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Financial Statement Discussion and Analysis 2010-11


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INTRODUCTION

The following Financial Statement Discussion and Analysis (FSD&A) should be read in conjunction with the unaudited Financial Statements and accompanying notes of the Courts Administration Service (CAS) for the fiscal year ended March 31, 2011. These financial statements have been prepared in accordance with Treasury Board (TB) accounting standards and year-end instructions issued by the Receiver General, which are consistent with Canadian generally accepted accounting principles (GAAP) for the public sector. The FSD&A has been prepared following the Public Sector Statement of Recommended Practice (SORP-1).

Responsibility for the preparation of the FSD&A rests with the management of CAS. The purpose of the FSD&A is to enhance the users’ understanding of CAS’s financial position and results of operations while demonstrating CAS’s accountability for its resources. Additional information on CAS’s performance is available in the CAS Departmental Performance Report (DPR).

The FSD&A consists of three distinct segments: (1) Overview, (2) Highlights (financial and non-financial) and (3) Discussion and Analysis, covering Risks and Uncertainties and Financial Analysis.

Please note that all financial information presented herein is denominated in Canadian dollars, unless otherwise indicated.

Special note regarding forward-looking statements

The words “estimate”, “will”, “intend”, “should”, “anticipate”, and similar expressions are intended to identify forward-looking statements that reflect assumptions and expectations of CAS, based on its experience and perceptions of trends and current conditions. Although CAS believes the expectations reflected in such forward-looking statements are reasonable, they may prove to be inaccurate; consequently CAS’s actual results could differ materially from expectations set out in this FSD&A. In particular, the risk factors described in the “Risks and Uncertainties” section of this report could cause actual results or events to differ materially from those contemplated in forward-looking statements.

OVERVIEW

The Courts Administration Service (CAS) was established in 2003 by the Courts Administration Service Act, S.C. 2002, c. 8. The role of CAS is to provide effective and efficient registry, judicial support and corporate services to four superior courts of record – the Federal Court of Appeal, the Federal Court, the Court Martial Appeal Court of Canada and the Tax Court of Canada. The Chief Administrator serves as deputy head.

CAS was created to ensure the effective and efficient provision of administrative support to the four federal courts; to enhance judicial independence by placing administrative services at arm’s length from the Government and affirming the roles of the chief justices and judges in the management of the courts; and to enhance accountability for the use of public money in support of court administration.  This in turn ensures timely and fair access to the judicial system, which is essential to constitutional governance.

CAS’ budget is allocated through appropriations approved by Parliament. CAS has one voted appropriation for program expenditures and one statutory authority for contributions to employee benefit plans. Total CAS parliamentary appropriations in 2010-11 amounted to $64,894 thousand.

Appropriations provided to CAS do not parallel financial reporting according to Canadian generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial Position are not necessarily the same as those provided through appropriations from Parliament. Note 3 of the financial statements provides a high-level reconciliation between the bases of reporting.

CAS’ financial statements are not audited.

2010-11 HIGHLIGHTS

Parliamentary Authorities

The following chart illustrates CAS’s available parliamentary authorities over the past three fiscal years. It includes Main Estimates, Supplementary Estimates, Transfers, Adjustments and Warrants and includes contributions to employee benefit plans.

Parliamentary authorities chart (in thousands)
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The chart shows a $2,266 thousand decrease to $64,894 thousand in 2010-2011 from $67,160 thousand in 2009-2010. This was the net result of several factors.

First, funding for new procedures related to security certificates (Bill C-3) was reduced by $596 thousand in 2010-11, reflecting the completion of the related leasehold improvement project.

Second, starting in 2010-11, changes to the refugee determination process introduced in Bill C-11 began to take effect. Accordingly, the potential judicial complement of the Federal Court was increased and an amount of $509 thousand was set aside in CAS authorities to provide support. However, since no such judicial appointments were made in 2010-11, CAS could not access any of this funding.

A further cause of the decrease was that temporary program integrity funding of approximately $2,278 thousand per year had been ended by Treasury Board in 2008-09. This resulted in a cascading effect on net carry forward, ultimately reducing the 2010-11 appropriations by $1,350 thousand. In addition, the timing of the federal election caused a temporary shortfall of $677 thousand in 2010-11 appropriations for maternity and severance payments, an amount which CAS will recover in 2011-12.

