Quarterly financial report, for the quarter ended September 30, 2013


Table of Contents


This quarterly report 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. This quarterly report should be read in conjunction with the Main Estimates, Supplementary Estimates, Quarterly Financial Report as of June 30, 2013 as well as Canada's Economic Action Plan 2012 (Budget 2012). This report has not been subject to an external audit or review.

Correctional Service Canada (CSC), as part of the criminal justice system and respecting the rule of law, contributes to public safety by actively encouraging and assisting offenders to become law-abiding citizens, while exercising reasonable, safe, secure and humane control. It delivers its mandate under four major program activities. A summary description of CSC's program activities can be found in Part II of the Main Estimates.

CSC contributes to public safety by administering court-imposed sentences for offenders sentenced to two years or more. Â This involves managing institutions of various security levels and supervising offenders on different forms of conditional release, while assisting them to become law-abiding citizens. CSC also administers post-sentence supervision of offenders with Long Term Supervision Orders for up to ten years.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the CSC's spending authorities granted by Parliament and those used by the department, consistent with the Main Estimates and Supplementary Estimates A for the 2013-2014 fiscal year, for which full supply was released on June 20, 2013Footnote 1. 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.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates, i.e., these authorities did not take into consideration any effect from the Deficit Reduction Action Plan.

In fiscal year 2012-2013, frozen allotments were established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In 2013-2014, the changes to departmental authorities were reflected in the 2013-2014 Main Estimates tabled in Parliament.

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.

CSC uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental reporting process. Â However, the spending authorities voted by Parliament remain on an expenditure basis.

CSC has an active Revolving Fund (CORCAN) which is included in the statutory votes of the enclosed Statement of Authorities. CORCAN's purpose is to aid in the safe reintegration of offenders into Canadian society by providing employment and training opportunities to offenders incarcerated in federal penitentiaries and, for brief periods of time, after they are released into the community. CORCAN has a continuing non-lapsing authority from Parliament to make payments out of the Consolidated Revenue Fund (CRF) for working capital, capital acquisitions and temporary financing of accumulated operating deficits, the total of which is not to exceed $5.0 million at any time.

Highlights of Fiscal Quarter End and Fiscal Year to Date (YTD) Results

Authorities Analysis

As reflected in the attached Statement of Authorities, as of September 30, 2013, CSC has seen a reduction in total authorities of $585.7 million for the current fiscal year compared to the previous fiscal year. This represents an 18.4% decrease over the total authorities available as of September 30, 2012.

The following table summarizes the variances in total authorities by vote between September 30, 2012 and September 30, 2013. The items highlighted in yellow represent the decrease that occurred in the second quarter of 2013-14.

(in millions of dollars)
(Vote 25)
(Vote 30)
AuthoritiesFootnote 2
Quarterly Financial Report as of June 30, 2013
CSC Accommodation Plan 2013-2018 (165.3) (19.8) (18.8) (203.9)
Budget 2012 Saving Measures (Deficit Reduction Action Plan) (154.3) - (15.9) (170.2)
Reprofiling among fiscal years - (81.1) - (81.1)
Collective Agreements Renewals 20.9 - 4.2 25.1
National Capital, Accommodation and Operations Plan 1.1 - (0.1) 1.0
Other (0.3) - 1.0 0.7
Quarterly Financial Report as of September 30, 2013
Operating Budget Carry-forward (53.3) - - (53.3) Capital Budget Carry-forward - (91.1) - (91.1) Reimbursement of personnel costs (12.4) - - (12.4) Disposal of Crown Assets - (0.5) - (0.5)
Total (363.6) (192.5) (29.6) (585.7)

Variances in Authorities for the Period of October 1st, 2012 to June 30, 2013Footnote 3

Through CSC 2013-2018 Accommodation Plan, funding has been reduced by $203.9 million. As part of the Plan, CSC's reference levels were reduced by $165.3 million in operating, $19.8 million in capital and $18.8 million in Employee Benefit Plan. This reduction in operating is associated with the return of funds related to projected inmate population growth which has not materialized for the Tackling Violent Crime Act and the Truth in Sentencing Act. The reduction in capital of $19.8 million is the result of two adjustments. Capital funding was reduced by $89.8 million to reflect the inmate population growth that has not materialized and an increase of $70.0 million was provided to address the ongoing capitalized maintenance requirements of existing and planned additional units within existing institutions.

The $170.2 million relates to savings identified as part of the Budget 2012 (Deficit Reduction Action Plan).

