Common menu bar

• Français
• Home
• Contact Us
• Help
• Search
• canada.gc.ca

Breadcrumb

1. Home >
2. Publications and Resources >
3. Departmental Reports

Human Resources and Skills Development Canada

Consolidated Financial Statements (Unaudited)
for the year-ended March 31, 2011

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, 2011, and all information contained in these statements rests with the management of Human Resources and Skills Development Canada (HRSDC). These consolidated financial statements have been prepared by management in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector.

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 HRSDC’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in HRSDC’s Departmental Performance Report (DPR), is consistent with these consolidated financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting 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 HRSDC; and through conducting an annual assessment of the effectiveness of the system of internal control over financial reporting.

An assessment for the year-ended March 31, 2011 was completed in accordance with the Policy on Internal Control and the results and action plans are summarized in the annex.

The system of internal control over financial reporting is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

The effectiveness and adequacy of HRSDC’s system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of HRSDC’s operations. Management is also supported and assisted by the Departmental Audit Committee (DAC). The DAC is an independent committee that provides objective advice and recommendations to the Deputy Minister regarding the sufficiency, quality and results of assurance on the adequacy and functioning of HRSDC’s risk management, control and governance frameworks and processes. The DAC also reviews the departmental financial statements with management, as well as all significant accounting estimates and judgments therein and advises the Deputy Minister on any apparent material concerns. The Office of the Auditor General has free access to the DAC.

The consolidated financial statements of HRSDC have not been audited.

Alfred Tsang, CMA 
Chief Financial Officer
Human Resources and Skills Development Canada

Ian Shugart
Deputy Minister
Human Resources and Skills Development Canada

Gatineau, Canada
August 31, 2011

Human Resources and Skills Development Canada
Consolidated Statement of Financial Position (Unaudited)
as at March 31

	2011	2010
	(in thousands of dollars)
ASSETS
Financial assets
Due from Consolidated Revenue Fund	$53,039	$381,838
Accounts receivable and advances (Note 4)	3,311,619	3,585,439
Canada Student Loans (Note 5)	10,813,378	10,118,409
	14,178,036	14,085,686
Non-financial assets
Prepaid expenses	13,035	11,232
Tangible capital assets (Note 6)	214,627	244,219
	227,662	255,451
	$14,405,698	$14,341,137
LIABILITIES AND EQUITY OF CANADA
Liabilities
Due to Canada Pension Plan (Note 7)	$23,216	$174,785
Accounts payable and accrued liabilities (Note 8)	1,436,143	1,544,212
Vacation pay and compensatory leave	63,384	63,674
Designated Amount Fund - Trust Account (Note 9)	354,176	374,222
Government Annuities Account (Note 10)	221,340	243,456
Employee future benefits (Note 11)	342,325	310,625
Other liabilities (Note 12)	47,049	64,507
Lease obligations for tangible capital assets	-	1,907
	2,487,633	2,777,388
Equity of Canada (Note 13)	11,918,065	11,563,749
	$14,405,698	$14,341,137

Contingent liabilities (Note 14)
Contractual obligations (Note 15)

The accompanying notes are an integral part of these consolidated financial statements.

Alfred Tsang, CMA
Chief Financial Officer
Human Resources and Skills Development Canada

Ian Shugart
Deputy Minister
Human Resources and Skills Development Canada

August 31, 2011

Human Resources and Skills Development Canada
Consolidated Statement of Operations (Unaudited)
for the year-ended March 31

	2011	2010
	(in thousands of dollars)
Expenses
Income Security	$35,826,306	$34,835,481
Skills and Employment	22,478,454	24,163,623
Social Development	2,914,266	2,793,593
Learning	2,281,307	1,919,609
Internal Services	967,693	944,960
Integrity and Processing	764,505	805,322
Citizen-Centred Service	559,538	486,759
Labour	115,557	121,704
	65,907,626	66,071,051
Revenues
Skills and Employment	17,928,497	17,184,907
Learning	462,280	390,405
Integrity and Processing	152,576	146,859
Internal Services	96,527	85,615
Citizen-Centred Service	54,242	47,985
Income Security	40,138	39,205
Labour	3,194	2,906
Social Development	38	-
	18,737,492	17,897,882
Net cost of operations	$47,170,134	$48,173,169

Segmented information (Note 17)

The accompanying notes are an integral part of these consolidated financial statements.