With respect to 2009-10, the $3,987 thousand decrease to $67,160 thousand from $71,147 thousand in 2008-09 is mainly related to the elimination of one-time funding items. These include $2,278 thousand in temporary program-integrity funding for judicial appointments, $2,008 thousand for collective bargaining differences, which included a large lump sum payment, and $1,349 thousand for the relocation of employees to 90 Sparks Street in Ottawa. This was partially offset by an increase of funding for security certificates (Bill C-3) of $547 thousand as well as a $467 thousand increase in maternity and severance benefits.

Financial Highlights

CAS’s Net Cost of Operations amounted to $84,950 thousand in 2010-11, an increase of 9% compared to $77,970 thousand in 2009-10. This $6,980 thousand variance represents an increase in total expenses of $1,204 thousand and a decrease in total revenues of $5,776 thousand. Although CAS total expenses increased in areas such as salary and employee benefits, many other expenses decreased as a result of expenditure restraint measures. Specific areas of fiscal restraint are further explained in the Financial Analysis section. Revenues decreased significantly mainly due to a reduction of fines, which are determined by the Courts on a case-by-case basis. All revenues are non-respendable and are therefore not a source of funds for CAS operations.

Effective this fiscal year, the Treasury Board Accounting Standard 1.2 (TBAS 1.2) introduced a new requirement to report the amount Due from the Consolidated Revenue Fund as a financial asset in the Statement of Financial Position. This item amounts to $7,640 thousand for 2010-11. Comparative figures for 2009-10 have been restated, resulting in an increase in Assets and Equity of Canada by $10,503 thousand.

Statement of Operations

Expenses: CAS incurred total expenses of $92,927 thousand in 2010-11, an increase of 1% from $91,723 thousand in 2009-10, mainly due to a $2,003 thousand increase in 2010-11 salaries and employee benefits. This was partly offset by decreases in many other expense items as a result of budget restrictions. Expenses in 2010-11 were down 1% from those two years earlier (2008-09).

The following chart illustrates CAS’s total expenses, categorized by personnel and operations costs, over the past three fiscal years:

Expenses chart (in thousands)
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Personnel: Of CAS’s total expenses, over half consist of salaries and employee benefits. In 2010-11, the proportion was 55.7%, up from 54.2% in 2009-10. These costs increased by $2,003 thousand (4.0%) to $51,758 thousand in 2010-11 compared to $49,755 thousand in 2009-10 ($49,751 thousand in 2008-09).

Among the factors explaining the recent rise in personnel costs are a $856 thousand increase in the charge for future employee severance benefits, a $739 thousand increase for the new procedures related to security certificates, and a $429 thousand increase resulting from collective agreements signed in 2010-11.

Operations: CAS’s non-salary operational costs decreased by $799 thousand (2%) in 2010-11 to $41,169 thousand compared to $41,968 thousand in 2009-10 ($43,982 in 2008-09). The decrease in costs is mainly attributable to a reduction in professional services, down $1,271 thousand ($1,967 thousand from 2008-09) and transportation and telecommunications, down $437 thousand ($708 thousand from 2008-09). These decreases were partially offset by increases in machinery and equipment, rentals, and repairs and maintenance.

 

Revenue:
CAS’s revenues consist primarily of fines, filing fees, and sales of copies of filed documentation, including copies of judgments and orders, collected pursuant to the legislation and Rules governing the Courts. In addition, at the end of each fiscal year, CAS charges Human Resources and Skills Development Canada (HRSDC) for the costs associated with the administration of Employment Insurance (EI) cases in the Courts. Such revenues are non-respendable, meaning they cannot be used by CAS, and must be deposited directly into the Consolidated Revenue Fund (CRF).

CAS’s revenues were $7,977 thousand in 2010-11, a decline of 42% compared to $13,753 thousand in 2009-10 (but 83% higher than the $4,369 thousand seen in 2008-09). The chart below illustrates CAS’s total revenues, categorized by major type, over the past three fiscal years. As can be seen, the main contributor to revenue volatility is the total amount of court fines, which dropped by $5,440 thousand in 2010-11 after rising $10,475 thousand from 2008-09. Since such fines are determined by the Courts on a case-by-case basis, the total varies significantly from year-to-year and cannot be forecast.

