Quarterly Financial Report ended December 31, 2016

Official title: Employment and Social Development Canada, Quarterly Financial Report - Statement Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs for the Quarter Ended December 31, 2016

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1. Introduction

This quarterly report 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. This quarterly report should be read in conjunction with the Main Estimates for the current year.

1.1 Authority, mandate and programs

The mission of Employment and Social Development Canada (ESDC), including the Labour Program and Service Canada, is to build a stronger and more competitive Canada, to support Canadians in making choices that help them live productive and rewarding lives and to improve Canadians’ quality of life.

ESDC delivers a range of programs and services that affect Canadians throughout their lives. The Department provides seniors with basic income security, supports unemployed workers, helps students finance their post-secondary education and assists parents who are raising young children. The Labour Program is responsible for labour laws and policies in federally regulated workplaces. Service Canada helps citizens access ESDC’s programs, as well as other Government of Canada programs and services.

The Minister of Families, Children and Social Development, the Minister of Employment, Workforce Development and Labour and the Minister of Sport and Persons with Disabilities are responsible for this organization.

To fulfill its mission, the Department is responsible for:

  1. developing policies that ensure all can use their talents, skills and resources to participate in learning, work and their community;
  2. delivering programs that help Canadians move through life’s transitions, from school to work, from one job to another, from unemployment to employment, from the workforce to retirement;
  3. providing income support to seniors, families with children and those unemployed due to job loss, illness or caregiving responsibilities;
  4. helping Canadians with distinct needs such as Indigenous people, persons with disabilities, homeless people, travelers and recent immigrants;
  5. overseeing federal labour responsibilities; and
  6. delivering programs and services on behalf of other departments and agencies.

Included in these core roles are responsibilities for the design and delivery of some of the Government of Canada’s most well-known programs and services, including:

  • Old Age Security (OAS);
  • the Canada Pension Plan (CPP);
  • Employment Insurance (EI);
  • Canada Student Loans and Grants;
  • the Canada Education Savings Program;
  • the Wage Earner Protection Program; and
  • passport services.

These direct benefits to Canadians are part of Canada’s social safety net and represent 95 percent of the Department’s expenditures.

Further details on ESDC’s authority, mandate and programs may be found in Part II of the Main Estimates and in the Report on Plans and Priorities.

1.2 Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities (Table 1) includes ESDC’s spending authorities granted by Parliament, consistent with the Main Estimates and the budgetary authorities used by the Department for the 2016–17 fiscal year. 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 moneys 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 authorities for specific purposes.

As part of the departmental performance reporting process, ESDC prepares its annual departmental financial statements on a full accrual basis in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector. However, the spending authorities voted by Parliament remain on an expenditure basis.

The quarterly report has not been subject to an external audit or review.

1.3 ESDC’s financial structure

ESDC has a complex financial structure, with various funding mechanisms used to deliver its mandate. This includes budgetary authorities, comprised of voted and statutory authorities, as well as a non-budgetary authorities. The voted budgetary authorities include Vote 1 (Operating Expenditures), vote-netted revenues, and Vote 5 (Grants and Contributions), while the statutory authorities are mainly comprised of the Old Age Security Program, the Universal Child Care Benefit, the Canada Student Loans Program, the Canada Education Savings Program, the Canada Disability Savings Program, the Wage Earner Protection Program, Federal Workers’ Compensation and employee benefit plans (EBP). The non-budgetary authorities consist of loans disbursed under the Canada Student Financial Assistance Act and Apprentice Loans Act.

It should be noted that EI and CPP benefits and related administrative costs are administered through specified purpose accounts and not through appropriations from government. The EI Operating Account and the CPP are financed by employers and employees. Federal administrative costs incurred by departments in the delivery of programs related to EI and CPP are charged to the respective accounts and reported as revenues credited to the vote. The EI Operating Account and the CPP are excluded from ESDC’s Main and Supplementary Estimates. However, they are presented in the Report on Plans and Priorities. Accordingly, these accounts are not reflected in the Quarterly Financial Report.

