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Employment and Social Development Canada Consolidated Financial Statements (Unaudited) for the year ended March 31, 2023

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Statement of Management Responsibility Including Internal Control over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying consolidated financial statements for the year ended March 31, 2023, and all information contained in these consolidated financial statements rests with the management of Employment and Social Development Canada (ESDC). These consolidated financial statements have been prepared by management using the Government of Canada's accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these consolidated financial statements. Some of the information in the consolidated financial statements is based on management’s best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of ESDC’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in ESDC’s Departmental Results Report (DRR), is consistent with these consolidated financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its consolidated financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout ESDC and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 2023, was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the annex.

The effectiveness and adequacy of ESDC’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of ESDC’s operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting.

The consolidated financial statements of ESDC have not been audited.

Original copy signed by:
Karen Robertson, CPA
Chief Financial Officer
Employment and Social Development Canada

Original copy signed by:
Jean-François Tremblay
Deputy Minister
Employment and Social Development Canada

Gatineau, Canada
August 28, 2023

Consolidated Statement of Financial Position (Unaudited) as at March 31

Table 1: Consolidated Statement of Financial Position (Unaudited) as at March 31 (in thousands of dollars)
Detail 2023 2022
Financial assets
Accounts receivable and advances (Note 4) 13,348,916 12,025,347
Loans receivable (Note 5) 19,666,293 19,149,205
Total gross financial assets 33,015,209 31,174,552
Financial assets held on behalf of Government
Loans receivable (Note 5) (106,055) (96,026)
Total net financial assets 32,909,154 31,078,526
Liabilities
Due to (from) Consolidated Revenue Fund 695,546 (266,851)
Due to Canada Pension Plan (Note 6) 305,726 101,266
Accounts payable and accrued liabilities (Note 7) 3,261,269 4,596,937
Vacation pay and compensatory leave 153,627 166,578
Designated Amount Fund Trust Account (Note 8) 1,917 1,916
Government Annuities Account (Note 9) 68,021 81,557
Employee future benefits (Note 10) 69,345 76,473
Total net liabilities 4,555,451 4,757,876
Departmental net financial asset 28,353,703 26,320,650
Non-financial assets
Prepaid expenses 17,587 20,383
Tangible capital assets (Note 11) 567,553 473,848
Total non financial assets 585,140 494,231
Departmental net financial position(Note 12) 28,938,843 26,814,881

Table notes:

Original copy signed by:
Karen Robertson, CPA
Chief Financial Officer
Employment and Social Development Canada

Original copy signed by:
Jean-François Tremblay
Deputy Minister
Employment and Social Development Canada

Gatineau, Canada

August 28, 2023

Consolidated Statement of Operations and Departmental Net Financial Position (Unaudited) for the year ended March 31

Table 2: Consolidated Statement of Operations and Departmental Net Financial Position (Unaudited) for the year ended March 31 (in thousands of dollars)
Detail 2023 Planned Results 2023 Actual 2022 Actual
Expenses
Pensions and Benefits 70,511,493 71,626,375 63,911,781
Learning, Skills Development and Employment 37,096,889 30,551,593 66,413,935
Social Development 6,149,549 6,529,336 4,160,192
Internal Services 1,099,145 1,313,930 1,277,371
Information Delivery and Services for Other Departments 278,738 457,741 275,840
Working Conditions and Workplace Relations 148,355 163,668 167,975
Expenses incurred on behalf of the Government (3,837) 29,926 (16,600)
Total expenses 115,280,332 110,672,569 136,190,494
Revenues
Employment Insurance (Note 12) 24,788,700 27,472,940 24,333,715
Recovery of CPP administration costs 516,306 532,906 539,703
Recovery of Other Government Department service delivery costs 217,024 480,226 261,769
User fees 0 138,262 80,629
Other 59,333 22,274 25,355
Interest on loans receivable 8,613 13,996 10,769
Revenues earned on behalf of Government (107,922) (697,133) (421,144)
Total revenues 25,482,054 27,963,471 24,830,796
Net cost of operations before government funding and transfers 89,798,278 82,709,098 111,359,698
Transferred operations
Expenses 0 0 306,309
Net cost of transferred operations 0 0 306,309
Net cost of operations before government funding and transfers 89,798,278 82,709,098 111,666,007
Government funding and transfers
Net cash provided by Government N/A 85,711,658 116,913,365
Change in due to the Consolidated Revenue Fund N/A (962,397) (2,897,971)
Services provided without charge by other government departments (Note 15) N/A 84,277 78,149
Transfer of the transition payments for implementing salary payments in arrears N/A 0 (3)
Other transfers of assets (to) from other government departments N/A (478) 176,693
Transfer of liabilities to other government departments N/A 0 55
Net revenue of operations after government funding and transfers N/A 2,123,962 2,604,281
Departmental net financial position beginning of year N/A 26,814,881 24,210,600
Departmental net financial position end of year N/A 28,938,843 26,814,881

Table notes:

Consolidated Statement of Change in Departmental Net Financial Assets (Unaudited) for the year ended March 31

Table 3: Consolidated Statement of Change in Departmental Net Financial Assets (Unaudited) for the year ended March 31 (in thousands of dollars)
Detail 2023 2022
Net revenue of operations after government funding and transfers 2,123,962 2,604,281
Change due to tangible capital assets
Acquisition of tangible capital assets (Note 11) (165,504) (170,785)
Amortization of tangible capital assets (Note 11) 71,556 66,528
Proceeds from disposal of tangible capital assets 40 173
Net loss on disposal of tangible capital assets 203 78
Transfer from other government departments 0 (44)
Total change due to tangible capital assets (93,705) (104,050)
Change due to prepaid expenses 2,796 11,777
Net increase in departmental net financial assets 2,033,053 2,512,008
Departmental net financial assets beginning of year 26,320,650 23,808,642
Departmental net financial assets end of year 28,353,703 26,320,650