Human Resources and Skills Development Canada
Consolidated Statement of Equity of Canada (Unaudited)
for the year-ended March 31

	2011	2010
	(in thousands of dollars)
Equity of Canada, beginning of year	$11,563,749	$11,086,165
Net cost of operations	(47,170,134)	(48,173,169)
Net cash provided by government	47,805,111	49,120,035
Change in due from the Consolidated Revenue Fund	(328,799)	(394,144)
Services provided without charge by other government departments (Note 16)	48,164	48,862
Transfer of a tangible capital asset to another government department	(26)	-
Funding from the Department of Finance - Employment Insurance (EI) benefit enhancement measures	-	(124,000)
Equity of Canada, end of year (Note 13)	$11,918,065	$11,563,749

The accompanying notes are an integral part of these consolidated financial statements.

Human Resources and Skills Development Canada
Consolidated Statement of Cash Flows (Unaudited)
for the year-ended March 31

	2011	2010
	(in thousands of dollars)
Operating activities
Cash received from:
EI premiums	$(17,933,616)	$(17,069,638)
Canada Student Loans reimbursements (Note 5)	(1,247,806)	(1,155,264)
Interest on Canada Student Loans	(431,001)	(380,255)
Recoveries of EI benefits overpayments and penalties	(334,944)	(346,457)
Recovery of CPP administration costs	(348,611)	(297,810)
EI benefit repayments received from higher income claimants	(199,894)	(165,950)
Other revenues	(88,998)	(156,653)
Designated purpose accounts	-	(19,917)
Cash paid for:
Benefits and transfer payments:
Individuals	40,113,004	38,973,629
EI benefits and support measures	20,379,575	22,230,430
Other	2,248,242	1,966,020
Operating expenses	3,090,389	3,273,776
Canada Student Loans disbursements (Note 5)	2,308,132	2,168,414
Designated purpose accounts	213,187	-
Cash used in operating activities	47,767,659	49,020,325
Capital investing activities
Acquisitions of tangible capital assets (Note 6)	37,491	99,233
Proceeds from disposal of tangible capital assets	(39)	(52)
Cash used in capital investing activities	37,452	99,181
Financing activities
Lease payments for tangible capital assets	-	529
Cash used in financing activities	-	529
Net cash provided by Government of Canada	$47,805,111	$49,120,035

The accompanying notes are an integral part of these consolidated financial statements.

Notes to the Consolidated Financial Statements (Unaudited)
for the year-ended March 31

1. Authority and Objectives

The name of the Department was changed to Human Resources and Skills Development Canada (HRSDC) on October 30, 2008. The Department of Human Resources and Social Development Canada was established, effective February 6, 2006, through the amalgamation of the Departments of Human Resources and Skills Development Canada and Social Development Canada, as an agent of Her Majesty of Canada. It is a department named in the Schedule I of the Financial Administration Act and reports to Parliament through the Minister of Human Resources and Skills Development Canada.

The legislative mandate of HRSDC is to improve the standard of living and quality of life of all Canadians by promoting a highly skilled and mobile labour force and an efficient and inclusive labour market.

Service Canada is one of HRSDC's business lines. Its mandate is to work in collaboration with federal departments, other levels of government and community service providers to bring services and benefits together in a single service delivery network.

The most significant acts and regulations under which HRSDC operates are: Department of Human Resources and Skills Development Act, Department of Social Development Canada Act, Old Age Security Act and Regulations, Employment Insurance Act and Regulations, Employment Equity Act, Government Annuities Act, Canada Pension Plan Act and Regulations, Canada Student Financial Assistance Act and Regulations, Canada Student Loans Act and Regulations, Canada Labour Code, Universal Child Care Benefit Act and Canada Disability Savings Act.