2. Highlights of Fiscal Quarter and Fiscal Year-to-Date results

This section highlights the significant items that contributed to the net increase in resources available for the year and the net decrease in actual expenditures for the quarter ending December 31, 2016.

ESDC’s total budgetary authority available in the third quarter ending December 31, 2016 was $56,266 million, which represents an overall increase of $1,962 million from the previous year. Much of this increase relates to an increase in statutory items. Statutory items are payments to be made under legislation previously approved by Parliament and are non-discretionary. Total Year-to-Date (YTD) budgetary authorities used as of the third quarter ending December 31, 2016 were $42,777 million. In comparison, total YTD budgetary authorities used as of the third quarter of the previous year were $44,390 million, representing a year-over-year decrease of $1,613 million.

Figure 1: Quarter ended December 31, 2016
Text description of Figure 1
2016–17  (in millions of dollars)
Total available % Total available YTD used % YTD used
Voted 2,667  5% 1,931  5%
Statutory 53,599  95% 40,846  95%
Total 56,266    42,777   
Figure 2: Quarter ended December 31, 2015
Text description
2015–16   (in millions of dollars)
Total available % Total available YTD used % YTD used
Voted 2,305  4% 1,581  4%
Statutory 51,999  96% 42,809  96%
Total 54,304    44,390   

2.1 Significant changes to authorities

ESDC’s budgetary authorities available for use increased by $1,962 million compared to the third quarter of 2015–16 (Tables 1 and 2).

This increase is primarily associated with statutory items. In particular, forecasted OAS pension and Guaranteed Income Supplement (GIS) payments represent an increase of $2,165 million and $199 million respectively owing to changes in average benefit payments and in the number of beneficiaries. This increase is mainly offset by a decrease of $926 million from the UCCB, whose forecasts were adjusted to include payments made to recipients for only the months of April, May and June 2016. The UCCB has been replaced by the Canada Child Benefit announced in Budget 2016, starting in July 2016. Other factors contributing to the increase include:

  • An increase of $297 million in Voted Grants and Contributions to fund government initiatives announced in Budget 2016, mainly due to the Canada Summer Jobs Program, the Social Infrastructure Fund and the Canada Job Fund;
  • An increase of $67 million to Canada Disability Savings Grants and Bonds which is due to a steady increase in total registered plans and participation in the program;
  • An increase of $66 million in Operating Expenditures which is mainly due to an increase in funding for the Temporary Foreign Workers Program to help ESDC respond to increased workloads due to changes in the program and additional funding to support the Old Age Security measures. These increases in funding are partially offset by a decrease in the carry-forward received in 2015-16 compared to the one received in 2014-15;
  • An increase of $49 million in the payments related to the direct financing arrangement under the Canada Student Financial Assistance Act and the direct financing arrangement under the Apprentice Loan Act mainly due to an increase to repayment assistance costs;
  • An increase of $39 million in Employee Benefit Plan;
  • An increase of $24 million in Canada Education Savings Grant payments due to more families saving for their children's post-secondary education; and
  • A decrease of $30 million in Allowance payments due to a decreased number of beneficiaries and a decreased average monthly benefit amount compared to last fiscal year.
Significant changes to authorities at the end of the third quarter of 2016–17
  (in millions of dollars)
Total budgetary authorities available for use — 2015–16 54,304
Changes to authorities available for use
Old Age Security Payments 2,165
Vote 5 — Grants and contributions 297
Guaranteed Income Supplement Payments 199
Canada Disability Savings Grants and Bonds 67
Vote 1 — Operating expenditures 66
Direct financing under the Canada Student Financial Assistance Act and Direct financing under the Apprentice Loan Act 49
Employee benefit Plans 39
Canada Education Saving Grants 24
Others 12
Allowance -30
Universal Child Care Benefit -926
Sub-Total - Changes to authorities available for use 1,962
Total budgetary authorities available for use — 2016–17 56,266

For non-budgetary loans, there is a net decrease in authorities of $47.4 million from fiscal year 2015–16, mainly resulting from a higher than originally forecasted volume of repayments against previously issued loans.

