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Quarterly financial report for the quarter ended June 30, 2020

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, 2020

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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 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 Ministers responsible for Employment and Social Development Canada are:

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.

1.1   Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities (Table 3) includes ESDC’s spending authorities granted by Parliament, consistent with the Main Estimates and the budgetary authorities used by the Department for the fiscal year ending March 31, 2021. 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.

1.2 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:

The statutory authorities are mainly comprised of:

The non-budgetary authorities consist of loans disbursed under the Canada Student Financial Assistance Act and the Apprentice Loans Act.

The Department is generally 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)
  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.

2. Highlights of Fiscal Quarter and Fiscal Year-to-Date results

As Canada’s economy closed in mid-March, the Government of Canada focused it efforts on ensuring Canadians had timely and efficient support when they needed it most for reasons related to COVID-19.  At the onset of COVID-19, ESDC had to continue supporting Canadians, while undertaking the monumental task of developing and delivering new benefits and services to reach all Canadians in need during these unprecedented times. The priority was to establish, implement, and quickly distribute the Canada Emergency Response Benefit (CERB), working with the Canada Revenue Agency. The department also focused on helping seniors and people with disabilities, supporting students and recent graduates, and addressing the pressing needs of vulnerable populations, including Canadians experiencing homelessness.

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, 2020.

ESDC’s total budgetary authority available in the first quarter ending June 30, 2020 was $138,332 million, which represents an overall increase of $73,523 million from the previous year. Much of this increase relates to COVID-19 benefits to be provided to the public as a result of the pandemic. These benefits are part of the 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, 2020 were $17,228 million. In comparison, total YTD budgetary authorities used as of the first quarter of the previous year were $15,696 million, representing a year-over-year increase of $1,532 million.

Figure 1: Quarter ended June 30, 2020
Figure 1: Quarter ended June 30, 2020
Text description of figure 1
Authorities Total available % Total available YTD used % YTD Used
Voted 3,580 3% 1,159 7%
Statutory 134,752 97% 16,070 93%
Total 138,332 100% 17,229 100%
Figure 2: Quarter ended June 30, 2019
Figure 2: Quarter ended June 30, 2019
Text description of figure 2
Authorities 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%

2.1 Significant changes to authorities

ESDC’s budgetary authorities available for use increased by $73,523 million compared to the first quarter of the fiscal year ending March 31, 2020 (Tables 3 and 4).

Approximately $69,919 million of the increase in the authorities available for use is due to benefits to be provided as part of the department’s response to COVID-19. The most significant measure being $60 billion for the Canada Emergency Response Benefit (CERB). Other measures include the Canada Emergency Student Benefit (CESB), Additional support for Canadian Seniors, the Canada Student Services Grant, Support for Students and Youth impacted by COVID 19, the Emergency Community Support Fund (ECSF), Reaching Home and New Horizons for Seniors.

The remainder of the increase ($3,604 million) is mainly associated with statutory items.

Table 1: Significant changes to authorities at the end of the first quarter of the fiscal year ending March 31, 2021
Detail (in millions of dollars)
Total budgetary authorities available for use for the fiscal year ending March 31, 2020 64,809
Changes to authorities available for use  N/A
Payments related to Public Health Events of National Concern and income support 69,919
Old Age Security benefits 3,324
Canada Student Loans Program and
Canada Apprentice Loans		 275
Canada Disability Savings Program 112
Vote 5 — Grants and contributions 50
Spending of Revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 38
Canada Education Savings Program   34
Vote 1 — Operating expenditures (197)
Contributions to employee benefit plans (32)
Sub-Total - Changes to authorities available for use 73,523
Total budgetary authorities available for use for the fiscal year ending March 31, 2021 138,332

Related to non-budgetary loans, there is a net decrease in authorities of $56.2 million from the fiscal year ending March 31, 2020, mainly attributed to the growing repayment portfolio. The growth in repayment portfolio follows the trend of previous years increase in loans disbursed due to an increase in student population as predicted by the Office of the Chief Actuary. Note that the Canada Student Loans Program will not reach the predicted authorities for repayment in the fiscal year ending March 31, 2021, due to new COVID-19 measures on the Six Month Moratorium on CSLP payments.

As shown in Table 4, total authorities related to transfer payments have increased by $73,706 million compared to the first quarter of the fiscal year ending March 31, 2020 mainly due to COVID-19 measures undertaken to provide relief to the public. There is also a decrease of $161 million to personnel due to the reduced supply of the Main Estimates. Due to the COVID-19 pandemic and limited sessions in the spring for Parliament to study supply, the Standing Orders of the House of Commons were amended to extend the study period into the Fall. ESDC is expected to receive full supply of the Main Estimates for the fiscal year ending March 31, 2021 in December 2020.

The variance in total authorities for Other subsidies and payments (standard object 12) and for Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits are related.  The reason for these variances is mainly attributable to the revenues of the Working Conditions and Workplace Relations program as a result of a change in presentation. Going forward, these revenues, which are related to Government Employees’ Compensation act, are being presented under Other subsidies and payments and no longer under Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits.

