Departmental Quarterly Financial Report (July – September 2024)

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended 30 September 2024

1. Introduction

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 and Supplementary Estimates.

A summary description of Veterans Affairs Canada’s (VAC) program activities can be found in Part II of the Main Estimates.

As a result of the Government’s expenditure management cycle, there are often fluctuations by quarter and between fiscal years when comparing budgets and expenditures. This is primarily a result of the quasi-statutory nature of the Department’s programs, which are demand-driven and based on need and entitlement. In other words, Veterans who meet the eligibility criteria for VAC’s programs, are paid as they apply for benefits.

We build our annual budget to respond to Veterans in need of benefits and services. A key part of this process is forecasting, which helps ensure there is enough funding for all eligible Veterans who are likely to need help in a given year.

Basis of presentation

This quarterly report has been prepared using an expenditure basis of accounting. The accompanying Statement of Authorities includes VAC’s spending authorities granted by Parliament and those used by the Department, consistent with the Main Estimates and Supplementary Estimates for the 2024-25 fiscal year. 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 monies 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.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The Department 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.

The quarterly report has not been subject to an external audit but has been reviewed by the Departmental Audit Committee.

2. Highlights of fiscal quarter and fiscal year-to-date (YTD) results

This section highlights the significant elements that contributed to the changes in Authorities available (i.e. budget) for the fiscal year, as well as the year-to-date expenditures for the quarter ended 30 September 2024.

The following tables provide a comparison of the authorities available for use and the expenditures for the quarters ending 30 September 2023 and 30 September 2024 for the Department.

2.1 Statement of authorities

2.1.1 Changes in fiscal year-to-date authorities available

As at 30 September 2024, total authorities available (i.e. budget) at quarter end were $763M more (12.7% increase) when compared to amounts available at the same quarter-end the previous year, from $5,995M in 2023-24 to $6,758M in 2024-25.

Much of this increase in total authorities can be attributed to temporary funding received in the first quarter 2024-25 for the Manuge class action settlement agreement. This class action sought damages as a result of alleged miscalculation of the annual adjustment of basic pension under the Pension Act from 2003 to present, resulting in underpayment to class members. Budget has also increased in comparison to the previous year due to increase in client demand for many of our benefits and services.

2.1.2 Changes in year-to-date expenditures

Year-to-date expenditures for Veterans Affairs Canada are $708M more (24.4% increase) when compared to the same timeframe in 2023-24. This increase over the second quarter of 2023-24 can be explained by variances detailed below.

Vote 1 - Operating expenditures – increase of $93M

• This quarter saw an increase in the number of clients accessing Treatment Benefits compared to the same quarter last year. Variations from quarter to quarter are the result of billing cycles and processes relating to certain programs and services. Year-to-date expenditures are in line with current forecasts.

Vote 5 – Grant and contribution – increase of $615M

• VAC’s expenditures fluctuate each year due to the demand-driven nature of its programs which are based on Veterans’ needs and entitlements. In other words, a Veteran who is entitled to a benefit is paid that benefit, whether 10 Veterans come forward or 10,000.
• Increases for this period are attributed to the cumulative increase in clients accessing our programs that have a lifelong benefit, combined with the Department's efforts to align production capacity with this increased demand. This has resulted in more benefits being paid to Veterans and their families, in a timely manner. Year-to-date expenditures are in line with current forecasts.

Budgetary statutory authorities – decrease of $674K

• Expenditures are being accrued based on opening authorities. Expenditures will be adjusted at fiscal year-end based on actual salary costs.

Fiscal Quarter

2.1.3 Changes in Expenditures – Quarter to Quarter Comparison

In-quarter expenditures for Veterans Affairs Canada are $4,420M more (0.3% increase) when compared to the same timeframe in 2023-24. This increase as compared to the second quarter in 2023-24 can be explained by variances detailed below.

Vote 1 - Operating Expenditures – increase of $22M

• This quarter saw an increase in the number of clients accessing prescription drugs and other Treatment Benefits compared to the same quarter last year. Variations from quarter to quarter are the result of billing cycles and processes relating to certain programs and services. Year-to-date expenditures are in line with current forecasts.

Vote 5 - Grant and Contribution - decrease of $18M

• Decrease for the quarter is due to timing of billing cycles for certain Quasi-Statutory programs.
• This decrease was partially offset by an increase in spending for certain programs due to the cumulative increase in clients accessing our programs that have a lifelong benefit, combined with increased production capacity.

Budgetary statutory authorities – decrease of $340K

• Expenditures are being accrued based on opening authorities. Expenditures will be adjusted at fiscal year-end based on actual salary costs.