As shown in Table 2, total authorities related to Personnel expenditures have increased by $204 million mainly due to additional resources for measures to improve EI and to implement the reduction of the waiting period for EI (announced as part of Budget 2016 on March 22, 2016), Overhauling the Temporary Foreign Worker Program, CPP workload and OAS related measures.

The increase of $102 million related to Authorities recoverable from Employment Insurance Operating account is mostly related to measures to improve EI and to implement the reduction of the waiting period for EI (announced as part of Budget 2016 on March 22, 2016) and the Mainframe Legacy Application Migration Project.

As well, variances to other operating expenditures (standard objects 02, 03, 04, 05, 06, 07 and 09) are the result of adjustments made to authorities available for use to bring them more in line with actual historical spending trends.

2.2 Significant changes to expenditures

Overall, the proportion of ESDC’s total budgetary expenditures as of December 31, 2016 is comparable to the usual spending presented at the third quarter, with approximately 76% of the authorities available for use expensed.

Compared to the previous year, total budgetary expenditures as of the quarter ending December 31, 2016 have decreased by $1,613 million (3.6%), from $44,390 million to $42,777 million (refer to Tables 1 and 2).

This 3.6% decrease is primarily explained by the decline in statutory expenditures from $42,809 million for the third quarter in 2015–16 to $40,846 million for the same period in 2016–17, representing a $1,963 million decrease as of the end of the third quarter 2016–17.

The main reason for this decrease is a reduction of $4,246 million that relates to the Universal Child Care Benefits, which was replaced by the new Canada Child Benefit introduced in Budget 2016 and effective July 1, 2016.

This large UCCB decrease is offset by increases to other statutory payments such as OAS pension payments which have increased by $1,212 million and GIS payments which have also increased by $736 million. The main factor explaining these increases is the aging population, thus the greater number of seniors receiving OAS and GIS benefits in addition to higher average amounts paid to beneficiaries, mainly explained by an increase of the GIS top-up amount for single seniors in July 2016.

In addition, Canada Student Grants payments have increased by as much as $142 million compared to the spending as at December 31, 2015 due to increased grant amounts for low-income, middle-income and part-time students announced as part of Budget 2016 and taking effect August 1st, 2016;

As for the payments related to the direct financing arrangement under the Canada Student Financial Assistance Act, the increase of $40 million reflects the increases in repayment assistance costs;

Canada Disability Savings Grant and Canada Disability Savings Bond payments have increased by $38 million and $30 million respectively, relative to the same period last year. These increases are mainly the result of the steady growth of the program and an increase in program beneficiaries;

An increase of $22 million for the allowance payments is mainly attributable to the increase in the top-up amount for the Allowance for the Survivor in July 2016;

An increase of $21 million in net costs this third quarter compared to the third quarter of 2015-16 for injury compensation benefits related to the Government Employees Compensation Act (GECA) is mainly due to the lack of third quarter recoveries from Crown corporations which will be reflected during fourth quarter, and;

Other smaller increases for Canada Education Savings Grants ($17 million), for Canada Learning Bond ($15 million) and for other programs ($10 million) are also responsible for the variance.

Also contributing to the $1,613 million variance is the increase of $258 million in Vote 5 — Grants and Contributions and the increase of $92 million in Vote 1 – Operating Expenditures.

