(FOSO) Consolidated future-oriented statement of operations (unaudited) for the year ending March 31, 2019

From: Employment and Social Development Canada

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Table: Consolidated future-oriented statement of operations (unaudited) for the year ending March 31, 2019 (in thousands of dollars)

Details Actual results 2016–17 Forecast results 2017–18 Planned results 2018–19
Expenses
Pensions and Benefits $49,127,488 $52,169,020 $54,824,977
Learning, Skills Development and Employment 26,854,678 27,221,521 27,533,304
Internal Services 858,226 927,250 843,878
Social Development 2,234,791 710,662 711,454
Information Delivery and Services for Other Departments 204,531 279,696 261,636
Working Conditions and Workplace Relations 135,843 144,839 138,645
Expenses incurred on behalf of Government (33,570) (16,419) (16,814)
Total expenses 79,381,987 81,436,569 84,297,080
Revenues
Employment Insurance 22,603,337 21,518,500 22,361,200
Interest on loans receivable 662,360 689,483 722,305
Recovery of CPP administration costs 327,248 387,865 369,588
Recovery of Passport service delivery costs 172,454 234,916 227,888
Other 62,512 62,296 47,003
Revenues earned on behalf of Government (770,734) (806,313) (828,034)
Total revenues 23,057,177 22,086,747 22,899,950
Net cost of operations $56,324,810 $59,349,822 $61,397,130

Information for the year ended March 31, 2018, includes actual amounts from April 1, 2017, to November 30, 2017.

The accompanying notes form an integral part of the consolidated future-oriented statement of operations.

Notes to the consolidated future-oriented statement of operations (unaudited) for the year ending March 31, 2019

1. Authority and objectives

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

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 for which ESDC Ministers are responsible include the: Department of Employment and Social Development Act, Old Age Security Act, Employment Insurance Act, Canada Pension Plan, Canada Student Financial Assistance Act, Canada Student Loans Act, Universal Child Care Benefit Act, Canada Disability Savings Act, Canada Education Savings Act, Labour Adjustment Benefits Act, Government Annuities Act, Government Annuities Improvement Act, Civil Service Insurance Act, Public Pensions Reporting Act, Apprentice Loans Act, Federal-Provincial Fiscal Arrangements Act, Canada Labour Code, Government Employees Compensation Act and, where applicable, related Regulations.

ESDC achieves its objectives under six core responsibilities: Social Development, Pension and Benefits, Learning, Skills Development and Employment, Working Conditions and Workplace Relations, Information Delivery and Services for Other Departments, and Internal Services. For full descriptions of core responsibilities, see the Departmental Plan.

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 Departmental Plan.

The information in the forecast results for the year 2017–18 is based on actual results as at November 30, 2017 and on forecasts for the remainder of the year. Forecasts have been made for the planned results for the 2018–19 year.

The main assumptions underlying the forecasts are as follows:

  • ESDC’s activities will remain substantially the same as for the previous year. However, the Departmental Results Framework has been approved to replace the Program Activity Architecture as of April 1, 2018. See the Departmental Plan for more details on the changes
  • For comparative purposes, 2016–17 actual expenses by program have been restated according to the new core responsibilities approved for 2018–19
  • Pension and Benefits, 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 uncollectability are based on either historical experience or, in the case of Learning, actuarial reports. The general historical pattern is expected to continue

These assumptions are adopted as at December 15, 2017.

3. Variations and changes to the forecast consolidated financial information

Although every attempt has been made to forecast final results for the remainder of 2017–18 and for 2018–19, actual results achieved for both years are likely to differ 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 about the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are based on past experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances, and are continually evaluated.

Factors that could lead to material differences between the Consolidated Future-Oriented Statement of Operations and the historical statement of operations include:

  • Budget announcements for changes to or additional funding
  • other changes to the operating budget, such as new initiatives or technical adjustments later in the fiscal year
  • economic conditions, which may affect both the amount of revenue earned and the collectability of loan receivables
  • the implementation of new collective agreements; and
  • the timing and amounts of acquisitions and disposals of capital assets may affect gains/losses and amortization expense

After the Departmental Plan is tabled in Parliament, ESDC will not be updating the forecasts for any changes in financial resources made in ensuing supplementary estimates or budget announcements. Variances will be explained in the Departmental Results Report.

4. Summary of significant accounting policies

The Consolidated Future-Oriented Statement of Operations has been prepared using the Government of Canada’s accounting policies in effect for fiscal year 2017–18, and is 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 (EIO) Account, a consolidated specified purpose account which includes revenues credited and expenses charged under the Employment Insurance Act and for which the Deputy Minister as Chairperson of the Canada Employment Insurance Commission is accountable. The accounts of the EIO Account have been consolidated with those of ESDC, and all inter-organizational balances and transactions have been eliminated.

The Canada Pension Plan (CPP) is excluded from the ESDC's reporting entity because changes to the CPP require the agreement of two-thirds of participating provinces and it is therefore not controlled by the Government.

(c) Expenses

Expenses are recorded on an 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. 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 terms of employment
  • 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
  • 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 is 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
  • The expenses incurred on behalf of Government are linked to the assets held on behalf of Government. As a result, these expenses are considered to be incurred on behalf of the Government of Canada and are therefore presented as a reduction of the department's gross expenses

(d) Revenues

Revenues are recorded on an accrual basis:

  • Employment Insurance (EI) premiums are recognized as revenue in the period in which they are earned, when workers, through their employment, generate these premiums and the related employer’s contribution. Premiums earned in the period are measured from amounts assessed by the Canada Revenue Agency (CRA) and from estimates of amounts not yet assessed. Premium revenue also includes adjustments between actual and estimated premiums of previous years
  • Interest revenues on loans receivable are recognized in the year they are earned. Interest revenues are 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, she 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 as a reduction of the department'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 EIO 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:

(a) Reconciliation of net cost of operations to requested authorities (in thousands of dollars)

Details Forecast results 2017–18 Planned results 2018–19
Net cost of operations $59,349,822 $61,397,130
Adjustments for items affecting net cost of operations but not affecting authorities:
Bad debt expense (excluding EI bad debts) (145,423) (162,433)
Refund of programs and prior years' expenditures 115,792 90,957
Revenue not available for spending 129,565 107,301
Allowance expense for the Repayment Assistance Plan program of Canada Student Loans (34,559) (46,031)
Amortization of tangible capital assets (74,222) (74,222)
Net EIO Account transactions (912,659) (288,704)
Decrease (increase) in accounts payable and accrued liabilities not charged to authorities (46,934) (38,858)
Services provided without charge by other government departments (67,474) (61,004)
Other adjustments (18,658) 17,118
Total items affecting net cost of operations but not affecting authorities (1,054,572) (455,876)
Adjustments for items not affecting net cost of operations but affecting authorities:
Canada Student and Apprentice Loans forgiveness (81,230) (91,314)
Debt write-offs 203,471 0
Acquisition of tangible capital assets 67,818 75,529
Other adjustments 0 0
Total items not affecting net cost of operations but affecting authorities 190,059 (15,785)
Requested authorities $58,485,310 $60,925,469

(b) Authorities requested (in thousands of dollars)

Details Forecast results 2017–18 Planned results 2018–19
Authorities requested
Vote 1 - Operating expenditures $726,458 $676,783
Vote 5 - Grants and contributions 2,470,235 2,439,760
Vote 7 - Debt write-offs 203,471 0
Statutory amounts 55,085,146 57,808,926
Requested authorities $58,485,310 $60,925,469
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