Table notes:

Consolidated Statement of Cash Flows (Unaudited) for the year ended March 31

Table 4: Consolidated Statement of Cash Flows (Unaudited) for the year ended March 31 (in thousands of dollars)
Detail 2023 2022
Operating activities
Net cost of operations before government funding and transfers 82,709,098 111,666,007
Noncash items:
Amortization of tangible capital assets (Note 11) (71,556) (66,528)
Loss on disposal of tangible capital assets (203) (78)
Services provided without charge by other government departments (Note 15) (84,277) (78,149)
Transition payments for implementing salary payments in arrears 0 3
Transfer of net financial assets and liabilities to or from other government departments 478 (176,649)
Variations in Consolidated Statement of Financial Position
Increase in accounts receivable and advances 1,323,569 2,353,821
Increase in loans receivable 507,059 117,712
Decrease in prepaid expenses (2,796) (11,777)
Decrease (increase) in due to Canada Pension Plan (204,460) 38,068
Decrease in accounts payable and accrued liabilities 1,335,668 2,897,209
Decrease (increase) in vacation pay and compensatory leave 12,951 (16,000)
Decrease (increase) in the Designated Amount Fund - Trust Account (1) 41
Decrease in Government Annuities Account 13,536 16,242
Decrease in employee future benefits 7,128 2,886
Transfer of liabilities to other government departments 0 (55)
Cash used in operating activities 85,546,194 116,742,753
Capital investing activities
Acquisitions of tangible capital assets (Note 11) 165,504 170,785
Proceeds from disposal of tangible capital assets (40) (173)
Cash used in capital investing activities 165,464 170,612
Net cash provided by Government of Canada 85,711,658 116,913,365

Table notes:

Notes to the Consolidated Financial Statements (Unaudited)

1. Authority and objectives

Employment and Social Development Canada (ESDC) is a Department in the core public administration. ESDC is a department named in Schedule I of the Financial Administration Act and reports to Parliament through the Ministers responsible for Employment and Social Development (ESD).

The legislative mandate of ESDC is to improve the standard of living and quality of life of all Canadians by promoting a highly skilled and mobile workforce and an efficient and inclusive labour market, as well as to promote social well being and income security.

Acts and Regulations for which ESDC Ministers are responsible include the: Department of Employment and Social Development Act, Old Age Security Act, Employment Insurance Act, Canada Pension Plan, Canada Student Financial Assistance Act, Canada Student Loans Act, Universal Child Care Benefit Act, Canada Disability Savings Act, Canada Education Savings Act, Labour Adjustment Benefits Act, Accessible Canada Act, Poverty Reduction Act, Government Annuities Act, Government Annuities Improvement Act, Civil Service Insurance Act, Public Pensions Reporting Act, Apprentice Loans Act, Federal Provincial Fiscal Arrangements Act, Canada Labour Code, Government Employees Compensation Act, Canada Emergency Response Benefit Act, Canada Emergency Student Benefit Act, Canada Recovery Benefits Act, Canada Worker Lockdown Benefit Act and the Regulations made under these Acts.

Employment and Social Development Canada achieves its objectives through the following departmental core responsibilities:

Social Development

To increase inclusion and opportunities for Canadians to participate in their communities.

Pensions and Benefits

Assist Canadians in maintaining income for retirement, and provide financial benefits to survivors, people with disabilities and their families.

Learning, Skills Development and Employment

Help Canadians access post secondary education and get the skills and training they need to participate in a changing labour market, as well as provide support to those who are temporarily unemployed.

Working Conditions and Workplace Relations

Promotes safe, healthy, fair and inclusive work conditions and cooperative workplace relations.

Information Delivery and Services for Other Departments

Provides information to the public on the programs of the Government of Canada, and provides services on behalf of government departments and other partners.

Internal Services

Internal Services are those groups of related activities and resources that the federal government considers to be services in support of programs and/or required to meet corporate obligations of an organization. These services are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Management Services; Materiel Management Services; and Acquisition Management Services.

2. Summary of significant accounting policies

These consolidated financial statements have been prepared using ESDC's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

(a) Parliamentary authorities

ESDC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to ESDC do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Consolidated Statement of Operations and Departmental Net Financial Position and in the Consolidated Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the ''Expenses'' and ''Revenues'' sections of the Consolidated Statement of Operations and Departmental Net Financial Position are the amounts reported in the Consolidated Future oriented Statement of Operations included in the 2022 to 2023 Departmental Plan. Planned results are not presented in the ''Government funding and transfers'' section of the Consolidated Statement of Operations and Departmental Net Financial Position and in the Consolidated Statement of Change in Departmental Net Financial Asset because these amounts were not included in the 2022 to 2023 Departmental Plan.

(b) Consolidation

These consolidated financial statements include the transactions of the Employment Insurance Operating (EIO) Account, a consolidated specified purpose account which includes revenues credited and expenses charged under the Employment Insurance Act and for which the Deputy Minister as Chairperson of the Canada Employment Insurance Commission is accountable. The accounts of the EIO Account have been consolidated with those of ESDC, and all inter organizational balances and transactions have been eliminated.