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, 2020 is lower than it usually is at the first quarter, with approximately 12% of the authorities available for use expensed.  This is mainly due to the increased total available authorities for use as of June 30, 2020 due to COVID-19.

Compared to the previous year, total budgetary expenditures as of the quarter ending June 30, 2020 have increased by $1,532 million (10%) from $15,696 million to $17,228 million (refer to Tables 3 and 4).

This 10% increase is primarily explained by the rise in statutory expenditures from $14,880 million for the first quarter in the fiscal year ending March 31, 2020 to $16,069 million for the same period in the fiscal year ending March 31, 2021, representing a $1,189 million increase as of the end of the first quarter of the fiscal year ending March 31, 2021. The main reason for this rise is due to increases in statutory payments such as OAS benefits, which have increased by $805 million. The main factor explaining these increases is the aging population, thus a greater number of seniors receiving benefits in addition to higher average amounts paid to beneficiaries.

The COVID-19 related statutory benefit payments have also contributed to $439 million of this increase as at June 30, 2020.

In addition, expenditures under Vote 5 — Grants and Contributions have increased by $321 million compared to the spending at the end of the same quarter in the fiscal year ending March 31, 2020. The increase is mainly attributable to the Workforce Development Agreements spending due to the timing of payment processed.

The Employee Benefit Plans variance of $56 million relates to an adjustment that is required to be done in the financial system during the next periods of this fiscal year.

Payments under the Canada Student Loans Program and Canada Apprentice Loans have decreased by $53 million compared to the spending as of June 30, 2019, mostly due to the implementation of new COVID-19 measure of Six Month Moratorium on CSLP payments. Due to this measure, students do not have to make payments of principal and interest for the 6 months period.

Under the Wage Earner Protection Program (WEPP), actual spending at the end of the first quarter of the fiscal year ending March 31, 2021 is $14 million. This represents a spending decrease of $17 million when compared to the fiscal year ending March 31, 2020, a period with higher volumes than usual. The variance is due to retroactive payments and close to 1,000 Sears claims that were carried over/processed in the first quarter of the fiscal year ending March 31, 2020, in addition to other large bankruptcies.

The decrease of $11 million under the new statutory authority for the delivery of services to the public on behalf of partners mainly relates to the reassignment of passport and biometric employees to critical services due to COVID-19 pandemic.

In addition, other smaller changes, equating $8 million, also contribute to the variance.

Table 2: Significant changes to expenditures at the end of the first quarter for the fiscal year ending March 31, 2021
Details (in millions of dollars)
Total budgetary authorities used as of June 30, 2019 15,696
Changes in authorities used N/A
Old Age Security benefits 805
Payments related to Public Health Events of National Concern and income support   439
Vote 5 — Grants and contributions 321
Contributions to employee benefit plans 56
Canada Student Loans Program and Canada Apprentice Loans (53)
Wage Earner Protection Program (17)
Spending of Revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act (11)
Other (8)
Sub-Total - Changes in authorities used 1,532
Total budgetary authorities used as of June 30, 2020 17,228

In Table 3, there is a net increase in net loans disbursed primarily due to the implementation of new COVID-19 measure of the Six Month Moratorium on CSLP payments. The Six Month Moratorium on payments generates less revenue for the Canada Student Loans Program.

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 Departmental Plan for the fiscal year ending March 31, 2021. 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. The Department has also identified project management capabilities within its workforce as an area requiring improvement, without 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 the fiscal year ending March 31, 2021:

Due to COVID-19, ESDC has taken on new priorities and work during this first quarter, which has resulted in reprioritizing the Department’s core work, and reallocating staff to the most critical and emerging business functions. As a result, ESDC business decisions will likely have much broader and significant financial impacts going forward, that are uncertain at this time. As the Department deals with new operational pressures that were not forecast at the beginning of the year, it may have additional financial risks to manage as the fiscal year progresses.  However, strong financial management practices are in place to monitor and mitigate the impacts of these potential risks.

4. Significant changes in operations, personnel and program

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 3: Statement of authorities (unaudited)

