Public Safety Canada Quarterly Financial Report
For the quarter ended December 31, 2013

Table of contents

1.0 Introduction

This quarterly financial report has been prepared by management as required by section 65.1 of the Financial Administration Act, in the form and manner prescribed by the Treasury Board Accounting Standard 1.3. This quarterly financial report should be read in conjunction with the Main Estimates, Supplementary Estimates (A) and Supplementary Estimates (B) for 2013-14 and 2012-13, as well as Canada's Economic Action Plan 2012 (Budget 2012).

1.1 Authority, Mandate and Program

Public Safety Canada plays a key role in discharging the Government's fundamental responsibility for the safety and security of its citizens.  The Department of Public Safety and Emergency Preparedness Act 2005 and the Emergency Management Act 2007 set out two essential roles for the Department: (i) support the Minister's responsibility for all matters, except those assigned to another federal minister, related to public safety and emergency management, including national leadership; and (ii) coordinate the efforts of Public Safety's Portfolio agencies, as well as provide guidance on their strategic priorities.

The Department provides strategic policy advice and support to the Minister of Public Safety and Emergency Preparedness on a range of issues, including: national security, border strategies, countering crime and emergency management.  The Department also delivers a number of grant and contribution programs related to emergency management and community safety.

Further information on the mandate, roles, responsibilities and program of Public Safety can be found in the Report on Plans and Priorities and the Main Estimates.

1.2 Basis of Presentation

This quarterly report has been prepared using an expenditure basis of accounting (modified-cash).  The accompanying Statement of Authorities includes the Department's spending authorities granted by Parliament, or received from Treasury Board Central Votes, and those used by the Department, consistent with the Main Estimates, the Supplementary Estimates (A) and (B) for the 2013-14 fiscal year.  This quarterly report has been prepared using a special purpose financial reporting framework designed to meet the information needs concerning the use of spending authorities.

The authority of Parliament is required before funds can be spent by the Government. Approvals are given in the form of annual limits provided through Appropriation Acts or through legislation in the form of statutory spending authority for specific purposes.

As part of the departmental performance reporting process, Public Safety prepares its annual departmental financial statements on a full accrual basis in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector. However, the spending authorities voted by Parliament remain on an expenditure basis, as do the expenditures presented in this report.

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. The Budget 2012 was tabled in Parliament on March 29, 2012 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.

In fiscal year 2012-13, 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 2013-14, the changes to departmental authorities were reflected in the 2013-14 Main Estimates tabled in Parliament.

The quarterly financial report has not been subject to an audit.  However, it has been reviewed by the Departmental Audit Committee.

1.3 Public Safety Canada Financial Structure

Public Safety has a financial structure composed mainly of voted budgetary authorities that include Vote 1 – Operating Expenditures, Vote Netted Revenues and Vote 5 – Grants and Contributions, while the statutory authorities comprise the Contributions to employee benefit plans (EBP) and Minister of Public Safety and Emergency Preparedness – Salary and motor car allowance.

About 90 percent of the Department's budget is devoted to delivering transfer payment programs related to emergency management and community safety.  The largest programs include payments made pursuant to the Disaster Financial Assistance Arrangements (DFAA), the First Nations Policing Program (FNPP), programming related to the National Crime Prevention Strategy (NCPS), as well as financial support to Provinces and Territories for the 2011 Flood Mitigation Investments and to the Province of Quebec for response and recovery costs from the explosion following the train derailment in Lac-Mégantic, Quebec.

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

The numbers presented in the report are in accordance with the government-wide chart of accounts for Canada for 2013-14 and Treasury Board Accounting Standard (TBAS) 1.3.

The following graph provides a comparison of the net budgetary authorities and expenditures as of December 31, 2013 and December 31, 2012 for the Department's combined Vote 1, Vote 5 and Statutory Votes.