Revenues chart (in thousands)
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Statement of Financial Position

Assets: CAS’ total assets signify its ability to provide future services to the four Federal Courts and thereby to ensure access to justice for Canadians. CAS’s total assets as at March 31, 2011 reached $13,753 thousand, down from $16,872 thousand the year before. The largest component is the amount Due from the Consolidated Revenue Fund, which represents 56% of the total ($7,640 thousand). Tangible Capital Assets, the second largest category, represents 33% of the total ($4,519 thousand).

  • Due from the Consolidated Revenue Fund (CRF): This account represents the net amount of cash that CAS is entitled to withdraw from the Consolidated Revenue Fund. The amount as at March 31, 2011 was $7,640 thousand, down from $10,503 thousand as at March 31, 2010. This decrease is mainly attributable to decreases in accounts payable and accrued liabilities and deposit accounts.
  • Tangible Capital Assets: Tangible capital assets are essential for the successful delivery of services required by the Courts. Re-investment is crucial for maintaining secure and modern facilities, updating technological infrastructure and information management capacity, and maintaining a reliable fleet of vehicles. The largest components are Leasehold improvements and Computer hardware and software. Combined, they account for 75% of the cost (85% of the net book value) of tangible capital investments. CAS’s Computer hardware and software are aging and as a result, the organization has placed a high degree of importance on addressing Information Technology (IT) rust-out.
  • In 2010-11, CAS acquired $643 thousand in tangible capital assets, down from $3,150 thousand in 2009-10. Of this amount, 60% ($383 thousand) related to leasehold improvements. The remaining balance was made up of expenditures on Assets under construction - Leasehold improvements, Motor vehicles, and Computer software and hardware.

    The total amount of annual amortization, transfers, adjustments, disposals, and write-offs was greater than tangible capital asset acquisitions. Consequently there was a decline in the total net book value of tangible capital assets over the past year.

Net debt: CAS’s net debt (financial assets less liabilities) as at March 31, 2011 reached $10,467 thousand, up from $9,679 thousand as at March 31, 2010. The $788 thousand increase in net debt is primarily due to an $856 thousand increase in employee future benefits and a $160 thousand reduction in accounts receivable, the latter mainly resulting from a decrease in the amount receivable from HRSDC for EI Cost Recoveries.

It is important to note that although parliamentary authorities are not recorded as income within CAS’s Financial Statement, CAS’s net debt will be paid with future authorities provided by Parliament.

Equity of Canada: This represents the net resources (financial and non-financial) that will be used to provide future services to the Courts system and thereby to benefit Canadians. CAS’s Equity of Canada consists of Non-Financial Assets less Net Debt.

CAS’s Equity of Canada is currently negative and becoming more so. As at
March 31, 2011 the amount was ($5,944) thousand, compared to ($5,060) thousand as at March 31, 2010. This situation reflects obligations recognized as liabilities, for instance employee future benefits that will be paid out of future appropriations.

Non-Financial Highlights

Governance: CAS has continued to improve its corporate governance in keeping with the broad government goal of improved management, accountability and transparency in the public sector.

To this end, CAS has continued implementation of an organization-wide business planning process to serve both financial and non-financial decision-making. The process allows CAS to coordinate financial planning and budgeting, human resource planning, and information technology planning to achieve the greatest return on investment for Canadians. This improved business planning process is now used in setting priorities and aligning scarce resources more strategically in order to maintain and strengthen CAS support to the Federal Courts.

Financial management is an essential component of good governance and has substantial influence on corporate values and culture. CAS strives to maintain effective and efficient financial management and control, address identified weaknesses, and strengthen oversight and sound management of the public resources entrusted to the organization. Responsibility Centre managers, in collaboration with Finance, undertake comprehensive budgetary reviews to provide timely, relevant and accurate financial information for decision-making. This work is critical to enable CAS to fulfill its mandate in support of the Courts system, judiciary, and public.

Change in Leadership: A number of changes occurred during 2010-11 within CAS’s senior leadership roles, including, most notably, the appointment of a new Chief Administrator.

