Quarterly financial report, for the quarter ended December 31, 2019

Table of Contents


This quarterly report has been prepared by management of Correctional Service of Canada (CSC) 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 and the Quarterly Financial Report for the quarter as at June 30, 2019 and September 30, 2019.This report has not been subject to an external audit or review.

The purpose of the federal correctional system, as defined by law, is to contribute to the maintenance of a just, peaceful and safe society by carrying out sentences imposed by courts through the safe and humane custody and supervision of offenders; and by assisting the rehabilitation of offenders and their safe reintegration into the community as law-abiding citizens through the provision of programs in penitentiaries and in the community (Corrections and Conditional Release Act, s.3). A summary description of CSC’s program activities can be found in Part II of the Main Estimates and the Departmental Plan 2018-2019.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes CSC’s spending authorities granted by Parliament and those used by the organization, consistent with the Main Estimates for the 2019-2020 fiscal year for which full supply was released on June 25, 2019 Endnote i as well as Supplementary Estimates (A) for 2019-2020 for which full supply was released on December 16, 2019 Endnote ii. 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.

CSC 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 an expenditure basis.

CSC has an active Revolving Fund (CORCAN) that is included in the statutory authorities 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 and Fiscal Year to Date (YTD) Results

The following graph provides a comparison of the total budgetary authorities and net budgetary expenditures as of December 31, 2019 and December 31, 2018 for CSC’s combined operating, capital and budgetary statutory authorities.

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

This graph depicts the net budgetary authorities as $2,646,533 thousand and the year to date net expenditures as $1,816,847 thousand for the third quarter ending December 31, 2019. In 2018-2019, the net budgetary authorities were $2,621,967 thousand for the third quarter ending December 31, 2018 and the year to date net expenditures were $1,785,724 thousand.

Significant Changes to Authorities

CSC’s 2019-2020 Main Estimates include $95.0M under Vote 10 for funding approved through Budget 2019 for “Support for the Correctional Service of Canada”, to support CSC’s existing operations. Funding approved through Vote 10 has not yet been transferred to CSC and is not yet available for use. Therefore, Vote 10 has been excluded from the budgetary authorities presented here and in the Statement of Authorities.

As reflected in the Statement of Authorities for the period ending December 31, 2019, CSC has seen an increase in total authorities of $24.6 million or 0.9% for the current fiscal year compared to the previous fiscal year.

Operating Vote

CSC’s Operating Vote increased by $70.8 million or 3.3% compared to the authorities at the end of December 2018, which is attributed to the net effect of the following items:

Capital Vote

CSC’s Capital Vote decreased by $47.9 million or -20.3% compared to the authorities at the end of December 2018, which is attributed to the following items:

Budgetary Statutory Authorities

CSC’s budgetary statutory authorities increased by $1.7 million or 0.7% compared to December 2018, which is related to increased employer contributions to the Employee Benefit Plan as a result of increases in personnel expenses associated with the items described above, as well as proceeds from the disposal of surplus Crown assets.

Explanation of Significant Variances from Previous Year Expenditures

Compared with the previous fiscal year, the total year to date net budgetary expenditures increased by $31.1 million or 1.7% mainly due to the following factors:

(in millions of dollars)
Organizational Budgetary Expenditures Year Over Year Quarter Over Quarter
Total Net Budgetary Expenditures 2018-2019 1,785.7 634.2
Total Net Budgetary Expenditures 2019-2020 1,816.8 647.4
Variance 31.1 13.2
Explanation of Variances by Standard Object
Personnel 38.7 28.4
Professional and special services 9.7 4.2
Utilities, materials and supplies 2.6 (5.2)
Acquisition of land, buildings and works (2.7) (4.8)
Acquisition of machinery and equipment (5.1) 5.4
Other subsidies and payments (14.8) (14.9)
CORCAN Revenues (3.0) (1.3)
Other Standard Objects 5.7 1.4
Total 31.1 13.2

Risks and Uncertainties

CSC’s Departmental Plan 2019-2020 identifies the current risk environment and CSC’s key risk areas to the achievement of its strategic outcomes.

In the 2013 Speech from the Throne, the Government of Canada announced it would freeze the overall federal operating budget. Consequently, CSC was required to fund the increases in salary resulting from collective agreements that took effect during the freeze period (2014-2015 and 2015-2016), and for the ongoing impact of those adjustments. Given that salaries represent a significant portion of CSC’s expenditures, this freeze and other government-wide spending reduction exercises have resulted in significant financial pressures.

CSC continues to review its operations to address the budgetary constraints resulting from the operating budget freeze. The department has undertaken a comprehensive two-year review to:

CSC continues to experience ongoing issues related to the Phoenix Pay System. Given the complexity of our workforce coupled with the operational nature of our organization, CSC has experienced a significantly high number of pay related issues. CSC is continuously working internally and with external stakeholders to resolve these issues.