Budgetary Authorities and Expenditures Comparison
Image Description

Starting from the left hand side, the "first" column in the graph indicates that the Department authorities are at $ 1,367.9 million for fiscal year 2013-14. The year-to-date expenditures of $425.3 million reported at the end of the third quarter of the 2013-14 fiscal year are shown under the "second" column. The expenditures of $74.7 million for the period ended December 31, 2013 (i.e. third quarter) are presented under the "third" column. The fourth column in the graph depicts the 2012-13 authorities which were at $631.4 million at the end of December 2012. The 2012-13 year-to-date expenditures of $259.9 million are shown under the "fifth" column. The Department's actual expenditures incurred in the third quarter of 2012-13 were $73.9 million and are shown under the "sixth" column of the graph.


2.1 Significant Changes to Authorities

For the period ending December 31, 2013, the authorities provided to the Department included the Main Estimates, the Supplementary Estimates (A) and (B), Treasury Board Central Vote transfers for Eligible Paylist Expenditures, Compensation Adjustments, and Operating Budget Carry-Forward.  The 2012-13 authorities for the same period included the same types of authorities, with the exception of a Treasury Board Central Vote transfer for Compensation Adjustments.  The Statement of Authorities presents a net increase of $736.5 million or 116.7 percent in Public Safety's total authorities as at December 31, 2013 compared to those of the previous year for the same period (from $631.4 million to $1,367.9 million).

This net increase in the authorities available for use is a combination of a decrease in Vote 1 – Operating Expenditures ($4.5 million), an increase in Vote 5 – Grants and Contributions ($740.1 million) and an increase in Budgetary Statutory Authorities ($0.9 million).

Vote 1 – Operating Expenditures

The Department's Vote 1 decreased by $4.5 million or 3.3 percent, mainly due to:

Vote 5 - Grants and Contributions (G&C)  

The Department's Vote 5 increased by $740.1 million or 154.4 percent, mainly due to:

Budgetary Statutory Authorities

The increase of $0.9 million in 2013-14 is in most part related to the Employee Benefit Plans (EBP) costs associated with the change in the Department budgetary requirements for salary.  This does not represent a material change compared to 2012-13.

2.2 Explanation of Significant Variances from Previous Year Expenditures

The total year-to-date (YTD) expenditures increased by $165.4 million, or 63.6 percent, in 2013-14, compared to 2012-13, from $259.9 million to $425.3 million. This increase is mostly due to higher spending in Transfer Payments, which increased by $162.1 million or 98.7 percent from $164.2 million in 2012-13 to $326.3 million in 2013-14. For a detailed explanation of variances in expenditures in the first and second quarters, please refer to the Quarterly Financial Report for the quarter ended June 30, 2013 and the quarter ended September 30, 2013. The cumulative effect of these variances, as well as the variances in the third quarter detailed below, explain the increase in YTD expenditures.

Compared to the previous year, the total expenditures in the third quarter, ending December 31, 2013, have increased by $0.8 million, from $73.9 million to $74.7 million as per the table of Departmental Budgetary Expenditures by Standard Object. This represents an increase of 1.0 percent against expenditures recorded for the same period in 2012-13.

This overall increase in spending is a combination of a decrease in Vote 1 – Operating Expenditures of $1.5 million or 4.6 percent (from $32.0 million to $30.5 million), an increase in Vote 5 – Grants and Contributions of $2.1 million or 5.4 percent (from $38.2 million to $40.3 million), as well as a minor increase of $0.2 million in Budgetary Statutory Authorities.   

The increase in Grants and Contributions is mainly attributed to expenditures of $7.2 million for the First Nations Policing Program, $0.4 million for the Kanishka Research Project, and of $0.4 million under the Disaster Financial Assistance Arrangements program.  The increases are offset by decreases in expenditures paid during the third quarter of 2012-13 of $3.2 million under the National Crime Prevention Strategy and $2.7 million in spending for one-time Ex Gratia payments to families of passengers and crew members of Air India Flight 182.