Detail Fiscal Year 2020–21 Fiscal Year 2019–20
Vote (in thousands of dollars) Total available for use for the year ending
March 31, 20211		 Used during the quarter ended
June 30, 2020		 Year to date used at quarter-end 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
1 Operating expenditures 633,443 189,006 189,006 831,173 166,911 166,911
5 Grants and contributions 2,946,167 970,040 970,040 2,896,174 649,513 649,513
(S) Contributions to employee benefit plans 258,501 109,997 109,997 290,510 53,683 53,683
(S) Minister of Employment, Workforce Development and Labour—Salary and motor car allowance N/A N/A N/A 88 22 22
(S) Minister of Families, Children and Social Development – Salary and motor car allowance 89 22 22 88 22 22
(S) Minister of Labour – Salary and motor car allowance 89 15 15 N/A N/A N/A
(S) Minister of Employment, Workforce Development and Disability Inclusion – Salary and motor car allowance 89 22 22 N/A N/A N/A
(S) Minister of State (Seniors) – Motor car allowance 2 1 1 88 14 14
(S) Payments related to Public Health Events of National Concern and income support 69,918,800 438,878 438,878 N/A N/A N/A
(S) Old Age Security Payments (Old Age Security Act) 44,966,057 12,562,827 12,562,827 42,754,294 10,843,338 10,843,338
(S) Guaranteed Income Supplement Payments (Old Age Security Act) 13,921,587 2,285,240 2,285,240 12,894,967 3,156,288 3,156,288
(S) Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 1,677,841 160,687 160,687 1,454,300 151,126 151,126
(S) Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 980,566 7,321 7,321 931,034 69,241 69,241
(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 980,000 214,707 214,707 955,000 222,900 222,900
(S) Allowance Payments (Old Age Security Act) 640,024 91,577 91,577 555,082 135,788 135,788
(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 478,032 94,828 94,828 430,700 103,391 103,391
(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 401,529 17,389 17,389 336,600 16,171 16,171
(S) Spending of Revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 233,375 19,842 19,842 194,537 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 194,000 18,886 18,886 185,000 26,392 26,392
(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 13,846 13,846 49,250 30,698 30,698
(S) Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 44,000 30,606 30,606 44,000 35,329 35,329
(S) The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 6,087 636 636 4,028 1,270 1,270
(S) Payment related to direct financing arrangement under the Apprentice Loan Act 2,995 133 133 3,144 139 139
(S) Spending pursuant to section 12(4) of the Canada Education Savings Act 923 N/A N/A 987 987 987
(S) Civil Service Insurance actuarial liability adjustments 145 N/A N/A 145 N/A N/A
(S) Spending of proceeds from the disposal of surplus Crown assets 109 N/A N/A 67 N/A N/A
(S) Universal Child Care Benefit (Universal Child Care Benefit Act) 100 965 965 300 1,793 1,793
(S) Refunds of amounts credited to revenues in previous years 8 8 8 10 10 10
(S) The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act (1,968) 16 16 (2,402) 28 28
(S) The provision of funds for interest payments to lending institutions under the Canada Student Loans Act N/A 28 28 N/A N/A N/A
Sub-total—Statutory items 134,752,230 16,068,477 16,068,477 61,081,817 14,879,667 14,879,667
Total budgetary 138,331,840 17,227,523 17,227,523 64,809,164 15,696,091 15,696,091
Non-Budgetary N/A N/A N/A N/A N/A N/A
(S) Loans disbursed under the Canada Student Financial Assistance Act 993,135 105,457 105,457 1,031,822 (339,644) (339,644)
(S) Loans disbursed under the Apprentice Loans Act 24,358 261 261 41,887 6,486 6,486
Total Non-Budgetary 1,017,493 105,718 105,718 1,073,709 (333,158) (333,158)

Table 4: Departmental budgetary expenditures by standard object (unaudited)

Detail Fiscal year 2020–21 Fiscal year 2019–20
Expenditures (in thousands of dollars) Planned expenditures for the year ending
March 31, 20211		 Expended during the quarter ended June 30, 2020 Year to date used at quarter-end Planned expenditures for the year ending
March 31, 20201		 Expended during the quarter ended June 30, 2019 Year to date used at quarter-end
(01) Personnel 2,121,394 623,742 623,742 2,283,427 525,653 525,653
(02) Transportation and communications 67,267 5,898 5,898 65,997 11,019 11,019
(03) Information 69,901 4,576 4,576 71,062 12,107 12,107
(04) Professional and special services 614,921 167,576 167,576 615,488 94,704 94,704
(05) Rentals 247,111 5,455 5,455 278,059 10,895 10,895
(06) Repair and maintenance 5,386 361 361 8,267 318 318
(07) Utilities, materials and supplies 6,738 888 888 9,749 799 799
(09) Acquisition of machinery and equipment 52,453 8,937 8,937 58,836 4,015 4,015
(10) Transfer payments 137,074,603 16,874,855 16,874,855 63,369,314 15,407,775 15,407,775
(12) Other subsidies and payments (118,294) 11,945 11,945 7,221 3,071 3,071
Total gross budgetary expenditures 140,141,480 17,704,233 17,704,233 66,767,420 16,070,356 16,070,356
LESS: Revenues netted against expenditures N/A N/A N/A N/A N/A N/A
Recoverable expenditures on behalf of the Employment Insurance Operating Account (1,412,965) (384,431) (384,431) (1,431,481) (310,129) (310,129)
Recoverable expenditures on behalf of the Canada Pension Plan (395,775) (92,279) (92,279) (401,190) (64,664) (64,664)
Amounts recoverable from Crown agencies and other government departments regarding payments of injury compensation benefits N/A N/A N/A (124,685) 528 528
Other amounts recoverable from provincial and territorial governments, other departments or other programs within a department (900) N/A N/A (900) N/A N/A
Total revenues netted against expenditures (1,809,640) (476,710) (476,710) (1,958,256) (374,265) (374,265)
Total net budgetary expenditures 138,331,840 17,227,523 17,227,523 64,809,164 15,696,091 15,696,091

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