Strategic Direction: Under the leadership of the Chief Administrator, the organization will develop a new strategic plan that will identify key priorities and position CAS to better serve the Courts and the public. Particular emphasis will be placed on improving security and strengthening information technology infrastructure, electronic records management and technology enabled courtrooms, while addressing the long term financial stability of CAS.

DISCUSSION AND ANALYSIS

Risks and Uncertainties

Like many other federal government organizations, CAS faces serious budget constraints. Several factors have contributed to the current situation. Principal among these is the requirement for CAS to support additional judicial appointments without having a source of permanent funding. This long standing situation resulted in the diversion of resources from other key priorities and areas of risk, and created important program integrity issues.

Federal Budget 2010 announced cost containment measures that froze appropriations at their 2010-11 levels for the years 2011-2012 and 2012-2013. Consequently, CAS, like all departments, has been required to absorb the negotiated salary increases of its employees. This measure has had a significant impact on service delivery organizations such as CAS whose budget is largely comprised of employee salaries. The resulting funding shortfall further eroded the budget available to address key priorities.

Federal Budget 2011 confirmed ongoing program integrity funding for CAS rising to an amount of $3,000 thousand per year in 2016-17 to address pressures affecting the delivery of its mandate. Federal Budget 2011 also announced the launch of a Strategic and Operating Review (SOR) across all of government in 2011-12. This review will focus on improving the efficiency and effectiveness of government operations and programs to ensure value for taxpayer money. CAS might be impacted by this review.

Close to 80% of CAS’ non-salary operating expenses are contracted costs for primarily non-discretionary services supporting the judicial process and court hearings. They include translation, court reporters and transcripts, library purchases and subscriptions as well as commissionaires and protection services, and are mostly driven by the number and type of hearings conducted in any given year. A risk management strategy is in place to monitor these costs and manage their fluctuation and related impacts on other key areas.

An important service provided by CAS is the courts computer system. Accordingly, a two-year refurbishment initiative has been launched that will result in more reliable IT services to members of the courts, litigants, registry staff and the public.

Financial Analysis

The following analysis explains the main items appearing on the financial statements, as well as significant variances and financial trends.

Assets

Due from the Consolidated Revenue Fund (CRF): This account represents the net amount of cash that CAS is entitled to withdraw from the Consolidated Revenue Fund in order to discharge its liabilities without generating any additional charges against its authorities in the year of the withdrawal. This includes expenses incurred but not yet paid and amounts received by CAS that can be paid out in future years, offset by accounts receivables from other government departments and agencies.

CAS’s Due from the CRF balance was $7,640 thousand as at March 31, 2011, down from $10,503 thousand as at March 31, 2010. The largest component of the $2,863 thousand decline was a $1,503 thousand decrease in accounts payable to other departments:
$1,216 thousand to Public Works and Government Services Canada (PWGSC) for leasehold improvements and $332 thousand to Treasury Board Secretariat (TBS) for the employee benefit plans. The other component of the decrease in CAS’s Due from the CRF balance is a $1,434 thousand decrease in the deposit accounts (in trust).

Accounts receivable and employee advances: Accounts receivable and employee advances totalled $1,590 thousand as at March 31, 2011, a $160 thousand decrease from 2009-10. The two main categories are receivables from other government departments and agencies and receivables from external parties.

Receivables from other government departments and agencies
CAS had accounts receivable from other government departments worth $1,531 thousand as at March 31, 2011 ($1,696 thousand as at March 31, 2010). The decrease of 10% is primarily due to a $385 thousand decrease in the amount receivable from HRSDC for EI account cost recoveries. This is partly offset by an increase of $76 thousand in the GST refundable advance account.

Receivables from external parties
CAS had accounts receivable from external parties worth $49 thousand as at March 31, 2011 ($46 thousand as at March 31, 2010), with a corresponding allowance for doubtful accounts equal to $1 thousand (no change from March 31, 2010). Write-offs in 2010-11 were $3 thousand (zero in 2009-10). External parties mostly include litigants and members of the general public being charged for photocopies.

Tangible capital assets: CAS’s tangible capital asset net book value has decreased from $4,619 thousand in 2009-10 to $4,519 thousand in 2010-11. In 2010-11, total tangible capital asset acquisitions totalled $643 thousand, amortization totalled $670 thousand, and net transfers, adjustments, disposals and write-offs were $61 thousand.