The increase in Grants and Contributions is partly explained by the following components; an increase of $101 million for Youth Employment Strategy from the same period last year, as there were some delays in approving and implementing projects in 2015-16 due to the federal election. There is also an increase of $79 million for Canada Job Fund from the same period last year; the Aboriginal Skills and Employment Training Strategy have increased by $32 million; Labour Market Agreements for Persons with Disabilities have increased by $21 million, as the agreements with the provinces and territories were signed earlier in 2016-17 than last year and an increase of $21 million in the Homelessness Partnering Strategy.

In terms of Operating expenditures, the increase of $92 million mainly relates to the timing of payments rather than changes in spending patterns.

Significant changes to expenditures at the end of the third quarter 2016–17
  (in millions of dollars)
Total budgetary authorities used as of December 31, 2015 44,390
Changes in authorities used
Universal Child Care Benefit -4,246
Old Age Security Pension Payments 1,212
Guaranteed Income Supplement Payments 736
Vote 5 — Grants and contributions 258
Canada Student Grant 142
Vote 1 — Operating expenditures 92
Canada Disability Savings Grants & Bond 68
Direct Financing Arrangement under the Canada Student Financial Assistance Act 40
Allowance Payments 22
Payments of compensation respecting government employees and merchant seamen 21
Canada Education Savings Grants 17
Canada Learning Bond 15
Other 10
Sub-Total - Changes in authorities used -1,613
Total budgetary authorities used as of December 31, 2016 42,777

In Table 1, the net amount of non-budgetary loans disbursed under the Canada Student Financial Assistance Act has decreased by $143 million at the end of the third quarter, primarily due to an increase in repayments and loan forgiveness.

In Table 2, the increase in professional services expenditures (standard object 04) is mostly attributable to the timing of payments rather than changes in spending patterns.

3. Risks and uncertainties

The delivery of our programs and services is impacted by factors such as economic fluctuations, demographic shifts, technological developments and government priorities, to which the Department must respond accordingly. The Department has identified corporate-level risk and mitigation strategies for the 2016–17 fiscal year in the Risk Analysis section of the Report on Plans and Priorities.

The risks identified under each of the key risk areas below are the result of risk management self-assessment activities and independent reviews conducted by the Department. These risks will be monitored by senior management throughout the year to ensure adequate measures are implemented to mitigate their impacts.

3.1 Privacy/Security of Personal Information

There is an inherent risk of privacy breach that could have a significant impact on affected citizens given the nature of the Department’s work and the need for a very high level of security safeguards.

Risk response strategies:

  • Continue to ensure robust privacy policies and processes and a strong approach to privacy management are in place;
  • Use Shared Services Canada Internet gateways to adequately monitor and protect departmental networks;
  • Ensure strong communications to staff on a variety of security requirements, including the safeguarding of information with a view to increasing awareness;
  • Portfolio mission-critical services and their supporting IT applications and services are defined; each with corresponding business and IT service continuity plans developed and verified; and
  • Physical and digital vulnerabilities are consistently identified and assessed against business impact and employee and public safety, resulting in proactive remediation plans.

3.2 Human Resource Management

Given high retirement/attrition rates, changing skillsets and capacity concerns, there is a risk that the Department will not be able to sustain a sufficient workforce or attract skilled employees with the appropriate competencies to meet current and future organizational needs.

Risk response strategies:

  • Continue to integrate workforce planning into business planning to recruit skilled resources and strengthen workforce capacity; and
  • Implement initiatives to enhance leadership development, recruitment and staffing, official languages, learning and mental health.

3.3 Information Technology Sustainability

Given the constantly evolving landscape of Information Technology (IT), there is a need for the Department to meet Canadians’ expectations of GoC services by continuing to rapidly advance technology while protecting private information. With this, there is a risk that IT may not be able to continuously transform, innovate, re-skill and invest at the nimble and flexible pace required to support ESDC programs and services.

Risk response strategies:

Through the use of the Departmental Business Capability Model and sound Application Portfolio Management practices, ESDC will:

  • rationalize IT investments while ensuring alignment to strategic priorities for a timely and effective roll out of new online service delivery platforms; and
  • continue to strengthen business continuity planning.