Human Resources and Skills Development Canada achieves its objectives under eight major programs:

Income Security

This program activity ensures that Canadians are provided with retirement pensions, survivor pensions, disability benefits and benefits for children, through the Old Age Security (OAS) program, the Canada Pension Plan (CPP), the Canada Disability Savings Program and the National Child Benefit program.

Skills and Employment 

Skills and Employment is intended to ensure that Canadian labour market participants are able to access the supports that they need to enter or reposition themselves in the labour market to allow them to contribute to economic growth through full labour market participation. Initiatives within this program activity contribute to the common overall objectives of promoting skills development, labour market participation and ensuring labour market efficiency.

Social Development

This program activity supports programs for the homeless or those individuals at risk of homelessness, as well as programs for children, families, seniors, communities, and people with disabilities. It provides these groups with the knowledge, information, and opportunities to move forward with their own solutions to social and economic challenges.

Learning

This program activity helps Canadians participate in post-secondary education to acquire the skills and credentials that enable them to improve their labour market outcomes and adapt to changing labour market conditions. It reduces barriers to education by providing financial assistance to individuals as well as incentives to save for a child’s post-secondary education.

It also provides information and awareness about opportunities to acquire education and skills. The program contributes to the inclusiveness of the workforce by giving Canadians with the required academic abilities a more equal opportunity to participate in post-secondary education. The program works with the provinces and territories, voluntary sector, financial institutions, service providers and other key stakeholders to help Canadians pursue post-secondary education.

Internal Services

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

Integrity and Processing

This program activity enhances and strengthens the integrity of Service Canada services and programs to ensure that the right person receives the right service or benefit at the right time, and for the intended purpose.

Citizen-Centred Service

This program activity aims to improve and integrate government service delivery by providing Canadians with a one-stop, easy-to-access, personalized service in person, by telephone, Internet and via mail. This program activity is supported by overarching client segment strategies and partnerships with other departments, levels of government and community-based partners. This program activity also includes client feedback mechanisms and the responsibility for increasing public awareness of Service Canada.

Labour

This program activity seeks to promote and sustain stable industrial relations and safe, fair, healthy, equitable, and productive workplaces within the federal jurisdiction (transportation, post office and courier companies, communications, banking, grain and nuclear facilities, federal Crown corporations, companies who have major contracts with the federal government and Aboriginal governments, their employees, Aboriginal communities and certain Aboriginal undertakings). It develops labour legislation and regulations to achieve an effective balance between workers' and employers' rights and responsibilities. The program ensures that workplaces under the federal jurisdiction respect the rights and obligations established under labour legislation. The program also manages Canada's international and intergovernmental labour affairs, as well as Aboriginal labour affairs responsibilities.

2. Summary of Significant Accounting Policies

These consolidated financial statements have been prepared in accordance with Treasury Board accounting policies stated below, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