Acquisitions
CAS spent $643 thousand on capital asset acquisitions during 2010-11, which is a decrease from the $3,150 thousand spent in 2009-10. This significant decrease is primarily a result of the $1,999 thousand spent in 2009-10 on Leasehold improvements. In addition, $328 thousand was spent on the Case Records Management system project in 2009-10, whereas there was no spending on the project in 2010-11.

Of the $643 thousand in tangible capital asset additions, $383 thousand or 60% relate to leasehold improvements. The remaining balance is made up of Assets under construction - Leasehold improvements, Motor vehicles, Computer software and Computer hardware.

The following represents significant tangible capital assets expenditures in 2010-11:

  • Relocation of the Registry counter at 90 Sparks Street at a cost of $383 thousand. The project was completed and ready for use as of February 28, 2011.
  • Completion of leasehold improvements at a cost of $145 thousand. The project was completed and ready for use as of September 30, 2010.
  • Purchase of two new motor vehicles in February 2011 for a price of $28 thousand each.
  • Purchase of computer software upgrades, at a cost of $47 thousand.
  • Purchase of computer hardware consisting of a new storage enclosure and a tape drive for a total of $12 thousand.

The following graph depicts CAS’s distribution of tangible capital asset acquisitions over the last two fiscal years.

Tangible capital assets acquisitions chart (in thousands)
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Liabilities

Accounts payable and accrued liabilities: CAS’s accounts payable and accrued liabilities as at March 31, 2011 were $3,247 thousand ($4,841 thousand as at March 31, 2010). The decrease of $1,594 thousand is mainly due to a significant decrease of $1,503 thousand in accounts payables to other government departments and a $311 thousand decrease in accounts payables to external parties, offset by a $220 thousand increase in accrued liabilities.

Accounts payable and accrued liabilities chart (in thousands)
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The $1,503 thousand decrease in payables to other government departments is primarily explained by a $1,216 thousand payable to PWGSC for work performed in 2009-10 on leasehold improvements.

CAS’s accrued liabilities, which represents salary earned by personnel as at March 31, 2011 for which they have not received payment, increased by $220 thousand in comparison to the previous year. This increase is primarily due to the timing of the final pay period in 2010-11 ending on March 30th, resulting in a one-day accrual of salaries.

Vacation pay and compensatory leave: Vacation pay and compensatory leave have steadily increased over the past few years due to the natural rise in employment wages. However, as a result of management oversight of outstanding vacation liabilities, vacation pay and compensatory leave have decreased by $63 thousand in 2010-11.

Employee future benefits: These represent an allowance for severance benefits payable to employees within the public service. The amount is established at year end based on the total annual salary cost of CAS’s indeterminate employees and an adjustment rate provided by the TBS. The increase of $856 thousand results from a 0.5% increase in the rate provided by TBS to be used by Government departments in accruing their portion of the allowance, plus a natural rise in employment wages applicable to CAS’s continuing workforce.

Vacation pay, compensatory and employee future benefits chart (in thousands)
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Deposit accounts: CAS maintains two deposit accounts on behalf of litigants who appear before the Courts. Pursuant to an order of the Court, funds are paid into the Federal Court of Appeal and the Federal Court, as well as the Tax Court of Canada. These amounts are held in trust in Specified Purpose Accounts (SPAs) and eventually released with interest, pending judgment of the Courts. These two accounts were established pursuant to Section 21.1 of the Financial Administration Act and under separate Orders in Council: Order in Council P.C. 1970 4/2 and Order in Council P.C. 1970-300.

At the end of 2010-11, the total of the deposit accounts was $5,949 thousand ($7,383 thousand as at March 31, 2010). Members of the Courts determine payments in to or out of the Courts, depending on the case. Therefore these deposits can not be projected and may vary significantly from year to year.

Revenues

CAS’s total revenues, as noted previously, fluctuate widely from year-to-year. Revenues were $7,977 thousand in 2010-11, compared to $13,753 thousand in 2009-10. Such revenue is non-respendable by CAS and must be deposited directly into the CRF. Recent trends in revenue components are shown in the following chart.

