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Quarterly Financial Report for the quarter ended June 30, 2023, ESDC

From: Employment and Social Development Canada

Statement outlining results, risks and significant changes in operations, personnel and programs

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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 and Supplementary Estimates (A) for the current year authorities.

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 ESDC at the end of the first quarter ended June 30, 2023, were:

ESDC delivers programs and services to Canadians 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 4) includes ESDC’s spending authorities granted by Parliament, consistent with the Main Estimates and Supplementary Estimates (A) for the fiscal year ending March 31, 2024. 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:

  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 and, in the case of the CPP, income from its investments. 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 Quarterly Financial Reports.

Also, the department has the legislative authority, through the Department of Employment and Social Development Act 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 Passport services.

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, 2023.

Table 1: Highlights of fiscal quarter and year-to-date (YTD) results (in millions of dollars)
Budgetary authorities 2023-24 Total available at quarter-end 2022-23 Total available at quarter-end Variance in total authorities available at quarter-end 2023-24 YTD used at quarter-end 2022-23 YTD used at quarter-end Variance in YTD used at quarter-end
Voted 11,101 11,351 -250 1,102 1,888 -786
Statutory 82,367 75,663 6,704 20,191 17,799 2,392
Total 93,468 87,014 6,454 21,293 19,687 1,606

ESDC’s total budgetary authorities available in the first quarter of the current fiscal year were $93,468 million, which represents an overall increase of $6,454 million (7%) from the previous fiscal year. Total YTD budgetary authorities used as of the first quarter ending June 30, 2023, were $21,293 million. In comparison, total YTD budgetary authorities used as of the first quarter of the previous fiscal year were $19,687 million, representing a year-over-year increase of $1,606 million (8%).

Further details can be found in the Statement of Authorities (Table 4) and Departmental Budgetary Expenditures by Standard Object (Table 5) at the end of the report.

2.1 Significant changes to authorities

ESDC’s total budgetary authorities available for use in the first quarter increased by $6,454 million, from $87,014 million as of June 30, 2022, to $93,468 million as of June 30, 2023 (Table 2).

Table 2: Significant changes to authorities at the end of the first quarter of the fiscal year ending March 31, 2024
Changes to voted and statutory budgetary authorities (from 2022-23 to 2023-24) (in millions of dollars)
Old Age Security Program 8,007
Canada Disability Savings Program 206
Vote 1 – Operating expenditures 185
Spending of revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 136
Canada Student Financial Assistance Program and Canada Apprentice Loans -1,332
Vote 5 – Grants and contributions -435
Canada Recovery Benefits (including Sickness and Caregiving) and Canada Worker Lockdown Benefit -300
Other statutory authorities -13
Total changes to voted and statutory budgetary authorities 6,454

This increase is primarily associated with statutory items, in particular, forecasted OAS pension, Guaranteed Income Supplement (GIS) and Allowance payments representing an increase of $8,007 million. This can be explained by an expected increase in the number of pensioners due to the aging of the population, and to an expected increase in the average monthly payments resulting mainly from the indexation of the benefits and the 10% increase to the OAS pension for seniors aged 75 year old over, in effect since July 2022.

Other factors contributing to the increase include:

Offsetting these increases are decreases totalling $2,080 million, mainly related to:

With respect to non-budgetary authorities, the net increase of $367 million from the previous fiscal year is mainly due to increased loan disbursements under the Canada Student Loans Act, as enrolment returns to pre-pandemic levels.

On a standard object perspective:

2.2 Significant changes to expenditures

Overall, the proportion of ESDC’s total budgetary expenditures as of June 30, 2023, 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 fiscal year, total budgetary expenditures for the first quarter have increased by $1,606 million from $19,687 million as of June 30, 2022, to $21,293 million as of June 30, 2023 (Table 3).

Table 3: Significant changes to expenditures at the end of the first quarter for the fiscal year ending March 31, 2024
Changes to voted and statutory budgetary expenditures (from 2022-23 to 2023-24) (in millions of dollars)
Old Age Security Program 2,577
Vote 5 — Grants and Contributions -723
Canada Recovery Benefits (including Sickness and Caregiving) and Canada Worker Lockdown Benefit -254
Other 6
Total changes to voted and statutory budgetary expenditures 1,606

This 8% increase is mostly explained by the increase in statutory expenditures from $17,799 million for the first quarter of last fiscal year to $20,191 million for the same period this fiscal year, representing an $2,392 million increase. This increase is primarily related to the OAS program, which has increased by $2,577 million. The main factors explaining this increase are the same as mentioned in section 2.1 above, such as the aging population and higher average monthly amounts paid to beneficiaries.

Offsetting this increase is a decrease of $723 million in grants and contributions (Vote 5) expenditures compared to the spending at the end of the same quarter in the previous fiscal year. This decrease is mainly attributable to the one-time grant payment for GIS recipients who received pandemic benefits ending on March 31, 2023. In addition, as expected, payments for the Canada Recovery Benefits (including Sickness and Caregiving) and Canada Worker Lockdown Benefit, have decreased by $254 million as of the first quarter of this fiscal year.

