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Quarterly financial report for the quarter ended June 30, 2022

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, 2022

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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 has not been subject to an external audit or review and 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 improving 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, 2023. 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.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

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 financed by 4 main sources of funds:

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.

The Department of Employment and Social Development Act was amended in June 2018 to broaden the Department’s mandate to include service delivery to the public with a view to improve services to Canadians. As such, the Department has the legislative authority to deliver services to the public for partners on a cost-recovery basis as well as to deliver select services for the Government of Canada, such as per example, Passport services.

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

Within the environment described above, this section highlights the significant items that contributed to the net decrease in resources available for the year and the net increase in actual expenditures for the quarter ending June 30, 2022.

ESDC’s total budgetary authority available in the first quarter ending June 30, 2022 was $87,014 million, which represents an overall decrease of $7,629 million from the previous year. Much of this decrease relates to COVID-19 statutory measures provided under the Canada Recovery Benefits Act in the first quarter of the fiscal year ending March 31, 2022. 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, 2022 were $19,687 million. In comparison, total YTD budgetary authorities used as of the first quarter of the previous year were $25,485 million, representing a year-over-year decrease of $5,798 million.

Figure 1: Quarter ended June 30, 2022
Figure 1: Quarter ended June 30, 2022 - Textuel description follow
Figure 1 Text description – 2022 to 2023 (in millions of dollars)
Authorities Total available % Total available YTD used % YTD Used
Voted 11,351 13 % 1,888 10 %
Statutory 75,663 87 % 17,799 90 %
Total 87,014 100 % 19,687 100 %
Figure 2: Quarter ended June 30, 2021
Figure 2: Quarter ended June 30, 2021 - Textuel description follow
Figure 2 Text description – 2021 to 2022 (in millions of dollars)
Authorities Total available % Total available YTD used % YTD Used
Voted 6,878 7 % 1,352 5 %
Statutory 87,765 93 % 24,133 95 %
Total 94,643 100 % 25,485 100 %

2.1 Significant Changes to Authorities

ESDC’s budgetary authorities available for use decreased by $7,629 million compared to the first quarter of the fiscal year ending March 31, 2022 (Table 3 and Table 4).

Approximately $13,818 million of the decrease in the authorities available for use is due to 3 statutory temporary recovery benefits: the Canada Recovery Benefit, which ended October 23, 2021, the Canada Recovery Caregiving Benefit and the Canada Recovery Sickness Benefit, which were extended until May 7, 2022.

Other measures totalling $4,451 million were funded for one year only through the Budget Implementation Act (BIA) 2021:

Additionally, a decrease of $157 million in Vote 1 mainly due to a reduction in resources for the administration and the integrity of the Canada Emergency Response Benefit, the Canada Emergency Student Benefit and the Employment Insurance Emergency Response Benefit; and the transfer of the Reaching Home portfolio to the Office of Infrastructure of Canada as of October 26, 2021.

Offsetting these decreases are increases totalling $10,797 million, mainly related to:

Table 1: Significant changes to authorities at the end of the first quarter of the fiscal year ending March 31, 2023
Details (in millions of dollars)
Total budgetary authorities available for use for the fiscal year ending March 31, 2022 94,643
Changes to authorities available for use n/a
Canada Recovery Benefits (including Sickness and Caregiving Benefits) (13,818)
Statutory funding for payment to provinces and territories for early learning and child care (2,648)
Transfer payments in connection with the Budget Implementation Act – Supplementary payments to seniors and Payment to the Government of Quebec for the Parental Insurance Plan (1,803)
Vote 1 – Operating expenditures (157)
Old Age Security benefits 5,432
Vote 5 – Grants and contributions 4,630
Canada Student Financial Assistance Program and Canada Apprentice Loans 646
Canada Education Saving Grants 70
Other 19
Sub-Total – Changes to authorities available for use (7,629)
Total budgetary authorities available for use for the fiscal year ending March 31, 2023 87,014

With respect to non-budgetary loans, there is a net decrease in authorities of $1,163 million from the fiscal year ending March 31, 2022, mainly since the temporary COVID-19 measure, which increased the limit on Canada Student Loans from $210 to $350 per week, ended in July 2021. In addition, amount of net non-budgetary Canada Student Loans disbursed under the Canada Student Financial Assistance Act is negative as loan repayments have resumed while loan disbursements have decreased.

