Quarterly Financial Report ended June 30, 2015

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 June 30, 2015.

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.

To fulfill its mission, the Department is responsible for:

  • developing policies that ensure all can use their talents, skills and resources to participate in learning, work and their community;
  • 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;
  • providing income support to seniors, survivors, families with children and Employment Insurance beneficiaries;
  • helping Canadians with distinct needs such as Aboriginal people, people with disabilities, homeless people, travellers and recent immigrants;
  • overseeing federal labour responsibilities; and
  • 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 Loans and Grants for Students and Apprentices Program;
  • the Canada Education Savings Program;
  • the National Child Benefit;
  • the Universal Child Care Benefit;
  • 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 2015–16 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 (YTD) results

This section highlights the significant items that contributed to the net increase in resources available for the year and the actual expenditures for the quarter ending June 30, 2015.

ESDC’s total budgetary authority available in the first quarter ending June 30, 2015 was $54,270 million, which represents an overall increase of $2,106 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 YTD budgetary authorities used as of the first quarter ending June 30, 2015 were $13,420 million. In comparison, total YTD budgetary authorities used as of the first quarter of the previous year were $12,485 million, representing a year-over-year increase of $935 million.

Quarter ended June 30, 2015
Bar graph of Quarter ended June 30, 2015: description follows
Text description of Quarter ended June 30, 2015
2015–16 (in millions of dollars)
Total available % Total available YTD used % YTD used
Voted 2,274 4% 648 5%
Statutory 51,996 96% 12,772 95%
Total 54,270 13,420
Quarter ended June 30, 2014
Bar graph of Quarter ended June 30, 2014: description follows
Text description of Quarter ended June 30, 2014
2014–15 (in millions of dollars)
Total available % Total available YTD used % YTD used
Voted 2,283 4% 383 3%
Statutory 49,881 96% 12,102 97%
Total 52,164 12,485

2.1 Significant changes to authorities

ESDC's budgetary authorities available for use increased by $2,106 million compared to the first quarter of 2014–15 (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 $1,366 million and $483 million respectively owing to changes in average benefit payments and in the number of beneficiaries. Other factors contributing to the increase include:

  • An increase of $84 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 $77 million in the payments related to the direct financing arrangement under the Canada Student Financial Assistance Act mainly due to an increase to repayment assistance costs that consider the latest Office of Chief Actuary projections for borrowers in repayments;
  • An increase of $34 million in the Canada Student Grant to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act attributed to the growth rate assumption from the Office of Chief Actuary;
  • An increase of $32 million to the Universal Child Care Benefit (UCCB) based on an increased number of children entitled to the benefit. This increase does not include Budget 2015 enhancements to the UCCB; and
  • An increase of $27 million in Canada Education Savings Grant payments due to more families saving for their children's post-secondary education.
Significant changes to authorities at the end of first quarter 2015–16
(in millions of dollars)
Total budgetary authorities available for use — 2014–15 52,164
Changes to authorities available for use
Old Age Security Payments 1,366
Guaranteed Income Supplement Payments 483
Canada Disability Savings Grants and Bonds 84
Direct Financing Arrangement under the Canada Student Financial Assistance Act 77
Canada Student Grants 34
Universal Child Care Benefits 32
Canada Education Savings Grants 27
Other 3
Sub-Total - Changes to authorities available for use 2,106
Total budgetary authorities available for use — 2015–16 54,270

For the non-budgetary authorities, there is a net increase of $136 million in forecasted loans disbursed under the Canada Student Financial Assistance Act due to new loan projections by the Chief Actuary reflecting an increasing number of students requiring financial assistance. The loans disbursed under the Apprentice Loans Act is a new initiative announced in the Economic Action Plan 2014.

As shown in Table 2, there is an increase of $41 million under the amounts recoverable from other departments mainly due to delivery of Passport services. Additional funding was received for Passport Modernization Initiative and accommodation.

