Public Safety Canada Quarterly Financial Report
For the quarter ended December 31, 2017

1.0 Introduction

This quarterly financial report for the period ending December 31, 2017 has been prepared by management as required by section 65.1 of the Financial Administration Act, in the form and manner prescribed by Treasury Board. The report should be read in conjunction with the Main Estimates and the Supplementary Estimates, as well as Building a Strong Middle Class (Budget 2017).

This quarterly financial report has not been subject to an external audit or review. However, it has been reviewed by the Departmental Audit Committee prior to approval by senior officials.

Information on the mandate, roles, responsibilities and programs of Public Safety Canada can be found in the 2017-18 Departmental Plan and the 2017-18 Main Estimates.

1.1 Basis of Presentation

This quarterly report has been prepared using an expenditure basis of accounting. The accompanying Statement of Authorities table includes the Department's spending authorities granted by Parliament, or received from Treasury Board Central Votes, and those used by the Department consistent with the Main Estimates and the Supplementary Estimates (A) and (B) for the 2017-18 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet the information needs concerning the use of spending authorities.

The authority of Parliament is required before funds 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.

Spending authorities voted by Parliament are on an expenditure basis, as are the expenditures presented in this Quarterly Financial report. However, Public Safety Canada uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental performance reporting process.

2.0 Highlights of Fiscal Quarter and Fiscal Year-to-Date (YTD) Results

The following graph provides a comparison of the net budgetary authorities and expenditures as of December 31, 2017 and December 31, 2016 for the Department's combined:

• Vote 1: Operating Expenditures;
• Vote 5: Grants and Contributions;
• Statutory Votes:
  • Employee Benefit Plans; and
  • Minister's Salary and Car Allowance.

Note: Public Safety's appropriations have decreased to $1,087,762K as of December 31, 2017. The 2017-18 Supplementary Estimates ''A'' (SEA) amounted to $4,496K, Supplementary Estimates ''B'' (SEB) amounted to $19,835K and TB Central Vote transfers amounted to $10,837K. The 2016-17 SEB amounted to $67,729K and TB Central Vote transfers amounted to $5,745K.

2.1 Significant Changes to Authorities

For the period ending December 31, 2017, the authorities provided to the Department include Main Estimates, Supplementary Estimates (A) and (B) and TB Central Vote transfers. The 2016-17 authorities for the same period included Main Estimates, Supplementary Estimates (B) and TB Central Vote transfers. The Statement of Authorities table presents a net decrease of $82.6 million (7.1 percent) compared to those of the same period of the previous year (from $1,170.4 million to $1,087.8 million).

Operating Expenditures authorities have increased by $7.2 million (5.3 percent) (from $135.5 million to $142.8 million) mainly due to:

• An increase of $6.4 million for negotiated salary adjustments;
• An increase of $2.5 million for funding related to government advertising initiatives for the Discouraging Drug-Impaired Driving campaign;
• An increase of $2.4 million for new funding to explore options for the potential deployment of a public safety broadband network in Canada (Budget 2015);
• An increase of $1.4 million to build capacity to address drug-impaired driving in Canada;
• An increase of $1.1 million towards the creation of the Canada Centre for Community Engagement and Prevention of Violence (Budget 2016);
• An increase of $0.9 million for the Canada's new legal framework to strictly regulate and restrict access to cannabis; and
• A net increase of $0.2 million for other initiatives of lesser value.

These increases are offset by the following decreases:

• A decrease of $2.1 million in funding levels for the ongoing Phase II of Canada's Cyber Security Strategy, to secure cyber systems outside of the Government of Canada;
• A decrease of $1.8 million in the Department's Operating Budget Carry Forward;
• A decrease of $1.5 million in funding levels for the National Disaster Mitigation Program, aimed at reducing the impacts of natural disasters on Canadians;
• A decrease of $1.1 million for the completion of a Beyond the Border time-limited program, which sought to strengthen the security of the Canada and the United States shared perimeter and facilitate secure trade and travel across borders;
• A decrease of $0.8 million for a permanent reduction to funding in operating expenditures authorities (Budget 2016 reduction); and
• A decrease of $0.4 million for a transfer to Shared Services Canada for costs associated with the transfer of employees, labs and local server rooms (data centre space) following the creation of Shared Services Canada.