As shown in Table 4, decrease in the Department total authorities between the end of the first quarter ending on June 30, 2022 and the first quarter of the previous year, ending on June 30, 2021, is mainly related to transfer payments (standard object 10) and is caused by variations in statutory items as described in the paragraphs above. Variances to other operating expenditures (standard objects 02, 03, 04, 05, 06, 07, 09, 12) 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, 2022 is comparable to the usual spending reported in the first quarter, with approximately 23% of the authorities available for use expensed.

Compared to the previous year, total budgetary expenditures as of the quarter ending June 30, 2022 have decreased by $5,798 million (23%) from $25,485 million to $19,687 million (refer to Table 3 and Table 4).

This 23% decrease is mostly explained by the reduction in statutory expenditures from $24,133 million for the first quarter in the fiscal year ending March 31, 2022 to $17,799 million for the same period in the fiscal year ending March 31, 2023. This is representing a $6,334 million decrease as of the end of the first quarter of the fiscal year ending March 31, 2023.

In addition, grant and contribution expenditures under Vote 5 have increased by $531 million compared to the spending at the end of the same quarter in the fiscal year ending March 31, 2022. This increase is mainly attributable to the one-time, non-taxable payment to alleviate the financial hardship of Guaranteed Income Supplement (GIS) and Allowance recipients who received pandemic benefits in 2020. Offsetting this increase are decreases in spending related to Reaching Home, which has been transferred to the Office of Infrastructure of Canada during the year ending March 31, 2022 and decrease for Workforce Development Agreements, due to the timing of payments to some provinces and territories.

Other smaller changes, totalling a decrease of $26 million, also contribute to the variance.

Table 2: Significant changes to expenditures at the end of the second quarter for the fiscal year ending March 31, 2023
Details (in millions of dollars)
Total budgetary authorities used as of June 30, 2021 25,485
Changes in authorities used n/a
Canada Recovery Benefits (including Sickness and Caregiving Benefits) (7,362)
Old Age Security benefits 1,059
Vote 5 — Grants and contributions 531
Other (26)
Sub-Total - Changes in authorities used (5,798)
Total budgetary authorities used as of June 30, 2022 19,687

In Table 3, 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.

In Table 4, the decrease in transfer payments (standard object 10) are in line with explanations provided in previous paragraphs regarding the changes in statutory items and voted grants and contributions (Vote 5) expenditures.

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 Overall risks and mitigation sub-section of ESDC’s Departmental Plan for the fiscal year ending March 31, 2023.

At this time, ESDC, like many organizations, is focused on the future of work post pandemic and the adoption of a flexible work model. This is to ensure it remains a high performing organization that is agile, inclusive and responsive to the needs of Canadians. To address risks related to the implementation of the new work model, the Department has created a dedicated secretariat to support the organization’s approach to the future of work.

In addition, ESDC recognizes that change management is a necessary part of the transition to new ways of working, including changes resulting from program delivery modernization. The Department set up a change management office to help managers introduce changes to employees to mitigate the risk of changes having a negative impact on employees’ wellness and on their productivity.

Subsequently, the Department must find the best way to allocate limited financial and human resources to accomplish ESDC’s mandate and priorities. In addition, there is tremendous competition across all sectors for qualified workers. This creates the risk that some improvements will be delayed until the right people can be found. To address risks related to planning and priority setting, the Department is currently reviewing the way it is organized for decision-making.

4. Significant Changes in Operations, Personnel and Programs

The conclusion of the Canada Worker Lockdown Benefit (CWLB), the Canada Recovery Benefit (CRB), the Canada Recovery Caregiving Benefit (CRCB) and the Canada Recovery Sickness Benefit (CRSB) are occurring in fiscal year 2022-2023.