4. Significant changes in operations, personnel and programs

Budget 2016 introduced the new Canada Child Benefit, one simple, tax-free, and more generous benefit targeted to families who needs it most. The new, income-tested Canada Child Benefit has come into effect and replaces the UCCB since July 1, 2016.

The UCCB payments were made to eligible recipients only for the months of April, May, and June 2016, UCCB forecasted statutory payment for the full fiscal year 2016-17 has been reduced by $5.8 billion.

5. Approval by senior officials

Approved by:

Mark Perlman, Chief Financial Officer
February 16, 2017
Gatineau, Canada

Leslie MacLean, Senior Associate Deputy Minister of ESD and Chief Operating Officer for Service Canada
February 17, 2017
Gatineau, Canada


Table 1: Statement of authorities (unaudited)

Vote (in thousands of dollars) Fiscal Year 2016–17 Fiscal Year 2015–16
Total available for use for the year ending
March 31, 2017 Footnote 1
Used during the quarter ended
December 31, 2016
Year to date used at quarter-end Total available for use for the year ending
March 31, 2016 Footnote 1
Used during the quarter ended
December 31, 2015
Year to date used at quarter-end
1 Operating expenditures 654,619 201,180 496,787 588,708 113,313 404,950
5 Grants and contributions 2,012,883 618,146 1,433,770 1,716,408 441,737 1,175,903
(S) Contributions to employee benefit plans 271,500 60,427 181,281 232,837 56,840 170,520
(S) Minister of Families, Children and Social Development – Salary and motor car allowance 84 21 56 82 7 48
(S) Minister of Employment, Workforce Development and Labour—Salary and motor car allowance 84 21 56 82 7 48
(S) Minister of State (Seniors)—Motor car allowance - - - 2 - 1
(S) Minister of State (Social Development)—Motor car allowance - - - 2 - 1
(S) Old Age Security Pension Payments (Old Age Security Act) 37,086,490 9,665,486 28,493,730 34,920,970 9,245,041 27,281,634
(S) Guaranteed Income Supplement Payments (Old Age Security Act) 10,804,379 2,811,803 8,029,700 10,605,509 2,456,142 7,293,926
(S) Universal Child Care Benefit (Universal Child Care Benefit Act) 1,924,955 10,735 1,953,304 2,851,433 1,895,511 6,199,294
(S) Canada Education Savings grant payments to Registered Education Savings Plan (RESP) trustees on behalf of RESP beneficiaries to encourage Canadians to save for post-secondary education for their children 824,000 187,785 552,829 800,000 176,043 536,053
(S) Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 763,845 103,541 534,038 756,113 81,019 392,283
(S) Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 705,088 101,436 234,087 658,646 71,000 193,822
(S) Allowance Payments (Old Age Security Act) 515,878 136,978 394,086 545,938 125,062 372,388
(S) Canada Disability Savings Grant payments to Registered Disability Savings Plan (RDSP) issuers on behalf of RDSP beneficiaries to encourage long-term financial security of eligible individuals with disabilities 322,900 64,922 203,026 266,900 50,108 165,385
(S) Canada Disability Savings Bond payments to Registered Disability Savings Plan (RDSP) issuers on behalf of RDSP beneficiaries to encourage long-term financial security of eligible individuals with disabilities 142,200 35,233 84,723 131,000 22,204 54,476
(S) Canada Learning Bond payments to Registered Education Savings Plan (RESP) trustees on behalf of RESP beneficiaries to support access to post-secondary education for children from low-income families 133,000 24,840 113,423 130,000 18,234 98,438
(S) Wage Earner Protection Program payments to eligible applicants owed wages and vacation pay, severance pay and termination pay from employers who are either bankrupt or in receivership as well as payments to trustees and receivers who will provide the necessary information to determine eligibility 49,250 4,910 16,400 49,250 3,260 17,454
(S) Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 44,000 28,946 50,784 44,000 (9,608) 30,086
(S) The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 6,892 2,574 3,874 7,871 2,111 5,883
(S) Payment related to direct financing arrangement under the Apprentice Loans Act 4,273 1,321 2,605 1,459 466 756
(S) Civil Service Insurance actuarial liability adjustments 145 - - 145 - -
(S) Supplementary Retirement Benefits—Annuities agents' pensions 35 - - 35 - -
(S) The provision of funds for interest payments to lending institutions under the Canada Student Loans Act 1 - - 3 - -
(S) The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act (4,080) (583) (2,691) (5,333) (1,503) (3,597)
(S) Spending of proceeds from the disposal of surplus Crown assets 45 7 45 394 24 27
(S) Refunds of amounts credited to revenues in previous years 298 110 155 220 32 220
(S) Spending pursuant to section 12(4) of the Canada Education Savings Act 2,803 468 751 1,461 199 316
Sub-total—Statutory items 53,598,065 13,240,981 40,846,262 51,999,019 14,192,199 42,809,462
Total budgetary 56,265,567 14,060,307 42,776,819 54,304,135 14,747,249 44,390,315
Non-Budgetary
(S) Loans disbursed under the Canada Student Financial Assistance Act 861,806 (121,741) 737,029 916,224 (9,353) 879,967
(S) Loans disbursed under the Apprentice Loans Act 118,164 15,105 38,889 111,199 16,873 39,507
Total Non-Budgetary 979,970 (106,636) 775,918 1,027,423 7,520 919,474

