Quarterly financial report for the quarter ended June 30, 2017

From Employment and Social Development Canada

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, 2017

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1.0 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 inclusive Canada, to support Canadians in helping them live productive and rewarding lives and improving 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 contributes to social and economic well–being by fostering safe, healthy, fair and inclusive work environments and cooperative workplace relations in the federal jurisdiction. 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:

  • 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, families with children and Employment Insurance beneficiaries
  • fostering inclusive growth by providing opportunity and assistance to Canadians with distinct needs, such as Indigenous people, people with disabilities, homeless people, and recent immigrants
  • overseeing labour relations, occupational health and safety, labour standards, employment equity and workers’ compensation in the federal jurisdiction
  • delivering programs and services on behalf of other departments and agencies, such as passport services delivered on behalf of Immigration, Refugees and Citizenship Canada and services to veterans delivered on behalf of Veterans Affairs Canada

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 and Canada Apprentice Loans Program
  • the Canada Education Savings Program
  • the Wage Earner Protection Program
  • 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 Departmental Plan.

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 2017-18 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 Canada Student Loans and Grants and Canada Apprentice 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 the 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 Departmental Plan. Accordingly, these accounts are not reflected in the Quarterly Financial Report.

2.0 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 June 30, 2017.

ESDC’s total budgetary authority available in the first quarter ending June 30, 2017 was $58,014 million, which represents an overall increase of $1,831 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 first quarter ending June 30, 2017 were $14,103 million. In comparison, total YTD budgetary authorities used as of the first quarter of the previous year were $15,108 million, representing a year–over–year decrease of $1,005 million.

Figure 1: Quarter ended June 30, 2017 - 2017-18 (in millions of dollars)
Graphic: Quarter ended June 30, 2017 of fiscal year 2017-18
Figure 1 – Text description
Details Total available Percentage total available YTD used Percentage YTD used
Voted 3,011 5% 753 5%
Statutory 55,003 95% 13,350 95%
Total 58,014 100% 14,103 100%
Figure 2: Quarter ended June 30, 2016 - 2016-17 (in millions of dollars)
Graphic: Quarter ended June 30, 2016 of fiscal year 2016-17
Figure 2 – Text description
Details Total available Percentage total available YTD used Percentage YTD used
Voted 2,593 5% 642 4%
Statutory 53,590 95% 14,466 96%
Total 56,183 100% 15,108 100%

2.1 Significant changes to authorities

ESDC’s budgetary authorities available for use increased by $1,831 million compared to the first quarter of 2016-17 (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 $1,724 million and $1,044 million respectively owing to changes in average benefit payments and in the number of beneficiaries. This increase is mainly offset by a decrease of $1,901 million from the Universal Child Care Benefit (UCCB), as planned spending was adjusted to include only retroactive payments pertaining to benefits paid prior to July 2016. The UCCB has been replaced by the Canada Child Benefit announced in Budget 2016, and administered by the Canada Revenue Agency as of July 2016. Other factors contributing to the increase include:

  • An increase of $461 million in Canada Student Loans and Grants for Students and Apprentices mostly explained by an increase to Canada Student Grants as a result of Budget 2016 measures to make post–secondary education more affordable for low– and middle–income families
  • An increase of $455 million in Voted Grants and Contributions to fund government initiatives announced in Budget 2016, mainly to support early learning and child care
  • An increase of $107 million to Registered Disability Savings Grants and Bonds which is due to a steady increase in total registered Canada Disability Savings Plans and participation in the program

These increases are offset by a decrease of $37 million to Vote 1 — Operating expenditures, mainly due to a reduction in resources for the Temporary Foreign Worker Program pending authority approval following Budget 2017 funding renewal, and a decrease of $22 million for other items.

Significant changes to authorities at the end of the first quarter of 2017-18

Detail Amount (in millions of dollars)
Total budgetary authorities available for use — 2016–17 56,183
Changes to authorities available for use
Old Age Security Payments 1,724
Guaranteed Income Supplement Payments 1,044
Canada Student Loans and Grants and Canada Apprentice Loans Program 461
Vote 5 — Grants and contributions 455
Canada Disability Savings Programs 107
Other (22)
Vote 1 — Operating Expenditures (37)
Universal Child Care Benefit (1,901)
Sub-Total – Changes to authorities available for use 1,831
Total budgetary authorities available for use 2017–18 58,014

For non–budgetary loans, there is a net decrease in authorities of $621 million from 2016-17 mainly as a result of Budget 2016 measures which increased Canada Student Grants and reduced the disbursement of Canada Student Loans as more borrowers will have their financial needs met by the increase in grants.

As shown in Table 2, total authorities related to personnel expenditures have decreased by $68 million mainly due to a reduction of resources for the Temporary Foreign Worker Program, the EI Inventory Reduction Strategy to address the accumulated inventory of EI claims, and Budget 2016 measures to improve EI. In addition, there is a decrease to the amount of Employee Benefit Plans (EBP) as a result of a reduction to the EBP rate.