1. Parliamentary authorities - HRSDC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to HRSDC 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 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.
2. Consolidation – These consolidated financial statements include the transactions of the EI Operating Account, a sub-entity under the control of HRSDC. The accounts of this sub-entity have been consolidated with those of HRSDC and all inter-organizational balances and transactions have been eliminated.
3. Net Cash Provided by Government - HRSDC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by HRSDC is deposited to the CRF and all cash disbursements made by HRSDC 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.
4. Amounts due from the CRF - These amounts 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 HRSDC is entitled to draw from the CRF without further appropriations to discharge its liabilities.
5. Revenues - Revenues are presented on the accrual basis:
   • EI premiums are recognized as revenue in the period in which they are earned. EI premiums earned in the period are measured by the Canada Revenue Agency (CRA) based on amounts assessed and reassessed at the time of preparation of its financial statements and an estimate of premiums earned in the period but not yet assessed or reassessed. The estimate of premiums earned but not yet assessed or reassessed is based on the cash amount received at the time of preparation of the financial statements that relate to the fiscal year. Premium revenue also includes adjustments between actual and estimated premiums of previous years.
   • Interest revenues on student loans are recognized in the year they are earned. Interest is not recorded on impaired loans.
   • Recoveries of CPP administration costs are recognized based on the services provided in the year.
   • Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
6. Expenses - Expenses are presented on the accrual basis:
   • Grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized when the Government announces a decision to make a non recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the consolidated financial statements.
   • Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement, provided that the transfer is authorized and a reasonable estimate can be made.
   • Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
   • Services provided without charge by other government departments for employer contributions to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.
7. Employee future benefits:
   • Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government. HRSDC’s contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require HRSDC to make contributions for any actuarial deficiencies of the Plan.
   • Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
8. Accounts receivable and advances - Accounts receivable and advances are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.
9. Canada Student Loans - Loans are recorded at original cost less reimbursements, forgiveness and valuation allowances. The allowance for bad debts and Repayment Assistance Plan (RAP) for Canada Student Loans is calculated based on rates determined according to an actuarial estimate for direct loans or as per historical collection rates for guaranteed and Risk-Shared loans.
10. Contingent liabilities - Contingent liabilities are potential liabilities which 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 an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the consolidated financial statements.
11. Tangible capital assets - All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. HRSDC does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

    Asset Class: Machinery and equipment
    Amortization period: 5 years

    Asset Class: Computer hardware
    Amortization period: 5 years

    Asset Class: Computer software
    Amortization period: 3-5 years

    Asset Class: Other equipment and furniture
    Amortization period: 5 years

    Asset Class: Vehicles
    Amortization period: 5 years

    Asset Class: Leased tangible capital assets
    Amortization period: Over term of the lease / useful life

    Asset Class: Leasehold improvements
    Amortization period: Lesser of the remaining term of lease or useful life of the improvement

    Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

12. Measurement uncertainty – The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the consolidated financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are the determination 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 salary, vacation pay and compensatory leave related accruals, the useful life of tangible capital assets 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

HRSDC receives most of its funding through annual Parliamentary authorities. Items recognized in the consolidated statement of operations and the consolidated statement of financial position in one 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 HRSDC's consolidated statement of operations do not affect Parliamentary authorities. Accordingly, HRSDC 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:

(a) Reconciliation of net cost of operations to current year authorities used:

	2011	2010
	(in thousands of dollars)
Net cost of operations	$47,170,134	$48,173,169
Adjustments for items affecting net cost of operations but not affecting authorities:
Bad debts (excluding EI bad debts)	(421,095)	(214,381)
Refunds of program expenses	87,706	71,733
Revenue not available for spending	665,678	611,641
Allowance for forgiveness of Canada Student Loans	(42,325)	(131,776)
Amortization of tangible capital assets (Note 6)	(63,219)	(51,580)
Increase in transfer payments payable	(43,973)	–
Increase in allowance for alternative payments for non-participating provinces to CSL	(21,341)	(157,800)
Decrease (increase) in employee future benefits	(31,700)	35,815
Net EI transactions before government funding (Note 13)	(3,889,617)	(6,586,144)
Services provided without charge by other government departments (Note 16)	(48,164)	(48,862)
Other adjustments	(5,460)	10,367
	43,356,624	41,712,182
Adjustments for items not affecting net cost of operations but affecting authorities:
EI funding from the Government of Canada	2,900,000	–
Net Canada Student Loans disbursed	1,043,988	974,384
Acquisitions of tangible capital assets (Note 6)	37,491	99,233
Other adjustments	12,077	11,575
	3,993,556	1,085,192
Current year authorities used	47,350,180	$42,797,374

(b) Authorities provided and used:

	2011	2010
	(in thousands of dollars)
Authorities Provided:
Vote 1 - Operating expenditures	763,864	$752,892
Vote 5 – Grants and contributions	2,287,753	2,053,835
Vote 7 – Debt write-offs	–	87
Statutory amounts	44,533,760	40,161,767
Less:
Authorities available for future years	(127)	(141)
Lapsed authorities:
Operating expenditures	(20,644)	(31,615)
Grants and contributions	(214,381)	(139,440)
Debt write-offs	–	(3)
Statutory amounts	(45)	(8)
Current year authorities used	$47,350,180	$42,797,374

