Quarterly Financial Report for the quarter ended June 30, 2024

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

On this page

• 1. Introduction
• 2. Highlights of fiscal quarter and fiscal year-to-date results
• 3. Risks and uncertainties
• 4. Significant changes in relation to operations, personnel and programs
• 5. Approval by senior officials
• Table 4: Statement of authorities (unaudited)
• Table 5: Departmental budgetary expenditures by standard object (unaudited)

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 are:

• the Minister of Employment, Workforce Development and Official Languages
• the Minister of Diversity, Inclusion and Persons with Disabilities
• the Minister of Citizens’ Services
• the Minister of Families, Children and Social Development
• the Minister of Labour and Seniors

ESDC delivers programs and services to Canadians throughout their lives in a significant capacity. ESDC fulfills its mission by:

• developing policies that ensure Canadians can use their talents, skills and resources to participate in learning, work and their community activities
• delivering programs that help Canadians move through life’s transitions, from school to work, from one job to another, from unemployment to employment, from the workforce to retirement
• providing income support to seniors, families with children and those unemployed due to job loss, illness or caregiving responsibilities
• helping Canadians with distinct needs, such as Indigenous people, persons with disabilities, homeless people, travelers and recent immigrants
• ensuring labour relations stability by providing mediation services
• promoting fair and healthy workplace by enforcing minimum working conditions, promoting decent work and employment equity, and fostering respect for international labour standards
• delivering programs and services on behalf of other departments and agencies

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, and those used by ESDC, consistent with the Main Estimates and Supplementary Estimates (A) for the fiscal year ending March 31, 2025. 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:

• Vote 1 (Operating Expenditures)
• Vote-Netted Revenues
• Vote 5 (Grants and Contributions)

The statutory authorities are mainly comprised of:

• the Old Age Security (OAS) Program
• the Canada Student Financial Assistance Program and Canada Apprentice Loan
• the Canada Education Savings Program
• the Canada Disability Savings Program
• the Canada Recovery Benefits
• the Canada Worker Lockdown Benefit
• the Wage Earner Protection Program
• Federal Workers’ Compensation Service
• Employee Benefit Plans

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, 2024.

ESDC’s total budgetary authorities available in the first quarter of the current fiscal year were $98,225 million, which represents an overall increase of $4,757 million (5%) from the previous fiscal year. Total YTD budgetary authorities used as of the first quarter ending June 30, 2024 were $23,207 million. In comparison, total YTD budgetary authorities used as of the first quarter of the previous fiscal year were $21,293 million, representing a year-over-year increase of $1,914 million (9%).

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 $4,757 million, from $93,468 million as of June 30, 2023, to $98,225 million as of June 30, 2024.

This increase is primarily associated with statutory items, in particular forecasted OAS pension, Guaranteed Income Supplement (GIS) and Allowance payments representing an increase of $4,643 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.

Other factors contributing to the increase include:

• an increase of $384 million in voted grants and contributions (Vote 5), mainly attributable to the increase in payments to provinces and territories for Early Learning and Child Care. This increase is partially offset by a decrease in funding related to the Sectoral Workforce Solutions Program, the Apprenticeship Service and Skills for Success
• an increase of $188 million for the delivery of services on behalf of other Government Departments (spending of revenues pursuant to the Department of Employment and Social Development Act), which is mainly due to a 2-year agreement with Health Canada for the Canadian Dental Care Plan
• an increase of $34 million in other budgetary authorities items

Offsetting these increases are decreases totalling $492 million, mainly related to:

• a decrease of $324 million for the Canada Student Financial Assistance Program and Canada Apprentice Loans, mainly due to a decrease in expected expenses for the Repayment Assistance Plan (RAP), following the permanent elimination of interest on Canada Student Loans announced in the 2022 Fall Economic Statement. Also, there is an expected decrease in the Canada Student Grants and in alternative payments to non-participating provinces and territories following the end of the temporary measure doubling the Canada Student Grants in July 2023
• a decrease of $168 million for the Canada Disability Savings Program, mainly due to a reduction in average contributions from beneficiaries as well as a larger proportion of new Registered Disability Savings Plans being opened by beneficiaries with higher income, and therefore eligible for lower grant amounts and/or ineligible for bonds

With respect to non-budgetary authorities (see Table 4 for details), the net increase of $1,048 million from the previous fiscal year is mainly due to the temporary measure raising the Canada Student Loan limit from $210 to $300 per week for the 2023 to 2024 academic year, and to lower Canada Student Loans repayments, mainly due to the economic situation and the permanent elimination of interests accrued.

