Public Safety Canada Quarterly Financial Report
For the quarter ended September 30, 2016

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, as well as Growing the Middle Class (Budget 2016).

This quarterly financial report has not been subject to an audit. However, it has been reviewed by the Departmental Audit Committee prior to approval by senior officials.

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 three fundamental roles for the Department: (i) support the Minister's responsibility for all matters related to public safety and emergency management, except those assigned to another federal minister, (ii) exercise national leadership for national security and emergency preparedness; and (iii) coordinate the efforts of Public Safety 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, national security and community safety.

Further information on the mandate, roles, responsibilities and program of Public Safety can be found in the 2016-17 Report on Plans and Priorities and the 2016-17 Main Estimates.

1.2 Basis of Presentation

This quarterly report has been prepared using an expenditure basis of accounting. 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 for the 2016-17 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. 

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. The Department's statutory authorities consist of Contributions to Employee Benefit Plans (EBP) and Minister of Public Safety and Emergency Preparedness – Salary and motor car allowance.

87.6 percent of the Department's budget is devoted to delivering transfer payment programs related to emergency management, national security and community safety. The largest programs include payments made pursuant to the Disaster Financial Assistance Arrangements (DFAA), the First Nations Policing Program (FNPP), the National Crime Prevention Strategy (NCPS), as well as the National Disaster Mitigation Program (NDMP).

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

The figures presented in the report are in accordance with the government-wide chart of accounts for Canada for 2016-17 and Treasury Board Accounting Standard 1.3.

The following graph provides a comparison of the net budgetary authorities and expenditures as of September 30, 2016 and September 30, 2015 for the Department's combined Vote 1, Vote 5 and Statutory Votes.

Budgetary Authorities and Expenditures Comparison
Image description

Budgetary Authorities and Expenditures Comparison
Starting from the left hand side, the "first" column in the graph indicates that the Department authorities are at $1,207.2 million for fiscal year 2016-17. The year-to-date expenditures of $543.9 million reported at the end of the second quarter of the 2016-17 fiscal year are shown under the "second" column. The expenditures of $175.2 million for the period ended September 30, 2016 (i.e. second quarter) are presented under the "third" column. The fourth column in the graph depicts the 2015-16 authorities which were at $1,138.2 million at the end of September 2015. The 2015-16 year-to-date expenditures of $103.2 million are shown under the "fifth" column. The Departments' actual expenditures incurred in the second quarter of 2015-16 were $54.2 million and are shown under the "sixth" column of the graph.

Note: The 2015-16 Supplementary Estimates "A" (SEA) decreased net funding by $17.9M. The Department's appropriations decreased by $41.5M for a transfer to the Royal Canadian Mounted Police for the First Nations Community Policing Service, offset by increases of $23.6M for other items included in SEA.

2.1 Significant Changes to Authorities

For the period ending September 30, 2016, the authorities provided to the Department included Main Estimates and TB Central Vote transfers. The 2015-16 authorities for the same period included Main Estimates, Supplementary Estimates (A) and TB Central Vote transfers. The Statement of Authorities presents a net increase of $68.9 million (6.1 percent) in Public Safety's total authorities as at September 30, 2016 compared to those of the same period of the previous year (from $1,138.2 million to $1,207.2 million).

This change in authorities is comprised of an increase in Vote 1 – Operating Expenditures ($10.4 million), an increase in Vote 5 – Grants and Contributions ($57.5 million) and an increase in Budgetary Statutory Authorities ($1.0 million).

Vote 1 – Operating Expenditures

The Department's Vote 1 increased by $10.4 million (8.5 percent) mainly due to:

Vote 5 - Grants and Contributions (G&C)

The Department's Vote 5 increased by $57.5 million (5.8 percent) mainly due to:

Budgetary Statutory Authorities

The increase of $1.0 million or 6.5 percent in 2016-17 is mostly related to the Employee Benefit Plan (EBP) costs associated with the change in the Department budgetary requirements for salary and EBP.

