Quarterly Financial Report Ended December 31, 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 December 31, 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 (CESP);
  • the National Child Benefit;
  • the Universal Child Care Benefit (UCCB);
  • the Wage Earner Protection Program; and
  • passport services.

These direct benefits to Canadians are part of Canada’s social safety net and represent 95% 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 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 CESP , the Canada Disability Savings Program, the Wage Earner Protection Program, Federal Workers’ Compensation and employee benefit plans . 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 actual expenditures for the quarter ending December 31, 2015.

ESDC’s total budgetary authority available in the third quarter ending December 31, 2015 was $54,304 million, which represents an overall increase of $2,056 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, 2015 were $44,390 million. In comparison, total YTD budgetary authorities used as of the third quarter of the previous year were $38,615 million, representing a year-over-year increase of $5,775 million.

Figure 1: Quarter ended December 31, 2015
Bar graph of Quarter ended December 31, 2015: description follows.
Textual description of Figure 1: Quarter ended December 31, 2015
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
Figure 2: Quarter ended December 31, 2014
Bar graph of Quarter ended December 31, 2014: description follows
Textual description of Figure 2: Quarter ended December 31, 2014
2014–15 (in millions of dollars)
Total available % Total available YTD used % YTD used
Voted 2,366 5% 1,658 4%
Statutory 49,882 95% 36,957 96%
Total 52,248 38,615

2.1 Significant changes to authorities

ESDC’s budgetary authorities available for use increased by $2,056 million compared to the third 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 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 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.

These increases are mainly offset by decreases in Vote 1 (Operating expenditures) and Vote 5 (Grants and contributions). The net decrease of $22 million in Vote 1 (Operating expenditures) is due to the sunsetting of resources for the Skills Partnership Fund (SPF) and Old Age Security workload, as well as other adjustments and transfers to other government departments.

The decrease of $39 million in voted grants and contributions is mainly explained by a decrease of $50 million due to the sunsetting of the SPF on March 31, 2015.

Significant changes to authorities at the end of third quarter of 2015-2016
(in millions of dollars)
Total budgetary authorities available for use – 2014-2015 52,248
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 Grant 34
Universal Child Care Benefit 32
Canada Education Savings Grants 27
Other 14
Vote 1 – Operating expenditures (22)
Vote 5 – Grants and Contributions (39)
Sub-Total - Changes to authorities available for use 2,056
Total budgetary authorities available for use –2015-2016 54,304

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 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 and accounts for an increase of $111 million to non-budgetary authorities.

2.2 Significant changes to expenditures

Overall, the proportion of ESDC’s total budgetary expenditures as of December 31, 2015 is comparable to expenditures as of December31, 2014. Expenditures were approximately 82% of authorities available as of December 31, 2015 while at the end of December 2014, they represented approximately 74% of available authorities at that date. The main reason for this increased spending rate relates to the UCCB for which expenditures are reflective of the new enhancements from Budget 2015 while authorities do not include the impact of the enhancements as of December 31, 2015.

Compared to the previous year, total budgetary expenditures as of the quarter ending December 31, 2015 have increased by $5,775 million (15%), climbing from $38,615 million to $44,390 million (refer to Tables 1 and 2).

This 15% increase is primarily explained by the rise in statutory expenditures from $36,957 million for the third quarter in 2014-15 to $42,809 million for the same period in 2015-16, representing a $5,852 million increase as of the end of the 2015-16 third quarter. The main reason for this increase relates to the UCCB, which accounts for $4,388 million. 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.

There is also an increase of $1,211 million in OAS pension payments and $174 million in GIS payments. The main factors explaining these increases are 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 $33 million for the CESP reflects the continued growth due to more families saving for their children’s future post-secondary education.

In addition, Canada Disability Savings Grant and Bond payments have increased by $27 million, relative to the same period last year. This increase is mainly the result of the steady growth of the program and an increase in program beneficiaries. Also, the $12 million increase related to Canada Learning Bond expenditures reflects the continued growth due to more families saving for their children’s future post-secondary education.

