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 September 30, 2018

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 inclusive Canada, support Canadians in helping them live productive and rewarding lives and improve Canadians’ quality of life.

The Minister of Families, Children and Social Development, the Minister of Employment, Workforce Development and Labour, the Minister of Seniors and the Minister of Public Services and Procurement and Accessibility are responsible for this organization.

ESDC delivers programs and services to each and every Canadian throughout their lives in a significant capacity. ESDC fulfills its mission by:

  • developing policies that ensure Canadians 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 those unemployed due to job loss, illness or caregiving responsibilities;
  • helping Canadians with distinct needs, such as Indigenous people, persons with disabilities, homeless people, travelers and recent immigrants;
  • ensuring labour relations stability by providing mediation services;
  • promoting a fair and healthy workplace by enforcing minimum working conditions, promoting decent work and employment equity and fostering respect for international labour standards; and
  • delivering programs and services on behalf of other departments and agencies.

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 2018–19 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.

The Department is financed by four main sources of funds:

  • appropriated funds from the Consolidated Revenue Fund (CRF);
  • the Employment Insurance (EI) Operating Account;
  • the Canada Pension Plan (CPP); and
  • Crown corporations and other government departments.

EI and CPP benefits and related administrative costs are charged against revenues earmarked in separate 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. Departmental costs related to the delivery of programs and services on behalf of other government departments, which are mainly for passport services and the administration of the Government Employee Compensation Act, are also reported as revenues netted against ESDC’s expenditures. 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. 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 increase in actual expenditures for the quarter ending September 30, 2018.

ESDC’s total budgetary authority available in the second quarter ending September 30, 2018 was $60,946 million, which represents an overall increase of $2,896 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 second quarter ending September 30, 2018 were $30,332 million. In comparison, total YTD budgetary authorities used as of the second quarter of the previous year were $28,773 million, representing a year-over-year increase of $1,559 million.

Quarter ended September 30, 2018
Text description for figure 1
2018–19 (in millions of dollars)
Total available % Total available YTD used % YTD Used
Voted 3,134 5% 1,342 4%
Statutory 57,812 95% 28,990 96%
Total 60,946 100% 30,332 100%
Quarter ended September 30, 2017
Text description for figure 2
2017–18 (in millions of dollars)
Total available % Total available YTD used % YTD Used
Voted 3,040 5% 1,420 5%
Statutory 55,010 95% 27,353 95%
Total 58,050 100% 28,773 100%

2.1 Significant changes to authorities

ESDC’s budgetary authorities available for use increased by $2,896 million compared to the second quarter of 2017–18 (Tables 1 and 2).

This increase is primarily associated with statutory items. In particular, forecasted OAS pension, Guaranteed Income Supplement (GIS) and Allowance payments represent increases of $2,045 million, $414 million and $53 million respectively, owing to expected changes in the average monthly benefit payments and in the number of beneficiaries. Other factors contributing to the increase include:

  • An increase of $119 million in Canada Student Loans and Grants for Students and Canada Apprentice Loans Program mostly due to the implementation of Budget 2016 and Budget 2017 measures that increased the number of low-and middle-income students, including those with dependent children, eligible for the Canada Student Grants;
  • An increase of $97 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;
  • An increase of $85 million to the Canada Education Savings Grant and the Canada Learning Bond, due to more people saving for the post-secondary education of children and to more children from low-income families receiving the education savings incentives for the first time in 2018–19.
  • An increase of $80 million in net operating expenditures (Vote 1), mainly related to the funding renewal in Budget 2017 for the Temporary Foreign Worker Program and new funding for the Old Age Security program workload to support the demographically driven increase; and
  • An increase of $3 million for other items.
Significant changes to expenditures at the end of the second quarter of 2018–19
(in millions of dollars)
Total Budgetary authorities available for use - 2017-2018 58,050
Changes in authorities used
Old Age Security Payments 2,045
Guaranteed Income Supplement Payments 414
Canada Student Loans and Grants and Canada Apprentice Loans Program 119
Canada Disability Savings Program 97
Canada Education Savings Program 85
Vote 1 - Operating Expenditures 80
Allowance Payments 53
Other 3
Sub-Total - Changes to authorities available for use 2,896
Total budgetary authorities available for use - 2018-2019 60,946

For non-budgetary loans, there is a net increase in authorities of $376 million from 2017–18 mainly as a result of introducing a fixed student contribution model to determine Canada Student Loans Program eligibility that allows students to gain valuable work experience without having to worry about a reduction in the amount of their financial assistance as announced in Budget 2016.

