Consolidated future-oriented statement of operations (unaudited) for the year ending March 31, 2018

Official title: Consolidated future-oriented statement of operations (unaudited) for the year ending March 31, 2018 - 2017-2018 Departmental Plan

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Table: Consolidated future-oriented statement of operations (unaudited) for the year ending March 31, 2018 (in thousands of dollars)
Details Actual results 2015-2016 Forecast results 2016-2017 Planned results 2017-2018
Expenses
Income Security $46,302,293 $49,253,879 $52,160,552
Skills and Employment 22,162,481 24,223,923 24,925,452
Learning 2,593,769 3,144,716 3,458,986
Internal Services 928,560 1,010,439 771,751
Social Development 7,728,867 2,314,857 306,351
Delivery of Services for Other Government of Canada Programs 143,086 171,412 183,514
Labour 132,295 115,692 137,223
Service Network Supporting Government Departments 68,249 69,860 73,628
Expenses incurred on behalf of Government (53,093) (41,572) (58,196)
Total expenses 80,006,507 80,263,206 81,959,261
Revenues
Employment Insurance 23,586,111 22,940,000 21,683,000
Interest on loans receivable 634,874 647,649 660,283
Recovery of CPP administration costs 316,230 335,558 347,675
Recovery of Passport service delivery costs 176,016 212,146 201,239
Other 66,594 70,347 60,879
Revenues earned on behalf of Government (751,443) (758,853) (764,273)
Total revenues 24,028,382 23,446,847 22,188,803
Net cost of operations $55,978,125 $56,816,359 $59,770,458

Information for the year ended March 31, 2017, includes actual amounts from April 1, 2016, to November 30, 2016.

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, 2018

1. Authority and objectives

Employment and Social Development Canada (ESDC) is a department of 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 (ESD).

The legislative mandate of the Ministers responsible for ESD 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 which fall within the mandate of the Ministers of ESD include the: Department of Employment and Social Development Act and Regulations, 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, Canada Education Savings Act and Regulations, Labour Adjustment Benefits Act, Government Annuities Act and Regulations, Government Annuities Improvement Act, Civil Service Insurance Act, Public Pensions Reporting Act, Apprentice Loans Act and Regulations and Federal-Provincial Fiscal Arrangements Act.

ESDC achieves its objectives under eight major programs: Income Security, Skills and Employment, Learning, Internal Services, Social Development, Delivery of Services for Other Government of Canada Programs, Labour and Service Network Supporting Government Departments. For full descriptions of programs, see Section II of 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 2016-2017 is based on actual results as at November 30, 2016, and on forecasts for the remainder of the year. Forecasts have been made for the planned results for 2017-2018.

The main assumptions underlying the forecasts are as follows:

  • ESDC's activities will remain substantially the same as for the previous year.
  • Income Security, Social Development and Skills and Employment statutory expenses and revenues are based on economic and fiscal projections, as well as on 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 19, 2016.

3. Variations and changes to the forecast consolidated financial information

Although every attempt has been made to forecast final results for the remainder of 2016-2017 and for 2017-2018, 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:

  • Economic conditions may affect the amounts of revenues earned, the expenses incurred and the 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 expenses.

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.

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 2016-2017, 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 does 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. 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 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 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. 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 the recipients have met all the eligibility criteria and the transfers are authorized by March 31. In the case of transfers that do not form part of an existing program, the transfers are considered to be authorized 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.
  • Expenses also include provisions to reflect changes in the value of assets, including provision 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 the Government are linked to the assets held on behalf of the 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 the 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 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. Although 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 Actual results 2015-2016 Forecast results 2016-2017 Planned results 2017-2018
Net cost of operations $55,978,125 $56,816,359 $59,770,458
Adjustments for items affecting net cost of operations but not affecting authorities:
  • Bad debt expense (excluding EI bad debts)
(133,000) (336,550) (374,139)
  • Refund of programs and prior years' expenditures
71,087 90,538 84,214
  • Revenue not available for spending
109,020 126,545 108,758
  • Allowance expense for the Repayment Assistance Plan program of Canada Student Loans
(231,010) (168,870) (171,420)
  • Amortization of tangible capital assets
(74,723) (87,342) (87,342)
  • Net EIO Account transactions
2,393,223 51,748 (1,973,949)
  • Decrease (increase) in accounts payable and accrued liabilities not charged to authorities
1,265,073 (40,854) (41,979)
  • Services provided without charge by other government departments
(53,291) (53,271) (57,528)
  • Other adjustments
(9,517) (4,177) 6,562
Total items affecting net cost of operations but not affecting authorities 3,336,862 (422,233) (2,506,823)
Adjustments for items not affecting net cost of operations but affecting authorities:
  • Net Canada Student Loans disbursed
750,686 472,795 280,883
  • Net Canada Apprentice Loans disbursed
66,463 76,355 77,880
  • Canada Student and Apprentice Loans forgiveness
53,419 69,902 88,812
  • Debt write-offs
172,045 178,370 -
  • Acquisition of tangible capital assets
48,667 52,893 70,409
  • Other adjustments
8,909 - -
Total items not affecting net cost of operations but affecting authorities 1,100,189 850,315 517,984
Requested authorities $60,415,176 $57,244,441 $57,781,619

(b) Authorities requested (in thousands of dollars)

Details Actual results 2015-2016 Forecast results 2016-2017 Planned results 2017-2018
Vote 1 - Operating expenditures $628,711 $648,497 $576,846
Vote 5 - Grants and contributions 1,559,678 2,023,569 1,846,495
Vote 7 - Debt write-offs 172,107 178,370 -
Statutory amounts 58,054,680 54,394,005 55,358,278
Requested authorities $60,415,176 $57,244,441 $57,781,619
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