As for the payments related to the direct financing arrangement under the Canada Student Financial Assistance Act, the increase of $18 million reflects the increases in repayment assistance costs.

The decrease of $20 million for the allowance payments is mainly attributable to a decrease in the number of beneficiaries.

The net decrease of $38 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.

The decrease of $40 million in Vote 5 (Grants and Contributions) is mostly explained by a decrease of $42 million in payments related to the Labour Market Agreements (Canada Job Fund), mostly attributable to the timing of payments rather than changes in spending patterns.

Significant changes to expenditures at the end of third quarter 2015-16
(in millions of dollars)
Total budgetary authorities used as of December 31, 2014 38,615
Changes in authorities used
Universal Child Care Benefit 4,388
Old Age Security Payments 1,211
Guaranteed Income Supplement Payments 174
Canada Education Savings Grants 33
Canada Disability Savings Grants and Bonds 27
Direct Financing Arrangement under the Canada Student Financial Assistance Act 18
Canada Learning Bond 12
Other 10
Allowance Payments (20)
Vote 1 — Operating expenditures (38)
Vote 5 – Grants and Contributions (40)
Sub-Total - Changes in authorities used 5,775
Total budgetary authorities used as of December 31, 2015 44,390

In Table 2, the $5,814 million increase in Transfer payments (standard object 10) is mainly due to major statutory expenditures, UCCB for $4,388 million and OAS pension for $1,211 million, and GIS for $174 million.

The $52 million decrease in Other subsidies and payments (standard object 12) 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 variances in Information (standard object 03), Professional and Special Services (standard object 04) and in Repair and maintenance (standard object 06) expenditures are mainly attributable to the timing of payments rather than changes in spending patterns. For Information (standard object 03), the variance is due to increased information requirements that relate to new funding received in 2015-16.

The amounts recoverable from other government departments have increased by $12 million, mainly attributable to the Passport Canada program.

The net amount of non-budgetary loans disbursed under the Canada Student Financial Assistance Act has decreased by $172 million at the end of the third quarter, primarily due to the impact of write-downs of loan values due to write-offs and an increase in repayments and loan forgiveness.

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 UCCB. The UCCB 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. While authorities as of December 31, 2015 do not include the enhancements to the UCCB, expenditures at the end of the third quarter are reflective of that change.

As well, a new departmental Program Alignment Architecture (PAA) has been approved by the 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
February 22, 2016
Gatineau, Canada

