October - December 2018
Table of Contents
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I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended December 31, 2018
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II. Financial Statements
I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended December 31, 2018
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 as well as Economic Action Plan 2017 and 2018 (Budget 2017 and Budget 2018).
A summary description of Veterans Affairs Canada's (VAC) program activities can be found in Part II of the Main Estimates.
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 2018-19 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
Statement of Authorities
Overall, VAC’s authorities reflect the changing demographic profile and changing needs of the men, women, and families the Department serves. This is evidenced by an increase in the number of modern-day Veterans and survivors (forecast to increase from 107,078 as of March 31, 2018, to 113,000 as of March 31, 2019) and a decrease in the number of War Service Veterans and survivors (forecast to decrease from 67,648 as of March 31, 2018, to 60,000 as of March 31, 2019). Despite the slight decrease in overall Veterans and recipients of VAC benefits, recent program enhancements have increased the demand on New Veterans Charter programs and benefits.
As at December 31, 2018, net budgetary authorities available (i.e. budget) for the year have decreased by $265M (5.6%) compared to the same quarter of the previous year, from $4,740M to $4,475M. This decrease is the result of a $384M decrease in Vote 5, Grants and Contributions, a $115M increase in Vote 1, Operating Expenditures, and a $4M increase in statutory authorities. The decrease in Vote 5 is attributable to the top-up payment that was made in 2017-18 to all Veterans who received a Disability Award since April 1, 2006. The increase in Vote 1 is attributable to the Pension for Life (PFL) program transition, as well as temporary funding related to the Budget 2018 initiative to increase service delivery capacity and eliminate the current backlog of repairs to graves cared for by the Department.
Total authorities used (i.e. expenditures) during the third quarter of 2018-19 are $165M (16%) more when compared to the same three-month period of 2017-18, increased from $1,033M to $1,198M. A break-down in the spending for the third quarter of 2018-19 indicates Grant and Contribution spending increased by $135M, primarily attributed to increased demand, as well as efficiency in processing applications for the Disability Awards and Earnings Loss programs. Additionally, spending on Operating expenditures (Vote 1) increased by $30M, and spending on statutory authorities remained relatively stable with only a small increase of approximately $75K.
Figure 1 - Third Quarter and Year-to-date Expenditures Compared to Budget
| Fiscal Years | 2017-2018 | 2018-2019 |
|---|---|---|
| Net Budgetary Authorities | 4,740 | 4,475 |
| Expenditures for the Quarter ended December 31st | 1033 | 1198 |
| Year to date Expenditures | 3,618 | 3,455 |
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.
Statement of Departmental Budgetary Expenditures by Standard Object
When analyzed by Standard Object, expenditures in the third quarter are generally consistent in comparison with prior-year spending. The largest variances include:
- An increase of $135M in Transfer Payments primarily attributed to increased demand and efficiency in processing applications for Disability Awards and Earnings Loss.
- An increase of $9M in Utilities, Materials, and Supplies primarily related to spending for Operational Stress Injury clinics. The increase is attributed to the timing of payments and an overall increase in planned expenditures this fiscal year when compared to the prior fiscal year.
- An increase of $11M in Professional and Special Services primarily attributed to increased demand for prescription drugs and the implementation of Pension for Life programs, as of April 1, 2019.
3. Risks and Uncertainties
VAC is dedicated to enhancing the health and well-being of Veterans and their families and recognizes that its success in fulfilling this mandate is directly related to the effective management of risk. Sound risk management equips the Department to respond proactively to change and uncertainty by using risk-based information to support effective decision-making, resource allocation, and ultimately, better results for Canadians. Additionally, it can lead to effective service delivery, better project management, and an increase in value for money.
VAC operates in a dynamic and complex environment characterized by internal and external drivers of change. The Department employs integrated risk management tools to proactively and systematically recognize, understand, accommodate and capitalize on new challenges and opportunities, with a focus on results. In addition, the Department has effective internal control systems in place, proportionate to the risks being managed.
As such, the Department’s executive-level committees, the Assistant Deputy Minister level Senior Management Committee and the Director General level Corporate Policy and Planning Management Committee serve as forums where the Deputy Head ensures that Senior Department Managers are aware of their financial management responsibilities, have the tools to enable these responsibilities, and manage the financial performance within their areas of responsibilities. In addition, these committees recommend and prioritize the department’s investment opportunities, based on Integrated Business Plans (IBPs), to ensure their alignment with departmental and Government of Canada expected results. The IBPs also support the development of integrated program and corporate risk registers and enable resource capacity planning for the department.