Also, 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 June 30, 2015 is comparable to expenditures as of June 30, 2014, with approximately 25% of the authorities available for use expensed as of the end of the first quarter.

Compared to the previous year, total budgetary expenditures as of the quarter ending June 30, 2015 have increased by $935 million (7%), climbing from $12,485 million to $13,420 million (refer to Tables 1 and 2).

This 7% increase is primarily explained by the rise in statutory expenditures from $12,102 million for the first quarter in 2014–15 to $12,772 million for the same period in 2015–16, representing a $670 million increase as of the end of the 2015–16 first quarter. Major statutory increases include $454 million in OAS pension payments and $154 million in GIS payments. The main factors 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.

The increase of $305 million in Vote 5 — Grants and Contributions is mostly explained by an increase of $218 million in payments related to the Canada Job Fund. Canada Job Fund agreements with the provinces and territories were not all signed as of the first quarter of 2014–15. In addition, Budget 2013 committed to introduce a new generation of Labour Market Agreements for Persons with Disabilities beginning in 2014–15, requiring new agreements with all provinces and territories. As not all the agreements were in place by the beginning of 2014–15, payments were made later compared to the current fiscal year, resulting in an increase of $85 million in expenditures in the first quarter of 2015–16.

Also, the increase of $27 million related to the Government Employees Compensation Act (GECA) is mainly due to the outstanding recoveries from Crown agencies and other government departments at the end of the first quarter of 2015–16.

In addition, Canada Disability Savings Grant and Canada Disability Savings Bond payments have increased by $10 million and $1 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.

The increase of $10 million in Canada Education Savings Grant payments is due to a higher number of families saving for their children's post-secondary education.

The net decrease of $39 million in Vote 1 — Operating expenditures is mainly the result of a one-time transition payment for implementing salary payment in arrears by the Government of Canada in fiscal year 2014–15.

Significant changes to expenditures at the end of first quarter 2015–16
(in millions of dollars)
Total budgetary authorities used as of June 30, 2014 12,485
Changes in authorities used
Old Age Security Payments 454
Vote 5 — Grants and contributions 305
Guaranteed Income Supplement Payments 154
Payments of compensation respecting government employees and Merchant seamen 27
Other 13
Canada Disability Savings Grants & Bonds 11
Canada Education Savings Grants 10
Vote 1 — Operating expenditures (39)
Sub-Total - Changes in authorities used 935
Total budgetary authorities used as of June 30, 2015 13,420

In Table 2, the $49 million decrease in Other subsidies and payments is mostly due to a one-time transition payment for implementing salary payment in arrears by the Government of Canada in fiscal year 2014–15.

The increase in rental expenditures (standard object 05) and the decreases in information (standard object 03) and repair and maintenance (standard object 06) expenditures are mostly attributable to the timing of payments rather than changes in spending patterns.

Also, the amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits related to the Government Employees Compensation Act (GECA) have decreased mainly due to outstanding recoveries at the end of the first quarter of 2015–16.

The net amount of non-budgetary loans disbursed under the Canada Student Financial Assistance Act for the first quarter is negative, primarily due to timing differences between loan disbursements and repayments. Disbursements normally increase in early fall with the start of the academic year and continue until January, while repayments remain relatively stable throughout the year. The variance of $13 million between the first quarter of 2015–16 and 2014–15 reflects timing of repayments rather than significant changes in repayment 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 2015–16 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.

1. Project Management

In support of the Government’s priority to modernize service delivery, the Department manages a number of complex projects in order to enhance services to Canadians. These projects must be managed effectively and efficiently to maintain high service standards. Given the scope and complexity of projects associated with the modernization agenda, it is increasingly imperative that ESDC has the project management capacity and resources to meet departmental priorities and objectives. This risk is further compounded by interdependencies between service and client branches, driving the need for collaboration and establishment of strong partnerships with enabling services.

