Quarterly financial report, for the quarter ended December 31, 2020

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 Reports for the quarters ended June 30, 2020 and September 30, 2020. 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 2020-2021 Departmental Plan.

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 2020-2021 fiscal year for which a first interim supply was released March 17, 2020Endnote i, a second interim supply was released June 26, 2020Endnote ii, and final supply was released December 14, 2020Endnote iii. 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 Department. 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, 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 $20.0 million at any time. Through Supplementary Estimates (A), 2020–2021Endnote iv, this limit was increased from a previous amount of $5.0 million. This increase was requested as a consequence of reduced sales and operations resulting from the COVID-19 pandemic.

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, 2020 and December 31, 2019 for CSC’s combined operating, capital and budgetary statutory authorities.

Budgetary Authorities and Net Budgetary Expenditures

This graph depicts the budgetary authorities as $2,795,126 thousand and the year to date net budgetary expenditures as $1,842,102 thousand for the third quarter ending December 31, 2020. In 2019-2020, the budgetary authorities were $2,646,533 thousand for the third quarter ending December 31, 2019 and the year to date net budgetary expenditures were $1,816,847 thousand.

Significant Changes to Authorities

As reflected in the Statement of Authorities for the period ending December 31, 2020, CSC has seen an increase in total authorities of $148.6 million or 5.6% for the current fiscal year compared to the previous fiscal year.

Operating Vote

CSC’s Operating Vote increased by $123.1 million or 5.6% compared to the authorities at the end of December 2019, which is attributed to the net effect of the following items:

Capital Vote

CSC’s Capital Vote increased by $21.7 million or 11.6% compared to the authorities at the end of December 2019, which is attributed to the net effect of the following items:

Budgetary Statutory Authorities

CSC’s budgetary statutory authorities increased by $3.8 million or 1.6% compared to December 2019, which is related to the department’s allocation of the employer’s share of the employee benefit plan, as well as proceeds from the disposal of surplus Crown assets.

CORCAN Drawdown Authority

CORCAN’s existing drawdown authority was increased from $5.0 million to a new limit of $20.0 million. This was requested as a consequence of reduced sales and operations resulting from the COVID-19 pandemic and was approved through Supplementary Estimates (A), 2020–2021.

Explanation of Significant Variances from Previous Year Expenditures

Compared with the previous fiscal year, the total year to date net budgetary expenditures increased by $25.3 million or 1.4%, mainly due to the following factors:

(in millions of dollars)
Organizational Budgetary Expenditures Year Over Year Quarter Over Quarter
Total Net Budgetary Expenditures 2019-2020 1,816.8 647.4
Total Net Budgetary Expenditures 2020-2021 1,842.1 635.6
Variance 25.3 (11.8)
Explanation of Variances by Standard Object
Personnel 31.5 (2.1)
Transportation and communications (11.8) (5.5)
Professional and special services (2.0) 11.7
Rentals (1.8) (2.7)
Repair and maintenance (4.1) (1.0)
Utilities, materials and supplies 32.9 4.4
Acquisition of land, buildings and works (61.4) (21.7)
Acquisition of machinery and equipment 0.6 (4.2)
Other subsidies and payments 26.7 5.7
CORCAN revenues 15.5 3.8
Other standard objects (0.8) (0.2)
Total 25.3 (11.8)

Risks and Uncertainties

CSC’s 2020-2021 Departmental Plan identifies the current risk environment and CSC’s key risk areas to the achievement of its strategic outcomes.

CSC was successful in obtaining permanent supplementary funding following the undertaking of an intensive two-year comprehensive review. The funding obtained will help to mitigate short and mid term financial pressures. However, a new financial risk has developed with the emergence of the COVID-19 pandemic. CSC is facing new challenges to ensure the health and safety of inmates, employees and the public during this pandemic, as it continues to contribute to the efforts to reduce the transmission of the virus. CSC has quickly adapted to a new reality by providing non-operational employees with the ability to telework and ensuring the delivery of services while respecting physical distancing regulations. These events have created additional pressures on CSC’s existing reference levels. In order to address this financial situation, CSC submitted a request for supplementary funding for critical operating requirements related to COVID-19 and this will be presented for approval through Supplementary Estimates (C), 2020–2021.

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 2020-2021 Departmental Plan, 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, the maintenance of public confidence in the federal correctional system, and the maintenance of a safe, secure, healthy, respectful, and collaborative working environment as established by its legal and policy obligations, mission, and values statement.

CSC has put in place risk mitigation strategies to address the stated risks. The integrated approach allows CSC to handle risk-related challenges, ensure operational sustainability to fulfill its mandate.

Significant Changes in Relation to Operations, Personnel and Programs

During the third quarter of 2020-2021, CSC has continued to feel the impact of the COVID-19 pandemic. Many of CSC’s operations were modified or temporarily suspended. Operating expenditures have seen a substantial increase from the previous year, as CSC continues to do its part to prevent the spread of the virus and manage outbreaks at several institutions. Conversely, planned capital projects that were halted at the end of the 2019-2020 fiscal year (as mandated by municipal and federal governments), have slowly restarted.

In an effort to respond to the pandemic, based on the advice of public health organizations, CSC has acquired personal protective equipment (PPE) for staff and offenders to reduce and control the spread of the virus. Furthermore, CSC has increased both its health care and purchases of cleaning materials and services as a means to ensure infection prevention and control within federal correctional institutions. Of note, demand and prices for PPE have increased significantly.