2.2 Explanation of Significant Variances from Previous Year Expenditures

Year-to-Date Expenditures

The total year-to-date (YTD) expenditures increased by $440.7 million (427.0 percent), from $103.2 million in 2015-16 to $543.9 million in 2016-17. This increase is mostly due to higher spending in Transfer Payments, which increased by $431.7 million (906.6 percent) from $47.6 million in 2015-16 to $479.4 million in 2016-17. For a detailed explanation of variances in expenditures in the first quarter, please refer to the Quarterly Financial Report for the quarter ended June 30, 2016. The cumulative effect of these variances, as well as the variances in the second quarter detailed below, explain the increase in YTD expenditures.

Second Quarter Expenditures

Compared to the previous year, the total expenditures in the second quarter, ending September 30, 2016, have increased by $121.0 million, from $54.2 million in 2015-16 to $175.2 million in 2016-17 as per the table of Departmental Budgetary Expenditures by Standard Object. This represents an increase of 223.4 percent against expenditures recorded for the same period in 2015-16.

This increase in spending is mainly composed of an increase in Vote 1 – Operating Expenditures of $3.9 million (from $25.5 million to $29.4 million), and an increase in Vote 5 – Grants and Contributions of $116.8 million (from $25.0 million to $141.8 million).

Personnel expenditures (including expenditures related to EBP and the Minister's salary and motor car allowance) have increased by $3.0 million over the previous year (from $23.7 million to $26.7 million), due to higher expenditures in regular salaries for continuing employees (increase of $1.4 million), acting pay (increase of $0.7 million), regular salaries for casual, part-time and seasonal employees (increase of $0.6 million), and in EBP (increase of $0.3 million). The increase is mainly attributed to the transfer of the National Search and Rescue Secretariat (NSS) from Department of National Defence to Public Safety Canada that occurred in third quarter of 2015, as well as higher expenditures resulting from new initiatives undertaken by the Department, such as Phase II of Canada's Cyber Security Strategy.

Other operating expenditures have increased by $1.6 million over the previous year (from $5.7 million to $7.3 million), mainly due to increases in professional and special services, due to the timing of payments for legal services from the Department of Justice Canada ($1.3 million) related to its new funding structure, as well as increases in information expenditures, such as the use of communications professional services ($0.2 million).

Transfer payments expenses increased by $116.8 million in the second quarter of 2016-17 compared to the second quarter of 2015-16 (from $25.0 million to $141.8 million) mainly due to a payment for matching domestic charitable donations to the Canadian Red Cross in support of wildfire relief efforts in Fort McMurray, Alberta and surrounding areas ($104.5 million - this item received funding from TB Vote 5 – Government Contingencies, which PS will reimburse upon receipt of 2016-17 Supplementary Estimates (B) Royal Assent), as well as higher expenditures for the First Nations Policing Program (increase of $7.1 million).

Lastly, revenues collected for interdepartmental provision of internal support services, which are netted against expenditures, increased by $0.4 million in the second quarter of 2016-17 compared to the same period of 2015-16.

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. Public Safety is called, on behalf of the Government of Canada, to rapidly respond to emerging threats and ensure the safety and security of Canadians. The Department'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 government-wide or central agency 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.

Operating Budget Freeze

The Government of Canada announced in 2013 a freeze in the overall federal operating budget, generating government-wide savings of roughly $550 million in 2014-15 and $1.1 billion in 2015-16. Consequently, Public Safety will have to fund the increases in salaries resulting from collective agreements that take effect during the freeze period (2014-2015 and 2015-2016), and for the ongoing impact of those adjustments. To mitigate the risk, the Department undertook the following actions:

The operating budget freeze is no longer in effect for 2016-17.