4. Accounts receivable and advances

The following table presents details of HRSDC’s accounts receivable and advances balances:

	2011	2010
	(in thousands of dollars)
Receivables from other federal government departments and agencies:
EI premiums receivable from the CRA	$1,241,951	$1,313,958
EI and OAS benefit repayments receivable from the CRA	1,364,745	1,237,104
Other	34,984	57,278
	2,641,680	2,608,340
Receivables and advances from external parties:
EI and OAS overpayments and penalties to be recovered	840,918	789,618
Accrued interest on Canada Student Loans receivable	514,058	487,432
Other	230,318	181,721
Amount to be recovered under Quebec Parental Insurance Plan	–	346,644
	1,585,294	1,805,415
Total accounts receivable and advances	4,226,974	4,413,755
Less: Allowance for doubtful accounts on receivables from external parties	(915,355)	(828,316)
	$3,311,619	$3,585,439

1. EI premiums receivable from CRA - Premiums for the year are measured by the CRA based on amounts assessed and reassessed at the time of preparation of its financial statements and an estimate of premiums earned in the period but not yet assessed or reassessed. The estimate of premiums earned but not yet assessed or reassessed is based on cash amounts received at the time of preparation of the financial statements that relate to the fiscal year.
2. EI and OAS benefit repayments receivable from CRA - These amounts are estimated by CRA and represent all the accounts receivable from beneficiaries who earn an individual net income of more than the maximum allowed threshold and are required to repay a portion of their benefits.
3. EI and OAS overpayments and penalties to be recovered - Overpayments on claims processed during the current and preceding years are deducted and accounted for by reducing the benefit expenses during the year in which they are established. Penalties may also be imposed on a claimant or an employer when it is determined that information they have provided is false or misleading.
4. Amount to be recovered under Quebec Parental Insurance Plan - The Canada-Quebec agreement relative to the Quebec Parental Insurance Plan (QPIP) signed in March 2005 was implemented on January 1, 2006. During the transition period of the QPIP (January 1 to December 31, 2006), Canada continued to pay active maternity, parental and adoption (MPA) claims. As per the agreement, Quebec has reimbursed Canada for these MPA benefits paid out by Canada to Quebec residents.
5. Allowance for doubtful accounts on receivables from external parties - HRSDC establishes an allowance for doubtful accounts by aging the balance of the accounts receivable outstanding and by applying varying percentages based on historical collection rates or on actuarial calculated rates to the aging categories so determined.

5. Canada Student Loans

(in thousands of dollars)

Table: Canada Student Loans

	Gross Loans					Allowance & Discount		Net Loans
	2010 Gross Loans	New Loans and Repurchases	Reimbur- sements	Loan write- offs and forgiveness	2011 Gross Loans	Unamortized discount	Allowance for bad debts	2011 Net Loans	2010 Net Loans
Direct Loans	$12,492,761	$2,283,705	$(1,228,552)	$(11,165)	$13,536,749	$–	$(2,812,803)	$10,723,946	$10,008,277
Guaranteed Loans	303,300	6,433	(13,443)	(22,479)	273,811	–	(188,552)	85,259	108,177
Risk-Shared Loans	159,986	17,994	(5,811)	(17,560)	154,609	(145,372)	(5,064)	4,173	1,955
	$12,956,047	$2,308,132	$(1,247,806)	$(51,204)	$13,965,169	$(145,372)	$(3,006,419)	$10,813,378	$10,118,409

The breakdown of the gross Canada Student Loans is as follows:

Table: Gross Canada Student Loans

	2011			2010
	Loans in good standing	Impaired Loans	Gross Loans	Loans in good standing	Impaired Loans	Gross Loans
Direct Loans	$13,179,833	$356,916	$13,536,749	$12,241,572	$251,189	$12,492,761
Guaranteed Loans	198,819	74,992	273,811	224,340	78,960	303,300
Risk-Shared Loans	112,046	42,563	154,609	117,559	42,427	159,986
	$13,490,698	$474,471	$13,965,169	$12,583,471	$372,576	$12,956,047

Since August 1^st 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). Under these three different regimes, no security is received from the students and the loans bear interest at either a variable rate (prime rate + 2.5%) or a fixed rate (prime rate + 5.0%). Students are not required to pay interest on their loans while studying full-time. For borrowers experiencing long-term difficulties repaying their loans, assistance is provided by the Repayment Assistance Plan (RAP) program. The maximum repayment period is 10 years and up to 15 years for borrowers that are eligible if their affordable payment, based on family income and family size, is less than their required monthly payment. RAP is divided into two stages to help student borrowers. Depending on the borrower's situation, HRSDC may cover the required principal and the interest amounts not covered by the borrower's affordable 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 HRSDC no longer has reasonable assurance of recovering the full amount of a loan at the expected date, the loan becomes impaired. Interest is not recorded on impaired loans. Loans considered as impaired are 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. The expense for impaired loans is included under the header "Bad debts", under "Learning" activity, of the Note 17.

1. Direct Loans

   Loans issued on or after August 1^st, 2000 are operated under the authority of section 6.1 of the Canada Student Financial Assistance Act, which authorizes HRSDC to enter into loan agreements directly with qualifying students.

   An allowance is recorded to provide for bad debts and RAP for Canada Student Loans. The allowance rate is determined according to an actuarial estimate. The calculation of the allowance is separated into three components according to the status of the loan: in-study, in repayment or in default. First, an allowance on the balance of in-study loans is determined using an allowance rate. For the year-ended March 31, 2011, the rate was established at 12.4% (12.4% in 2010) of the disbursements which occurred during the year and at 1.8% (1.8% in 2010) of this same amount for RAP. Secondly, an allowance on the balance of loans in repayment is determined using a rate corresponding to the proportion of projected defaulted loans that will not be recovered. The future default rate was established at 16% (16% in 2010). Finally, an allowance is determined on the balance of defaulted loans that will not be recovered. The recovery rate for future cohorts was established at 26% (26% in 2010). The total level of the allowance is determined by the Office of the Chief Actuary on July 31^st of each year (end of loan year) and is adjusted as at March 31 based on the monthly net loans issued from August to March.

   There were no direct loans write-offs for the year-ended March 31, 2011 (2010 - nil).

2. Guaranteed Loans

   The Guaranteed Loan Regime applies to loans issued between 1964 and 1995. Loans under this regime were issued by financial institutions under the Canada Student Loans Act. In the event of default, permanent disability, or death of the borrower, HRSDC reimburses the financial institutions for the outstanding principal, accrued interest and costs. HRSDC bears all risks associated with Guaranteed Loans. As at March 31, 2011, HRSDC has guaranteed the following debt:

   	Authorized Limit	Loans outstanding with financial institutions
   	(in thousands of dollars)
   Guaranteed loans under the Canada Student Loans Act	$10,781,963	$35,124

   An allowance for losses on Guaranteed Loans is recorded when it is likely that a payment will be made to honour a guarantee and where the amount of the anticipated loss can be reasonably estimated. The amount of the allowance for losses is calculated by using an allowance rate which was determined by taking into consideration historical loss experience and current economic conditions. The rate was established at 17.3% (17.0% as at March 31, 2010). As at March 31, 2011, HRSDC has an allowance for losses on Guaranteed Loans of $6.1 million ($8.6 million as at March 31, 2010) presented in the Accounts payable and accrued liabilities (Note 8). The increase or decrease in the allowance for loan losses between years is recorded in operating expenses. In addition, there exists an exposure of $29.0 million to a liability in excess of the $6.1 million already accrued.

   An allowance is also recorded to account for bad debts on Guaranteed Loans. The allowance is established by aging the balance of the accounts receivable outstanding and by applying varying percentages based on past recovery experience to the aging categories so determined.