As shown in Table 2, total authorities related to personnel expenditures have increased by $89 million, mainly due to compensation increases resulting from the signing of new collective agreements, to new funding related to Old Age Security workload and to the funding renewal in Budget 2017 of the Temporary Foreign Worker Program.

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 September 30, 2018 is comparable to the usual spending presented at the second quarter, with approximately 50% of the authorities available for use expensed.

Compared to the previous year, total budgetary expenditures as of the quarter ending September 30, 2018 have increased by $1,559 million (5.4%) from $28,773 million to $30,332 million (refer to Tables 1 and 2).

This 5.4% increase is primarily explained by the rise in statutory expenditures from $27,353 million for the second quarter in 2017–18 to $28,990 million for the same period in 2018–19, representing a $1,637 million increase as of the end of the second quarter of 2018–19. The main reason for this rise is due to increases in statutory payments such as OAS pension, GIS payments and allowance payments, which have respectively increased by $1,023 million, $393 million and $13 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.

In addition, payments under the Canada Student Loans and Grants and Canada Apprentice Loans Program have increased by $164 million compared to the spending as at September 30, 2017, mostly due to increased grant amounts for low-income, middle-income and part-time students provided through the Canada Student Grants.

An increase of $14 million compared to the second quarter of 2017–18 for the Canada Disability Savings Program is due to a steady increase in the program’s participation.

An increase of $12 million compared to the second quarter of 2017-18 for the Canada Education Savings Grant can be mainly attributed to more people opening Registered Education Savings Plans and requesting the education savings incentives for children.

Other smaller changes, equating $8 million, also contribute to the variance.

Offsetting these increases is a decrease of $68 million in Vote 1 — Operating expenditures. This decrease in operating expenditures, as compared to the same period last year is partly attributable to the absence of retroactive payments for collective agreements in 2018-19 while this type of payment occurred in second quarter of 2017-18. It is also due to the timing of payment processing for an amount paid to Shared Service Canada and for Labour Market Development Agreements administrative costs paid to provinces and territories.

Significant changes to expenditures at the end of the second quarter of 2018–19
(in millions of dollars)
Total Budgetary authorities used as of September 30, 2017 28,773
Changes in authorities used
Old Age Security Payments 1,023
Guaranteed Income Supplement Payments 393
Canada Student Loans and Grants and Canada Apprentice Loans Program 164
Canada Disability Savings Program 14
Allowance Payments 13
Canada Education Savings Grants 12
Other 8
Vote 1 - Operating expenditures (68)
Sub-Total - Changes in authorities used 1,559
Total budgetary authorities used as of September 30, 2018 30,332

In Table 1, the net amount of non-budgetary loans disbursed under the Canada Student Financial Assistance Act has increased by $133 million at the end of the second quarter, primarily due to an increase in loans being issued.

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

3. Risks and uncertainties

ESDC faces a wide variety of risks due to its extensive mandate and responsibility for designing and delivering a broad span of programs and services to Canadians. ESDC maintains awareness of potential risks associated with the changing service delivery landscape, demographic changes within ESDC and Canadian society, protection of personal information, cyber-security, and the need to build and acquire relevant competencies in a rapidly changing work environment. ESDC is actively managing risks which could impact the Canadian public and continues to make progress on reducing risk levels for key corporate risks through an active enterprise risk management approach. This approach includes ongoing risk updates and discussions with senior management; continuous scanning of internal and external trends driving risks; aligning risk management with departmental goals; and basing risk assessments on evidence. Included in the supplementary information to the 2018–19 Departmental Plan, key risks and response strategies are reported. The key risks highlighted below might have a potential financial impact and a brief overview of progress to date to reduce them is provided.