The decrease of $77 million in authorities recoverable from the Employment Insurance Operating Account is mostly attributable to a reduction in resources for the EI Inventory Reduction Strategy, and the completion of Budget 2016 measures, and other related initiatives to improve EI.

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 June 30, 2017 is comparable to the usual spending presented at the first quarter, with approximately 24% of the authorities available for use expensed.

Compared to the previous year, total budgetary expenditures as of the quarter ending June 30, 2017 have decreased by $1,005 million (6.7%), from $15,108 million to $14,103 million (refer to Tables 1 and 2).

This 6.7% decrease is primarily explained by the decline in statutory expenditures from $14,466 million for the first quarter in 2016-17 to $13,350 million for the same period in 2017-18, representing a $1,116 million decrease as of the end of the first quarter of 2017-18.

The main reason for this decrease is a reduction of $1,896 million that relates to the Universal Child Care Benefit, which was replaced by the new Canada Child Benefit introduced in Budget 2016 and administered by the Canada Revenue Agency 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 $458 million and GIS payments which have also increased by $256 million. The main factor explaining these increases is the aging population, thus a 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, payments under the Canada Student Loans and Grants and Canada Apprentice Loans Program have increased by $29 million compared to the spending as at June 30, 2016, mostly due to increased grant amounts for low–income, middle–income and part–time students provided through the Canada Student Grants. Enhancements to the Canada Student Grants took effect August 1, 2016.

An increase of $22 million compared to the first quarter of 2016-17 for the Canada Education Savings Program is due to an increase in more Canadians saving for the post–secondary education of children.

Other smaller changes, equating $15 million, also contribute to the variance.

Also offsetting the $1,005 million overall decrease is the increase of $86 million in Vote 1 – Operating Expenditures and an increase of $25 million in Vote 5 — Grants and Contributions. The increase in operating expenditures, as compared to the same period last year, is partly attributable to the timing of invoice processing for both the National Accommodation Plan paid to Public Services and Procurement Canada and information technology infrastructure provided by Shared Service Canada. 2017-18 invoices were processed at the end of the first quarter, while they were processed early in the second quarter in the previous fiscal year. For voted grants and contributions, the increase of $25 million is mainly related to the Youth Employment Strategy and the Homelessness Partnering Strategy.

Significant changes to expenditures at the end of the first quarter 2017-18

Detail Amount in  (in millions of dollars)
Total budgetary authorities used as of June 30, 2016 15,108
Changes in authorities used
Universal Child Care Benefit (1,896)
Old Age Security Payments 458
Guaranteed Income Supplement Payments 256
Vote 1 — Operating expenditures 86
Canada Student Loans and Grants and Canada Apprentice Loans Program 29
Vote 5 — Grants and contributions 25
Canada Education Savings Program 22
Other 15
Sub-Total – Changes in authorities used (1,005)
Total budgetary authorities used as of June 30, 2017 14,103

In Table 1, 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.

In Table 2, the expenditure increase in professional services and rentals (standard object 04 and 05) is mostly attributable to the timing of payments rather than changes in spending patterns.

3.0 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 2017-18 in the Key Risks section of the Departmental Plan. The following report identifies risks which have a potential financial impact and provides a brief overview of progress to date to reduce them.

3.1 Human resource management

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:

  • A 2017-18 Workforce Action Plan has been developed
  • Significant improvement has been made, specifically in terms of increased senior leadership capacity and innovative hiring approaches

3.2 Investment planning and project management

There is a risk that major projects may be over budget, face substantial delays and/or not be completed within scope.

Risk response strategy:

  • An Investment Advisory Group was formalized to provide investment recommendations to senior management through the use of a new investment prioritization methodology

3.3 Policy on results

There is a risk that ESDC may not adequately meet the objectives or expected results of Treasury Board Secretariat's Policy on Results thereby limiting its ability to effectively achieve and communicate results to Canadians.

Risk response strategy:

  • The 2018-19 Departmental Results Framework has been developed and approved by the Minister

4.0 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 need it most. The new, income–tested Canada Child Benefit came into effect and replaced the UCCB on July 1, 2016. The UCCB payments were made to eligible recipients only for the months of April, May, and June 2016. ESDC is still disbursing payments for retroactive claims, and other adjustments, and this responsibility has not been transferred to any another department.

5.0 Approval by senior officials

Original document was signed in Gatineau, Canada by:

  • Mark Perlman, Chief Financial Officer, on August 10 2017
  • Louise Levonian, Deputy Minister, on August 11 2017

Table 1: Statement of authorities (unaudited) (in thousands of dollars)

