Quarterly financial report for the quarter ended June 30, 2019

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, 2019

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1. Introduction

This quarterly report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This quarterly report should be read in conjunction with the Main Estimates for the current year.

1.1 Authority, mandate and programs

The mission of Employment and Social Development Canada (ESDC), including the Labour Program and Service Canada, is to build a stronger and more inclusive Canada, to 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:

Further details on ESDC's authority, mandate and programs can 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 2019 to 2020 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 (OAS) Program, the Canada Student Loans Program and Canada Apprentice Loans, 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:

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

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. While presented in the Departmental Plan, the EI Operating Account and the CPP are excluded from ESDC's Main and Supplementary Estimates. Accordingly, these accounts are not reflected in the Quarterly Financial Report.

In addition, 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, were reported as revenues netted against ESDC's expenditures. However, in 2018, the Department of Employment and Social Development Act was amended to broaden the Department's mandate to include service delivery to the public for partners with a view to improving services to Canadians. The Department now has the legislative authority to deliver services to the public for partners on a cost-recovery basis as well as to deliver specific services for the Government of Canada. As a result, departmental costs related to the delivery of programs and services on behalf of other government departments are reported in 2019 to 2020 under a new statutory authority. The Department will recover its service delivery costs from partners under a non-respendable revenue authority.

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 June 30, 2019.

ESDC's total budgetary authority available in the first quarter ending June 30, 2019 was $64,809 million, which represents an overall increase of $3,879 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, 2019 were $15,696 million. In comparison, total YTD budgetary authorities used as of the first quarter of the previous year were $14,748 million, representing a year-over-year increase of $948 million.

Quarter ended June 30, 2019

Text description
Quarter ended June 30, 2019
 2019 to 2020  (in millions of dollars)
Total available % Total available YTD used % YTD Used
Voted 3,727 6% 816 5%
Statutory 61,082 94% 14,880 95%
Total 64,809 100% 15,696 100%

Quarter ended June 30, 2018

Text description
Quarter ended June 30, 2018
 2018 to 2019  (in millions of dollars)
Total available % Total available YTD used % YTD Used
Voted 3,118 5% 651 4%
Statutory 57,812 95% 14,097 96%
Total 60,930 100% 14,748 100%

2.1 Significant changes to authorities

ESDC's budgetary authorities available for use increased by $3,879 million compared to the first quarter of 2018 to 2019 (Tables 1 and 2).

This increase is primarily associated with statutory items. In particular, forecasted OAS pension and Guaranteed Income Supplement (GIS) represent increases of $1,900 million and $633 million, owing to expected changes in the average monthly benefit payments and in the number of beneficiaries. Other factors contributing to the increase include:

Significant changes to authorities at the end of the first quarter of 2019 to 2020
Detail Amount (in millions of dollars)
Total budgetary authorities available for use — 2018 to 2019 60,930
Changes to authorities available for use -
Old Age Security Payments 1,900
Guaranteed Income Supplement Payments 633
Vote 5— Grants and contributions 455
Canada Student Loans Program and Canada Apprentice Loans 335
Spending of Revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 195
Vote 1 — Operating expenditures 154
Canada Disability Savings Program 98
Canada Education Savings Program 69
Contributions to employee benefit plans 49
Other (9)
Sub-Total –Changes to authorities available for use 3,879
Total budgetary authorities available for use – 2019 to 2020 64,809

Related to non-budgetary loans, there is a net increase in authorities of $339 million from 2018 to 2019, 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 and Budget 2017.

As shown in Table 2, total authorities related to personnel expenditures have increased by $320 million mainly due to the implementation of Budget 2019 measures in the first quarter of 2019 to 2020. There is also an increase of $49 million to contributions to employee benefit plans as a result of an increase in personnel and a change in rate.

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 align them with actual historical spending trends.

2.2 Significant changes to expenditures

Overall, the proportion of ESDC's total budgetary expenditures as of June 30, 2019 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, 2019 have increased by $948 million (6%) from $14,748 million to $15,696 million (refer to Tables 1 and 2).

This 6% increase is primarily explained by the rise in statutory expenditures from $14,097 million for the first quarter in 2018 to 2019 to $14,880 million for the same period in 2019 to 2020, representing a $783 million increase as of the end of the first quarter of 2019 to 2020. The main reason for this rise is due to increases in statutory payments such as OAS pension and GIS payments, which have respectively increased by $532 million and $152 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, expenditures under Vote 5 — Grants and Contributions have increased by $157 million compared to the spending at the end of the same quarter in 2018 to 2019. The increase is partly attributable to the Indigenous Skills and Employment Training Program and the new Indigenous Early Learning and Child Care Transformation Initiative. The increase is mainly offset by a decrease in the Workforce Development Agreements spending due to timing of payment processing and new payment schedules.

