Quarterly Financial Report - For the period ending June 30, 2020

Statement outlining results, risks and significant changes in operations, personnel and program

1. Introduction

This quarterly financial report (QFR) 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. The report should be read in conjunction with the Main Estimates for 2020-21. The quarterly report has not been subject to an external audit or review.

1.1 Mandate

The Minister of Public Safety and Emergency Preparedness is the minister responsible for the Royal Canadian Mounted Police (RCMP). The responsibilities of the RCMP are set out in section 18 of the Royal Canadian Mounted Police Act. The RCMP's mandate is multi-faceted, it includes preventing and investigating crime; maintaining peace and order; enforcing laws; contributing to national security; ensuring safety of state officials, visiting dignitaries and foreign missions; and providing vital operational support services to other police and law enforcement agencies within Canada and abroad.

Further information on the mandate, roles, responsibilities and programs of the RCMP can be found in the Part II of the Main Estimates.

1.2 Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the RCMP's spending authorities granted by Parliament and those used by the department consistent with the Main Estimates and Supplementary Estimates "A". 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 money 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.

The RCMP 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 a cash expenditure basis.

2. Highlights of the fiscal quarter and fiscal year-to-date (YTD) results

For the period ending June 30, 2020, the RCMP had $3,417.5 million in total authorities available for use, which represents a decrease of $122.8 million or (3%) when compared at the same quarter in the previous year. The RCMP's authorities have decreased in the Operating (Vote 1), Capital (Vote 5) and Statutory authorities totalling $185.9 million. These decreases are offset by an increase of $63.1 million in Grant and Contributions (Vote 10).

The RCMP's expenditures were $1,004.5 million in the first quarter of the year, representing an increase of $77.8M or 8% from the previous year's first quarter. Increases in Operating and Statutory expenditures totalled $88.1 million offset by a decrease of $10.3 million in Capital and Grants and Contribution expenditures, as shown in Table 1.

2.1 Statement of authorities

Comparison of Total Budgetary Authorities as of June 30, 2019 and June 30, 2020 (in thousands of dollars)

A decrease of $122.8 million in the authorities available for use is due to the reduced supply of the Main Estimates. Due to the COVID-19 pandemic and limited sessions in the spring for Parliament to study supply, the Standing Orders of the House of Commons were amended to extend the study period into the Fall. The RCMP is expected to receive full supply for the 2020-21 Main Estimates in December 2020.

For more information on the authority changes that affect the RCMP, we would direct the reader to the RCMP's 2020-21 Main Estimates.

2.1.1 Variance to the Net Operating Vote

The Net Operating Vote is $119.3 million (or 5%) lower than the same period last year. The decrease is largely attributed to the RCMP receiving 11/12th of the approved Main Estimates in 2020-21, in comparison to full supply in 2019-20. Should full supply be approved by the Government, the RCMP will receive an additional $217.6 million, representing an increase in year-over-year authorities.

2.1.2 Variance to the Capital Vote

The Capital Vote is $64.5 million (or 26%) lower than the same period last year. This decrease is largely attributed to the RCMP receiving 9/12th of the approved Main Estimates in 2020-21, in comparison to full supply in 2019-20. Should full supply be approved by the Government, the RCMP will receive an additional $62.3 million, which is in line with the 2019-20 first quarter authorities.

2.1.3 Variance to the Grants and Contributions Vote

The Grants and Contributions Vote is $63.1 million (or 22%) higher than the same period last year. The increase is the result of RCMP receiving $203.1 million in support of the Grant to compensate members of the RCMP for injuries received in the performance of duty received in 2020-21 Supplementary Estimates A, offset by the RCMP receiving 9/12th of the approved Main Estimates in 2020-21.

2.2 Statement of Departmental Budgetary Expenditures by Standard Object

Net Expenditures by standard objects at the end of the first quarter 2020-21 were $77.8 million (or 8%) higher than the previous year. This variance is primarily the result of a decrease in vote netted revenues of $112.8 million (or 42%) in addition to decreases in gross budgetary expenditures of $35.0 million (or 5%) from the previous year. The increase is driven by timing differences in Vote Netted Revenues collected for Contract Policing activities. This was partially offset by decreases in gross budgetary expenditures largely the result of reduced activities due to COVID-19. A detailed review by standard object emphasizes some significant variances described below and displayed in Annex B.

2.2.1 Variance by Personnel

Personnel expenditures have increased by $17.9 million (or 2%) over the same period last year. This increase is attributed to higher statutory expenditures for employee benefit plans.

2.2.2 Variance by Transportation and communications

Transportation and communications expenditures have decreased by $27.1 million (or 40%) over the same period last year. This decrease is mainly attributed to the reduced relocations, travel, delayed training as measures were implemented to contain the spread of COVID-19.

2.2.3 Variance by Information

Information increased by $0.4 million (or 77%) over the same period last year. This was mainly related to the RCMP providing firearm license holders information regarding the announcement by the Government of Canada to banning models and variants of assault-style firearms.

2.2.4 Variance by Professional and special services

Professional and special services decreased by $38.5 million (or 35%) when compared to 2019-20. The decrease is primarily due to timing differences in invoicing for legal services, health costs which occurred in the first quarter of 2019-20. Additionally, COVID-19 has delayed certain activities across programs leading to reduced expenditures in the first quarter.