The Canada Pension Plan (CPP) is excluded from ESDC's reporting entity because changes to the CPP require the agreement of two thirds of the provinces and therefore, the CPP is not controlled by ESDC.

(c) Net cash provided by Government

ESDC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by ESDC is deposited to the CRF, and all cash disbursements made by ESDC are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.

(d) Amounts due from or to the CRF

Amounts due from or to the CRF are the result of timing differences at year end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that ESDC is entitled to draw from the CRF without further authorities to discharge its liabilities.

(e) Revenues

Revenues are recorded on an accrual basis of accounting:

(f) Expenses

Expenses are recorded on an accrual basis of accounting:

(g) Employee future benefits

(h) Financial instruments

A contract establishing a financial instrument creates, at its inception, rights and obligations to receive or deliver economic benefits. The financial assets and financial liabilities portray these rights and obligations in the consolidated financial statements. ESDC recognizes a financial instrument when it becomes a party to a financial instrument contract.

Financial instruments consist of accounts and loans receivable and accounts payable and accrued liabilities.

All financial assets and liabilities are recorded at cost or amortized cost. Any associated transaction costs are added to the carrying value upon initial recognition.

For financial instruments measured at amortized cost, the effective interest method is used to determine interest revenue or expense.

Accounts and loans receivable are initially recorded at cost and, where necessary, are discounted to reflect their concessionary terms. Concessionary terms of loans include cases where loans are made on a long-term, low interest or interest-free basis or include forgiveness clauses. Unconditionally repayable contributions are recognized as loans receivable. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts and loans receivable to amounts that approximate their net recoverable value. Loans receivable are subsequently measured at amortized cost.

(i) Contingent liabilities

Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the consolidated financial statements.

(j) Contingent assets

Contingent assets are possible assets which may become actual assets when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, the contingent asset is disclosed in the notes of the consolidated financial statements.

(k) Tangible capital assets

All tangible capital assets having an initial cost of $10,000 or more are recorded at their acquisition cost. ESDC does not capitalize intangibles, works of art, museum collections, and immovable assets located on reserves as defined in the Indian Act.

(l) Related party transactions

Related party transactions, other than inter entity transactions, are recorded at the exchange amount. Inter entity transactions are transactions between commonly controlled entities. Inter entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:

(m) Measurement uncertainty

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the consolidated financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect management's best estimate of the related amount at the end of the reporting period. The most significant items where estimates are used are the determination of part of the EI premiums, the allowances for doubtful accounts, the OAS and EI benefit repayments, the liability for employee future benefits, the recovery of CPP administration costs, the accrued liabilities, the useful life of tangible capital assets, the liability of the Government Annuities Account, and the contingent liabilities. Actual results could significantly differ from those estimated. Management’s estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the consolidated financial statements in the year they become known.

3. Parliamentary authorities

ESDC receives most of its funding through annual parliamentary authorities. Items recognized in the Consolidated Statement of Operations and Departmental Net Financial Position and the Consolidated Statement of Financial Position in 1 year may be funded through parliamentary authorities in prior, current or future years. Furthermore, as a consolidated specified purpose account, the EI Operating Account expenses and revenues recognized in ESDC’s Consolidated Statement of Operations and Departmental Net Financial Position do not affect parliamentary authorities. Accordingly, ESDC has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

Table 5: (a) Reconciliation of net cost of operations to current year authorities used (in thousands of dollars)
Detail 2023 2022
Net cost of operations before government funding and transfers 82,709,098 111,666,007
Adjustments for items affecting net cost of operations but not affecting authorities:
Bad debt expense (excluding EI) (1,037,726) (484,864)
Amortization of tangible capital assets (Note 11) (71,556) (66,528)
Services provided without charge by other government departments (Note 15) (84,277) (78,149)
Decrease in employee future benefits 7,128 2886
Decrease (increase) in vacation and compensatory leave 12,951 (16,000)
Refund of programs and prior years' expenditures 3,845,525 1,983,268
Loss on disposal of tangible capital assets (203) (78)
Allowance expense for the Repayment Assistance Plan of Canada Student Loans and Canada Apprentice Loans (401,025) (148,342)
Net EIO Account transactions (Note 12) 2,794,719 (17,265,883)
Decrease (increase) in accounts payable and accrued liabilities not charged to authorities 44,662 (140,200)
Other adjustments (1,907) (1,950)
Total items affecting net cost of operations but not affecting authorities 5,108,291 (16,215,840)
Adjustments for items not affecting net cost of operations but affecting authorities
Net Canada Student Loans disbursed 355,087 232,762
Net Canada Apprentice Loans disbursed 6,788 3,575
Acquisition of tangible capital assets (Note 11) 165,504 170,785
Canada Student Loans and Canada Apprentice Loans forgiveness 159,552 160,837
Transition payments for implementing salary payments in arrears 0 3
Decrease in prepaid expenses (2,796) (11,777)
Other adjustments 12,588 15,060
Total items not affecting net cost of operations but affecting authorities 696,723 571,245
Current year authorities used 88,514,112 96,021,412
Table 6: (b) Authorities provided and used (in thousands of dollars)
Detail 2023 2022
Authorities provided
Vote 1 - Operating expenditures 1,466,723 1,357,634
Vote 5 - Grants and contributions 10,680,436 6,273,678
Debt write offs 227,472 170,358
Statutory amounts 76,852,221 89,827,598
Less
Authorities available for future years (971) (1,075)
Lapsed authorities
Operating expenditures (104,291) (125,025)
Grants and contributions (600,569) (1,480,082)
Debt write offs (6,909) (1,585)
Statutory amounts 0 (89)
Current year authorities used 88,514,112 96,021,412