Ian Shugart, Deputy Minister
February 23, 2016
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
December 31, 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
December 31, 2014
Year to date used at quarter-end
1 Operating expenditures 588,708 113,313 404,950 610,371 126,737 443,212
5 Grants and contributions 1,716,409 441,737 1,175,903 1,755,398 535,360 1,215,456
(S) Contributions to employee benefit plans 232,837 56,840 170,520 230,481 55,503 166,509
(S) Minister of Employment and Social Development, Democratic Reform and Minister for the National Capital Commission—Salary and motor car allowance 82 7 48 80 21 60
(S) Minister of Labour and Minister of Status of Women—Salary and motor car allowance 82 7 48 80 21 60
(S) Minister of State (Seniors)—Motor car allowance 2 - 1 2 - 2
(S) Minister of State (Social Development)—Motor car allowance 2 - 1 2 - 2
(S) Old Age Security Payments (Old Age Security Act) 34,920,970 9,245,041 27,281,634 33,554,711 8,829,672 26,070,196
(S) Guaranteed Income Supplement Payments (Old Age Security Act) 10,605,509 2,456,142 7,293,926 10,122,657 2,448,237 7,119,831
(S) Universal Child Care Benefit (Universal Child Care Benefit Act) 2,851,433 1,895,512 6,199,294 2,819,000 681,493 1,811,533
(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 800,000 176,042 536,053 773,000 168,051 502,643
(S) Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 756,113 81,021 392,283 722,620 98,515 383,512
(S) Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 658,646 71,001 193,822 581,205 50,779 175,863
(S) Allowance Payments (Old Age Security Act) 545,938 125,063 372,388 544,294 145,724 392,229
(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 50,107 165,385 228,300 46,350 146,464
(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 22,203 54,476 85,700 12,631 46,006
(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 18,234 98,438 127,000 16,194 86,235
(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 3,261 17,454 49,250 5,367 18,534
(S) Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 44,000 (9,608) 30,086 44,000 5,277 34,500
(S) The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 7,871 2,111 5,883 6,497 2,546 5,743
(S) Payment related to direct financing arrangement under the Apprentice Loans Act 1,459 466 756 - - -
(S) Civil Service Insurance actuarial liability adjustments 145 - - 145 - -
(S) Supplementary Retirement Benefits—Annuities agents' pensions 35 - - 35 - 1
(S) The provision of funds for interest payments to lending institutions under the Canada Student Loans Act 3 - - 3 - 1
(S) The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act (5,333) (1,502) (3,597) (8,564) (923) (3,638)
(S) Spending of proceeds from the disposal of surplus Crown assets 394 25 27 305 2 -
(S) Refunds of amounts credited to revenues in previous years 220 31 220 269 61 269
(S) Spending pursuant to section 12(4) of the Canada Education Savings Act 1,461 199 316 1,406 - -
Sub-total—Statutory items 51,999,019 14,192,203 42,809,462 49,882,478 12,565,521 36,956,555
Total budgetary 54,304,136 14,747,253 44,390,315 52,248,247 13,227,618 38,615,223
Non-Budgetary
(S) Loans disbursed under the Canada Student Financial Assistance Act 916,224 (9,353) 879,967 779,981 (15,214) 1,052,056
(S) Loans disbursed under the Apprentice Loans Act 111,199 16,874 39,508 - - -
Total Non-Budgetary 1,027,423 7,521 919,475 779,981 (15,214) 1,052,056

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 December 31, 2015 Year to date used at quarter-end Planned expenditures for the year ending
March 31, 2015Footnote 1
Expended during the quarter ended December 31, 2014 Year to date used at quarter-end
Expenditures
(01) Personnel 1,750,830 457,885 1,331,501 1,778,974 438,722 1,306,849
(02) Transportation and communications 66,515 11,780 32,958 65,982 13,407 31,270
(03) Information 65,076 16,770 30,955 65,786 5,462 16,343
(04) Professional and special services 652,461 109,548 373,220 638,033 167,630 381,510
(05) Rentals 264,993 52,278 156,467 274,079 47,522 157,789
(06) Repair and maintenance 12,988 431 1,018 8,171 1,686 5,979
(07) Utilities, materials and supplies 9,341 1,577 4,395 9,432 1,886 4,469
(09) Acquisition of machinery and equipment 27,170 3,854 5,880 19,349 2,007 3,876
(10) Transfer payments 53,333,828 14,570,875 43,744,249 51,260,377 13,040,901 37,930,157
(12) Other subsidies and payments 3,392 (311) 367 3,056 1,649 52,357
Total gross budgetary expenditures 56,186,594 15,224,687 45,681,010 54,123,239 13,720,872 39,890,599
LESS: Revenues netted against expenditures
Recoverable expenditures on behalf of the Employment Insurance Operating Account (1,274,794) (313,898) (922,269) (1,262,192) (317,124) (919,754)
Recoverable expenditures on behalf of the Canada Pension Plan (285,844) (70,380) (210,712) (299,789) (79,161) (217,137)
Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits (128,334) (48,090) (76,882) (128,387) (29,541) (69,935)
Other amounts recoverable from provincial and territorial governments, other departments or other programs within a department (193,486) (45,066) (80,832) (184,624) (67,428) (68,550)
Total revenues netted against expenditures (1,882,458) (477,434) (1,290,695) (1,874,992) (493,254) (1,275,376)
Total net budgetary expenditures 54,304,136 14,747,253 44,390,315 52,248,247 13,227,618 38,615,223
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