3.1 Investment Planning and Project Management

There is a risk specific to individual projects that they may not deliver on time, within scope and on budget, or deliver their intended benefits and there is a risk that the level of ambition of the investment portfolio does not match with the Department’s capacity to execute.

Risk response strategies:

  • To improve project management capacity for major initiatives, the implementation of project management tools to provide real-time information on project status, timelines and expenditures is progressing on target; and
  • A competency development model has been developed for project managers in order to improve their capacity.

3.2 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:

  • The Staffing and Recruitment Strategy has been implemented to ensure the Department has the right people, in the right place at the right time;
  • A design thinking methodology has been developed to create a user-centric talent management model with a roadmap of key experiments to support an ESDC talent model;
  • The Professional Development Framework to manage talent has been completed.
  • A new Competency-Based Management approach is being developed, including learning paths to encourage employee development and career progression;
  • To foster a productive workforce, the implementation of the Mental Health in the Workplace Integrated Framework and three-year Action Plan (2015–2018) has been completed. The Department is continuing to mitigate this risk through the implementation of a new three-year action plan for 2018–2021, which has been developed.; and
  • HRSB / ESDC is working with the Office of the Chief Human Resources Officers (OCHRO), the Human Resources Council (HRC) and Policy Horizons to develop a future of work for Public service people management strategy and plan.

4. Significant changes in operations, personnel and programs

To achieve the goals and commitments of the Government of Canada and ESDC Service Strategy that seeks to transform how services are delivered to clients, the Department has launched the Service Transformation Plan. This plan serves as the roadmap for the transformation and modernization of ESDC’s services and advances its vision for improved service delivery. An Integrated Service Management function has been established within the Department that will define the operational context and enabling environment for a successful implementation of the Service Transformation Plan. The agenda aims to establish a new departmental culture and way of operating to ensure service delivery is managed holistically. In 2018–19, ESDC will focus on implementing initiatives related to integrated resource planning, integrated workload management and integrated view of all operations. More information on ESDC’s Service Strategy and Service Transformation Plan can be found in the 2018–19 Departmental Plan, under “Our vision for service excellence”.

5. Approval by senior officials

Approved by:

Mark Perlman, Chief Financial Officer
Gatineau, Canada

November 19, 2018
DATE

Graham Flack, Deputy Minister
Gatineau, Canada

November 23, 2018
DATE

Table 1: Statement of authorities (unaudited)