The Department will continue to work with provinces and territories toward a Canada-wide Early Learning and Child Care system, with a rise in funding to increase access to high quality, affordable, flexible and inclusive early learning and child care.

The Department will increase the Old Age Security Pension (OAS) and the Guaranteed Income Supplement (GIS). ESDC expects an increased number of OAS pensioners due to the aging population and increases to the average monthly amounts paid, particularly resulting from the Budget 2021 announcement to increase by 10 percent the monthly OAS pension for seniors aged 75 and over as of July 2022, as well as from the indexation of benefits.

Finally, Canadians had many other concerns on their mind and travel limits imposed during COVID-19 resulted in an 80% decrease in demand for passport services when compared to pre-pandemic forecasts for those years. What this means is, that over the course of the pandemic 3 million clients did not apply for or renew adult and child applications. The Passport Program saw 20% of regular volume during this period.

With the easing of restrictions and the resumption of travel, Service Canada has seen an increase in passport applications across the country. Through the Passport Revolving Fund, Service Canada has put a number of measures in place to make it easier for Canadians to access passport services, improve processing and increase resources. The Passport Program operates on a cost-recovery basis through a revolving fund, financing its operations entirely from the fees charged for passport and other travel document services.

5. Approval by Senior Officials

Original document was signed in Gatineau, Canada by:

Table 3: Statement of Authorities (unaudited)
Vote (in thousands of dollars) Fiscal Year 2022 to 2023: Total available for use for the year ending March 31, 20231 Fiscal Year 2022 to 2023: Used during the quarter ended June 30, 2022 Fiscal Year 2022 to 2023: Year to date used at quarter-end Fiscal Year 2021 to 2022: Total available for use for the year ending March 31, 20221 Fiscal Year 2021 to 2022: Used during the quarter ended June 30, 2021 Fiscal Year 2021 to 2022: Year to date used at quarter-end
1 Operating expenditures 1,094,229 319,209 319,209 1,251,054 314,156 314,156
5 Grants and contributions 10,257,126 1,569,183 1,569,183 5,626,694 1,037,419 1,037,419
(S) Contributions to employee benefit plans 372,214 72,488 72,488 351,216 70,192 70,192
(S) Minister of Employment, Workforce Development and Disability Inclusion – Salary and motor car allowance 92 23 23 90 23 23
(S) Minister of Families, Children and Social Development – Salary and motor car allowance 92 23 23 90 23 23
(S) Minister of Labour – Salary and motor car allowance 92 23 23 90 23 23
(S) Minister of State (Seniors) – Motor car allowance 2 1 1 2 1 1
(S) Old Age Security Payments (Old Age Security Act) 51,854,000 12,768,348 12,768,348 47,189,124 11,843,006 11,843,006
(S) Guaranteed Income Supplement Payments (Old Age Security Act) 15,435,000 3,631,763 3,631,763 14,613,979 3,476,537 3,476,537
(S) Payments related to the Canada Recovery Benefits Act 388,500 274,471 274,471 14,207,000 7,636,426 7,636,426
(S) Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 3,414,308 367,248 367,248 2,997,188 351,639 351,639
(S) Payments to provinces and territories for early learning and child care pursuant to the Budget Implementation Act, 2021, No. 1 n/a n/a n/a 2,648,082 n/a n/a
(S) Transfer payments in connection with the Budget Implementation Act, 2021, No. 1 n/a 354 354 1,803,251 n/a n/a
(S) Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 1,296,269 35,933 35,933 1,067,777 35,216 35,216
(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 1,050,000 243,832 243,832 980,000 258,458 258,458
(S) Allowance Payments (Old Age Security Act) 617,000 127,175 127,175 670,775 148,602 148,602
(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 491,473 141,100 141,100 472,004 141,214 141,214
(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 199,577 26,591 26,591 216,737 40,024 40,024
(S) Spending of revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 252,129 50,779 50,779 223,509 37,276 37,276
(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 181,000 24,194 24,194 180,000 20,361 20,361
(S) One-time payment to persons with disabilities pursuant to An Act respecting further COVID-19 measures n/a (25) (25) 56,109 25,941 25,941
(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 4,687 4,687 49,250 7,065 7,065
(S) Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 31,445 21,757 21,757 31,445 38,500 38,500
(S) Payments for the Canada Worker Lockdown Benefit pursuant to the Canada Worker Lockdown Benefit Act 21,120 7,353 7,353 n/a n/a n/a
(S) The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 4,405 214 214 5,107 981 981
(S) Payments related to direct financing arrangement under the Apprentice Loans Act 3,208 44 44 2,564 296 296
(S) Spending pursuant to section 12(4) of the Canada Education Savings Act 1,230 n/a n/a 880 n/a n/a
(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 221 n/a n/a 138 1 1
(S) The provision of funds for interest payments to lending institutions under the Canada Student Loans Act 32 1 1 46 4 4
(S) Universal Child Care Benefit (Universal Child Care Benefit Act) 660 848 848 40 1,115 1,115
(S) Refunds of amounts credited to revenues in previous years 72 72 72 22 22 22
(S) The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act   (1,342) (282) (282) (1,613) 19 19
(S) Payment pursuant to section 24(1) of the Financial Administration Act for the Temporary Foreign Worker Program under the Public Health Events of National Concern Payments Act n/a n/a n/a n/a (10) (10)
N/A Sub-total—Statutory items 75,662,194 17,799,015 17,799,015 87,765,047 24,132,955 24,132,955
N/A Total budgetary 87,013,549 19,687,407 19,687,407 94,642,795 25,484,530 25,484,530
N/A Non-Budgetary n/a n/a n/a n/a n/a n/a
(S) Loans disbursed under the Canada Student Financial Assistance Act (217,915) (226,937) (226,937) 937,194 (198,623) (198,623)
(S) Loans disburded under the Apprentice Loans Act 12,271 234 234 19,997 16 16
N/A Total Non-Budgetary (205,644) (226,703) (226,703) 957,191 (198,607) (198,607)