Other minor changes totalling a net increase of $6 million also contribute to the variance.

With respect to non-budgetary expenditures, the net increase of $133 million from the previous fiscal year is primarily due to the increase in loans disbursed to students as enrolment returns to pre-pandemic levels, although for the quarter ending June 30, 2023, the repayment of loans is still higher than disbursements.

On a standard object perspective:

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 Strategies” sub-section of ESDC’s Departmental Plan for the fiscal year ending March 31, 2024.

Of note, ESDC, like many organizations, faces challenges arising from the economy, public health uncertainty and climate change, which may cause service disruptions. For example, the volume of Employment Insurance benefits, delivered by ESDC, could increase significantly during recessions; the department could have difficulty finding employees to provide in-person service to the public during public heath uncertainty, which may create a risk of longer wait times; ESDC must also be prepared to respond quickly to catastrophic weather events and maintain service to Canadians.

To mitigate risks associates with service disruptions, ESDC has business continuity plans and business resumption plans, reviewed and updated on a regular basis, to cover most situations. In addition, the department is working on streamlining, automating and modernizing its processes; transitioning from paper to paperless processing; increased recruitment and specialized training. The department will also continue to work with partner organization to resolve service backlogs.

ESDC must also find the best way to allocate limited financial and human resources to accomplish its mandate and priorities, based on 3 main factors: the need to deliver the programs and services assigned to it by legislation, the need to respond to the Ministers’ mandate letters, and the need to make improvements to serve the public better. The department need to ensure that strategic outcomes and business objectives are clearly defined and that the right resources are assigned to the right priorities.

To mitigate risks related to planning and priority setting, the department has created a Service Performance Measurement Centre of Expertise that will integrate service performance measurement across the department. The ESDC’s investment plan also addresses how financial and human resources are allocated to address departmental projects.

4. Significant changes in relation to operations, personnel and programs

The COVID-19 pandemic is less likely to impact the department’s operations this fiscal year compared to previous years. Even so, new challenges will shape the economy and labour market, such as high level inflation, low unemployment rate, the aging population and a rapidly changing global economic landscape. The department will ensure all Canadians have access to government programs and support them with timely and efficient access to accurate information, benefits, and services.

Note that any impact of the changes to the Ministry announced by the Prime Minister on July 26, 2023, will be reflected in subsequent quarterly reports, as appropriate.

5. Approval by senior officials

Original document was signed in Gatineau, Canada by:

Karen Robertson, Chief Financial Officer, on August 18, 2023

Jean-François Tremblay, Deputy Minister, on August 21, 2023

Table 4: Statement of authorities (unaudited)