CSC’s specific risks, as outlined in CSC’s Plans at a glance and operating context, are the increasingly diverse and evolving profile of the offender population, the maintenance of required levels of operational safety and security in institutions and the community, the inability to implement its mandate and ensure the financial sustainability of the organization, the potential loss of partners delivering critical services and providing resources for offenders and the need to sustain results related to violent reoffenders.

CSC has put in place risk mitigation strategies to address the stated potential risks. The integrated approach allows CSC to handle risk-related challenges, ensure operational sustainability and fulfill its mandate. This includes receiving program integrity funding in the last quarter of 2017-2018, the third quarter of 2018-2019, and through Budget 2019, along with additional anticipated funding in the future until such time as the comprehensive review is completed.

Significant Changes in Relation to Operations, Personnel and Programs

CSC sought incremental funding to implement Transforming Federal Corrections (TFC), a strategy to eliminate the practice of segregation and to transform federal corrections through investments in proactive diagnosis, targeted intervention and treatment of inmates needs.

The TFC Memorandum to Cabinet was approved in September 2018 and funding was approved by Treasury Board Ministers in May 2019. Funding approved through the Treasury Board Submission has begun in the 2019-2020 fiscal year, and will gradually increase over the following five years until it will finally stabilize in fiscal year 2024-2025 going forward.

The Honorable Bill Blair was appointed Minister of Public Safety and Emergency Preparedness on November 20, 2019.

Statement of Authorities (unaudited)

(in thousands of dollars)
Fiscal Year 2019-2020 Fiscal Year 2018-2019
Total available for use for the year ending
March 31, 2020*
Used during the quarter ended
December 31, 2019
Year to date used at quarter-end Total available for use for the year ending
March 31, 2019*
Used during the quarter ended
December 31, 2018
Year to date used at quarter-end
Vote 1 – Operating Expenditures 2,217,404 530,449 1,526,959 2,146,643 515,861 1,488,901
Vote 5 – Capital Expenditures 187,722 49,014 110,610 235,661 51,651 125,430
Budgetary Statutory Authorities
CORCAN Gross Expenditures 124,339 31,039 85,736 108,355 28,952 78,281
CORCAN Gross Revenues (124,339) (21,753) (82,261) (108,355) (20,405) (79,237)
CORCAN Net Expenditures (Revenues) - 9,286 3,475 - 8,547 (956)
Contributions to employee benefit plans 239,664 58,584 175,751 237,905 57,070 171,209
Refunds of previous years revenue - - (54) 55
Spending of proceeds from the disposal of surplus Crown assets 1,743 44 52 1,758 1,074 1,085
Total Budgetary Authorities 2,646,533 647,377 1,816,847 2,621,967 634,149 1,785,724
Non-Budgetary Authorities 45 (1) (1) 45 - -
Total Authorities 2,646,578 647,376 1,816,846 2,622,012 634,149 1,785,724
* Includes only Authorities available for use and granted by Parliament at quarter-end.

Organizational Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)
Fiscal Year 2019-2020 Fiscal Year 2018-2019
Planned expenditures for the year ending
March 31, 2020
Expended during the quarter ended
December, 2019
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2019
Expended during the quarter ended
December, 2018
Year to date used at quarter-end
Personnel 1,851,660 464,602 1,329,500 1,901,034 436,211 1,290,815
Transportation and communications 24,631 8,975 20,785 24,502 7,807 18,483
Information 621 165 499 538 115 419
Professional and special services 435,943 85,779 243,795 295,638 81,570 234,119
Rentals 18,093 9,003 19,863 22,630 9,878 18,846
Repair and maintenance 23,873 8,138 21,358 23,035 7,165 19,319
Utilities, materials and supplies 142,597 31,631 94,061 130,516 36,806 91,421
Acquisition of land, buildings and works* 130,127 34,057 82,399 153,282 38,844 85,064
Acquisition of machinery and equipment* 56,036 13,951 22,158 85,648 8,575 27,275
Transfer payments 120 379 918 120 224 662
Other subsidies and payments 87,171 12,450 63,772 93,379 27,359 78,538
Total Gross Budgetary Expenditures 2,770,872 669,130 1,899,108 2,730,322 654,554 1,864,961
Less Revenues Netted against Expenditures
CORCAN (124,339) (21,753) (82,261) (108,355) (20,405) (79,237)
Total Net Budgetary Expenditures 2,646,533 647,377 1,816,847 2,621,967 634,149 1,785,724
* These are mainly Vote 5 (Capital) expenditures

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