The Department will continue relying on risk mitigation strategies and monitoring tools, including the Investment Management Process and the Project Management Framework, to ensure that all projects undertaken are planned, managed and delivered in a consistent and timely manner. To increase its capacity, the Department will recruit employees with project management skills as well as provide training to existing employees to support the implementation of large projects. Additionally, various governance structures are established to monitor and manage project expenditures and resource allocation.

2. Privacy/Security

Over the past decade, use of the Internet has significantly increased across the Government to enhance services and meet the evolving needs of clients. To help ensure the protection of personal and sensitive information, the Department will continue expanding and implementing its Data Protection Strategy; providing support to employees through training and development of Data Management tools; and increasing its awareness efforts to ensure that both employees and clients are aware of the threats or other attempts to gather personal information through various methods and techniques.

3. Information Technology

To support the changing needs of Canadians, ESDC must ensure that its programs and service delivery channels evolve at the same pace as the technologies used to support them. Maintaining a high service delivery standard requires investments by the Department in information technology applications to replace aging applications and develop systems, infrastructure and business applications that meet clients’ demand for fast, efficient, timely and secure service.

4. Human Resource Management

To ensure sufficient capacity and the right mix of skills and competencies, the Department will continue to maintain an integrated approach to workforce planning and management to assist managers and employees in delivering on business objectives. The Department’s approach includes implementation of a five-year ESDC Workforce Plan (2015-2020) containing numerous initiatives to attract and maintain a skilled and diverse workforce.

4. Significant changes in operations, personnel and programs

The Government increased and expanded the Universal Child Care Benefit (UCCB). The UCCB now provides up to $1,920 per year for each child under the age of 6 and up to $720 per year for each child aged 6 through 17.

The first enhanced payment has been issued in July 2015 and included any retroactive payments for the period of January 2015 to June 2015. The authorities and the expenditures as of June 30, 2015 do not include the enhancements to the UCCB.

Also, a new departmental Program Alignment Architecture (PAA) has been approved by Treasury Board and is effective starting in Fiscal year 2015–16. The Department has realigned its PAA to foster a stronger emphasis on horizontal collaboration and integration by bringing together all elements on the spectrum of policy development to service delivery.

5. Approval by senior officials

Original signed by:

Alain P. Séguin, Chief Financial Officer
August 21, 2015
Gatineau, Canada

Ian Shugart, Deputy Minister
August 21, 2015
Gatineau, Canada

Table 1: Statement of authorities (unaudited)