3. Risks and uncertainties

VAC is committed to enhancing the health and well-being of Veterans and their families. The Department recognizes that its ability to fulfill this mandate is closely tied to the effective management of risk. Strong risk management practices allow VAC to respond proactively to change and uncertainty, using risk-based information to support informed decision-making, optimize resource allocation, and ultimately deliver better outcomes for Canadians.

By effectively managing risk, VAC enhances service delivery, improves project management, and maximizes value for money. Operating in a dynamic and complex environment shaped by both internal and external factors, VAC uses integrated risk management tools to anticipate, understand, and adapt to new challenges and opportunities, always with a focus on achieving results.

To manage these risks effectively, VAC has internal control systems proportionate to the risks it faces. Additionally, executive-level committees, including the Assistant Deputy Minister-level Senior Management Committee, are well-equipped to manage financial responsibilities. These committees ensure that investment opportunities are prioritized and aligned with departmental objectives and Government of Canada outcomes, based on Operational Plans.

Key risks currently managed by the Department include:

1. Maintaining core services: To mitigate the risk of not providing timely, high-quality services and benefits to Veterans and their families while simultaneously implementing new initiatives and programs from multiple federal budgets, VAC is:
   1. Streamlining internal processes to improve efficiency;
   2. Expanding the use of automation;
   3. Recruiting, training, motivating, and retaining employees; and
   4. Ensuring a balanced case manager-to-client ratio.
2. Fulfilling mandate letter commitments: To address the risk of not fully implementing remaining mandate commitments, due to the volume and complexity of promises made to Veterans, VAC is:
   1. Monitoring and reporting progress internally and through Canada.ca;
   2. Collaborating with other government departments and partners;
   3. Increasing the use of automation; and
   4. Recruiting, training, motivating, and retaining employees.
3. Achieving and demonstrating results: To prevent the risk of not meeting planned targets, given that responsibility for Veterans' well-being is shared across various jurisdictions, government departments, and Veterans themselves, VAC is:
   1. Collaborating closely with partners to align efforts; and
   2. Exploring new opportunities for research and data to guide decision-making.

The Department monitors these risks through its Departmental Results Framework and internal performance reports. By tracking performance in these areas, the Department can make timely adjustments to ensure risks are effectively mitigated.

In addition, the Departmental Audit Committee plays a key advisory role within the Department’s governance structure for risk management. It provides the Deputy Head with objective advice and recommendations on the sufficiency, quality, and effectiveness of the Department's risk management processes.

This integrated risk management approach supports the Department in achieving its objectives. More information on the risks facing the Department and the mitigation strategies in place can be found on VAC's website.

4. Significant changes in relation to operations, personnel and programs

Mandate/budget commitments

Commemorative Partnership Program – No. 2 Construction Battalion

Veterans Affairs Canada, in partnership with the Department of National Defence (DND)/Canadian Armed Forces (CAF), will provide funding to address one of the recommendations outlined by the National Apology Advisory Committee (NAAC) by creating opportunities for education, remembrance and honouring of No. 2 Construction Battalion. This funding will commemorate the legacy of the No.2 Construction Battalion.

Commemorative activities

During the second quarter of the 2024-25 fiscal year, Commemoration observed a number of key milestones and anniversaries with both domestic and international programming. Activities included the following:

Domestic ceremonies and events

• Supported International Operations in the repatriation of the Unknown Newfoundland soldier from France and supported in Canada delegation with events and ceremonies marking the unveiling of the Tomb.
• Marked National Peacekeepers’ Day and Merchant Navy Veterans Day with ceremonies and wreath placements across the country.
• Supported events/exhibits to mark the 100^th anniversary of the Royal Canadian Air Force (RCAF).

International Ceremonies and Events

• Continued extensive planning and consultations for the overseas event to commemorate the 60^th anniversary of the Canadian Peacekeeping Operation in Cyprus that will take place during Veterans’ Week.
• Organized and hosted the annual commemorative ceremony to mark the Battles of the Somme and Beaumont-Hamel on July 1 at the Newfoundland Beaumont-Hamel Memorial and participated in several French ceremonies commemorating the 80^th anniversary of the liberation of local communities.

Work was completed to remediate and repair the Vimy monument. Visitor Experience Strategies are in development to enhance the visitor experience at both National Historic Sites. During the quarter, Canada’s Sports Hall of Fame display was exhibited on sports and the military at both Canadian National Historic Sites in France for the Summer Olympics and Paralympics. Photo banners of Canadian Invictus athletes were created and displayed to promote the 2025 Vancouver/Whistler Invictus Games.

5. Approvals by senior officials

Original signed by:

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II. Financial statements

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

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

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

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