There was a reduction in capital vote reference levels of $81.1 million due to reprofiling of capital funding among fiscal years. It is attributable to the Construction Portfolio ($12.3 million), the reduction in opening reference level relating to the Truth in Sentencing Act ($57.6 million), the Strategic Review Reallocation ($10.8 million) and other adjustments ($0.4 million).

In the first quarter of 2013-2014, CSC received $25.1 million for Collective Agreement renewals.

The $1.0 million increase for the National Capital, Accommodation & Operations Plan (NCAOP) represents a net adjustment from previous years' plans. These changes are based on funding formulae driven by variations in Consumer Price Index and offender population levels, both incarcerated and in the community, as well as changes to the offender profile.

Variances in Authorities for the Period of July 1st, 2013 to September 30, 2013

As of September 30, CSC request to carry forward operating and capital funds in 2013-14Footnote 4 was not yet approved by Treasury Board and therefore resulted in a reduction in authorities of $53.3 million in operating and $91.1 million in capital funds.

The reduction of $12.4 million is attributable to a timing difference in the reception of funds from Treasury Board to supplement other appropriations for requirements related to parental and maternity allowances, and for entitlements on cessation of service or employment.

Quarterly Expenditures Analysis

Compared to the second quarter of the previous fiscal year, total net budgetary expenditures have increased by $4.0 million (0.6%). In the same manner, the total year-to-date expenditures have slightly increased by $0.4 million (0.03%).

(in millions of dollars)
Departmental Budgetary Expenditures Year
Total Net Budgetary Expenditures 2012-2013 1,171.5 649.1
Total Net Budgetary Expenditures 2013-2014 1,171.9 653.1
Variance 0.4 4.0
Explanation of Variances by Standard Object
  • Professional and special services
(9.3) 4.8
  • Other
9.7 Â (0.8)
  • Total
0.4 4.0

Year-To-Date Expenditures Analysis and Quarter Over Quarter Expenditures Analysis

The decrease of $9.3 million in year-to-date expenditure and the increase of $4.8 million in quarter over quarter expenditure in professional and special services expenditures are mainly due to a modification in the Correctional and Training feeFootnote 5 invoicing process between CSC and CORCAN that resulted from a difference in the timing of the expenditure. In 2012-2013, CSC had completely paid the Training fee invoice to CORCAN during the first quarter whereas in 2013-2014 CORCAN is invoicing CSC throughout the year.

Spending Trend Analysis

Overall, CSC's trend in annual budgetary expenditures is consistent with 2012-2013. CSC's spending trend in the second quarter of 2013-2014 is comparable to the same quarter last year ($653.1 million versus $649.1 million).

Although the Deficit Reduction Action Plan saving measures will reduce CSC's expenditures as measures are implemented as planned later in the year, it is expected that CSC's total expenditures for the current fiscal year will increase compared to 2012-2013. This forecasted expenditures increase is mostly attributable to:

Risks and Uncertainties

CSC's Report on Plans and Priorities (RPP) identifies the current risk environment and CSC's key risk areas to the achievement of its strategic outcomes. Within this context, specific financial risks relative to the second quarter include the following:

On November 5, 2013, the Treasury Board of Canada and the Union of Canadian Correctional Officers have ratified a new collective agreement (retroactive to June 1, 2010) that has resulted in significant financial impact for CSC. For fiscal year 2013-14, the financial impact of this settlement is estimated to be up to $90.5 million and approximately $30 million annually for future years (including the employer's share of Employee Benefit Plan). The 2012-13 Departmental Performance Report provides additional details regarding the carry forward of funds in 2013-14 that will be mainly used to cover the increase in salary. As part of this new agreement, the accumulation of severance benefits under the employee severance pay program will cease and the employees will be given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. Although CSC will report an increase in salary expenditures due to the one-time severance payments, it will not create an additional financial pressure for CSC since additional funding will be provided by the Treasury Board of Canada to cover these costs.

CSC continues to implement measures to address the budgetary constraints resulting from the Expenditure Restraint ActFootnote 6, including:

Significant Changes in Relation to Operations, Personnel and Programs

During the second quarter of 2013-2014, CSC completed the closure of three institutions (Kingston Penitentiary and the Regional Treatment Centre in Ontario and Leclerc Institution in Quebec) as previously announced on April 19, 2012 by the federal government.

All transfers of inmates were made in accordance with the Corrections and Conditional Release Act, and risk assessments were performed by CSC before transferring an offender to a facility that meets his or her security and programming needs.