On a standard object perspective (see Table 5 for details) :

• the planned expenditures related to Transfer Payments (standard object 10) for the quarter ended June 30, 2024, increased by $4,573 million when compared to the previous fiscal year. This is in line with the above explanations for statutory items and voted grants and contributions (Vote 5)
• the variance in planned expenditures for Personnel (standard object 1) is mainly due to compensation adjustments for new collective agreements
• the variance in planned expenditures for Other Subsidies and Payments (standard object 12) is due to funding related to information technology services corporate costs for the stabilization of aging information technology through the Technical Debt Remediation and Benefits Delivery Modernization. The increase in planned expenditures is in part offset by a decrease in operating costs associated with the delivery of the multiple COVID‑19 measures

2.2 Significant changes to expenditures

Overall, the proportion of ESDC’s total budgetary expenditures as of June 30, 2024 is comparable to the usual spending reported in the first quarter, with approximately 24% of the authorities available for use expensed.

Compared to the previous fiscal year, total budgetary expenditures for the first quarter have increased by $1,914 million from $21,293 million as of June 30, 2023, to $23,207 million as of June 30, 2024.

This 9% increase is mostly explained by the increase in statutory expenditures from $20,191 million for the first quarter of last fiscal year to $21,610 million for the same period this fiscal year, representing an $1,419 million increase. This increase is primarily related to the OAS program, which has increased by $1,432 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.

As well, an increase in expenditures of $485 million in voted grants and contributions (Vote 5), mainly attributable to the increase in payments to provinces and territories for Early Learning and Child Care. This increase is partially offset by the timing of payments to provinces and territories for Workforce Development Agreements and a reduction in contribution payments for other programs, due to decreases in their funding authorities as mentioned in section 2.1.

The increase of $49 million related to the Government Employees Compensation Act (GECA) is mainly due to the outstanding recoveries from other government departments at the end of the first quarter of the fiscal year 2024 to 2025.

Additionally, expenditures for the delivery of services on behalf of other Government Departments (spending of revenues pursuant to the Department of Employment and Skills Development Act) have increased by $23 million, which is explained by an increase related to the delivery of the service delivery partnership with Health Canada established in fiscal year 2023 to 2024 for the Canadian Dental Care Plan.

Offsetting these increases is a decrease of $109 million for the Canada Student Financial Assistance Program and Canada Apprentice Loans mainly explained by the decrease of $116 million in Canada Student Grants, following the end of the temporary measure doubling Canada Student Grants in July 2023. This is partially offset by a new temporary 40% increase to the grant amounts (compared to pre-pandemic levels) from August 1st, 2023 to July 31st, 2025.

Other minor changes in budgetary expenditures totalling a net increase of $34 million also contribute to the variance.

On a standard object perspective (see Table 5 for details):

• the YTD expenditures related to Transfer Payments (standard object 10) for the quarter ended June 30, 2024, increased by $1,857 million when compared to the previous fiscal year, which is in line with explanations provided above regarding the changes in statutory items and voted grants and contributions (Vote 5) expenditures
• the YTD expenditures related to Personnel (standard object 1) have increased mainly for compensation adjustments for new collective agreements

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 2024 to 2025.

For instance, the 2023 Fall Economic Statement outlined the Government's efforts to refocus government spending. To mitigate risks related to planning and stewardship, ESDC is developing a joint financial and human resources plan. The plan will serve as a guide for the department to balance its budget and put resources into the most important services and activities, while ensuring that the department can meet its commitments.

Moreover, ESDC is implementing an important transformation project to improve the client and employee experience for benefits and service delivery, named the Benefits Delivery Modernization Programme (BDM). This Programme will bring together one common delivery platform for the Old Age Security, the Employment Insurance and the Canada Pension Plan. Like any large-scale transformations, there are risks that could impact the timelines and the costs. To address these risks, ESDC is implementing mitigation measures to ensure the department is ready to address potential issues as they may arise.

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

On April 26, 2024, Prime Minister Justin Trudeau announced the appointment of Andrew Brown, at that time Associate Deputy Minister of Employment and Social Development, as the new Associate Deputy Minister of Canadian Heritage. No announcement was made regarding his replacement as of today.

5. Approval by senior officials

Original document was signed in Gatineau, Canada by:

Antoine Thibodeau on behalf of Karen Robertson, Chief Financial Officer, on August 13, 2024

Cliff Groen on behalf of Paul Thompson, Deputy Minister, on August 16, 2024