Departmental Quarterly Financial Report (October - December 2023)

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended 31 December 2023

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.

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 for the 2023-24 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 31 December 2023.

The following tables provide a comparison of the authorities available for use and the expenditures for the quarters ending 31 December 2022 and 31 December 2023 for the Department.

2.1 Statement of authorities

2.1.1 Changes in fiscal year-to-date authorities available

As at 31 December 2023, total authorities available (i.e. budget) at quarter end were $467M (8.3%) more when compared to amounts available at the same quarter-end the previous year, from $5,606M in 2022-23 to $6,073M in 2023-24.

Much of this increase in total authorities is due to additional funding received in 2023-24 to support more effective and timely service to Veterans and their families. Additionally, funding was received for newly signed collective agreements.

2.1.2 Changes in year-to-date expenditures

Year-to-date expenditures for Veterans Affairs Canada are $532M more (13.5% increase) when compared to the same timeframe in 2022-23. This increase over the third quarter of 2022-23 can be explained by variances detailed below.

Vote 1 - Operating expenditures – increase of $119M

• This increase is mostly attributed to a rise in the number of clients accessing prescription drugs and other Treatment Benefits, resulting in increased expenditures in Vote 1. While demand and expenditures are on an increasing trend, variations from year to year are also influenced by billing cycles associated with the program. Year-to-date expenditures align with current forecasts.
• Additionally, expenditures saw an increase over last year due to retroactive and in-year payments that occurred relating to newly signed collective agreements.

Vote 5 - Grant and contribution - increase of $406M

• This increase in spending can be attributed to the cumulative increase in clients accessing our programs, particularly those that have a lifelong benefit. Furthermore, the continued efforts of the department to improve disability benefit processing times have resulted in increased expenditures.

Budgetary statutory authorities – increase of $6.4M

• Expenditures are being accrued based on opening authorities, which are higher than the previous year. Expenditures will be adjusted at fiscal year-end based on actual salary costs.

2.1.3 Changes in Expenditures – Quarter to Quarter Comparison

In-quarter expenditures for Veterans Affairs Canada are $294M more (23.1% increase) when compared to the same timeframe in 2022-23. This increase as compared to the third quarter in 2022-23 can be explained by variances detailed below.

Vote 1 - Operating Expenditures – increase of $68M

• This quarter saw an increase in the number of clients accessing prescription drugs and other Treatment Benefits, resulting in increased expenditures in Vote 1. While demand and expenditures are on an increasing trend, variations from quarter to quarter are also influenced by billing cycles associated with the program. Year-to-date expenditures align with current forecasts.
• Additionally, expenditures saw an increase due to retroactive and in-year payments that occurred during the quarter relating to the newly signed collective agreements.

Vote 5 - Grant and Contribution - increase of $224M

• This increase in spending can be attributed to the cumulative increase in clients accessing our programs, particularly those that have a lifelong benefit. Furthermore, the continued efforts of the department to improve disability benefit processing times, have resulted in increased expenditures.

Budgetary statutory authorities – increase of $2.0M

• Expenditures are being accrued based on opening authorities, which are higher than the previous year. Expenditures will be adjusted at fiscal year-end based on actual salary costs.

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 Deputy level Senior Management Committee and various executive-level committees 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 Operational Plans, to ensure their alignment with departmental and Government of Canada expected results.

Key risks currently being managed by the Department include:

1. 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:
   1. Refining internal processes to improve efficiency;
   2. Increasing the use of automation;
   3. Recruiting, training, motivating and retaining employees; and
   4. Maintaining a reasonable case manager to client ratio.
2. 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:
   1. Reporting progress internally and through canada.ca;
   2. Increasing the use of automation; and
   3. Recruiting, training, motivating and retaining employees.
3. 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:
   1. Working closely with partners to ensure efforts are well aligned;
   2. Exploring additional opportunities for sound research and data to inform direction; and
   3. Actively gathering information from clients on their overall health, well-being, and satisfaction with VAC programs through the VAC National Client Survey.

The Department monitors these risks through the Departmental Results Framework and internal performance reports. Tracking performance in these areas enables timely adjustments and ensures 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: Operating context and risks.

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

Personnel

On 30 November 2023, Kenneth MacKillop, Associate Deputy Minister of Veterans Affairs, assumed a new role as the Secretary to the Governor General.

Mandate/budget commitments

Services for Veterans

Veterans Affairs Canada has committed to new investment that will result in more effective and timely service to Veterans and their families. The Government of Canada will invest $164.4 million to retain existing employees for an additional two years. This commitment supports hiring of additional case managers and support staff to lower the caseload of service delivery employees and reduce the volume of disability applications currently in queue.

Commemorative activities

During the third quarter of the 2023-24 fiscal year, Commemoration observed a number of key milestones and anniversaries with both domestic and international programming. Activities included the following:

Domestic

• Delivered Veterans’ Week programming from 05 November to 11 November, including Senate Ceremony, Learning Days at schools and museums, a Veteran Open-Mic Series, and a Candlelight tribute.
• Supported events, ceremonies, and activities to recognize National Indigenous Veterans’ Day and Remembrance Day.
• Events to mark the 35^th anniversary of the Nobel Peace Price to UN Peacekeeping.

International

• Delivered Veterans’ Week programming from 05 November to 11 November, with events and ceremonies at the Canadian National Vimy and Beaumont-Hamel Newfoundland memorial sites in France.
• Supported events during Veterans’ Week with partnership from Memorial Museum Passchendaele 1917 and No Stone Left Alone.
• Developed new interchangeable interpretative panels featuring first World War soldiers from diverse cultural and Indigenous backgrounds who are commemorated on the Vimy Memorial were completed.

At VAC memorials sites in Europe, work continued to address maintenance and modernization needs and to enhance visitor experience.  Renovation and paving work was completed on a significant portion of the pathway at the Canadian National Vimy Memorial and the pathways at the Gallipoli Newfoundland Memorial and Hill 62 Canadian Memorial were repaved. Demining and depollution work also took place at the Canadian National Vimy Memorial in preparation for the planting of over 3,500 trees.  Accessibility assessment were also undertaken at 13 Canadian memorial sites in France and Belgium.

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.