CSC has put in place a comprehensive plan to accommodate staff impacted by the closures, with the majority of affected staff being redeployed to other facilities or other institutions nearby.

CSC is currently building additional new units within existing institutions to accommodate the increase in offender population due to the implementation of the Tackling Violent Crime Act and the Truth in Sentencing Act. Most staff affected by the closure of the institutions have been accommodated and will remain on strength to meet the staffing requirements as new accommodation units come on-line.

Statement of Authorities (unaudited)

(in thousands of dollars)
Fiscal Year 2013-2014 Fiscal Year 2012-2013
Expenditures Total available for use for the year ending
March 31, 2014*
Used during the quarter ended September 30, 2013 Year to date used at quarter-end Total available for use for the year ending
March 31, 2013*, **
Used during the quarter ended September 30, 2012 Year to date used at quarter-end
Vote 25 ’ Operating Expenditures 2,008,952 495,546 927,928 2,372,554 474,668 919,055
Vote 30 ’ Capital Expenditures 355,545 94,698 125,173 547,554 100,532 120,206
Budgetary Statutory Authorities
CORCAN Gross Expenditures 87,201 20,841 37,589 86,633 19,448 37,120
CORCAN Gross Revenues (87,201) (16,258) (35,313) (86,633) (11,270) (36,270)
CORCAN Net Expenditures (Revenues) - 4,583 2,276 - 8,178 850
Contributions to employee benefit plans 233,117 58,279 116,558 262,737 65,685 131,369
Spending of proceeds from the disposal of surplus Crown assets 1,449 - - 1,956 - -
Total Budgetary Authorities 2,599,063 653,106 1,171,935 3,184,801 649,063 1,171,480
Non-Budgetary Authorities 70 - - 46 - -
Total Authorities 2,599,133 653,106 1,171,935 3,184,847 649,063 1,171,480

More information is available on the following page.

* Includes only Authorities that were available for use and granted by Parliament as of quarter end.

** Total available for use does not reflect measures announced in Budget 2012.

Departmental Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)
Expenditures Fiscal Year 2013-2014 Fiscal Year 2012-2013
Planned expenditures for the year ending
March 31, 2014**
Expended during the quarter ended
September 30, 2013
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2013*, **
Expended during the quarter ended
September 30, 2012
Year to date used at quarter-end
Personnel 1,614,750 432,584 847,629 1,810,767 424,681 844,236
Transportation and communications 60,641 6,802 12,673 73,847 6,160 12,354
Information 1,931 137 311 2,113 175 326
Professional and special services 356,414 73,649 125,011 471,045 68,810 134,322
Rentals 16,847 5,404 8,336 20,496 3,801 6,228
Repair and maintenance 46,327 5,294 8,055 63,199 4,452 7,099
Utilities, materials and supplies 149,888 27,003 49,129 183,094 27,453 48,498
Acquisition of land, buildings and works 280,725 82,452 108,924 394,598 87,441 103,902
Acquisition of machinery and equipment 76,268 6,696 8,745 154,912 9,404 12,133
Transfer payments 958 30 151 1,590 278 278
Other subsidies and payments 81,515 29,313 38,284 95,773 27,678 38,374
Total Gross Budgetary Expenditures 2,686,264 669,364 1,207,248 3,271,434 660,333 1,207,750
Less Revenues Netted Against Expenditures
CORCAN (87,201) (16,258) (35,313) (86,633) (11,270) (36,270)
Total Net Budgetary Expenditures 2,599,063 653,106 1,171,935 3,184,801 649,063 1,171,480

* Planned expenditures do not reflect measures announced in Budget 2012.

** The variations in planned expenditures by Standard Object in 2013 are attributable to the implementation of Budget 2012 Saving Measures as well as the return of operating and capital funds associated with the CSC Accommodation Plan 2013-2018.


Footnote 1

Released through Orders in Council P.C. 2013-0827 and P.C. 2013-0828.

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Footnote 2

Represent CSC's allocation of the employer's share of Employee Benefit Plan.

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Footnote 3

Quarterly Financial Report as of June 30, 2013

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Footnote 4

For 2013-14, CSC requested the authority from Treasury Board to carry forward $115.3 million in operating and $101.8 million in capital funds.

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Footnote 5

The Correctional and Training fee's purpose is to offset salary and operating costs that cannot be recovered by CORCAN through the sale of goods and services due to the correctional environment in which it operates.

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Footnote 6

As of 2013-2014, CSC is receiving the funding for the increase in salary; however, CSC has to cover the salary increase for signed agreement for 2010-2011, 2011-2012 and 2012-2013.

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