4. Accounts receivable and advances

Table 7: ESDC's accounts receivable and advances (in thousands of dollars)
Detail 2023 2022
Receivables - Other government departments and agencies
EI premiums receivable from CRA 2,952,231 1,975,369
EI and OAS benefit repayments receivable from CRA 3,107,335 3,312,026
COVID 19 support measures receivable from CRA 1,639,991 1,790,755
Other 87,037 76,011
Subtotal, Receivables, Other government departments and agencies 7,786,594 7,154,161
Receivables and advances - External parties
EI and OAS overpayments and penalties to be recovered 1,477,722 1,473,267
COVID 19 support measures overpayments and penalties to be recovered 6,693,539 4,990,859
Other 659,642 667,442
Allowance for doubtful accounts on receivables from external parties (3,268,581) (2,260,382)
Subtotal, Receivables and advances, External parties 5,562,322 4,871,186
Net accounts receivable and advances 13,348,916 12,025,347

5. Loans receivable

Table 8: Loans receivable (in thousands of dollars)
Detail Student loans Apprentice Loans 2023 Total 2022 Total
Loans receivable
Gross loans - beginning of year 23,696,200 283,807 23,980,007 23,753,079
New loans and repurchases 3,148,827 38,235 3,187,062 3,205,965
Reimbursements (2,417,664) (31,123) (2,448,787) (2,633,900)
Loan write offs and forgiveness (384,500) (324) (384,824) (345,137)
Gross loans - end of year 24,042,863 290,595 24,333,458 23,980,007
Unamortized discount (22,842) 0 (22,842) (28,237)
Allowance for bad debts (4,702,112) (37,592) (4,739,704) (4,891,094)
Net loans 19,317,909 253,003 19,570,912 19,060,676
Accrued interest
Gross accrued interest - beginning of year 353,962 1,175 355,137 423,662
New interest 10,917 (5) 10,912 7,668
Reimbursements (30,675) (228) (30,903) (33,067)
Interest write-offs and forgiveness (50,802) (4) (50,806) (43,126)
Gross accrued interest - end of year 283,402 938 284,340 355,137
Unamortized discount (7,441) 0 (7,441) (10,363)
Allowance for bad debts (181,232) (286) (181,518) (256,245)
Net accrued interest 94,729 652 95,381 88,529
Total net loans and net accrued interest 19,412,638 253,655 19,666,293 19,149,205
Loans and accrued interest held on behalf of Government (105,403) (652) (106,055) (96,026)
Total Loans receivable 19,307,235 253,003 19,560,238 19,053,179

The following table provides an aging analysis of loans receivable and the associated valuation allowances used to reflect their net recoverable value:

Table 9: Aging of loans receivable (in thousands of dollars)
Detail Student Loans Apprentice Loans 2023 Total 2022 Total
Loans receivable
Not past due 20,686,801 251,858 20,938,659 20,735,887
Number of days past due
1 to 90 716,765 9,409 726,174 639,010
91 to 365 124,592 2,402 126,994 124,163
Impaired 2,491,863 26,926 2,518,789 2,452,710
Sub‑total 24,020,021 290,595 24,310,616 23,951,770
Less: Allowance (4,702,112) (37,592) (4,739,704) (4,891,094)
Net loans 19,317,909 253,003 19,570,912 19,060,676

Canada Student Loans

The Canada Student loans consist of 3 different types of loans, Direct Loans, Guaranteed Loans and Risk Shared Loans. Since August 1, 2000, Canada Student Loans are issued under the Direct Loan Regime. Before this date, the loans were issued under the Guaranteed Loan Regime (1964 1995) or under the Risk Shared Loan Regime (1995 2000). Direct loans issued on or after August 1, 2000 are administered under the authority of section 6.1 of the Canada Student Financial Assistance Act, which authorizes the Minister of Employment, Workforce Development and Official Languages to enter into loan agreements directly with any qualifying students. Guaranteed loans provided by financial institutions between 1964 and August 1995, under the Canada Student Loans Act, are fully guaranteed by ESDC to the lenders. Risk shared loans issued prior to August 1, 2000 and on or after August 1, 1995 are amounts related to student loans subrogated to the Crown under the authority of the Canada Student Financial Assistance Act.

An allowance is recorded to provide for bad debts and Repayment Assistance Plan (RAP) for Canada Student Loans. The allowance for direct loans is determined according to an actuarial estimate provided by the Office of the Superintendent of Financial Institutions (Chief Actuary). Based on projected defaulted loans and recovery rates, the Chief Actuary establishes the allowance rates to be applied to the outstanding balances of the portfolio according to the status of the loans.

The total amount of direct loans issued under the authority of the Canada Student Financial Assistance Act and outstanding risk-shared loans bought back by ESDC may not exceed $34 billion. The total amount of direct loans and outstanding risk-shared loans as at March 31, 2023 amounted to $24.0 billion ($23.6 billion in 2022).

Canada Apprentice Loans

Canada Apprentice Loans (CAL) are administrated under the authority of section 4 of the Apprentice Loans Act which came into effect on January 2, 2015. The Minister of Employment, Workforce Development and Official Languages is authorized to enter into a loan agreement directly with any eligible apprentice.

An allowance is recorded to provide for CAL bad debts and Repayment Assistance Plan (RAP). The allowance is determined according to an actuarial estimate provided by the Chief Actuary. Based on projected defaulted loans and recovery rates, the Chief Actuary establishes the allowance rates to be applied to the outstanding balances of the portfolio according to the status of the loans.