Personnel expenditures, which include expenditures related to employee benefit plans (EBP) and the Minister's salary and car allowance, have decreased by $1.0 million, or 3.8 percent, compared to those of the previous year for the same period (from $27.4 million to $26.3 million). The decrease is mainly attributed to decreases in salary and wages expenditures in the third quarter of 2013-14 of $0.7 million in regular salaries of employees, and $0.4 million for eligible paylist expenditures such as severance pay, and parental allowance.

Other Operating expenditures have decreased by $1.1 million, or 11.5 percent, compared to those of the previous year for the same period (from $9.5 million to $8.4 million). The decrease is a result of decreases in expenditures in the third quarter of 2013-14 of $0.5 million related to repairs and maintenance expenditures, $0.4 million for Professional Services, mainly attributed to consultants employed for evaluation purposes, $0.4 million for capital goods, mainly attributed to the purchase of video communication and software equipment, $0.2 million for office space rentals, and $0.2 million for non-capital good expenditures, mainly attributed to the purchase of telecommunication and hardware equipment.  The decreases are offset by increases in expenditures paid during the third quarter of 2013-14 of $0.6 million for specialized professional services, mainly attributed to expenditures related to legal services.

Lastly, revenues netted against expenditures collected for interdepartmental provision of internal support services decreased by $0.9 million in the third quarter of 2013-14 compared to the same period of 2012-13.

3.0 Risks and Uncertainty

The Department's mandate spans from public safety and security, intelligence and national security functions, social interventions for youth-at-risk, to readiness for all manner of emergencies.  The Department is called to rapidly respond to emerging threats and ensure the safety and security of Canadians.  It's ability to deliver its programs and services is subject to several risk sources, such as, the rapidly changing asymmetrical threat environment, its ability to respond to natural or man-made disasters, government priorities, and central agencies' or government-wide initiatives.  To deliver this mandate effectively, the collaboration of many departments and agencies, provincial and territorial governments, international partners, private sector and first responders is required.  Without the collaboration of all these partners, the Department is at risk in the delivery of its mandate and objectives, making the effectiveness of these relationships crucial.

Fiscal Restraint

Public Safety continues to face pressures that have been previously identified. Collectively these pressures have reduced the Department's funding base and its flexibility to reallocate funding to achieve expected results.  

As in the past, the Operating Budget Carry Forward (OBCF) has been used to offset the pressures in the operating vote and to address a number of important sustainability issues. The Department's eligible OBCF shows a decrease in year-over-year comparison. The 2013-14 OBCF decreased by 41.4 percent of the amount received in 2012-13. In addition, the Department is also facing a potential litigation pressure in 2013-14 related to the Canadian Firearms Program.

In recognition of this tightening fiscal environment, Public Safety examined all of its departmental program spending, balancing resource allocations against identified priorities by shifting from lower to higher priorities.  The Department continues to explore actions to mitigate and manage the impact of the changing fiscal environment on the organization.  As such, the Department announced in December 2013 a realignment of departmental functions. (of note, details on the realignment of departmental functions are found in the Significant Changes in Relation to Key Personnel section).

Natural Disaster Response and Recovery

Provinces and territories (P/Ts) have primary responsibility for responding to, and managing the consequences of, natural disasters within their jurisdictions.  However, P/Ts may request financial assistance from the Government of Canada when response and recovery costs exceed what they may reasonably be expected to bear on their own.

For this reason, Public Safety is allocated a base reference level of $100 million annually for Disaster Financial Assistance Arrangements (DFAA) payments.  As required, Public Safety may come forward annually to request incremental funding from the Supplementary Estimates process if existing reference levels are insufficient to meet P/T requests for payments.

The Government of Canada was anticipating making payments totaling $1.1 billion to P/Ts for events approved up to March 31, 2013.  To address this significant obligation, in March 2013 Treasury Board Ministers approved $700 million over four years to supplement Public Safety' existing reference levels of $400 million.  An amount of $230 million was approved through the 2013-14 Supplementary Estimates (A).