Fiscal year 2023-24 compared with fiscal year 2022-23 (in thousands of dollars) Fiscal year 2023-24 Total authorities available for use for the year ending March 31, 2024* Fiscal year 2023-24 Authorities used during the quarter ended June 30, 2023 Fiscal year 2023-24 Year-to-date authorities used at quarter-end Fiscal year 2022-23 Total authorities available for use for the year ending March 31, 2023* Fiscal year 2022-23 Authorities used during the quarter ended June 30, 2022 Fiscal year 2022-23 Year-to-date authorities used at quarter-end
Budgetary
Vote 1 – Operating expenditures 1,278,761 256,113 256,113 1,094,229 319,209 319,209
Vote 5 – Grants and contributions 9,821,738 845,470 845,470 10,257,126 1,569,183 1,569,183
(S) Contributions to employee benefit plans 368,043 88,235 88,235 372,214 72,488 72,488
(S) Minister of Employment, Workforce Development and Disability Inclusion – Salary and motor car allowance 95 24 24 92 23 23
(S) Minister of Families, Children and Social Development – Salary and motor car allowance 95 24 24 92 23 23
(S) Minister of Labour – Salary and motor car allowance 95 24 24 92 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) 57,558,000 14,639,500 14,639,500 51,854,000 12,768,348 12,768,348
(S) Guaranteed Income Supplement Payments (Old Age Security Act) 17,706,000 4,318,071 4,318,071 15,435,000 3,631,763 3,631,763
(S) Payments related to the Canada Recovery Benefits Act 94,188 23,392 23,392 388,500 274,471 274,471
(S) Canada Student Grants to qualifying full and part-time students pursuant to the Canada Student Financial Assistance Act 1,937,858 431,315 431,315 3,414,308 367,248 367,248
(S) Transfer payments in connection with the Budget Implementation Act, 2021, No. 1 0 0 0 0 354 354
(S) Payments related to the direct financing arrangement under the Canada Student Financial Assistance Act 1,443,971 36,815 36,815 1,296,269 35,933 35,933
(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 1,040,000 241,964 241,964 1,050,000 243,832 243,832
(S) Allowance Payments (Old Age Security Act) 649,000 147,433 147,433 617,000 127,175 127,175
(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 631,444 143,217 143,217 491,473 141,100 141,100
(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 265,963 17,412 17,412 199,577 26,591 26,591
(S) Spending of revenues pursuant to subsection 5.2(2) of the Department of Employment and Social Development Act 388,440 78,784 78,784 252,129 50,779 50,779
(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 180,000 24,533 24,533 181,000 24,194 24,194
(S) One-time payment to persons with disabilities pursuant to An Act respecting further COVID-19 measures 0 -3 -3 0 -25 -25
(S) 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 10,127 10,127 49,250 4,687 4,687
(S) Payments of compensation respecting government employees (Government Employees Compensation Act) and merchant seamen (Merchant Seamen Compensation Act) 31,445 -14,001 -14,001 31,445 21,757 21,757
(S) Payments for the Canada Worker Lockdown Benefit pursuant to the Canada Worker Lockdown Benefit Act 15,869 3,769 3,769 21,120 7,353 7,353
(S) The provision of funds for interest and other payments to lending institutions and liabilities under the Canada Student Financial Assistance Act 347 99 99 4,405 214 214
(S) Payments related to direct financing arrangement under the Apprentice Loans Act 3,812 167 167 3,208 44 44
(S) Spending pursuant to section 12(4) of the Canada Education Savings Act 1,873 0 0 1,230 0 0
(S) Civil Service Insurance actuarial liability adjustments 145 0 0 145 0 0
(S) Spending of proceeds from the disposal of surplus Crown assets 88 0 0 221 0 0
(S) The provision of funds for interest payments to lending institutions under the Canada Student Loans Act 0 0 0 32 1 1
(S) Universal Child Care Benefit (Universal Child Care Benefit Act) 2,000 221 221 660 848 848
(S) Refunds of amounts credited to revenues in previous years 124 124 124 72 72 72
(S) The provision of funds for liabilities including liabilities in the form of guaranteed loans under the Canada Student Loans Act -1,161 -268 -268 -1,342 -282 -282
Sub-Total – Statutory Items 82,366,986 20,190,979 20,190,979 75,662,194 17,799,015 17,799,015
Total Budgetary 93,467,485 21,292,562 21,292,562 87,013,549 19,687,407 19,687,407
Non-Budgetary
(S) Loans disbursed under the Canada Student Financial Assistance Act 150,441 -94,175 -94,175 -217,915 -226,937 -226,937
(S) Loans disbursed under the Apprentice Loans Act 11,079 1,637 1,637 12,271 234 234
Total Non-Budgetary 161,520 -92,538 -92,538 -205,644 -226,703 -226,703

Table 5: Departmental budgetary expenditures by standard object (unaudited)

Fiscal year 2023-24 compared with fiscal year 2022-23 (in thousands of dollars) Fiscal year 2023-24 Planned expenditures for the year ending March 31, 2024* Fiscal year 2023-24 Expended during the quarter ended June 30, 2023 Fiscal year 2023-24 Year to date used at quarter-end Fiscal year 2022-23 Planned expenditures for the year ending March 31, 2023* Fiscal year 2022-23 Expended during the quarter ended June 30, 2022 Fiscal year 2022-23 Year to date used at quarter-end
(01) Personnel 3,185,521 842,745 842,745 2,925,075 783,541 783,541
(02) Transportation and communications 71,322 14,628 14,628 62,054 12,593 12,593
(03) Information 100,719 9,846 9,846 80,130 11,203 11,203
(04) Professional and special services 1,036,216 117,877 117,877 1,049,378 167,071 167,071
(05) Rentals 307,529 60,668 60,668 263,052 25,050 25,050
(06) Repair and maintenance 7,985 218 218 6,867 199 199
(07) Utilities, materials and supplies 11,449 329 329 9,304 620 620
(09) Acquisition of machinery and equipment 84,669 1,744 1,744 87,181 2,862 2,862
(10) Transfer payments 91,195,140 20,856,746 20,856,746 85,124,195 19,165,890 19,165,890
(12) Other subsidies and payments 32,427 -8,053 -8,053 139,516 61,897 61,897
Total gross budgetary expenditures 96,032,977 21,896,748 21,896,748 89,467,720 20,230,926 20,230,926
Less: Revenues netted against expenditures
Recoverable expenditures on behalf of the Employment Insurance Operating Account -2,057,823 -486,829 -486,829 -1,974,759 -430,981 -430,981
Recoverable expenditures on behalf of the Canada Pension Plan -506,769 -117,357 -117,357 -478,512 -112,538 -112,538
Other amounts recoverable from provincial and territorial governments, other departments or other programs within a department -900 0 0 -900 0 0
Total revenues netted against expenditures -2,565,492 -604,186 -604,186 -2,454,171 -543,519 -543,519
Total net budgetary expenditures 93,467,485 21,292,562 21,292,562 87,013,549 19,687,407 19,687,407

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

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