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

Table 4: Departmental budgetary expenditures by standard object (unaudited)
Expenditures (in thousands of dollars) Fiscal year 2022 to 2023: Planned expenditures for the year ending March 31, 20231 Fiscal year 2022 to 2023: Expended during the quarter ended June 30, 2022 Fiscal year 2022 to 2023: Year to date used at quarter-end Fiscal year 2021 to 2022: Planned expenditures for the year ending March 31, 20221 Fiscal year 2021 to 2022: Expended during the quarter ended June 30, 2021 Fiscal year 2021 to 2022: Year to date used at quarter-end
(01) Personnel 2,925,075 783,541 783,541 2,865,887 722,601 722,601
(02) Transportation and communications 62,054 12,593 12,593 97,768 4,389 4,389
(03) Information 80,130 11,203 11,203 98,433 5,508 5,508
(04) Professional and special services 1,049,378 167,071 167,071 1,393,977 157,545 157,545
(05) Rentals 263,052 25,050 25,050 290,232 58,851 58,851
(06) Repair and maintenance 6,867 199 199 12,277 274 274
(07) Utilities, materials and supplies 9,304 620 620 10,119 373 373
(09) Acquisition of machinery and equipment 87,181 2,862 2,862 140,960 7,777 7,777
(10) Transfer payments 85,124,195 19,165,890 19,165,890 92,393,652 25,020,759 25,020,759
(12) Other subsidies and payments (139,516) 61,897 61,897 (122,305) 4,116 4,116
Total gross budgetary expenditures 89,467,720 20,230,926 20,230,926 97,181,000 25,982,193 25,982,193
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 (1,974,759) (430,981) (430,981) (2,029,836) (387,755) (387,755)
Recoverable expenditures on behalf of the Canada Pension Plan (478,512) (112,538) (112,538) (507,469) (109,908) (109,908)
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 (2,454,171) (543,519) (543,519) (2,538,205) (497,663) (497,663)
Total net budgetary expenditures 87,013,549 19,687,407 19,687,407 94,642,795 25,484,530 25,484,530

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

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