The total amount of CAL issued under the authority of Apprentice Loans Act may not exceed $1.5 billion. The total amount of outstanding apprentice loans as at March 31, 2023 amounted to $290.6 million ($283.8 million in 2022).

Interest and repayment terms

Under these 2 programs, no security is received from the borrowers and the loans bear interest at either a variable rate (prime rate) or a fixed rate (prime rate + 2.0%). Borrowers are not required to pay interest on their loans while they are still studying, enrolled in their apprentice program or during the 6-month grace period after completing their studies or apprentice program. Interest was paused on loans from April 1, 2021 through March 31, 2023. Loans will be made permanently interest‑free starting April 1, 2023.

Borrowers having difficulty repaying their loans may be eligible for assistance under the Repayment Assistance Plan. The typical repayment period is 10 years, with a maximum period of 15 years for borrowers that are eligible if their affordable payment, which is based on family income and family size, is less than their required monthly payment. Depending on their regime, borrowers may also benefit from another type of loan forgiveness program in the event of severe permanent disability or death.

When ESDC no longer has reasonable assurance of recovering the full amount of a loan at the expected date, the loan becomes impaired. Interest revenue is not recorded on impaired loans. Loans that are considered impaired are eventually subject to the write off process. Subsequent recoveries on these loans are recorded as a reduction of the expense in the consolidated statement of operations and departmental net financial position.

6. Due to Canada Pension Plan

The Canada Pension Plan (CPP) is a federal/provincial plan established by an Act of Parliament in 1965. The CPP is administered by the Government of Canada and the provinces; therefore, it is excluded from ESDC's reporting entity.

In accordance with the Canada Pension Plan, the financial activities of the CPP are recorded in the CPP Account and the Additional CPP Account, collectively referred to as the CPP Accounts. CPP’s revenues and expenses, such as contributions, interests, investment income or loss from the CPP Investment Board, pension benefits and operating expenses, are reported as increases and decreases to the liability and are reported separately in the CPP consolidated financial statements. The CPP Accounts also record the amounts transferred to or received from the CPP Investment Board.

Table 10: Due to Canada Pension Plan (in thousands of dollars)
Detail 2023 2022
Due to Canada Pension Plan - beginning of year 101,266 139,334
Receipts and other credits 114,960,098 97,461,296
Payments and other charges (114,755,638) (97,499,364)
Due to Canada Pension Plan - end of year 305,726 101,266

7. Accounts payable and accrued liabilities

Table 11: ESDC’s accounts payable and accrued liabilities (in thousands of dollars)
Detail 2023 2022
Accounts payable - Other government departments and agencies
Income taxes payable to CRA 5,929 4,394
Universal Child Care Benefits payable to CRA 77,759 81,617
Other 642,174 481,779
Subtotal Accounts payable, Other government departments and agencies 725,862 567,790
Accounts payable - External parties
EI benefits payable to individuals 767,355 852,820
OAS and Guaranteed Income Supplement benefits payable to individuals 78,067 34,693
COVID-19 support measures payable to individuals 34,489 512,230
Other 781,969 1,738,725
Subtotal Accounts payable, External parties 1,661,880 3,138,468
Accrued liabilities 257,273 221,240
Allowance for alternative payments for non participating provinces to Canada Student and Apprentice Loans 616,254 669,439
Total accounts payable and accrued liabilities 3,261,269 4,596,937

8. Designated Amount Fund – Trust Account

This account was established pursuant to section 21 of the Financial Administration Act, to record amounts received and paid under Article 5 of the Indian Residential Schools Settlement Agreement. It was established on September 19, 2007, and provides for the payments referred to as Common Experience Payments (CEP) to eligible former students of recognized Indian Residential Schools and personal credits for educational programs and services to CEP recipients or to certain family members. The account is credited with interest, pursuant to section 21(2) of the Financial Administration Act. The Designated Amount Fund is co administered by the Trustee, the Government of Canada, represented jointly by the Minister of Employment, Workforce Development and Official Languages and the Minister of Crown Indigenous Relations.

Table 12: Designated Amount Fund, Trust Account (in thousands of dollars)
Detail 2023 2022
Designated Amount Fund - beginning of year 1,916 1,957
Interest credited to the Trust account 106 4
Payments and other charges (105) (45)
Designated Amount Fund - end of year 1,917 1,916

9. Government Annuities Account

ESDC administers the Government Annuities Account. This account was established by the Government Annuities Act, and modified by the Government Annuities Improvement Act, which discontinued sales of annuities in 1975.

The purpose of the Government Annuities Act was to assist Canadians to provide for their later years through the purchase of Government annuities.

Receipts and other credits consist of premiums received, funds reclaimed from the Consolidated Revenue Fund for previously untraceable annuitants, earned interest and any transfer needed to cover the actuarial deficit. Payments and other charges represent matured annuities, the commuted value of death benefits, premium refunds and withdrawals, as well as actuarial surpluses and unclaimed annuities. The amounts of unclaimed annuities related to untraceable annuitants are transferred to non tax revenues.

The Government Annuities Account is valued on an actuarial basis each year, using prescribed mortality and interest rates, with the deficit or surplus charged or credited to the Consolidated Revenue Fund. Any adjustments required under the Government's accounting policies are recorded through an allowance adjustment account. The allowance account reflects the adjustment to the liability due to the differential between prescribed rates and best estimates of experience adjusted mortality tables and discount rates. The discount rates used to measure the present value of accrued benefits is based on the Government's cost of borrowing derived from the yields on the actual zero coupon yield curve for Government of Canada bonds which reflect the timing of the expected future cash flows.