Revenues chart (in thousands)
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Fines: In 2010-11, 63% or $5,060 thousand of CAS revenues were from court fines (compared to 76% or $10,500 thousand in 2009-10). As noted previously, fines are imposed by the Courts; the total amount may vary significantly from year to year and cannot be predicted.

EI account cost recoveries: In 2010-11, 15% or $1,233 thousand of CAS revenues were from EI account cost recoveries (12% or $1,618 thousand in 2009-10). At the end of each fiscal year, CAS determines the cost associated with the administration of EI cases. The total cost allocated by the CAS for handling EI cases is charged to HRSDC, the department responsible for the EI account. As such, HRSDC reports an expense and CAS reports an equivalent revenue item on their respective Statements of Operations. The purpose of this accounting exercise is to more accurately reflect the total cost of running the federal government's EI program and is strictly internal to the government.

Filing fees: In 2010-11, 19% or $1,484 thousand of CAS revenues were generated from filing fees (10% or $1,417 thousand in 2009‑2010). Filing fees are charged to register court documents pursuant to the legislation and Rules governing the Courts.

Photocopies: In 2010-11, 2% or $196 thousand of CAS revenues were generated from photocopies (2% or $215 thousand in 2009-10). Photocopy revenue is the result of the sale of copies of filed documents, including copies of judgments and/or orders. These fees are charged pursuant to the Rules governing the Courts.

Expenses

As noted in the Highlights section, CAS’s expenses increased by $1,204 thousand, from $91,723 thousand in 2009-10 to $92,927 in 2010-11. The two major categories of expense are salaries and employee benefits (56% of total expenses in 2010-11, 54% in 2009-10) and accommodations (27% of total expenses in both 2010-11 and 2009‑10).

Expenses chart (in thousands)
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Salaries and employee benefits1: Salaries and employee benefits include such costs as gross salaries and wages, overtime pay, retroactive salary adjustments, employee entitlements and allowances, severance pay, pension and medical benefits. Total CAS salaries and employee benefits have increased by $2,003 thousand to $51,758 thousand in 2010-11, from $49,755 thousand in 2009-10.

The main cause of this increase is due to the adjustment to the liability for future employee severance benefits. Severance benefits are provided to CAS employees based on eligibility, years of service and final salary. The severance benefits liability is adjusted annually based on the total annual salary cost of CAS’s indeterminate employees and an adjustment rate provided by the TBS. This adjustment to the severance benefits liability results in an increase or decrease in the salaries and employee benefits expense. In 2010-11, the expense resulting from the year-end adjustment to the severance benefits liability increased by $828 thousand. This large increase is due to an increase in the indeterminate employee payroll and a 0.5% increase in the rate provided by TBS to be used by Government departments and agencies to accrue their portion of the allowance.

In addition, there was a $739 thousand increase in salary and employee benefits to manage the new procedures related to security certificates. There was another $429 thousand increase resulting from newly signed collective bargaining agreements. Collective bargaining agreements signed in previous years resulted in negotiated salary range increases, with an average 1.5% increase in salary rates. Finally, there were small offsetting increases in other salary and employee benefits.

Accommodations: Accommodations increased by $251 thousand, from $24,902 thousand in 2009-10 to $25,153 thousand in 2010-11. CAS received accommodation services without charge from PWGSC, a common service organization providing accommodation services to the government. CAS has three offices in Ottawa, including its head office. CAS also has three main regional offices located in Toronto, Montreal and Vancouver, as well as a number of smaller satellite offices located throughout the country.

Professional and special services: Professional and special services decreased by $1,271 thousand, from $9,223 thousand in 2009-10 to $7,952 thousand in 2010-11. The 14% decrease represents a $352 thousand decrease in transcripts costs. In prior years, transcripts were automatically produced. In 2010-11, Members of the Courts determined that fewer transcripts were required, significantly reducing the number of urgent and regular transcripts. Other court related costs (i.e. court ushers, court reporting, court registrars, and court-related travel) also decreased overall by $96 thousand.