Key risks currently being managed by the Department include:
- Maintaining Core Services: To avoid the risk of not providing timely, high quality core services and benefits to Veterans and their families while simultaneously implementing several new initiatives and programs from multiple federal budgets, Veterans Affairs is monitoring and mitigating the risks through:
- Refining internal processes to improve efficiency
- Increasing the use of automation
- Recruiting, training, motivating and retaining employees
- Progressing toward the government's goal of a 25:1 case manager to client ratio
- Fulfilling Mandate Letter Commitments: To prevent the risk of not fully implementing remaining mandate commitments, given the volume and complexity of commitments made to Veterans, Veterans Affairs Canada is mitigating the risk through:
- Reporting progress internally and through canada.ca
- Increasing the use of automation
- Recruiting, training, motivating and retaining employees
- Achieving and Demonstrating Results: To avert the risk of not fully meeting planned targets, given that responsibility for Veterans' well-being is shared with multiple jurisdictions, other government departments, and individual Veterans, Veterans Affairs Canada is mitigating the risks through:
- Working closely with partners to ensure efforts are well aligned
- Exploring additional opportunities for sound research and data to inform direction
The Department monitors these risks through the Departmental Results Framework and internal performance reports. Tracking performance in these areas enables timely adjustments and ensure risks are being effectively mitigated.
Additionally, the Departmental Audit Committee provides an important advisory function as part of the Department’s governance structure for risk. It provides objective advice and recommendations to the Deputy Head regarding the sufficiency, quality and adequacy of the department's risk management process.
This integrated risk management process ultimately supports the Department in meeting its objectives. Further information on risks facing the Department and the steps taken to mitigate them can be found on VAC's website.
4. Significant Changes in Relation to Operations, Personnel and Programs
From November 9 to 11, 2018, Veterans Affairs Minister Seamus O’Regan led an official Government of Canada delegation to Belgium to take part in ceremonies and events marking the 100th anniversary of Canada’s Hundred Days and the end of the First World War.
On November 14, 2018, Veterans Affairs Minister Seamus O’Regan welcomed the appointment of Mr. L. Craig Dalton as the new Ombudsperson for the Department, and thanked Mr. Guy Parent for his service to the Veterans community as Ombudsperson since 2010.
Pension for Life
On February 5, 2018, the Department’s Service Delivery branch launched the Pension for Life (PFL) implementation project. The project rolls out new program benefits such as Income Replacement Benefit, Pain and Suffering Compensation, and Additional Pain and Suffering Compensation.
VAC will start accepting applications and paying new benefits on April 1st, 2019. It is expected that the implementation project will close a year later. The total project team includes over eight (8) self-managed teams with members from different areas of the Department. These teams reach out across the Department to gather the information and skills necessary to complete the work.
The staffing required to properly support the project is an important aspect of PFL. VAC is applying innovative recruitment approaches to attract and retain the talent required. The Diminished Earnings Capacity (DEC) and Outreach units are now operational in Winnipeg and Campbellton, respectively. The Income Replacement Benefit (IRB) unit will follow in February 2019.
Another important facet of PFL is the need to train staff. More than forty (40) training modules are being delivered to staff across the Department. Multiple delivery approaches will be used, including self-paced modules, video-conferencing and classroom training.
In 2018, the Department changed its project delivery approach from a predictive model to an adaptive model. Adaptive models, often referred to as “agile”, rely on iterative deployments and continuous improvement. The agile approach requires breaking the work into units small enough to be prioritized and completed in one iteration each. This new approach necessitates empowering the teams to make the decisions required to complete the work on time. Leading by example and results, the Department’s divisions are adopting agile practices and restructuring themselves to maximize efficiencies.
5. Approvals by Senior Officials
Original signed by:
__________________________________
W.J. Natynczyk
General (Retired)
Deputy Minister
Ottawa, ON
February 19, 2019
__________________________________
Elizabeth M. Stuart
Rear-Admiral (Retired)
Chief Financial Officer
Charlottetown, PE
February 14, 2019
II. Financial Statements
Statement of Authorities (unaudited)
| (in thousands of dollars) | Total available for use for the year ended March 31, 2018* | Used during the quarter ended December 31, 2017 | Year-to-date used at quarter-end |
|---|---|---|---|
| Vote 1 - Net Operating expenditures | 972,437 | 230,784 | 653,258 |
| Vote 5 - Grants and Contributions | 3,735,639 | 794,698 | 2,941,181 |
| Statutory Authority - Minister's Salary and Motor Car Allowance | 84 | 21 | 64 |
| Statutory Authority - Court Award - Crown Liability and Proceeding Act | 0 | 2 | 7 |
| Statutory Authority - Refunds of Previous Years Revenue | 0 | 1 | 5 |
| Statutory Authority – Spending of Amounts Equivalent to Proceeds from Disposal of Surplus Moveable Crown Assets | 0 | 8 | 8 |
| Statutory Authority - Contributions to Employee Benefit Plans - Program | 31,174 | 7,730 | 23,190 |
| Statutory Authority - Veterans Insurance Actuarial Liability Adjustment | 175 | 0 | 0 |
| Statutory Authority - Returned Soldiers Insurance Actuarial Liability Adjustment | 10 | 0 | 0 |
| Statutory Authority - Re-establishment credits under Section 8 of the War Services Grants Act | 2 | 0 | 0 |
| Statutory Authority - Repayments under Section 15 of the War Services Grants Act | 10 | 0 | 0 |
| Total Statutory | 31,455 | 7,762 | 23,274 |
| Total Budgetary authorities | 4,739,531 | 1,033,244 | 3,617,713 |
| Non-budgetary authorities | 0 | 0 | 0 |
| Total Authorities | 4,739,531 | 1,033,244 | 3,617,713 |
* Includes only Authorities available for use and granted by Parliament at quarter-end.