Grants and Contributions (G&C) authorities have decreased by $88.9 million (8.7 percent) (from $1,018.6 million to $929.7 million) mainly due to:

• A decrease of $104.5 million for matching domestic charitable donations to the Canadian Red Cross in 2016-17 in support of wildfire relief efforts in Fort McMurray, Alberta and surrounding areas;
• A decrease of $38.3 million associated with the completion of financial assistance to the Province of Quebec for decontamination costs following the train derailment and explosion in Lac-Mégantic, Quebec;
• A decrease of $10.5 million in funding levels for non-discretionary requirements to address existing and future obligations under the Disaster Financial Assistance Arrangements program; and
• A decrease of $0.6 million for other initiatives of lesser value.

These decreases are offset by the following increases:

• An increase of $38.6 million for supporting the Canadian Red Cross' relief efforts in response to the 2017 wildfires in British Columbia;
• An increase of $15.2 million to build capacity to address drug-impaired driving in Canada;
• An increase of $4.2 million in funding levels for the National Disaster Mitigation Program, which aims at reducing the impacts of natural disasters on Canadians;
• An increase of $2.2 million in funding levels for the First Nations Policing Program;
• An increase of $1.2 million towards the creation of the Canada Centre for Community Engagement and Prevention of Violence (Budget 2016);
• An increase of $1.0 million for Supporting the Canadian Red Cross' Spring 2017 flood relief efforts across Canada;
• An increase of $1.0 million resulting from a transfer to Indian Affairs and Northern Development in 2016-17 to facilitate the design and construction of an emergency services building on the Tobique Reserve in New Brunswick;
• An increase of $0.9 million in funding levels for the National Search and Rescue Secretariat; and
• An increase of $0.7 million for the Indigenous Community Corrections Initiative to address the needs of vulnerable offenders in the federal correctional system.

Budgetary Statutory authorities have decreased by $1.0 million (6.0 percent) in 2017-18 mostly as a result of the Employee Benefit Plan (EBP) costs associated with the department's budgetary requirements for salary and for which the EBP rate decreased for of an increase in the employee contributions portion.

2.2 Significant Variances from Previous Year Expenditures

Year-to-Date Expenditures

For the period ending December 31, 2017, the Departmental Budgetary Expenditures by Standard Object table presents a net decrease of $164.4 million (25.5 percent) in Public Safety's year-to-date (YTD) expenditures compared to the previous year (from $644.3 million to $479.9 million). This decrease is mostly due to:

• A net decrease of $129.6 million in transfer payments expenditures made under the Disaster Financial Assistance Arrangements (DFAA) program, a large portion of which was dedicated to an advance payment in June 2016 to the Province of Alberta to assist with the recovery efforts of the Fort McMurray wildfire ($307.0 million) and offset by a payment of $175.0 million in December 2017 for British Columbia wildfires;
• A decrease of $104.5 million in transfer payments made in July 2016 for matching domestic charitable donations to the Canadian Red Cross in support of wildfire relief efforts in Fort McMurray, Alberta and surrounding areas; and
• A net decrease of $5.8 million for other expenditure variances of lesser value.

These decreases are offset by:

• An increase of $38.6 million for supporting the Canadian Red Cross' relief efforts in response to the 2017 wildfires in British Columbia;
• An increase of $12.1 million in payments in support of the First Nations Policing Program;
• An increase of $7.7 million in payments in support of the National Crime Prevention Strategy Program; and
• Retroactive salary payments of $5.6 million as a result of the signing of collective bargaining agreements.

Third Quarter Expenditures

Compared to the previous year, expenditures during the quarter ended December 31, 2017 have increased by $187.7 million (187.1 percent) (from $100.3 million to $288.0 million) as reflected in the Departmental Budgetary Expenditures by Standard Object table.

• Personnel expenditures have increased by $1.6 million (5.8 percent) mainly due to:
• An increase of $1.6 million in expenditures as a result of addressing staffing gaps and commencing new programs.

• Operating and Maintenance expenditure have increased by $1.5 million (26.2 percent) mainly due to:
• An increase of $1.2 million in professional and special services due to the timing of payments for legal services from the Department of Justice Canada; and
• An increase of $0.3 million for information technology services.

