Departmental Quarterly Financial Report (July - September 2022)

July - September 2022

I. Statement outlining results, risks and significant changes in operations, personnel and program for the quarter ended 30 September 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 30 September 2022.

The following tables provide a comparison of the authorities available for use and the expenditures for the quarters ending 30 September 2021 and 30 September 2022 for the Department.

2.1 Statement of authorities

2.1.1 Changes in fiscal year-to-date authorities available

As at 30 September 2022, total authorities available (i.e. budget) at quarter end were $764M (12.2%) less when compared to amounts available at the same quarter-end the previous year, from $6,289M in 2021-22 to $5,524M in 2022-23.

Total Authorities as of Quarter 2 do not include 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 budget 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 $40M more (1.5% increase) when compared to the same timeframe in 2021-22. This increase over the second quarter of 2021-22 can be explained by variances detailed below.

Vote 1 - Operating expenditures – increase of $31.4M

• Much of the increase is attributed to an increase in clients accessing Treatment Benefits and Services, such as prescription drugs, physiotherapy, occupational therapy, massage therapy and chiropractic/acupuncture services, which have seen increased demand compared to last year.

Vote 5 - Grant and contribution - increase of $11.2M

• Expenditures are in line with previous year’s quarter two.

Budgetary statutory authorities – decrease of $2.8M,

• 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 $44M more (3.4% increase) when compared to the same timeframe in 2021-22. This increase as compared to the second quarter in 2021-22 can be explained by variances detailed below.

Vote 1 - Operating Expenditures – increase of $35.2M

• Much of the increase is attributed to an increase in clients accessing Treatment Benefits and Services, such as prescription drugs, physiotherapy, occupational therapy, massage therapy and chiropractic/acupuncture services, which have seen increased demand compared to last year.

Vote 5 - Grant and Contribution - increase of $10.2M

• Expenditures are in line with previous year’s quarter two.

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, 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.

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.

In previous reports, a forth risk of Maintaining Core Services During the COVID-19 Global Pandemic had been included. Going forward, this is no longer considered a risk, however, is being monitored as we return to normal operation. 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

Service excellence

Reducing processing times for disability benefit applications remains Veterans Affairs Canada’s top priority. Through funding committed in previous budgets, the Department has and continues to reduce processing times for Veterans and their families through increased capacity, integration, innovation and digital solutions. Through Budget 2022, additional funding for two years has been committed to continue efforts to reduce the backlog.

Mental Health Benefit

Veterans Affairs Canada is committed to ensuring eligible Veterans and their families have access to the mental health support they need, when they need it. Budget 2021 announced funding to enable the Department to enhance existing mental health supports for Veterans. The Department launched a Mental Health Benefit on 1 April 2022, which allows eligible Veterans to access coverage for mental health treatment and supports immediately upon application for Disability Benefits for an eligible mental health condition. Coverage under the Mental Health Benefits will continue until a decision is made with respect to the application for disability benefits, or for a period of two years.

New Branch structure

In the second quarter, the Department moved to a new Branch structure. That change seen the creation of re-worked Branches of; Commemoration and Public Affairs (CPA) and Strategic Policy, Planning and Performance (SPPP). These two Branches, along with Service Delivery (SD) and Chief Financial Officer and Corporate Services (CFOCS) Branches which remain unchanged in the restructure, form the Departments new organizational structure.

Personnel

The second quarter saw significant changes at the senior management level:

• Amy Meunier was appointed Assistant Deputy Minister of Commemoration and Public Affairs effective 4 July 2022.
• Ken MacKillop was appointed Associate Deputy Minister of Veterans Affairs effective 25 July 2022.
• Pierre Tessier was appointed Assistant Deputy Minister of Strategic Policy, Planning, and Performance effective 29 August 2022.

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 second 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

• Ceremonies to mark the 80th anniversary of the Dieppe Raid;
• Veteran Delegation to honour the passing of Her Majesty Queen Elizabeth II;
• Ceremonies marking the anniversaries of the Battles of the Somme and Beaumont-Hamel, Defense of Hong Kong & VJ-Day and the Korean War;
• Ceremony to mark National Peacekeepers’ Day; 
• Commemorative ceremony with colleagues from Global Affairs Canada for the official visit by the President of the Republic of Korea;
• Events to mark the 25^th anniversary of the Red River Flood in Manitoba, including a learning day with over 100 students from the community.

International

• Delegations in France marking the 80^th anniversary of the Dieppe Raid;
• Ceremony in Turkey to dedicate the new Gallipoli Newfoundland Memorial and mark the transfer of responsibility for its stewardship to Veterans Affairs Canada;
• Ceremonies at our memorial sites in France marking Canada Day and the Battles of the Somme and Beaumount-Hamel;
• Departmental support to families attending CAF burials in Europe of recently identified remains from the First and Second World Wars.

At our memorials sites in Europe, a successful summer term was completed by student guides at the Canadian National Vimy and Beaumont-Hamel Newfoundland memorial sites. Work also continued on the significant ongoing stewardship project aimed at renewing the forests at Vimy and Beaumont-Hamel, with over a hectare of land at Vimy prepared for fall planting.

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.