Table 2: Departmental budgetary expenditures by standard object (unaudited)

(in thousands of dollars) Fiscal year 2016–17 Fiscal year 2015–16
Planned expenditures for the year ending
March 31, 2017 Footnote 1
Expended during the quarter ended December 31, 2016 Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2016 Footnote 1
Expended during the quarter ended  December 31, 2015 Year to date used at quarter-end
Expenditures
(01)  Personnel 1,954,836 943,113 1,385,905 1,750,830 457,885 1,331,501
(02)  Transportation and communications 60,251 55,937 65,942 66,515 11,780 32,958
(03)  Information 60,873 22,451 31,939 65,076 16,770 30,955
(04)  Professional and special services 668,305 345,241 453,661 652,461 109,548 373,220
(05)  Rentals 276,031 147,168 155,797 264,993 52,278 156,467
(06)  Repair and maintenance 11,488 1,566 2,182 12,988 431 1,018
(07)  Utilities, materials and supplies 9,999 3,143 4,178 9,341 1,577 4,395
(09)  Acquisition of machinery and equipment 33,020 5,165 6,138 27,170 3,854 5,880
(10)  Transfer payments 55,173,341 27,092,873 41,996,815 53,333,828 14,570,875 43,744,249
(12)  Other subsidies and payments 4,683 4,673 4,723 3,392 (311) 367
Total gross budgetary expenditures 58,252,827 28,621,330 44,107,280 56,186,594 15,224,687 45,681,010
LESS: Revenues netted against expenditures
Recoverable expenditures on behalf of the Employment Insurance Operating Account (1,376,941) (685,016) (980,439) (1,274,794) (313,898) (922,269)
Recoverable expenditures on behalf of the Canada Pension Plan (300,076) (154,393) (213,263) (285,844) (70,380) (210,712)
Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits (114,566) (45,640) (60,817) (128,334) (48,090) (76,882)
Other amounts recoverable from provincial and territorial governments, other departments or other programs within a department (195,566) (67,851) (75,946) (193,486) (45,066) (80,832)
Total revenues netted against expenditures (1,987,149) (952,900) (1,330,465) (1,882,458) (477,434) (1,290,695)
Total net budgetary expenditures 56,265,678 27,668,430 42,776,815 54,304,136 14,747,253 44,390,315
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