related to various construction projects.
2.2.8 Variance by Acquisition of machinery and equipment
Increased expenditures for the acquisition of machinery and equipment of $34.7 million (or 46%) in comparison to 2017-18 is primarily due to $23.5 million in security costs related to security costs for the G7 Summit, $7.4 million related to the timing of radio purchases, and $3.5 million for the purchase of a rotary winged aircraft. The remaining variance is largely as a result of timing differences in the vehicle bulk purchases, the acquisition of annual inventories, information management and information technology invoices, and investigational aids.
2.2.9 Variance by Transfer payments
Increases of $70.7 million (or 63%) related to Transfer Payments are 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.
2.2.10 Variance by Public debt charges
The $0.4 million (or 100%) increase in expenditures is due to a government wide coding change. Previously these expenditures were captured under Other Subsidies and payments as was the case in 2017-18.
2.2.11 Variance by Other subsidies and payments
Other subsidies and payments have increased by $19.9 million (or 45%) in comparison to 2017-18. This is mainly due to increased payouts of claims as part of the Merlo-Davidson class action settlement agreement.
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. The RCMP 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.
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 was approved by the Federal Court and 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 assessment of claims is the responsibility of an Independent Assessor appointed by the Federal Court. The window in which class members could file claims ran from August 12, 2017 to May 22, 2018. According to statistics posted on the Independent Assessor's website, a total of 3,131 claims were filed. As claims are assessed by the Independent Assessor, compensation awards are currently being paid to claimants in accordance with the terms of the settlement.
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 continues to create unanticipated 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, and a final report was completed in May 2017. The review findings have been assessed and the RCMP will be returning to Government with a fulsome Departmental Review in the fall of 2018, with the expectation that longer term options related to addressing the resourcing issues will be presented.
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 second quarter of 2018-19.
4.2 Personnel
There has been no significant change in relation to operations in the second quarter of 2018-19.
4.3 Programs
There has been no significant change in relation to operations in the second quarter of 2018-19.
Approved by Senior Officials
Approved by:
Original signed by
Brenda Lucki, Commissioner
Original signed by
Dennis Watters, CPA, CA
Chief Financial and Administrative Officer
Ottawa, Canada
Date: November 29, 2018
Annex A: Statement of Authorities (unaudited)
| Total available for use for the year ending March 31, 2019 Footnote 4 | Used during the quarter ended September 30, 2018 | Year to date used at quarter-end | |
|---|---|---|---|
| Gross Operating expenditures | 4,340,605 | 1,134,171 | 2,138,488 |
| Less: Vote Netted Revenues | 1,699,988 | 282,970 | 690,825 |
| Vote 1 - Net Operating expenditures | 2,640,617 | 851,201 | 1,447,663 |
| Vote 5 - Capital expenditures | 345,781 | 70,730 | 104,263 |
| Vote 10 - Grants and contributions | 253,673 | 120,275 | 179,811 |
| Pensions and other employee benefits - Members of the Force | 398,850 | 79,666 | 164,705 |
| Contributions to employee benefit plans (public servants) | 59,526 | 14,871 | 29,743 |
| Pensions under the Royal Canadian Mounted Police Pension Continuation Act | 8,250 | 1,791 | 3,537 |
| Refunds of amounts credited to revenues in previous years | 0 | 174 | 693 |
| Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act | 9,297 | 3,111 | 3,113 |
| Court Awards | 0 | 0 | 0 |
| Statutory Authorities | 475,923 | 99,613 | 201,791 |
| Total budgetary authorities | 3,715,994 | 1,141,819 | 1,933,528 |
| 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 | 0 | 96 | 179 |
| Proceeds from the Disposal of Crown Assets under the Surplus Crown Assets Act | 7,836 | 1,074 | 1,074 |
| Court Awards | 0 | 0 | 0 |
| Statutory Authorities | 451,345 | 99,121 | 219,004 |
| Total budgetary authorities | 3,067,945 | 819,506 | 1,720,633 |
Annex B: Departmental budgetary expenditures by standard object (unaudited)
| Planned expenditures for the year ending March 31, 2019 | Expended during the quarter ended September 30, 2018 | Year to date used at quarter-end | |
|---|---|---|---|
| Expenditures: | |||
| Personnel | 3,472,759 | 873,024 | 1,683,735 |
| Transportation and communications | 213,982 | 61,769 | 129,310 |
| Information | 4,420 | 592 | 929 |
| Professional and special services | 476,993 | 124,920 | 220,746 |
| Rentals | 123,145 | 50,703 | 84,153 |
| Repair and maintenance | 103,525 | 21,227 | 34,600 |
| Utilities, materials and supplies | 144,048 | 39,308 | 74,627 |
| Acquisition of land, buildings and works | 116,855 | 28,115 | 37,924 |
| Acquisition of machinery and equipment | 276,536 | 61,102 | 110,031 |
| Transfer payments | 261,924 | 63,166 | 183,348 |
| Public debt charges | 375 | 187 | 375 |
| Other subsidies and payments | 221,420 | 100,676 | 64,575 |
| Total gross budgetary expenditures | 5,415,982 | 1,424,789 | 2,624,353 |
| Less Revenues netted against expenditures: | |||
| Vote Netted Revenues | 1,699,988 | 282,970 | 690,825 |
| Total Revenues netted against expenditures: | 1,699,988 | 282,970 | 690,825 |
| Total net budgetary expenditures | 3,715,994 | 1,141,819 | 1,933,528 |
| Planned expenditures for the year ending March 31, 2018 | Expended during the quarter ended September 30, 2017 | Year to date used at quarter-end | |
|---|---|---|---|
| Expenditures: | |||
| Personnel | 3,245,090 | 870,579 | 1,783,084 |
| Transportation and communications | 187,553 | 55,588 | 117,924 |
| Information | 3,742 | 454 | 810 |
| Professional and special services | 436,214 | 106,587 | 189,544 |
| Rentals | 98,004 | 25,655 | 45,687 |
| 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 |
| Transfer payments | 233,573 | 58,476 | 112,636 |
| Public debt charges | 0 | 0 | 0 |
| 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 |
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