| (in thousands of dollars) | 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 - Net Operating expenditures | 1,087,444 | 260,285 | 693,612 |
| Vote 5 - Grants and Contributions | 3,351,947 | 929,607 | 2,737,906 |
| Statutory Authority - Minister's Salary and Motor Car Allowance | 86 | 21 | 65 |
| Statutory Authority - Court Award - Crown Liability and Proceeding Act | 0 | 9 | 11 |
| Statutory Authority - Refunds of Previous Years Revenue | 0 | 2 | 2 |
| Statutory Authority – Spending of Amounts Equivalent to Proceeds from Disposal of Surplus Moveable Crown Assets | 0 | 3 | 3 |
| Statutory Authority - Contributions to Employee Benefit Plans - Program | 35,643 | 7,802 | 23,407 |
| Statutory Authority - Veterans Insurance Actuarial Liability Adjustment | 175 | 0 | 0 |
| Statutory Authority - Returned Soldiers Insurance Actuarial Liability Adjustment | 10 | 0 | 0 |
| Statutory Authority - Re-establishment credits under Section 8 of the War Services Grants Act | 2 | 0 | 0 |
| Statutory Authority - Repayments under Section 15 of the War Services Grants Act | 10 | 0 | 0 |
| Total Statutory | 35,926 | 7,837 | 23,488 |
| Total Budgetary authorities | 4,475,317 | 1,197,729 | 3,455,006 |
| Non-budgetary authorities | 0 | 0 | 0 |
| Total Authorities | 4,475,317 | 1,197,729 | 3,455,006 |
* Includes only Authorities available for use and granted by Parliament at quarter-end.
Departmental Budgetary Expenditures by Standard Object (unaudited)
| Expenditures (in thousands of dollars) | Planned expenditures for the year ended March 31, 2018 | Expended during the quarter ended December 31, 2017 | Year-to-date used at quarter-end |
|---|---|---|---|
| 01 Personnel | 239,364 | 65,340 | 197,428 |
| 02 Transportation and communications | 30,935 | 7,193 | 21,062 |
| 03 Information | 12,139 | 465 | 917 |
| 04 Professional and special services | 473,162 | 111,844 | 300,926 |
| 05 Rentals | 8,085 | 857 | 3,254 |
| 06 Repair and maintenance | 11,025 | 673 | 2,274 |
| 07 Utilities, materials and supplies | 218,787 | 49,054 | 140,814 |
| 08 Acquisition of land, buildings and works | 735 | 0 | 0 |
| 09 Acquisition of machinery and equipment | 3,583 | (15) | 535 |
| 10 Transfer payments | 3,735,836 | 794,698 | 2,941,181 |
| 11 Public debt charges | 0 | 0 | 0 |
| 12 Other subsidies and payments | 5,880 | 3,135 | 9,322 |
| Total gross budgetary expenditures | 4,739,531 | 1,033,244 | 3,617,713 |
| Less Revenues netted against expenditures | 0 | 0 | 0 |
| Total Revenues netted against expenditures: | 0 | 0 | 0 |
| Total net budgetary expenditures | 4,739,531 | 1,033,244 | 3,617,713 |
| Expenditures (in thousands of dollars) | Planned expenditures for the year ending March 31, 2019 | Expended during the quarter ended December 31, 2018 | Year-to-date used at quarter-end |
|---|---|---|---|
| 01 Personnel | 263,275 | 68,454 | 189,759 |
| 02 Transportation and communications | 36,207 | 11,134 | 26,772 |
| 03 Information | 4,337 | 1,439 | 2,494 |
| 04 Professional and special services | 516,211 | 122,851 | 318,590 |
| 05 Rentals | 8,807 | 1,635 | 3,673 |
| 06 Repair and maintenance | 10,513 | 1,660 | 2,775 |
| 07 Utilities, materials and supplies | 256,283 | 58,300 | 158,425 |
| 08 Acquisition of land, buildings and works | 528 | 10 | 10 |
| 09 Acquisition of machinery and equipment | 13,210 | 645 | 1,773 |
| 10 Transfer payments | 3,352,144 | 929,607 | 2,737,906 |
| 11 Public debt charges | 0 | 0 | 0 |
| 12 Other subsidies and payments | 13,802 | 1,994 | 12,829 |
| Total gross budgetary expenditures | 4,475,317 | 1,197,729 | 3,455,006 |
| Less Revenues netted against expenditures | 0 | 0 | 0 |
| Total Revenues netted against expenditures: | 0 | 0 | 0 |
| Total net budgetary expenditures | 4,475,317 | 1,197,729 | 3,455,006 |
* Includes only Authorities available for use and granted by Parliament at quarter-end.