Departmental Quarterly Financial Report (October - December 2022)

October – December 2022

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended 31 December 2022

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 2022-23 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 2022.

The following tables provide a comparison of the authorities available for use and the expenditures for the quarters ending 31 December 2021 and 31 December 2022 for the Department.

2.1 Statement of authorities

2.1.1 Changes in fiscal year-to-date authorities available

As at 31 December 2022, total authorities available (i.e. budget) at quarter end were $705M (11.2%) less when compared to amounts available at the same quarter-end the previous year, from $6,311M in 2021-22 to $5,606M in 2022-23.

Operating authorities as of Quarter 3 include the funding announced in Budget 2022 which brought with it two years of continuation of funding for efforts to reduce the disability application backlog. The Department’s Grants and Contribution funding will be adjusted through the estimates process in future supply periods to reflect this new funding, and to align with the latest forecast of client demand and expenditures

2.1.2 Changes in year-to-date expenditures

Year-to-date expenditures for Veterans Affairs Canada are $97M less (2.4% decrease) when compared to the same timeframe in 2021-22. This decrease over the third quarter of 2021-22 can be explained by variances detailed below.

Vote 1 - Operating expenditures – increase of $7.0M

• Expenditures are in line with previous year’s quarter three

Vote 5 - Grant and contribution - decrease of $99.4M

• Expenditures are largely in line with previous year’s quarter three, with a slight decrease due to complexity of cases for disability applications.

Budgetary statutory authorities – decrease of $4.2M,

• Expenditures are being accrued based on opening authorities, which are lower than the previous year. 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 $136M less (9.7% decrease) when compared to the same timeframe in 2021-22. This decrease as compared to the third quarter in 2021-22 can be explained by variances detailed below.

Vote 1 - Operating Expenditures – decrease of $24.4M

• Year-to-date expenditures are in line with current forecasts of increased expenditures over the previous year. Variations from quarter to quarter are due to billing cycles relating to Other Health Related Services program.

Vote 5 - Grant and Contribution - decrease of $110.6M

• Expenditures are largely in line with previous year’s quarter three, with a slight decrease due to complexity of cases.

Budgetary statutory authorities – decrease of $1.4M

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

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 135,450 as of 31 March 2022, to 143,800 as of 31 March 2023) and a decrease in the number of War Service Veterans and survivors (forecast to decrease from 36,321 as of 31 March 2022, to 31,300 as of 31 March 2023).

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, and the Assistant Deputy Minister level Senior Management Committee 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.

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; and
   2. 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 ensures risks are being effectively mitigated.

In response to the global pandemic (COVID-19), the Government of Canada is also monitoring risks in various areas, including: Governance, Business Continuity Planning and Emergency Preparedness, IT Systems and Security, Information Management and Privacy, Finance and Workforce Health.

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

Mandate/budget commitments

Case Management Services

Veterans Affairs Canada is committed to maintaining frontline staffing levels, including the Case Manager to Veteran ratio. Case Managers play an important role in helping Veterans with getting the benefits and services they need. Since 2015, the number of Veterans supported by Case Managers has nearly doubled. The Government of Canada announced funding to support Veterans by allowing VAC to extend temporary resources to support case management and upgrade the tools they use to free up more time to work directly with Veterans. This additional funding will allow VAC to improve case management services, ensuring Veterans are receiving the care and support they need, when they need it.

Juno Beach

The Department is committed to supporting the Juno Beach site in France. The Juno Beach Centre is the only major commemorative site in Europe recalling the full scope of Canada’s participation in the Second World War. It holds special meaning for all Canadians and especially Veterans of the Second World War. The Government of Canada announced funding to help protect a piece of land adjacent to the Juno Beach Centre site in France from commercial development that would interfere with operations of the centre and the experience of visitors. This funding will allow the Juno Beach Centre to continue its commitment to remembering and honouring the sacrifices of Canadians who served their country and, in particular, those who bravely landed on the beaches of Normandy on D-Day.

Commemorative activities

Grave marker maintenance continues to be a priority as we complete a five year project in Canada to eliminate the backlog of repairs. Veterans Affairs Canada and Commonwealth War Graves Commission maintain the grave sites and grave markers of more than 300,000 fallen Canadian Armed Forces around the world.

During the third quarter of the 2022-23 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 the Senate Ceremony, the Candlelight Ceremony and other larger November 11th gatherings. This week is dedicated to honouring and remembering those who served and those who paid the ultimate sacrifice.
• Marked Indigenous Veterans with a panel of Indigenous Veterans and still serving members who spoke to over 150 school-aged children.
• Hosted 2 learning day events that focus on educating and raising awareness regarding Canadian Armed Forces support in response to domestic disasters.
• Supported many partner organizations who hosted events and ceremonies in local communities.

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, as well as staff participation at several events in France and Belgium.
• Continued priority of the Forest Management project with tree removal, demining, planting, and monitoring continuing across the Fall.
• Initiated engineering work to stabilize the caribou mound at Monchy-le-Preux and wrapped up data collection for our visitor satisfaction survey.
• Completed a successful summer term in December by student guides at the Canadian National Vimy and Beaumont-Hamel Newfoundland memorial sites.

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.