2.2.5 Variance by Rentals

Rentals have decreased by $4.9 million (or 22%) when compared to 2019-20. The decrease is due to timing differences of invoicing and delayed activities due to COVID-19.

2.2.6 Variance by Purchased repair and maintenance

Purchase Repair and Maintenance decreased by $3.5 million (or 22%) compared to 2019-20. This is mainly attributed to lower renovation costs of buildings within the Contract Policing program in comparison to 2019-20. In addition, there was a timing difference related to bulk purchases such as vehicle replacements.

2.2.7 Variance by Utilities

Utilities expenditures have decreased by $6.8 million (or 21%) compared to 2019-20. The decrease in expenditures is primarily due to lower fuel and gas prices as well as reduced consumption as a result of slower operational tempo in comparison to the previous years, reduced building expenses as many employees work remotely during COVID-19, and reduced food expenditures at the RCMP's training facilities while training has been deferred.

2.2.8 Variance by Acquisition of land, buildings and works

Acquisitions of Land, Buildings and Works expenditures have decreased by $3.0 million (or 37%) when compared to the same period in 2019-20. This decrease primarily relates to projects completed in the first quarter of 2019-20 that did not occur in the same period in this fiscal year such as the indoor range and integrated training centre in the RCMP's training academy (DEPOT), as well as the construction of the National Operations Centre.

2.2.9 Variance by Other subsidies and payments

Other subsidies and payments have increased by $30.6 million (or 170%) when compared to 2019-20. This increase is primarily due to the timing of items being cleared from suspense accounts into other standard objects such as legal services, as well as increased claims payments related to the Merlo Davidson Class Action Settlement.

2.2.10 Variance by Revenues and other reductions

Vote netted revenue collected in the first quarter of 2020-21 decreased by $112.7 million (or 42%) compared to the same period last year. The decrease is primarily related to timing differences in revenue collections related to Contract Policing. In addition, due to the current environment of physical distancing and limited group settings, the number or courses provided by the Canadian Police College have decreased in comparison to the previous year, which has reduced the amount of revenues collected.

3. Risks and uncertainties

The Departmental QFR reflects the results of the current fiscal period in relation to the Main Estimates and the Supplementary Estimates "A".

The RCMP is funded through annual appropriations and are, therefore, impacted by any changes in funding approved through Parliament. In addition, it receives a significant portion of funding through vote netted revenue (VNR) from the provision of policing services to provinces, territories, municipalities and first nations communities, as well as from cost sharing agreements with provinces and territories for the provision of DNA analysis by the RCMP. The RCMP also receives VNR authorities to bill Parliamentary Protective Service (PPS) for the provision of security services throughout the Parliamentary precinct and the grounds of Parliament Hill.

On October 6, 2016, the RCMP announced that a settlement agreement had been reached between the RCMP and the plaintiffs in the Merlo and Davidson lawsuits filed on behalf of current and former female regular members, civilian members and public service employees. The settlement agreement was approved by the Federal Court and includes an independent claims process with compensation for women working, or having worked, at the RCMP who experienced harassment, bullying or discrimination based on their gender or sexual orientation during their employment from September 16, 1974 until May 30, 2017. The assessment of claims is the responsibility of an Independent Assessor appointed by the Federal Court. The window in which class members could file claims ran from August 12, 2017 to May 22, 2018. According to statistics posted on the Independent Assessor's website, a total of 3,131 claims were filed. As claims are assessed by the Independent Assessor, compensation awards are paid to successful claimants in accordance with the terms of the settlement.

In recent years, the RCMP's reference levels have been constrained by government-wide spending reduction exercises which have resulted in significant financial pressures. In order to assess the financial integrity issues faced by the RCMP and serve as the basis for longer term strategic recommendations to the Minister of Public Safety and Emergency Preparedness, a comprehensive resourcing review was undertaken, and a final report was completed in May 2017. The review findings have been assessed and the RCMP returned to Treasury Board with a fulsome Departmental Review in the fall of 2018 that included short, medium and long-term proposals to address its ongoing resourcing issues. Announcements in Budget 2019 and the Economic and Fiscal Update 2020 identified funding to support and enhance RCMP operations.

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

4.1 Operations

In comparison to the first quarter of 2019-20, certain activities have been delayed as a result of the impacts of COVID-19. The RCMP continues to assess the evolving circumstances of COVID-19 and is adjusting its operations accordingly.

4.2 Personnel

Subsequent to the end of the first quarter, the following changes to the senior ranks of the department have occurred:

• Ms. Jen O'Donoughue, previously Assistant Deputy Minister and Chief Financial Officer of the Department of Fisheries and Oceans becomes Chief Financial Officer of the Royal Canadian Mounted Police.
• Mrs. Alison Whelan, previously Executive Director, National Security and Protective Policing of the Royal Canadian Mounted Police becomes Chief Strategic Policy and External Relations Officer of the Royal Canadian Mounted Police.

4.3 Programs

There has been no significant change in relation to programs in the first quarter of 2020-21.

Approved by senior officials

Approved by:

Annex A: Statement of authorities (unaudited)

Annex B: Departmental budgetary expenditures by standard object (unaudited)

Date modified:

2020-08-27