Vote (in thousands of dollars) Fiscal Year 2015–16 Fiscal Year 2014–15
Total available for use for the year ending
March 31, 2016Footnote 1
Used during the quarter ended
June 30, 2015
Year to date used at quarter-end Total available for use for the year ending
March 31, 2015Footnote 1
Used during the quarter ended
June 30, 2014
Year to date used at quarter-end
1 Operating expenditures 561,410 134,759 134,759 580,032 174,080 174,080
5 Grants and contributions 1,712,659 513,898 513,898 1,702,912 208,492 208,492
(S) Contributions to employee benefit plans 230,764 56,840 56,840 230,059 55,503 55,503
(S) Minister of Employment and Social Development, Democratic Reform and Minister for the National Capital Commission—Salary and motor car allowance 82 20 20 80 20 20
(S) Minister of Labour and Minister of Status of Women—Salary and motor car allowance 82 20 20 80 20 20
(S) Minister of State (Seniors)—Motor car allowance 2 1 1 2 1 1
(S) Minister of State (Social Development)—Motor car allowance 2 1 1 2 1 1
(S) Old Age Security Payments (Old Age Security Act) 34,920,970 8,975,225 8,975,225 33,554,711 8,520,898 8,520,898
(S) Guaranteed Income Supplement Payments (Old Age Security Act) 10,605,509 2,505,803 2,505,803 10,122,657 2,351,718 2,351,718
(S) Universal Child Care Benefit (Universal Child Care Benefit Act) 2,851,433 678,136 678,136 2,819,000 675,945 675,945
(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 800,000 188,787 188,787 773,000 178,404 178,404
(S) Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 756,113 53,368 53,368 722,620 49,472 49,472
(S) Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 658,646 48,089 48,089 581,205 48,521 48,521
(S) Allowance Payments (Old Age Security Act) 545,938 127,764 127,764 544,294 125,226 125,226
(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 266,900 68,836 68,836 228,300 58,999 58,999
(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 131,000 19,643 19,643 85,700 18,348 18,348
(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 130,000 17,783 17,783 127,000 17,085 17,085
(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 7,361 7,361 49,250 5,930 5,930
(S) Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 44,000 21,493 21,493 44,000 (5,232) (5,232)
(S) The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 7,871 2,109 2,109 6,497 1,111 1,111
(S) Payment related to direct financing arrangement under the Apprentice Loans Act 1,459 - - - - -
(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 3 - - 3 - -
(S) The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act (5,333) 184 184 (8,564) 495 495
(S) Spending of proceeds from the disposal of surplus Crown assets 295 - - 162 - -
(S) Refunds of amounts credited to revenues in previous years 160 160 160 58 58 58
(S) Spending pursuant to section 12(4) of the Canada Education Savings Act 508 104 104 758 - -
Sub-total—Statutory items 51,995,834 12,771,727 12,771,727 49,881,054 12,102,523 12,102,523
Total budgetary 54,269,903 13,420,384 13,420,384 52,163,998 12,485,095 12,485,095
Non-Budgetary
(S) Loans disbursed under the Canada Student Financial Assistance Act 916,224 (244,695) (244,695) 779,981 (231,242) (231,242)
(S) Loans disbursed under the Apprentice Loans Act 111,199 12,291 12,291 - - -
Total Non-Budgetary 1,027,423 (232,404) (232,404) 779,981 (231,242) (231,242)

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

(in thousands of dollars) Fiscal year 2015–16 Fiscal year 2014–15
Planned expenditures for the year ending
March 31, 2016Footnote 1
Expended during the quarter ended June 30, 2015 Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2015Footnote 1
Expended during the quarter ended June 30, 2014 Year to date used at quarter-end
Expenditures
(01) Personnel 1,739,397 430,907 430,907 1,757,061 426,803 426,803
(02) Transportation and communications 63,198 9,574 9,574 63,675 6,012 6,012
(03) Information 63,260 826 826 64,656 8,753 8,753
(04) Professional and special services 624,372 95,724 95,724 608,238 99,951 99,951
(05) Rentals 251,651 54,085 54,085 236,114 33,223 33,223
(06) Repair and maintenance 12,913 199 199 7,453 3,597 3,597
(07) Utilities, materials and supplies 8,980 1,148 1,148 9,053 1,023 1,023
(09) Acquisition of machinery and equipment 26,910 460 460 19,010 297 297
(10) Transfer payments 53,330,079 13,197,579 13,197,579 51,207,891 12,245,045 12,245,045
(12) Other subsidies and payments 2,379 523 523 2,368 49,991 49,991
Total gross budgetary expenditures 56,123,139 13,791,025 13,791,025 53,975,519 12,874,695 12,874,695
LESS: Revenues netted against expenditures
Recoverable expenditures on behalf of the Employment Insurance Operating Account (1,242,195) (300,045) (300,045) (1,233,112) (296,869) (296,869)
Recoverable expenditures on behalf of the Canada Pension Plan (289,786) (69,952) (69,952) (297,607) (62,058) (62,058)
Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits (128,334) (440) (440) (128,387) (30,673) (30,673)
Other amounts recoverable from provincial and territorial governments, other departments or other programs within a department (192,921) (204) (204) (152,415) - -
Total revenues netted against expenditures (1,853,236) (370,641) (370,641) (1,811,521) (389,600) (389,600)
Total net budgetary expenditures 54,269,903 13,420,384 13,420,384 52,163,998 12,485,095 12,485,095
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