4.0 Significant Changes in Relation to Operations, Programs and Personnel

4.1 Significant Changes in relation to Operations

Phoenix Pay Modernization Project

In April 2016, Public Safety moved to the new Phoenix federal public service pay system. In transitioning to the new pay system, large backlogs and delays at the Pay Centre have led to a significant increase in pay-related issues reported by employees. Between April 1 and September 30, the department issued 207 salary advances to employees whose pay was interrupted. To support employees at highest risk, a priority system has been implemented for triaging and escalating pay issues, to ensure that the most urgent cases are resolved as quickly as possible. Departmental governance committees have been used on an ongoing basis to discuss issues related to Phoenix and to develop solutions, and unions have been engaged to ensure that employees' perspectives are represented. Moreover, the Department has strengthened its internal controls to ensure additional measures were put in place to reduce the instances of errors, including additional monitoring over salary payments.

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 and territorial costs for natural disaster response and recovery where such costs would place an undue burden on a provincial or territorial economy.

There are currently 77 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. After taking into account all of the 2016-17 anticipated payments, the total outstanding federal share is $2.0 billion at the end of the second quarter, the majority of which is expected to be paid out over the next five years.

The five most significant events represent 57 percent of Public Safety Canada's current liabilities under the DFAA:

The 2016 Alberta Wildfires that took place in Fort McMurray, added significantly to the federal liability of the DFAA Program. An initial advance payment of $307 million was made to the province of Alberta in June 2016 under the DFAA. Also, as announced by the Prime Minister on May 6, 2016, the Government of Canada matched every dollar donated to the Canadian Red Cross between May 3rd, 2016 and May 31st, 2016 in support of the Fort McMurray relief effort. A payment in the amount of $104,466,553 was issued to the Canadian Red Cross in July 2016.

Budget 2016

Budget 2016 announced support for a number of initiatives within Public Safety, including the establishment of an Office of the Community Outreach and Counter-radicalization Coordinator. Starting in 2016-17, the Government of Canada is devoting $35 million to this initiative over five years, with $10 million per year ongoing to Public Safety. The Office will provide leadership on Canada's response to radicalization to violence, coordinate federal/provincial/territorial and international initiatives, and support community outreach and research.

Swift and effective response to emergencies is critical for keeping Canadians and communities safe, and heavy urban search and rescue is primarily used in cases of large-scale incidents. Budget 2016 provided $15.5 million over five years, starting in 2016–17, to restore funding to heavy urban search and rescue task forces in Vancouver, Toronto, Calgary and Manitoba, as well as to work with provinces to expand this capacity in underserved regions.

4.3 Significant Changes in Relation to Personnel

Mark Perlman, Chief Financial Officer and Assistant Deputy Minister (ADM), Corporate Management Branch, has left Public Safety to assume a new role at Employment and Social Development Canada as Chief Financial Officer.

Patrick Amyot, Comptroller and Deputy Chief Financial Officer, will act as Chief Financial Officer and Assistant Deputy Minister (ADM), Corporate Management Branch on an interim basis until a replacement is named.

5.0 Approval by Senior Officials

Approved by:

Malcolm Brown, Deputy Minister
Public Safety Canada
Ottawa (Canada)
Date: November 16, 2016

Nancy Sanders for Patrick Amyot
A/Chief Financial Officer and Assistant
Deputy Minister, Corporate Management Branch
Public Safety Canada
Ottawa (Canada)
Date: November 10, 2016

6.0 Statement of Authorities (unaudited)

Fiscal year 2016-17 (in dollars)
Total available for use for the year ending March 31, 2017(1) Used during the quarter ended September 30, 2016 Year to date used at quarter-end
Vote 1 - Net Operating Expenditures 133,824,661 29,358,028 56,553,896
Vote 5 - Grants and Contributions 1,057,334,354 141,854,458 479,361,992
Employee Benefit Plans (EBP) 15,927,088 3,981,772 7,963,544
Minister's Salary and Motor Car Allowance(2) 83,500 27,833 34,791
TOTAL AUTHORITIES 1,207,169,603 175,222,091 543,914,223

(1) Includes only authorities available for use and granted by Parliament at quarter end.