In addition, the Department of Finance approved a reprofile in the amount of $100 million from 2016-17 approved funding to 2013-14.  Funding was requested to supplement the existing funding in order to issue a $200 million advance payment to the Province of Manitoba for the severe 2011 floods in 2013-14.

More recently, to address the anticipated payments to P/Ts of $3 billion in financial assistance for approved disasters since April 2013, which includes the preliminary cost estimates of $2.8 billion (2013-14 to 2022-23) for the severe flooding in southern Alberta, Public Safety sought $2.1 billion in incremental funding over five years through the 2013-14 Supplementary Estimates (B).  Of this amount, $589 million was approved to make advance payments to Provinces and Territories in 2013-14.  Public Safety will seek the remaining required funding through a future Estimates process to cover the payment obligations to the P/Ts. 

4.0 Significant Changes in Relation to Operations, Programs and Personnel

4.1 Significant Changes in Relation to Operations

Reducing Travel Costs through the use of Technology

In keeping with the Government's commitment to implement new measures to return to balanced budgets and to make government more efficient, Economic Action Plan 2013 announced a number whole-of government initiatives to modernize government administration by improving service delivery and achieving efficiencies. One of these initiatives is to reduce travel costs through the use of technology.

Economic Action Plan 2013 implements measures to reduce departmental travel costs by $42.7 million, or 5 percent, and to boost productivity by using modern alternatives to travel.

Public Safety is committed to controlling costs related to travel.  As a result of cost containment measures announced in earlier budgets, coupled with the implementation of departmental strategies and tools that reinforce the use of lower cost alternatives and focus departmental expenditures on core mandates, Public Safety' spending trend shows a steady decrease in year over year comparison.

Public Safety' share of the government-wide travel cost reduction initiative is $0.2 million ongoing starting in 2013-14. The reduction will be achieved by freezing the funds in the current fiscal year and by a reduction of future reference levels through the Annual Reference Level Update (ARLU) process.

4.2 Significant Changes in Relation to Programs

Disaster Financial Assistance Arrangements

The Disaster Financial Assistance Arrangements (DFAA) contribution program was established in 1970 to provide a consistent and equitable mechanism for federal sharing of provincial or territorial costs for natural disaster response and recovery where such costs would place an undue burden on a provincial or territorial economy.

Since the inception of the program, the DFAA has been applied to over 200 events with a total federal payment to over $2.6 billion.  From 1970 to 1995, the total amount of DFAA payments averaged approximately $10 million per fiscal year.  The 1996 Saguenay Flood, the 1997 Red River Flood and the 1998 Ice Storm resulted in large DFAA payments to affected provinces.  DFAA payments of over $1.1 billion were made for these three events.  Between 1996 and 2012, DFAA payments averaged $118 million per year.  Annual DFAA payments are expected to exceed $600 million per year over the next five years.

There are currently over 65 natural disasters for which Orders-in-Council (OiCs) have been approved, authorizing the provision of federal financial assistance under DFAA, and for which final payments have not yet been made.  Much of the outstanding federal share results from recent natural disasters, which is expected.  More recently, the anticipated payments to provinces and territories is $3 billion for events approved since April 2013, which includes the preliminary cost estimates of $2.8 billion for the recent severe flooding in southern Alberta. 

Taking into account all the expected DFAA final payments, the total estimated outstanding federal liability at the end of the third quarter was $4.0 billion, the majority of which is expected to be paid out over the next five years.  The four most significant events represent over 80 percent of Public Safety's current liabilities under the DFAA.  They are the Alberta 2013 June Flood estimated at $2.8 billion, the Manitoba 2011 Spring Flood at $253 million, the Saskatchewan 2011 Spring Flood at $178 million, and the Alberta 2010 June Rainstorm at $90 million.  Seven new OiCs totaling $133.1 million have been added during the third quarter, the majority of which is dedicated to the Alberta 2011 Wildfires ($73.5M), the Saskatchewan 2010 Spring Flood ($26.2M), and the Alberta 2012 July Rainstorm ($20.6M).

