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, 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, the Canada Apprentice Loan, 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 4 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); and
  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 heretofore 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 September 30, 2019.

ESDC’s total budgetary authority available in the second quarter ending September 30, 2019 was $64,854 million, which represents an overall increase of $3,908 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, 2019 were $31,966 million. In comparison, total YTD budgetary authorities used as of the second quarter of the previous year were $30,332 million, representing a year-over-year increase of $1,634 million.

Quarter ended September 30, 2019

Figure 1
Text description
 2019 to 2020  (in millions of dollars)
Item Total available % Total available YTD Used % YTD Used
Voted 3,768 6% 1,451 5%
Statutory 61,086 94% 30,515 95%
Total 64,854 100% 31,966 100%

Quarter ended September 30, 2018

Figure 2
Text description
 2018 to 2019  (in millions of dollars)
Item Total available % Total available YTD used % YTD Used
Voted 3,134 5% 1342 4%
Statutory 57,812 95% 28,990 96%
Total 60,946 100% 30,322 100%

2.1 Significant changes to authorities

ESDC’s budgetary authorities available for use increased by $3,908 million compared to the second quarter of 2018 to 2019 (Tables 1 and 2).

This increase is primarily associated with forecasted OAS pension and Guaranteed Income Supplement (GIS), which increased by $1,900 million and $633 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:

Significant changes to authorities at the end of the second quarter of 2019 to 2020 (in millions of dollars)
Total budgetary authorities available for use — 2018 to 2019 60,946
Changes to authorities available for use
Old Age Security Payments 1,900
Guaranteed Income Supplement Payments 633
Vote 5— Grants and contributions 482
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 151
Canada Disability Savings Program 98
Canada Education Savings Program 69
Contributions to employee benefit plans 52
Other (7)
Sub-Total –Changes to authorities available for use 3,908
Total budgetary authorities available for use – 2019 to 2020 64,854

Related to non-budgetary loans, there is a net increase in authorities of $339 million from 2018 to 2019, mainly because the introduction of a fixed student contribution model, to determine Canada Student Loans Program eligibility, had a bigger impact than expected on the issuance of loans. This model 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 the table, total authorities related to personnel expenditures have increased by $333 million mainly due to the implementation of Budget 2019 measures in the first and second quarter of 2019 to 2020.

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 September 30, 2019 is comparable to the usual spending presented at the end of the second quarter, with approximately 49% of the authorities available for use expensed.

Compared to the previous year, total budgetary expenditures as of the quarter ending September 30, 2019 have increased by $1,634 million (5%) from $30,332 million to $31,966 million (refer to Tables 1 and 2).

This 5% increase is primarily explained by the rise in OAS pension and GIS payments by $1,051 million and $272 million respectively, due to the increased number of beneficiaries and the indexation of the maximum benefit amounts. Other factors contributing to the increased expenditures include:

Significant changes to authorities at the end of the second quarter of 2019 to 2020 (in millions of dollars)
Total budgetary authorities used as of September 30, 2018 30,332
Changes in authorities used
Old Age Security Payments 1,051
Guaranteed Income Supplement Payments 272
Vote 5— Grants and contributions 164
Spending of Revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 68
Canada Student Loans Program and Canada Apprentice Loans 46
Canada Education Savings Program 41
Wage Earner Protection Program 32
Federal Workers' Compensation Payments 31
Vote 1 — Operating expenditures (54)
Other (17)
Sub-Total - Changes in authorities used 1,634
Total budgetary authorities used as of September 30, 2019 31,966

As shown in Table 1, the net amount of non-budgetary loans expenditures under the Canada Student Financial Assistance Act has decreased by $167 million at the end of the second quarter, primarily due to an excess of loans reimbursements received in relation to new loans disbursed to students during the first half of 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)