Vote Fiscal year 2017-2018 Fiscal year 2016-2017
Total available for use for the year ending March 31, 2018Footnote 1 Used during the quarter ended June 30, 2017 Year to date used at quarter-end Total available for use for the year ending March 31, 2017Footnote 1 Used during the quarter ended June 30, 2016 Year to date used at quarter-end
Budgetary
1 – Operating expenditures 583,544 206,632 206,632 620,452 120,667 120,667
5 – Grants and contributions 2,426,924 545,524 545,524 1,972,638 521,118 521,118
(S) – Contributions to employee benefit plans 233,986 57,855 57,855 265,226 60,427 60,427
(S) – Minister of Families, Children and Social Development—Salary and motor car allowance 84 21 21 84 6 6
(S) – Minister of Employment, Workforce Development and Labour—Salary and motor car allowance 84 7 7 84 7 7
(S) – Old Age Security Pension Payments (Old Age Security Act) 38,810,000 9,810,832 9,810,832 37,086,489 9,352,563 9,352,563
(S) – Guaranteed Income Supplement Payments (Old Age Security Act) 11,848,000 2,824,170 2,824,170 10,804,379 2,568,105 2,568,105
(S) – Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 1,135,016 85,669 85,669 763,845 61,851 61,851
(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 843,000 206,655 206,655 824,000 193,331 193,331
(S) – Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 795,376 56,531 56,531 705,088 51,170 51,170
(S) – Allowance Payments (Old Age Security Act) 497,000 131,754 131,754 515,878 131,455 131,455
(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 371,500 95,136 95,136 322,900 80,885 80,885
(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 200,600 17,202 17,202 142,200 29,292 29,292
(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 143,000 28,019 28,019 133,000 19,863 19,863
(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 8,136 8,136 49,250 5,731 5,731
(S) – Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 44,000 25,109 25,109 44,000 13,574 13,574
(S) – Universal Child Care Benefit (Universal Child Care Benefit Act) 24,000 1,217 1,217 1,924,955 1,897,338 1,897,338
(S) – The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 7,359 1,391 1,391 6,892 640 640
(S) – Payment related to direct financing arrangement under the Apprentice Loans Act 3,219 202 202 4,273 425 425
(S) – Civil Service Insurance actuarial liability adjustments 145 0 0 145 0 0
(S) – Supplementary Retirement Benefits—Annuities agents' pensions 35 0 0 35 0 0
(S) – The provision of funds for interest payments to lending institutions under the Canada Student Loans Act 0 0 0 1 0 0
(S) – The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act (3,572) 16 16 (4,080) (386) (386)
(S) – Spending of proceeds from the disposal of surplus Crown assets 216 0 0 220 1 1
(S) – Refunds of amounts credited to revenues in previous years 12 12 12 38 38 38
(S) – Spending pursuant to section 12(4) of the Canada Education Savings Act 1,652 764 764 1,151 284 284
Sub-total – Statutory items 55,003,962 13,350,698 13,350,698 53,590,053 14,466,600 14,466,600
Total budgetary 58,014,430 14,102,854 14,102,854 56,183,143 15,108,385 15,108,385
Non-budgetary
(S) – Loans disbursed under the Canada Student Financial Assistance Act 280,883 (240,626) (240,626) 861,806 (240,891)  (240,891)
(S) – Loans disbursed under the Apprentice Loans Act 77,880 10,472 10,472 118,164 13,624 13,624
Total non-budgetary 358,763 (230,154) (230,154) 979,970 (227,267) (227,267)

Table 2: Departmental budgetary expenditures by standard object (unaudited) (in thousands of dollars)

Details Fiscal year 2017-2018 Fiscal year 2016-2017
Planned expenditures for the year ending March 31, 2018Footnote 1 Expended during the quarter ended June 30, 2017 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2017Footnote 1 Expended during the quarter ended June 30, 2016 Year to date used at quarter-end
Expenditures
(01) Personnel 1,850,345 465,217 465,217 1,918,024 442,792 442,792
(02) Transportation and communications 53,905 10,049 10,049 57,606 10,005 10,005
(03) Information 63,852 9,374 9,374 56,361 9,488 9,488
(04) Professional and special services 618,127 134,339 134,339 646,804 108,420 108,420
(05) Rentals 242,560 56,384 56,384 266,027 8,629 8,629
(06) Repair and maintenance 5,243 151 151 11,365 616 616
(07) Utilities, materials and supplies 8,403 906 906 9,367 1,035 1,035
(09) Acquisition of machinery and equipment 34,511 1,163 1,163 30,290 973 973
(10) Transfer payments 57,033,138 13,805,920 13,805,920 55,133,095 14,903,942 14,903,942
(12) Other subsidies and payments 3,512 3,250 3,250 2,914 50 50
Total gross budgetary expenditures 59,913,596 14,486,753 14,486,753 58,131,853 15,485,950 15,485,950
Less: Revenues netted against expenditures
Recoverable expenditures on behalf of the Employment Insurance Operating Account (1,267,509) (307,116) (307,116) (1,344,722) (295,423) (295,423)
Recoverable expenditures on behalf of the Canada Pension Plan (312,711) (75,833) (75,833) (299,443) (58,870) (58,870)
Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits (124,671) (486) (486) (114,566) (15,177) (15,177)
Other amounts recoverable from provincial and territorial governments, other departments or other programs within a department (194,275) (464) (464) (189,979) (8,095) (8,095)
Total revenues netted against expenditures (1,899,166) (383,899) (383,899) (1,948,710) (377,565) (377,565)
Total net budgetary expenditures 58,014,430 14,102,854 14,102,854 56,183,143 15,108,385 15,108,385
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