Lac Mégantic, Quebec

In response to the train derailment in Lac-Mégantic, Quebec on July 6, 2013, the Government of Canada committed on July 22, 2013, $25 million for immediate response and recovery needs from Public Safety to help support the longer-term economic recovery and rebuilding of this community and this region. Public Safety received this funding through the 2013-14 Supplementary Estimates (B).

On November 21, 2013, Prime Minister Stephen Harper announced significant additional support for Lac-Mégantic, which will be used to decontaminate the town's soil and water, contributing to the town's reconstruction and recovery.  The new support will contribute to cleaning up the estimated 31 hectares of affected soil, disposing of contaminated waste, decontaminating Lac-Mégantic and the Chaudière River, helping to restore the integrity of the town's sewer system, cleaning up buildings and infrastructure, and demolishing contaminated buildings.  An estimated $190 million is to be cost-shared between the Government of Quebec and the federal government, amounting up to $95 million for each party.

First Nations Policing Program

The federal government will maintain funding for policing agreements with First Nation and Inuit communities under the First Nations Policing Program (FNPP) for the next five years. Budget 2013 announced an additional $33 million over two years to support these communities. Public Safety will seek $15.9 million of this additional funding for fiscal year 2013-14 through the Supplementary Estimates process.

The FNPP supports professional, dedicated and culturally responsive policing services to First Nation and Inuit communities.  FNPP funding supplements existing funding and policing services provided by provinces and territories.

Currently, funding provided under the FNPP supports 163 policing agreements, which represent approximately 1,250 professionally trained and dedicated police officers working in some 400 First Nation and Inuit communities, serving a total population of over 338,000.

4.3 Significant Changes in Relation to Key Personnel

In December of 2013 Public Safety marked its tenth anniversary from its creation to ensure coordination across federal departments and agencies responsible for national security and the safety of Canadians. At the same time, the Department announced the realignment of a number of functions in order to align programs, authorities, resources and activities to departmental priorities.

The new structure amalgamates six existing branches into five, contributing to a stable and solid organizational structure with effective governance systems. The new branches and its associated Branch Heads will be as follows: Emergency Management and Programs Branch led by Mr. Shawn Tupper, Community Safety and Countering Crime Branch led by Ms. Kathy Thompson, Portfolio Affairs and Communications Branch led by Mr. Paul MacKinnon, National and Cyber Security Branch jointly led by Ms. Lynda Clairmont and Mr. Gary Robertson, and Corporate Management Branch led by Mr. Mark Perlman.

5.0 Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

Public Safety is doing its part to support the federal government's return to a balanced budget, reduce the deficit, and deliver on its commitments to Canadians.

The Department will achieve Budget 2012 savings of $24.7 million by fiscal year 2014-15 through organizational restructuring as well as by transforming some of its business activities, while also minimizing service reductions to priority policies and programs.

The Department is achieving Budget 2012 savings of $15.8 million in 2013-14. Vote 1 - Operating Expenditures saving measures account for $6.0 million, Vote 5 - Grants and contributions account for $9.2 million and the Statutory Vote - Employee Benefit Plans account for the remaining $0.5 million.

Public Safety is well positioned to undertake these changes.  The Department has developed action plans for each initiative and is currently monitoring to ensure it meets its financial obligations. The initiatives arising from Budget 2012 will further enable Public Safety to focus its resources on the Department's key priorities and core mandate, while at the same time ensuring we continue to build a safe and secure Canada.