Table 13: Government Annuities Account (in thousands of dollars)
Detail 2023 2022
Government Annuities Account - beginning of year 66,895 75,755
Receipts and other credits 4,265 4,828
Payments and other charges (12,293) (13,688)
Government Annuities Account - Subtotal 58,867 66,895
Allowance for pension adjustment - beginning of year 14,662 22,044
Allowance for pension adjustment - for the year (5,508) (7,382)
Allowance for pension adjustment - end of year 9,154 14,662
Government Annuities Account - end of year 68,021 81,557

10. Employee future benefits

(a) Pension benefits

ESDC's employees participate in the Public Service Pension Plan (the "Plan"), which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2% per year of pensionable service, times the average of the best 5 consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation.

Both the employees and ESDC contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to the Economic Action Plan 2012, employee contributors have been divided into 2 groups: Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2023 expense amounts to $276.2 million ($248.6 million in 2022). For Group 1 members, the expense represents approximately 1.02 times (1.01 times in 2022) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2022) the employee contributions.

ESDC's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Consolidated Financial Statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

Severance benefits provided to ESDC's employees were previously based on an employee's eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2023, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

Table 14: Changes in the obligations during the year (in thousands of dollars)
Detail 2023 2022
Accrued benefit obligation - beginning of year 76,473 79,359
Expense for the year (1,652) 6,231
Benefits paid during the year (5,476) (9,117)
Accrued benefit obligation - end of year 69,345 76,473

11. Tangible capital assets

Amortization of tangible capital assets is done on a straight‑line basis over the estimated useful life of the asset as follows:

Table 15: Amortization policy
Asset Class Amortization period
Machinery and equipment 5 years
Computer hardware 5 years
Computer software 3 years ‑ Purchased
5 years ‑ Developed in‑house
Other equipment and furniture 5 years
Vehicles 5 years
Leasehold improvements Lesser of the remaining term of lease or useful life of the improvement
10 years ‑ Service delivery space
15 years ‑ Office space

Assets under construction are recorded in the applicable asset class in the year they are put into service and are not amortized until they are put into service.

The following table presents a summary of the transactions and balances for the main categories of tangible capital assets:

Table 16: Summary of the transactions and balances for the main categories of tangible capital assets (in thousands of dollars)
Detail Cost Accumulated amortization Net book value
Class Opening balance Acquisitions Adjustments (1) Disposals and write-offs Closing balance Opening balance Amortization Adjustments (1) Disposals and write-offs Closing balance 2023 2022
Machinery and equipment 291 0 0 (26) 265 221 25 0 (26) 220 45 70
Computer hardware 814 31 0 0 845 254 152 0 0 406 439 560
Computer software 691,239 0 23,130 (16,750) 697,619 498,951 56,894 0 (16,750) 539,095 158,524 192,288
Other equipment and furniture 2,275 0 0 (32) 2,243 1,993 82 0 (12) 2,063 180 282
Vehicles 2,435 46 0 (67) 2,414 1,690 267 0 (67) 1,890 524 745
Assets under construction 183,364 165,427 (69,653) 0 279,138 0 0 0 0 0 279,138 183,364
Leasehold improvements 410,229 0 46,523 (29,529) 427,223 313,690 14,136 0 (29,306) 298,520 128,703 96,539
Total 1,290,647 165,504 0 (46,404) 1,409,747 816,799 71,556 0 (46,161) 842,194 567,553 473,848

Table notes:

12. Departmental net financial position

A portion of ESDC's net financial position is used for a specific purpose. Related revenues and expenses are included in the Consolidated Statement of Operations and Departmental Net Financial Position.

The Employment Insurance Operating (EIO) Account was established in the accounts of Canada by the Employment Insurance Act (the Act). All amounts received under the Act are deposited in the Consolidated Revenue Fund (CRF) and credited to the EIO Account. The benefits and the costs of administration of the Act are paid out of the CRF and charged to the EIO Account.

Table 17: Departmental net financial position (in thousands of dollars)
Detail 2023 2022
EIO Account - restricted
Balance - beginning of year - restricted (24,971,704) (7,705,821)
Revenues
Premiums 27,422,130 24,304,685
Penalties and interest 50,810 29,030
Total revenues 27,472,940 24,333,715
Expenses
Benefits and support measures
Unemployment and self employment benefits (19,677,774) (36,964,549)
Transfers to provinces and territories related to Labour Market Development Agreements (2,344,229) (2,375,000)
Support measures (145,542) (137,309)
EI Emergency Response Benefit 69,530 40,542
Benefit repayments from higher income claimants 262,572 513,289
Administration costs (2,709,913) (2,640,234)
Bad debts 350,485 58,387
Total expenses (24,194,871) (41,504,874)
Net EIO Account transactions before government funding (3,278,069) (17,171,159)
Funding from the Government of Canada - EI Emergency Response Benefit (483,350) (94,724)
Net EIO Account transactions 2,794,719 (17,265,883)
Balance - end of year - restricted (22,176,985) (24,971,704)
Unrestricted 51,115,828 51,786,585
Departmental net financial position - end of year 28,938,843 26,814,881

13. Contractual obligations and contractual rights

(a) Contractual obligations

The nature of ESDC’s activities may result in some large multi year contracts and obligations whereby ESDC will be obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

