ESDC Consolidated Future-Oriented Statement of Operations (Unaudited) For the year ending March 31

1. Authority and objectives

Employment and Social Development Canada (ESDC) is a Department of the core public administration. ESDC is a department named in the Schedule I of the Financial Administration Act and reports to Parliament through the Minister of ESD.

The legislative mandate of ESDC is to improve the standard of living and quality of life of all Canadians by promoting a highly skilled and mobile workforce and an efficient and inclusive labour market, as well as to promote social well-being and income security.

Acts and Regulations under the authority of the Minister of ESD include: Department of Employment and Social Development Act, Old Age Security Act and Regulations, Employment Insurance Act and Regulations, Canada Pension Plan and Regulations, Canada Student Financial Assistance Act and Regulations, Canada Student Loans Act and Regulations, Universal Child Care Benefit Act, Canada Disability Savings Act and Regulations and Apprentice Loans Act and Regulations.

ESDC achieves its objectives under eight major programs: Income Security, Skills and Employment, Social Development, Learning, Internal Services, Delivery of Services for Other Government of Canada Programs, Labour and Service Network Supporting Other Government Departments. For full descriptions of programs, see Section II of the Report on Plans and Priorities (RPP).

2. Methodology and significant assumptions

The consolidated future-oriented statement of operations has been prepared on the basis of government priorities and departmental plans as described in the RPP.

The information in the estimated results for the year 2014-15 is based on actual results as at November 30, 2014 and on forecasts for the remainder of the year. Forecasts have been made for the planned results for the 2015-16 year.

The main assumptions underlying the forecasts are as follows:

• ESDC’s activities will remain substantially the same as for the previous year. However, there is a change in the Program Alignment Architecture (PAA) structure effective April 1, 2015.
• For comparative purposes, 2013–14 actual expenses as well as 2014–15 estimated results by program have been restated according to the new Program Alignment Architecture (PAA) approved for 2015–16.
• Income Security, Social Development and Skills and Employment statutory expenses and revenues are based on economic and fiscal projections, as well as the labour market projections in effect at the time of preparation of the future-oriented statement of operations.
• Learning expenses and revenues, including Canada student loans, are based on information available in the latest actuarial report.
• Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue.
• Allowances for uncollectibility are based on historical experience. The general historical pattern is expected to continue.

These assumptions are adopted as at December 18, 2014.

3. Variations and changes to the forecast consolidated financial information

While every attempt has been made to forecast final results for the remainder of 2014–15 and for 2015–16, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this consolidated future-oriented statement of operations, ESDC has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the consolidated future-oriented statement of operations and the historical statement include:

• Economic conditions may affect the amounts of revenues earned, the expenses incurred for collectability of loans and accounts receivable.
• Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.
• Implementation of new collective agreements.
• The timing and amounts of acquisitions and disposals of capital assets may affect gains/losses and amortization expense.

Once the RPP is presented, ESDC will not be updating the forecasts for any changes in financial resources made in ensuing supplementary estimates.

4. Summary of significant accounting policies

The consolidated future-oriented statement of operations has been prepared using the Government’s accounting policies that came into effect for the 2011-12 fiscal year which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

(a) Parliamentary authorities – ESDC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to ESDC do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the future-oriented consolidated statement of operations are not necessarily the same as those provided through authorities from Parliament. Note 5 provides a reconciliation between the bases of reporting.

(b) Consolidation – This consolidated future-oriented statement of operations includes the transactions of the Employment Insurance Operating Account, a sub-entity that the Deputy Minister is accountable for. The accounts of this sub-entity have been consolidated with those of ESDC, and all inter-organizational balances and transactions have been eliminated.

The Canada Pension Plan (CPP) is a federal/provincial plan established by an Act of Parliament in 1965. The CPP is administered by the Government of Canada and the participating provinces. As the CPP is controlled by both the Government of Canada and the provinces, its financial activities are not part of ESDC's reporting entity.

(c) Expenses – Expenses are recorded on the accrual basis:

• Expenses for ESDC’s operations are recorded when goods are received or services are rendered including services provided without charges for employer contributions to the health and dental insurance plans and legal services which are recorded as expenses at their estimated cost.
• Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.
• Vacation pay and compensatory leave (as well as severance benefits) are accrued and expenses are recorded as the benefits are earned by employees under their respective terms of employment.
• Expenses also include provisions to reflect changes in the value of assets, including provisions for bad debt on accounts receivable, provision for valuation on Canada Student Loans or liabilities, including contingent liabilities, to the extent the future event are likely to occur and a reasonable estimate can be made.
• Expenses also include amortization of tangible capital assets which are capitalized at their acquisition cost. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset.

(d) Revenues – Revenues are recorded on the accrual basis:

• Employment Insurance (EI) premiums are recognized as revenue in the period in which they are earned.
• Interest revenues on student loans are recognized in the year they are earned. Interest is not recorded on impaired loans.
• Recoveries of CPP administration costs are recognized based on the services provided in the year.
• Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
• Revenues that are non-respendable are not available to discharge ESDC's liabilities. While the Deputy Minister is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.

5. Parliamentary authorities

ESDC receives most of its funding through annual parliamentary authorities. Items recognized in the consolidated future-oriented statement of operations in one year may be funded through parliamentary authorities in prior, current or future years. Furthermore, as a consolidated specified purpose account, the EI Operating Account expenses and revenues recognized in ESDC’s consolidated future-oriented statement of operations do not affect parliamentary authorities. Accordingly, ESDC has different net cost of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

6. Comparative information

Certain comparative figures from 2013-14 actual results have been reclassified to conform to the estimated results and planned results presentation.