CSC is also facing additional operational and health care challenges, such as required modifications to the routines of inmates, enhanced institutional cleaning strategies, and staff usage of overtime above usual levels. In addition, CSC anticipates needing to conduct extensive virus testing to limit the infection and spread of the virus within institutions.

Under the Corrections and Conditional Release Act (CCRA), CSC has an obligation to provide essential health care to inmates. To this effect, we will be vaccinating the inmate population. We have been working closely with the Public Health Agency of Canada (PHAC). We will continue to follow the National Advisory Committee on Immunization (NACI) guidelines and work with our public health partners to support the timely allocation, distribution and administration of the vaccine for staff and offenders under our care as efficiently, equitably and effectively as possible.

CSC is Special Operating Agency (SOA), CORCAN, operates a revolving fund with authority to spend its revenues. Due to the resulting measures around COVID-19, CORCAN has been unable to operate under normal conditions. Consequently, CSC is seeking to maintain CORCAN’s increased drawdown limit set at $20.0M until such time as operations return to normal or compensating measures are implemented.

CSC received significant investments via the Fall Economic Statement (2018) to enhance mental health services for offenders, and support amendments to transform federal corrections, specifically in support of Bill C-83. Bill C-83 “An Act to amend the Corrections and Conditional Release Act and another Act” received Royal Assent on June 21, 2019. The amendments eliminate administrative and disciplinary segregation, and introduce a new correctional model including the use of structured intervention units (SIUs) for inmates who cannot be managed safely within a mainstream inmate population. CSC has started and is continuing the process of making the necessary infrastructure changes, developing policies, and hiring and training staff to operate the SIUs. Funding for these initiatives gradually increases over a period of five years and stabilizes in fiscal year 2024-2025.

There have been no changes to key senior personnel in the third quarter of 2020-2021.

Statement of Authorities (unaudited)

(in thousands of dollars)
Fiscal year 2020-2021 Fiscal year 2019-2020
Total available for use at Q3 for the year ending March 31, 2021* Used during the quarter ended December 31, 2020 Year to date used at quarter-end Total available for use at Q3 for the year ending March 31, 2020* Used during the quarter ended December 31, 2019 Year to date used at quarter-end
Vote 1– Net operating expenditures 2,340,532 551,934 1,633,362 2,217,404 530,449 1,526,959
Vote 5 – Capital expenditures 209,428 23,987 47,422 187,722 49,014 110,610
Budgetary statutory authorities
CORCAN gross expenditures 124,334 22,461 62,766 124,339 31,039 85,736
CORCAN revenues (124,334) (17,925) (66,729) (124,339) (21,753) (82,261)
CORCAN net expenditures (revenues) - 4,536 (3,963) - 9,286 3,475
Spending of proceeds from the disposal of surplus Crown assets 1,182 15 15 1,743 44 52
Refunds from previous years 1 1
Contributions to employee benefits plans 243,984 55,088 165,265 239,664 58,584 175,751
245,166 55,104 165,281 241,407 58,628 175,803
Total budgetary authorities 2,795,126 635,561 1,842,102 2,646,533 647,377 1,816,847
Non-budgetary authorities 45 0 (1) 45 (1) (1)
Total authorities 2,795,171 635,561 1,842,101 2,646,578 647,376 1,816,846

More information is available on the following page.

* Includes Authorities available for use and granted by Parliament at quarter-end.

Note: CORCAN’s available drawdown authority at the end of December 2020 was $20.0M, of which $7.0M was used, leaving a residual balance available of $13.0M. In comparison, at the end of December 2019, CORCAN’s drawdown authority was $5.0M, of which $4.5M was utilized, leaving a residual balance available of $0.5M.

Organizational Budgetary Expenditures by Standard Object (unaudited)

(in thousands of dollars)
Fiscal year 2020-2021 Fiscal year 2019-2020
Planned expenditures at Q3 for the year ending
March 31, 2021
Expended during the quarter ended December 31, 2020 Year to date used at quarter-end Planned expenditures at Q3 for the year ending
March 31, 2020
Expended during the quarter ended December 31, 2019 Year to date used at quarter-end
Personnel 1,912,986 462,488 1,360,982 1,851,660 464,602 1,329,500
Transportation and communications 29,374 3,439 8,936 24,631 8,975 20,785
Information 836 92 181 621 165 499
Professional and special services 438,901 97,430 241,822 435,943 85,779 243,795
Rentals 23,665 6,285 18,100 18,093 9,003 19,863
Repair and maintenance 29,727 7,142 17,287 23,873 8,138 21,358
Utilities, materials and supplies 172,040 36,062 126,954 142,597 31,631 94,061
Acquisition of land, buildings and works* 169,428 12,335 20,966 130,127 34,057 82,399
Acquisition of machinery and equipment* 36,481 9,782 22,780 56,036 13,951 22,158
Transfer payments 120 267 382 120 379 918
Other subsidies and payments 105,902 18,164 90,441 87,171 12,450 63,772
Total gross budgetary expenditures 2,919,460 653,486 1,908,831 2,770,872 669,130 1,899,108
Less revenues netted against expenditures
CORCAN (124,334) (17,925) (66,729) (124,339) (21,753) (82,261)
Total revenues netted against expenditures (124,334) (17,925) (66,729) (124,339) (21,753) (82,261)
Total net budgetary expenditures 2,795,126 635,561 1,842,102 2,646,533 647,377 1,816,847
* These are mainly Vote 5 (Capital) expenditures.

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