Table 18: Contractual obligations (in thousands of dollars)
Detail 2024 2025 2026 2027 2028
and
thereafter 		Total
Labour Market Development Agreements including EI administration costs related to LMDA 2,141,756 0 0 0 0 2,141,756
Other transfer payments 8,709,183 8,401,396 8,983,662 1,202,970 2,179,115 29,476,326
Operating and Maintenance 261,594 65,879 65,879 65,879 0 459,231
Total 11,112,533 8,467,275 9,049,541 1,268,849 2,179,115 32,077,313

Table notes:

(b) Contractual rights

The activities of ESDC sometimes involve the negotiation of contracts or agreements with outside and related parties that result in the department having rights to both assets and revenues in the future. They principally involve the administration of services on behalf of other government departments and other organizations. Major contractual rights that will generate revenues in future years and that can reasonably be estimated are summarized as follows:

Table 19: Contractual rights (in thousands of dollars)
Detail 2024 2025 2026 2027 2028
and
thereafter 		Total
External parties
Recovery of CPP administration costs 501,334 0 0 0 0 501,334
Related parties
Other revenues 311,597 0 0 0 0 311,597
Total 812,931 0 0 0 0 812,931

14. Contingent liabilities and contingent assets

a) Contingent liabilities

Claims, litigations and grievances have been made against ESDC in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. ESDC records an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $5.2 million ($3.6 million in 2022) at March 31, 2023.

b) Contingent assets

Under the Social Finance Fund (SFF), there are currently 3 conditionally repayable contribution agreements with potential repayments due no later than March 31, 2039. As these are conditionally repayable contributions, the amounts that may become repayable cannot be currently estimated as contribution agreements are subject to specific program requirements. Thus, to forecast a specific amount repayable is not possible due to the varying factors facing each recipient as it relates to their economic and production performances.

15. Related party transactions

ESDC is related as a result of common ownership to all government departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family member of that individual.

The department enters into transactions with these entities in the normal course of business and on normal trade terms.

(a) Common services provided without charge by other government departments

During the year, ESDC received services without charge from certain common service organizations, related to the employer’s contribution to the health and dental insurance plans and legal services. These services provided without charge have been recorded at the carrying value in ESDC’s Consolidated Statement of Operations and Departmental Net Financial Position as follows:

Table 20: Common services provided without charge by other government departments (in thousands of dollars)
Detail 2023 2022
Employers' contribution to the health and dental insurance plans 79,608 73,588
Legal services 4,669 4,561
Total 84,277 78,149

The Government has centralized some of its administrative activities for efficiency, cost effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada, information technology infrastructure services provided by Shared Services Canada and audit services provided by the Office of the Auditor General are not included in the ESDC’s Consolidated Statement of Operations and Departmental Net Financial Position.

(b) Common services provided without charge to other government departments

During the year, ESDC provided services without charge to other government departments, related to the provision of workers’ compensation services, amounted to $18.1 million in 2023 ($19.0.0 million in 2022).

(c) Other transactions with related parties

In the normal course of business, ESDC enters into transactions with government departments, agencies and Crown corporations. The assets, liabilities, revenues and expenses related to these transactions are as follows:

Table 21: Other transactions with related parties (in thousands of dollars)
Detail 2023 2022
Expenses - Other government departments, agencies and Crown corporations 1,276,618 1,415,185
Revenues - Other government departments, agencies and Crown corporations 483,619 265,137

Table notes:

16. Risk management

ESDC has exposure to the following risks from its use of financial instruments: credit risk, market risk and liquidity risk.

(a) Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss.

ESDC’s maximum exposure to credit risk at March 31, 2022 and March 31, 2023 is the carrying amount of its financial assets.

ESDC has determined that there is no significant concentration of credit risk related to accounts receivable and advances from external parties and loans receivable. An analysis of the age of the loans receivable and the associated valuation allowances used to reflect these accounts at their net recoverable value is disclosed in note 5.

(b) Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk is comprised of currency risk and interest rate risk.

i) Currency Risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in the foreign exchange rates.

ESDC has determined that there is no significant concentration of currency risk related to foreign denominated financial instruments.

ii) Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. ESDC’s loans receivable bear variable and fixed interest rates. Although the fair value of these financial instruments will be affected by changes in market interest rates, there is no impact on these consolidated financial statements as these items are measured at cost or amortized cost.

(c) Liquidity Risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting its obligations associated with financial liabilities.

As the funding for ESDC’s financial liabilities is drawn from the Consolidated Revenue Fund, its exposure to liquidity risk is fully mitigated.

17. Segmented information

Presentation by segment is based on ESDC's core responsibilities. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the core responsibilities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