Payments under the Canada Student Loans Program and Canada Apprentice Loans have increased by $41 million compared to the spending as of June 30, 2018, mostly due to increased grant amounts for low-income, middle-income and part-time students provided through the Canada Student Grants.

The increase of $31 million under the new statutory authority for the delivery of services to the public on behalf of partners mainly relates to passport services. Gross spending is comparable to 2018 to 2019, which was netted against expenditures in previous years.

Under the Wage Earner Protection Program (WEPP), actual spending at the end of the 2019 to 2020 first quarter is $31 million. This represents a spending increase of $25 million when compared to 2018 to 2019, which is mainly due to Sears Canada entering into receivership, and as a result, close to 10,000 former Sears Canada employees received a WEPP payment in the last quarter of 2018 to 2019 and the first quarter of 2019 to 2020. Furthermore, the increase is also due to the Budget 2018 increase to the WEPP maximum payment, which increased from $3,977 to $7,148.

In addition, other smaller changes, equating $10 million, also contribute to the variance.

Significant changes to expenditures at the end of the first quarter 2019 to 2020
Details Amount (in millions of dollars)
Total budgetary authorities used as of June 30, 2018 14,748
Changes in authorities used -
Old Age Security Payments 532
Vote 5 — Grants and contributions 157
Guaranteed Income Supplement Payments 152
Canada Student Loans Program and Canada Apprentice Loans 41
Spending of Revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 31
Wage Earner Protection Program 25
Other 10
Sub-Total - Changes in authorities used 948
Total budgetary authorities used as of June 30, 2019 15,696

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.

3. Risks and uncertainties

As the Department strives to ensure that Canadians receive high quality and efficient services, it must remain mindful of the changing environment in which it operates as well as the risks that may delay or prevent it from achieving its mission. Across the portfolio, the Department uses standard risk management practices, oversight committees, consultation, and training to anticipate and mitigate the probability and impact of negative events. The Department's top corporate risks and the efforts being taken to mitigate them are described in the Risks and Mitigation sub-section of the ESDC 2019 to 2020 Departmental Plan. Risks which have a potential financial impact are explained below and a brief overview of progress to date to reduce them is provided.

In a department the size of ESDC, with its vast and varied programs and benefits, there is a risk that current funding is insufficient to meet the Department's transformation agenda intended to meet rising expectations for service delivery. In addition, the Department has also identified a lack of project management capabilities within its workforce which could result in scheduling delays, cost overruns and ultimately reduce the likelihood of delivering on project benefits.

The Department is committed to strengthen project management and investment planning to direct resources to emerging priorities and deliver results.

Mitigation strategies implemented as of the first quarter of 2019 to 2020:

4. Significant changes in operations, personnel and programs

The Department will continue to transform the delivery of its services to ensure they meet the evolving expectations of Canadians by:

5. Approval by senior officials

Original document was signed in Gatineau, Canada by:

Table 1: Statement of authorities (unaudited)