(2) Due to timing, Minister's Salary and Motor Car Allowance does not reflect full expenditures incurred during the quarter ended September 30, 2016. The adjustment is expected to be reflected in future Quarterly Financial Reports.
Fiscal year 2015-16 (in dollars)
Total available for use for the year ended March 31, 2016(1) Used during the quarter ended September 30, 2015 Year to date used at quarter-end(2)
Vote 1 - Net Operating Expenditures 123,384,461 25,478,731 48,192,824
Vote 5 - Grants and Contributions 999,798,024 25,012,694 47,623,377
Employee Benefit Plans (EBP) 14,952,248 3,672,330 7,344,660
Minister's Salary and Motor Car Allowance 82,100 20,525 41,050
TOTAL AUTHORITIES 1,138,216,833 54,184,280 103,201,911

(1) Includes only authorities available for use and granted by Parliament at quarter end.

(2)Authorities available for use, expenditures for the second quarter and year to date expenditures exclude amounts for the National Search and Rescue Secretariat (NSS).

7.0 Departmental budgetary expenditures by Standard Object (unaudited)

Fiscal year 2016-17 (in dollars)
Planned expenditures for the year ending March 31, 2017(1) Expended during the quarter ended September 30, 2016 Year to date used at quarter-end
Expenditures:
Personnel 108,609,936 26,659,818 53,949,262
Transportation and communications 4,071,579 712,407 1,191,201
Information 7,234,103 576,561 869,832
Professional and special services 21,886,592 4,629,617 7,939,792
Rentals 4,379,545 1,021,590 1,699,271
Repair and maintenance 474,935 50,969 88,148
Utilities, material and supplies 1,074,788 130,924 208,826
Acquisition of land, buildings and works 2,254,705 - -
Acquisition of machinery and equipment 2,549,066 213,075 355,725
Transfer payments 1,057,334,354 141,854,457 479,361,992
Public debt charges - - -
Other subsidies and payments - 4,791 4,194
Total gross budgetary expenditures 1,209,869,603 175,854,209 545,668,243
Less Revenues netted against expenditures:
Interdepartmental Provision of Internal Support Services 2,700,000 632,118 1,754,020
Total net budgetary expenditures 1,207,169,603 175,222,091 543,914,223
(1) Includes only planned expenditures against authorities for use and granted by Parliament at quarter end. 
Fiscal year 2015-16 (in dollars)
Planned expenditures for the year ended March 31, 2016(1) Expended during the quarter ended September 30, 2015 Year to date used at quarter-end(2)
Expenditures:
Personnel 103,785,416 23,673,605 48,480,065
Transportation and communications 3,222,998 609,523 1,148,389
Information 5,820,091 321,030 479,596
Professional and special services 18,433,918 3,172,703 4,708,955
Rentals 2,789,009 1,016,209 1,078,665
Repair and maintenance 1,324,551 88,829 121,189
Utilities, material and supplies 1,091,347 202,761 256,361
Acquisition of land, buildings and works 1,558,062 - -
Acquisition of machinery and equipment 3,009,574 283,559 521,204
Transfer payments 999,798,024 25,012,694 47,623,377
Public debt charges - - -
Other subsidies and payments 83,842 24,290 70,438
Total gross budgetary expenditures 1,140,916,833 54,405,203 104,488,239
Less Revenues netted against expenditures:
Interdepartmental Provision of Internal Support Services 2,700,000 220,923 1,286,328
Total net budgetary expenditures 1,138,216,833 54,184,280 103,201,911

(1) Includes only planned expenditures against authorities for use and granted by Parliament at quarter end.

(2) Authorities available for use, expenditures for the second quarter and year to date expenditures exclude amounts for the National Search and Rescue Secretariat (NSS).
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