In addition, deputy judges’ fees and travel decreased by $240 thousand from $346 thousand in 2009-10 to $106 thousand in 2010-11. Spending on various professional services consultants decreased by $157 thousand, partly due to completion of the E-filing study. There was a $117 thousand decrease in spending on information technology consultants in 2010-11, reflecting a need for further study before continuing with the development of the Court Records Management System. Finally, temporary help services decreased by $89 thousand, and legal services by $72 thousand.

Transportation and telecommunications: Transportation and telecommunications expenses decreased by $437 thousand, from $2,973 thousand in 2009-10 to $2,536 thousand in 2010-11. The 15% decrease is mainly attributable to CAS’s continued support of the government’s commitment to reduce government-wide travel expenses, achieving $281 thousand in cost avoidance in 2010-11. The 2009 and 2010 Federal Budgets imposed a travel expenditure ceiling, capped at 2008-09 levels, on all federal departments and agencies. This cap does not apply to judicial related travel.

In addition, Postage, freight and express expenses decreased by $133 thousand. This decrease was mainly caused by the change in Rule 395 of the Federal Court Rules allowing court documents (court orders and reasons for judgment) to be sent by fax and other electronic methods instead of by registered mail only.

Materials and supplies: CAS’s materials and supplies include expenditures such as legal books, publications and subscriptions as well as stationery and supplies. Materials and supplies spending decreased by $137 thousand, from $2,274 thousand in 2009-10 to $2,137 thousand in 2010-11. The 6% decrease primarily results from decrease in office supplies and stationary and printer toner by $52 thousand and $36 thousand respectively. In addition, legal subscription expense decreased by $32 thousand. The overall decrease in materials and supplies is due to budgetary constraints.

Machinery and equipment: CAS’s machinery and equipment include informatics equipment, office equipment, furniture and parts and motor vehicle parts costing less than $5 thousand per item. Machinery and equipment expense increased by $129 thousand, from $933 thousand in 2009-10 to $1,062 thousand in 2010-11. The 14% increase is largely related to an increase in the purchase of office equipment by $90 thousand compared to 2009-10, related to the leasehold improvement project. In addition, there was an increase in the purchase of informatics equipment by $36 thousand from 2009-10 as well as other small increases in machinery and equipment. Additional informatics equipment were required in 2010-11 to begin addressing IT rust-out issues.

Rentals: CAS’s rentals expense increased by $263 thousand, from $674 thousand in 2009-10 to $937 thousand in 2010-11. The 39% increase is largely related to rent paid in relation to the leasehold improvement project, which began during 2010-11.

Amortization of tangible capital assets: Tangible capital assets are expected to yield benefits over several accounting periods. As such, CAS’s use of these assets to provide services is recognized on a straight-line basis over the estimated useful life of each asset class. This cost, which reached $670 thousand in 2010-11 ($505 thousand in 2009-10), is referred to as amortization. The 33% increase is due to the completion of the leasehold improvement project. Since the area was available for use in September 2010, amortization began to be recorded during 2010-11.

Repairs and Maintenance: Regular repair and maintenance is required on CAS’s leased facilities, machinery and equipment. CAS’s repair and maintenance costs increased by $141 thousand, from $487 thousand in 2009-10 to $628 thousand in 2010-11. The 29% increase is due to increased spending on informatics maintenance in 2010-11, including $116 thousand for rectifying the issue of network licenses and maintenance fees.

Information: CAS’s information expenses decreased by $75 thousand, from
$182 thousand in 2009-10 to $107 thousand in 2010-11. The 41% decrease is due to a decrease in costs related to printing services. In 2010-11, fewer printing materials were purchased and better pricing was obtained.

Miscellaneous: CAS’s miscellaneous expenses include losses on the disposal and write-down of tangible capital assets, interest on overdue supplier accounts, losses on foreign currency transactions and adjustments to the prior year’s payable at year-end (PAYE).

CAS’s miscellaneous expenses increased by $172 thousand, from ($185) thousand in 2009-10 to ($13) thousand in 2010-11.


1 On March 1, 2011, the Public Service Alliance of Canada signed a new collective agreement which eliminates the accumulation of severance benefit going forward. Current employees have been given the option to cash-out immediately. Furthermore, Budget 2011 states that the Government intends to pursue this approach of eliminating the accumulation of severance benefits in its negotiations with other bargaining agents. This may have a significant impact on the severance benefits liability in future years.