The printed version signed by:

François Guimont, Deputy Minister
Public Safety Canada
Ottawa, Canada
February 11, 2014

Mark Perlman, CMA, Chief Financial Officer and Assistant Deputy Minister of the Corporate Management Branch
Public Safety Canada
Ottawa, Canada
February 10, 2014

6.0 Statement of Authorities (unaudited)

Fiscal year 2013-2014 (in thousands of dollars)
  Total available for
use for the year
ending March 31, 2014* 		 Used during the
quarter ended
December 31, 2013		 Year to date used
at quarter-end
       
Vote 1 - Net Operating expenditures 132,334 30,475 87,073
       
Vote 5 - Grants and contributions 1,219,531 40,251 326,280
       
Employee Benefit Plans (EBP) 15,916 3,965 11,896
       
Minister's Salary and Car Allowance 79 20 54
TOTAL AUTHORITIES 1,367,860 74,710 425,303

* Includes only authorities available for use and granted by Parliament at quarter end.

Note: Totals may not add and may not agree with details provided elsewhere due to rounding.

 

Fiscal year 2012-2013 (in thousands of dollars)
 

Total available for
use for the year ending
March 31, 2013*

 Used during the
quarter ended
December 31, 2012

Year to date
used
at quarter-end
       
Vote 1 - Net Operating expenditures 136,790 31,956 84,304
       
Vote 5 - Grants and contributions 479,441 38,199 164,225
       
Employee Benefit Plans (EBP) 15,056 3,764 11,292
       
Minister's Salary and Car Allowance 78 19 58
TOTAL AUTHORITIES 631,364 73,938 259,879

* Includes only authorities available for use and granted by Parliament at quarter end.

Note: Totals may not add and may not agree with details provided elsewhere due to rounding.

7.0 Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2013-2014 (in thousands of dollars)
 

Planned expenditures
for the year ending
March 31, 2014* 

 Expended
during the
quarter ended
December 31, 2013

Year to date
used
at quarter-end
Expenditures:      
Personnel 111,559 26,322 84,067
Transportation and communications 5,162 991 2,210
Information 2,543 732 1,122
Professional and special services 19,845 4,913 9,779
Rentals 5,087 412 1,215
Repair and maintenance 2,006 935 1,151
Utilities, material and supplies 958 76 350
Acquisition of land, buildings and works 1,207 - -
Acquisition of machinery and equipment 2,840 296 803
Transfer payments 1,219,531 40,251 326,280
Public debt charges - - -
Other subsidies and payments 121 26 35
Total gross budgetary expenditures 1,370,860 74,955 427,012
Less Revenues netted against expenditures:      
Interdepartmental Provision of Internal Support Services 3,000 244 1,709
Total net budgetary expenditures 1,367,860 74,710 425,303

* Includes only planned expenditures against authorities available for use and granted by Parliament at quarter end.

Note: Totals may not add and may not agree with details provided elsewhere due to rounding.

 

Fiscal year 2012-2013 (in thousands of dollars)
 

Planned expenditures
for the year ending
March 31, 2013*

 Expended
during the
quarter ended
December 31, 2012		 Year to date
used
at quarter-end
Expenditures:      
Personnel 105,879 27,364 80,267
Transportation and communications 8,237 1,042 2,474
Information 1,500 557 895
Professional and special services 26,025 4,824 8,086
Rentals 5,450 650 2,472
Repair and maintenance 1,566 1,385 1,905
Utilities, material and supplies 1,323 166 383
Acquisition of land, buildings and works 1,558 - -
Acquisition of machinery and equipment 4,865 840 1,337
Transfer payments 480,190 38,199 164,225
Public debt charges - - -
Other subsidies and payments 78 8 17
Minus: Funds available 2,808 - -
Total gross budgetary expenditures 633,864 75,035 262,061
Less Revenues netted against expenditures:      
Interdepartmental Provision of Internal Support Services 2,500 1,097 2,182
Total net budgetary expenditures 631,364 73,938 259,879

* Includes only authorities available for use and granted by Parliament at quarter-end

Note: Totals may not add and may not agree with details provided elsewhere due to rounding.

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