  Fiscal Year 2018–19 Fiscal Year 2017–18
Vote (in thousands of dollars) Total available for use for the year ending
March 31, 20191
Used during the quarter ended
September 30, 2018
Year to date used at quarter-end Total available for use for the year ending
March 31, 20181
Used during the quarter ended
September 30, 2017
Year to date used at quarter-end
1 Operating expenditures 693,556 253,675 412,859 613,485 275,049 481,681
5 Grants and contributions 2,440,860 436,957 929,033 2,426,924 392,185 937,709
(S) Contributions to employee benefit plans 242,061 60,247 120,494 240,013 57,853 115,709
(S) Minister of Families, Children and Social Development—Salary and motor car allowance 86 22 43 84 21 42
(S) Minister of Employment, Workforce Development and Labour—Salary and motor car allowance 86 22 43 84 35 42
(S) Minister of Seniors—Motor car allowance - 7 7 - - -
(S) Old Age Security Payments (Old Age Security Act) 40,854,760 10,536,515 20,847,886 38,810,000 10,014,243 19,825,075
(S) Guaranteed Income Supplement Payments (Old Age Security Act) 12,262,059 3,061,929 6,065,985 11,848,000 2,848,817 5,672,986
(S) Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 1,190,685 598,529 715,483 1,135,016 508,397 594,067
(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 912,000 186,578 398,493 843,000 179,043 385,697
(S) Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 858,073 133,359 195,337 795,376 97,974 154,506
(S) Allowance Payments (Old Age Security Act) 550,221 139,763 276,432 497,000 131,036 262,790
(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 435,456 61,482 165,347 371,500 57,698 152,833
(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 233,243 12,567 32,809 200,600 14,228 31,430
(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 159,000 85,639 114,393 143,000 77,716 105,735
(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 4,201 10,083 49,250 (17) 8,119
(S) Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 44,000 7,744 36,824 44,000 10,668 35,777
(S) Universal Child Care Benefit (Universal Child Care Benefit Act) 12,000 2,850 6,000 24,000 2,307 3,525
(S) The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 4,449 1,364 3,442 7,359 1,414 2,805
(S) Payment related to direct financing arrangement under the Apprentice Loans Act 5,279 1,307 1,791 3,219 1,591 1,792
(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 - - - - - -
(S) The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act (2,889) (406) (1,080) (3,572) (1,473) (1,457)
(S) Spending of proceeds from the disposal of surplus Crown assets 91 - - 224 1 1
(S) Refunds of amounts credited to revenues in previous years 44 3 47 13 1 13
(S) Spending pursuant to section 12(4) of the Canada Education Savings Act 1,972 - 657 1,652 887 1,651
Sub-total—Statutory items 57,812,106 14,893,722 28,990,516 55,009,998 14,002,440 27,353,138
Total budgetary 60,946,522 15,584,354 30,332,408 58,050,407 14,669,674 28,772,528
Non-Budgetary
(S) Loans disbursed under the Canada Student Financial Assistance Act 669,084 1,480,660 1,190,142 280,883 1,297,581 1,056,956
(S) Loans disbursed under the Apprentice Loans Act 65,890 4,840 12,892 77,880 6,263 16,735
Total Non-Budgetary 734,974 1,485,500 1,203,034 358,763 1,303,844 1,073,691

1.Includes only authorities available for use and granted by Parliament at quarter-end.

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

Fiscal year 2018–19 Fiscal year 2017–18
(in thousands of dollars) Planned expenditures for the year ending
March 31, 20191
Expended during the quarter ended September 30, 2018 Year to date used at quarter-end Planned expenditures for the year ending
March 31, 20181
Expended during the quarter ended September 30, 2017 Year to date used at quarter-end
Expenditures
(01) Personnel 1,973,362 526,097 1,042,719 1,884,421 606,600 1,071,817
(02) Transportation and communications 59,920 14,154 24,443 58,788 12,420 22,469
(03) Information 62,911 5,008 14,340 65,961 2,946 12,320
(04) Professional and special services 656,083 118,345 225,113 663,948 142,775 277,114
(05) Rentals 276,835 106,288 116,213 262,565 56,338 112,722
(06) Repair and maintenance 6,503 938 1,369 5,39 572 723
(07) Utilities, materials and supplies 7,426 1,467 2,379 9,581 1,492 2,398
(09) Acquisition of machinery and equipment 30,446 1,884 4,291 36,048 6,155 7,318
(10) Transfer payments 59,843,279 15,229,322 29,725,007 57,033,138 14,306,015 28,111,935
(12) Other subsidies and payments 8,538 22,661 22,470 4,223 98 3,348
Total gross budgetary expenditures 62,925,303 16,026,164 31,178,344 60,024,065 15,135,411 29,622,164
LESS: Revenues netted against expenditures
Recoverable expenditures on behalf of the Employment Insurance Operating Account (1,303,422) (309,055) (617,746) (1,329,026) (307,350) (614,466)
Recoverable expenditures on behalf of the Canada Pension Plan (351,106) (81,698) (162,937) (316,217) (75,832) (151,665)
Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits (124,678) (33,223) (33,979) (124,671) (35,560) (36,046)
Other amounts recoverable from provincial and territorial governments, other departments or other programs within a department (199,575) (17,834) (31,274) (203,744) (46,995) (47,459)
Total revenues netted against expenditures (1,978,781) (441,810) (845,936) (1,973,658) (465,737) (849,636)
Total net budgetary expenditures 60,946,522 15,584,354 30,332,408 58,050,407 14,669,674 28,772,528

1.Includes only authorities available for use and granted by Parliament at quarter-end.

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