• Transfer payments expenditures have increased by $185.1 million (273.4 percent) mainly due to:
• An increase of $127.4 million in payments in support of the Disaster Financial Assistance Arrangements (DFAA) program to the Province of British Columbia to assist with the wildfires recovery efforts;
• An increase of $38.6 million for supporting the Canadian Red Cross' wildfire relief efforts in 2017 in British Columbia;
• An increase of $15.7 million in payments in support of the First Nations Policing Program;
• An increase of $4.6 million in payments in support of the National Crime Prevention Strategy Program; and
• An increase of $0.2 million for other expenditure variances of lesser value.

Offset by the following decrease:

• A decrease of $1.4 million in payments in support of the Search and Rescue New Initiatives Fund.

3.0 Risks and Uncertainty

The Department's mandate spans from public safety and security, intelligence and national security functions, social interventions for youth-at-risk, to readiness for all manner of emergencies. Public Safety is called, on behalf of the Government of Canada, to rapidly respond to emerging threats and ensure the safety and security of Canadians. The Department's ability to deliver its programs and services is subject to several risk sources, such as the rapidly changing asymmetrical threat environment, its ability to respond to natural or man-made disasters, government priorities, and government-wide or central agency initiatives. To deliver this mandate effectively, the collaboration of many departments and agencies, provincial and territorial governments, international partners, private sector and first responders is required.

Disaster Financial Assistance Arrangements

The Disaster Financial Assistance Arrangements (DFAA) contribution program presents a greater level of risk and uncertainty than other PS grants and contributions programs given that it represents a significant portion of the PS budget and that it is subject to unforeseen events. The DFAA was established in 1970 to provide a consistent and equitable mechanism for federal sharing of provincial and territorial costs for natural disaster response and recovery where such costs would place an undue burden on a provincial or territorial economy.

• There are currently 72 natural disasters for which Orders-in-Council (OiCs) have been approved, authorizing the provision of federal financial assistance under the DFAA, and for which final payments have not yet been made.
• Public Safety's total outstanding share of liability under the DFAA in regards to these 72 events is $1.98 billion as of December 31, 2017, the majority of which is expected to be paid out over the next five years.
• The following are the most significant events within Public Safety's DFAA liability:
• Alberta 2013 June Flood ($370.7 million);
• Manitoba 2011 Spring Flood ($370.2 million);
• Alberta 2016 Wildfires ($188.3 million);
• British Columbia 2017 July Wildfires ($182.3 million); and
• Manitoba 2014 June Rainstorm ($120.7 million).

Phoenix Pay Modernization Project

In April 2016, Public Safety moved to the new Phoenix federal public service pay system. In transitioning to the new pay system, large backlogs and delays at the centralized Pay Centre have led to a significant increase in pay-related issues reported by employees.

To support employees at highest risk, Public Safety continues to work on a range of issues that fall within the department's scope of control to support employees who are experiencing difficulties with their pay, including: providing emergency salary advances, analyzing and resolving integration issues between the department's Human Resource Management System and the Phoenix pay system. Issues affecting Public Safety employees and the measures the Department is able to take to help mitigate them have been discussed with the unions at local and national level management consultation committees. At these meetings, union representatives have been engaged to ensure that employees' perspectives are shared with Management.

The Department is closely monitoring pay transactions to identify and address over and under payments in a timely manner and continues to apply ongoing mitigating controls which were implemented in 2016.

4.0 Significant Changes in Relation to Operations, Programs and Personnel

• Effective October 25, 2017, Christian Roy was appointed to the position of Executive Director, Public Safety Legal Services.
• On December 18, 2017, the Deputy Minister and the Associate Deputy Minister announced that Daniel Giroux was appointed to the position of Chief, Internal Audit and Evaluation effective on January 2, 2018.

5.0 Approval by Senior Officials

Approved as required by the Policy on Financial Resource Management, Information and Reporting:

Malcolm Brown
Deputy Minister
Public Safety Canada
Ottawa (Canada)
Date: February 27, 2018

Caroline Weber
Chief Financial Officer and Assistant
Deputy Minister, Corporate Management Branch
Public Safety Canada
Ottawa (Canada)
Date: February 23, 2018

6.0 Statement of Authorities (unaudited)

7.0 Departmental budgetary expenditures by Standard Object (unaudited)

Date modified:

2018-02-28