Table 22: Expenses incurred and revenues generated for the core responsibilities (in thousands of dollars)
Detail Pensions and Benefits Learning, Skills Development and Employment Social Development Internal Services Information Delivery and Services for Other Departments Working Conditions and Workplace Relations 2023 Total 2022 Total
Benefits and transfer payments
Individuals 70,768,285 1,528,519 4,327 0 0 384 72,301,515 83,444,814
EI benefits and support measures 0 21,835,443 0 0 0 0 21,835,443 38,923,027
Other 0 3,790,848 6,373,076 0 (183) 11,233 10,174,974 8,013,118
Total benefits and transfer payments 70,768,285 27,154,810 6,377,403 0 (183) 11,617 104,311,932 130,380,959
Operating expenses
Salaries and benefits 625,396 1,579,365 70,917 686,880 357,594 123,191 3,443,343 3,068,755
Professional and special services 68,766 384,379 12,382 419,506 50,162 834 936,029 898,540
Administration costs charged by CRA 0 546,860 0 0 0 0 546,860 732,896
Bad debts 38,085 756,621 66,907 (4,002) 0 20,267 877,878 611,849
Accommodation and rentals 29 2,401 188 256,943 30,723 501 290,785 291,759
Transportation and communications 21,567 26,032 417 27,416 4,723 1,716 81,871 75,240
Amortization 32,894 8,985 995 23,654 548 4,480 71,556 66,528
Other 70,670 90,274 105 (130,040) 12,485 1,009 44,503 13,837
Machinery and equipment 683 1,866 22 33,573 1,689 53 37,886 66,731
Expenses incurred on behalf of Government 0 29,926 0 0 0 0 29,926 (16,600)
Total operating expenses 858,090 3,426,709 151,933 1,313,930 457,924 152,051 6,360,637 5,809,535
Total expenses 71,626,375 30,581,519 6,529,336 1,313,930 457,741 163,668 110,672,569 136,190,494
Revenues
Employment Insurance (Note 12) 0 27,472,940 0 0 0 0 27,472,940 24,333,715
Recovery of CPP administration costs 365,612 0 0 167,294 0 0 532,906 539,703
Recovery of OGD service delivery costs 0 0 0 53,217 427,009 0 480,226 261,769
User fees 0 138,262 0 0 0 0 138,262 80,629
Other 8 17,211 1 881 351 3,822 22,274 25,355
Interest on loans receivable 0 13,996 0 0 0 0 13,996 10,769
Revenues earned on behalf of Government (40,053) (162,674) (1) (64,186) (427,360) (2,859) (697,133) (421,144)
Total revenues 325,567 27,479,735 0 157,206 0 963 27,963,471 24,830,796
Net cost from continuing operations 71,300,808 3,101,784 6,529,336 1,156,724 457,741 162,705 82,709,098 111,359,698

18. Comparative information

Certain comparative figures have been reclassified to conform to the current year’s presentation.

Employment and Social Development Canada Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting for the fiscal year ended March 31, 2023

1. Introduction

This document provides summary information on the measures taken by ESDC to maintain an effective system of internal control over financial reporting (ICFR), including information on internal control management, assessment results and related action plans.

Detailed information on ESDC’s authority, mandate and program activities can be found in the Departmental Plan for the 2022 to 2023 fiscal year and the Departmental Results Report for the 2021 to 2022 fiscal year.

2. Departmental system of internal control over financial reporting

2.1 Internal Control Management

ESDC has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal control management framework, approved by the Deputy Minister, is in place and comprises:

The Departmental Audit Committee provides advice to the Deputy Minister on the adequacy and functioning of the department’s risk management, control and governance frameworks and processes.

2.2. Service arrangements relevant to financial statements

ESDC relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:

Common Arrangements:

Readers of this Annex may refer to the annexes of the above-noted organizations for a greater understanding of the systems of ICFR related to these services.

As a result, ESDC relies on the effective system of internal control over financial reporting in place at these service providers.

Specific Arrangements:

3. Departmental assessment results for fiscal year 2022 to 2023

The following table summarizes the status of the ongoing monitoring activities according to the previous fiscal year’s rotational plan.

Table 23: Summary of the status of the ongoing monitoring activities
Previous year’s rotational ongoing monitoring plan for current year Status
IT General Controls Completed as planned; remedial actions started
Financial Close & Reporting Completed as planned; no remedial action required
Old Age Security Completed as planned; remedial actions started
Revenue, Receivables and Receipts Completed as planned; no remedial action required

ESDC determined that key financial controls examined are generally working effectively to prevent or detect a material misstatement to the Financial Statements. There are however areas that have been identified requiring remediation including:

IT General Controls (ITGC)

The ongoing monitoring of ITGC is conducted as part of a five-year cycle, which assess SAP and fourteen (14) feeder systems.

As a result of the year-two ongoing monitoring assessment, some key recommendations are noted in 2 of the 4 main control pillars evaluated: access to programs and data and change management.

Management responses and action plans (MRAPs) have been prepared by the process owners with a view to strengthen control and progress against these plans will be tracked during 2023 to 2024 as part of the year-three ongoing monitoring of ITGCs.

Old Age Security

Some key recommendations included but were not limited to:

MRAPs have been prepared by the process owners with a view to strengthen control and progress against these plans will be tracked during 2023 to 2024.

Revenue, Receivables and Receipts

The process was reviewed, and it was concluded that its components are being documented and tested throughout the various other processes that are identified in the rotational ongoing monitoring plan. Therefore, this process will be removed as a stand-alone key control area.

4. Departmental action plan for the next fiscal year and subsequent years

ESDC’s rotational ongoing monitoring plan over the next 5 fiscal years is shown in the following table. Note that the plan will be adjusted as required subject to an annual revalidation of the high-risk control areas, the timing of other relevant audit and monitoring activities and the impact of changes that occurred during the year or that are planned for the coming year(s).

Table 24: Rotational Ongoing Risk-Based Monitoring Plan
Key Control Areas 2024 2025 2026 2027 2028
Canada Student Financial Assistance Program No No Yes No No
Employment Insurance No Yes No Yes No
Entity Level Controls No Yes No No No
Financial Close and Reporting No No Yes No No
IT General Controls1 Yes Yes Yes Yes Yes
Grants and Contributions No Yes No No Yes
Old Age Security No No No Yes No
Pay Administration Yes No Yes No Yes
Planning and Budgeting Yes No No Yes No
Procure to Payment Yes No No No Yes

Table notes:

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