Item 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 Septembre 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 September 30, 2018 Year to date used at quarter-end
1 Operating expenditures 844,362 191,797 358,708 693,556 253,675 412,859
5 Grants and contributions 2,923,207 443,022 1,092,534 2,440,860 436,957 929,033
(S) Contributions to employee benefit plans 293,659 53,682 107,365 242,061 60,247 120,494
(S) Minister of Families, Children and Social Development—Salary and motor car allowance 88 22 44 86 22 43
(S) Minister of Employment, Workforce Development and Labour—Salary and motor car allowance 88 22 44 86 22 43
(S) Minister of Seniors—Motor car allowance 88 29 44 N/A 7 7
(S) Old Age Security Payments (Old Age Security Act) 42,754,294 11,055,505 21,898,842 40,854,760 10,536,515 20,847,886
(S) Guaranteed Income Supplement Payments (Old Age Security Act) 12,894,967 3,182,139 6,338,427 12,262,059 3,061,929 6,065,985
(S) Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 1,454,300 624,176 775,302 1,190,685 598,529 715,483
(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 955,000 193,496 416,397 912,000 186,578 398,493
(S) Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 931,034 111,755 180,997 858,073 133,359 195,337
(S) Allowance Payments (Old Age Security Act) 555,082 134,224 270,012 550,221 139,763 276,432
(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 67,386 170,776 435,456 61,482 165,347
(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 13,928 30,099 233,243 12,567 32,809
(S) Spending of Revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 194,537 37,107 68,144 N/A N/A N/A
(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 185,000 111,472 137,864 159,000 85,639 114,393
(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 10,912 41,611 49,250 4,201 10,083
(S) Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 44,000 32,758 68,087 44,000 7,744 36,824
(S) Universal Child Care Benefit (Universal Child Care Benefit Act) 300 2,555 4,347 12,000 2,850 6,000
(S) The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 4,028 1,829 3,099 4,449 1,364 3,442
(S) Payment related to direct financing arrangement under the Apprentice Loans Act 3,144 1,447 1,586 5,279 1,307 1,791
(S) Civil Service Insurance actuarial liability adjustments 145 N/A N/A 145 N/A N/A
(S) Supplementary Retirement Benefits—Annuities agents' pensions N/A N/A N/A 35 N/A N/A
(S) The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act (2,402) 48 76 (2,889) (406) (1,080)
(S) Spending of proceeds from the disposal of surplus Crown assets 100 N/A N/A 91 N/A N/A
(S) Refunds of amounts credited to revenues in previous years 852 842 852 44 3 47
(S) Spending pursuant to section 12(4) of the Canada Education Savings Act 1,212 44 1,031 1,972 N/A 657
Sub-total—Statutory items 61,086,066 15,635,378 30,515,046 57,812,106 14,893,722 28,990,516
Total budgetary 64,853,635 16,270,197 31,966,288 60,946,522 15,584,354 30,332,408
Non-Budgetary
(S) Loans disbursed under the Canada Student Financial Assistance Act 1,031,822 1,363,235 1,023,591 669,084 1,480,660 1,190,142
(S) Loans disbursed under the Apprentice Loans Act 41,887 3,969 10,455 65,890 4,840 12,892
Total Non-Budgetary 1,073,709 1,367,204 1,034,046 734,974 1,485,500 1,203,034

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

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

Item 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 September 30, 2019 Year to date used at quarter-end Planned expenditures for the year ending March 31, 20191 Expended during the quarter ended September 30, 2018 Year to date used at quarter-end
(01) Personnel 2,305,977 537,877 1,063,530 1,973,362 526,097 1,042,719
(02) Transportation and communications 67,936 14,711 25,730 59,920 14,154 24,443
(03) Information 73,216 12,413 24,521 62,911 5,008 14,340
(04) Professional and special services 630,756 133,810 228,514 656,083 118,345 225,113
(05) Rentals 285,687 94,136 105,031 276,835 106,288 116,213
(06) Repair and maintenance 8,530 1,466 1,784 6,503 938 1,369
(07) Utilities, materials and supplies 9,986 1,256 2,055 7,426 1,467 2,379
(09) Acquisition of machinery and equipment 60,411 2,564 6,578 30,446 1,884 4,291
(10) Transfer payments 63,396,347 15,941,192 31,348,967 59,843,279 15,229,322 29,725,007
(12) Other subsidies and payments 8,472 4,920 7,990 8,538 22,661 22,470
Total gross budgetary expenditures 66,847,318 16,744,345 32,814,700 62,925,303 16,026,164 31,178,344
Less: Revenues netted against expenditures
Recoverable expenditures on behalf of the Employment Insurance Operating Account (1,463,833) (358,134) (668,263) (1,303,422) (309,055) (617,746)
Recoverable expenditures on behalf of the Canada Pension Plan (404,265) (108,441) (173,105) (351,106) (81,698) (162,937)
Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits (124,685) (7,573) (7,044) (124,678) (33,223) (33,979)
Other amounts recoverable from provincial and territorial governments, other departments or other programs within a department (900) N/A N/A (199,575) (17,834) (31,274)
Total revenues netted against expenditures (1,993,683) (474,148) (848,412) (1,978,781) (441,810) (845,936)
Total net budgetary expenditures 64,853,635 16,270,197 31,966,288 60,946,522 15,584,354 30,332,408

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

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