  Fiscal Year 2019 to 2020 Fiscal Year 2018 to 2019
Vote (in thousands of dollars) Total available for use for the year ending March 31, 20201 Used during the quarter ended June 30, 2019 Year to date used at quarter-end Total available for use for the year ending March 31, 20191 Used during the quarter ended June 30, 2018 Year to date used at quarter-end
1 Operating expenditures 831,173 166,911 166,911 676,783 159,184 159,184
5 Grants and contributions 2,896,174 649,513 649,513 2,440,860 492,076 492,076
(S) Contributions to employee benefit plans 290,510 53,683 53,683 242,061 60,247 60,247
(S) Minister of Families, Children and Social Development—Salary and motor car allowance 88 22 22 86 21 21
(S) Minister of Employment, Workforce Development and Labour—Salary and motor car allowance 88 22 22 86 21 21
(S) Minister of Seniors—Motor car allowance 88 14 14 - - -
(S) Old Age Security Payments (Old Age Security Act) 42,754,294 10,843,338 10,843,338 40,854,760 10,311,371 10,311,371
(S) Guaranteed Income Supplement Payments (Old Age Security Act) 12,894,967 3,156,288 3,156,288 12,262,059 3,004,056 3,004,056
(S) Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 1,454,300 151,126 151,126 1,190,685 116,954 116,954
(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 955,000 222,900 222,900 912,000 211,915 211,915
(S) Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 931,034 69,241 69,241 858,073 61,978 61,978
(S) Allowance Payments (Old Age Security Act) 555,082 135,788 135,788 550,221 136,669 136,669
(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 430,700 103,391 103,391 435,456 103,865 103,865
(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 336,600 16,171 16,171 233,243 20,242 20,242
(S) Spending of Revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 194,537 31,037 31,037 - - -
(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 185,000 26,392 26,392 159,000 28,754 28,754
(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 30,698 30,698 49,250 5,882 5,882
(S) Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 44,000 35,329 35,329 44,000 29,080 29,080
(S) Universal Child Care Benefit (Universal Child Care Benefit Act) 300 1,793 1,793 12,000 3,150 3,150
(S) The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 4,028 1,270 1,270  4,449 2,078 2,078
(S) Payment related to direct financing arrangement under the Apprentice Loans Act 3,144 139 139 5,279 484 484
(S) Civil Service Insurance actuarial liability adjustments 145   - - 145 - -
(S) Supplementary Retirement Benefits—Annuities agents' pensions -   - - 35 - -
(S) The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act (2,402) 28 28 (2,889) (674) (674)
(S) Spending of proceeds from the disposal of surplus Crown assets 67   - - 91 - -
(S) Refunds of amounts credited to revenues in previous years 10 10 10 44 44 44
(S) Spending pursuant to section 12(4) of the Canada Education Savings Act 987 987 987 1,972 657 657
Sub-total—Statutory items 61,081,817 14,879,667 14,879,667 57,812,106 14,096,794 14,096,794
Total budgetary 64,809,164 15,696,091 15,696,091 60,929,749 14,748,054 14,748,054
Non-Budgetary
(S) Loans disbursed under the Canada Student Financial Assistance Act 1,031,822 (339,644) (339,644) 669,084 (290,518) (290,518)
(S) Loans disbursed under the Apprentice Loans Act 41,887 6,486 6,486 65,890 8,052 8,052
Total Non-Budgetary 1,073,709 (333,158) (333,158) 734,974 (282,466) (282,466)

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 2019 to 2020 Fiscal year 2018 to 2019
Expenditures (in thousands of dollars) Planned expenditures for the year ending March 31, 20201 Expended during the quarter ended June 30, 2019 Year to date used at quarter-end Planned expenditures for the year ending March 31, 20191 Expended during the quarter ended June 30, 2018 Year to date used at quarter-end
(01) Personnel 2,283,427 525,653 525,653 1,963,803 516,622 516,622
(02) Transportation and communications 65,997 11,019 11,019 57,471 10,289 10,289
(03) Information 71,062 12,107 12,107 60,336 9,332 9,332
(04) Professional and special services 615,488 94,704 94,704 622,898 106,768 106,768
(05) Rentals 278,059 10,895 10,895 265,531 9,924 9,924
(06) Repair and maintenance 8,267 318 318 6,239 430 430
(07) Utilities, materials and supplies 9,749 799 799 7,123 912 912
(09) Acquisition of machinery and equipment 58,836 4,015 4,015 29,635 2,407 2,407
(10) Transfer payments 63,369,314 15,407,775 15,407,775 59,843,279 14,495,686 14,495,686
(12) Other subsidies and payments 7,221 3,071 3,071 7,848 (191) (191)
Total gross budgetary expenditures 66,767,420 16,070,356 16,070,356 62,864,163 15,152,179 15,152,179
Less: Revenues netted against expenditures
Recoverable expenditures on behalf of the Employment Insurance Operating Account (1,431,481) (310,129) (310,129) (1,274,401) (308,690) (308,690)
Recoverable expenditures on behalf of the Canada Pension Plan (401,190) (64,664) (64,664) (336,425) (81,239) (81,239)
Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits (124,685) 528 528 (124,678) (756) (756)
Other amounts recoverable from provincial and territorial governments, other departments or other programs within a department (900) - - (198,910) (13,440) (13,440)
Total revenues netted against expenditures (1,958,256) (374,265) (374,265) (1,934,414) (404,125) (404,125)
Total net budgetary expenditures 64,809,164 15,696,091 15,696,091 60,929,749 14,748,054 14,748,054

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

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