   Guaranteed Loan write-offs for the year ended March 31, 2011 amounted to $22.7 million ($28.6 million in 2010) and payments received while the account was in write-off status were valued at $0.2 million ($0.2 million in 2010).

3. Risk-Shared Loans

   The Risk-Shared Loan Regime applies to loans issued between August 1995 and July 2000. Loans of this regime were disbursed, managed and collected by financial institutions. According to the Canada Student Financial Assistance Act, HRSDC pays a risk premium representing 5% of the consolidated value of loans at the time when students must begin to reimburse their loans. In addition, financial institutions can decide to sell a portion of the amount of impaired loans and HRSDC must pay a put-back fee of five cents for each dollar of the repurchased loan. In the event of default, permanent disability, or death of the borrower, HRSDC reimburses the financial institutions for the outstanding principal, accrued interest and costs.

   The unamortized discount on the defaulted Risk-Shared Loans amount represents 95% of the total value of the loan. This amount offsets the total amount of the repurchased loans (100%) which are recorded as Risk-Shared Loans.

   An allowance is recorded to account for bad debts on Risk-Shared Loans. The allowance is established by aging the balance of the accounts receivable outstanding and by applying varying percentages based on past recovery experience to the aging categories so determined. The allowance for bad debts solely applies to the balance of 5% (100%-95%) borne by HRSDC.

   Risk-Shared Loan write-offs for the year-ended March 31, 2011 amounted to $17.6 million ($19.9 million in 2010) and payments received while the account was in write-off status were valued at $0.1 million ($0.1 million in 2010).

6. Tangible capital assets

(in thousands of dollars)

Table: Tangible capital assets

	Cost				Accumulated amortization				Net book value
Capital assets class	Opening balance	Acquisitions	Disposals, write- offs and adjustments	Closing balance	Opening balance	Amortization	Disposals, write-offs and adjustments	Closing balance	2011	2010
Machinery & equipment	$2,502	$48	$1,239	$3,789	$2,247	$333	$(54)	$2,526	$1,263	$255
Computer hardware	209,660	5,543	(8,667)	206,536	185,297	4,794	(4,530)	185,561	20,975	24,363
Computer software	250,764	993	66,414	318,171	198,291	40,928	(142)	239,077	79,094	52,473
Other equipment & furniture	9,224	863	(146)	9,941	8,275	291	(47)	8,519	1,422	949
Vehicles	6,228	922	(605)	6,545	5,541	283	(681)	5,143	1,402	687
Assets under construction for in-house developed software	117,951	10,863	(65,871)	62,943	–	–	–	–	62,943	117,951
Leasehold improvements	206,854	18,259	–	225,113	160,995	16,590	–	177,585	47,528	45,859
	803,183	37,491	(7,636)	833,038	560,646	63,219	(5,454)	618,411	214,627	242,537
Leased tangible capital assets – office equipment	2,835	–	(2,835)	–	1,153	–	(1,153)	–	–	1,682
Leased tangible capital assets – other equipment	290	–	(290)	–	290	–	(290)	–	–	–
	3,125	–	(3,125)	–	1,443	–	(1,443)	–	–	1,682
	$806,308	$37,491	$(10,761)	$833,038	$562,089	$63,219	$(6,897)	$618,411	$214,627	$244,219

Disposals of assets under construction represent assets that were put into use in the year and have been transferred to the other capital asset classes as applicable.

7. Due to Canada Pension Plan

The Canada Pension Plan (CPP) is a federal-provincial plan created by an Act of Parliament in 1965. The Minister of HRSDC, on behalf of the Government of Canada and the participating provinces, is responsible for the administration of the CPP. The CPP is a compulsory and contributory social insurance program operating in all parts of Canada, except in Québec, which operates a comparable program. As the CPP is controlled by both the Government of Canada and the participating provinces, its financial activities are not part of HRSDC's reporting entity.

The CPP account was established in the accounts of Canada by the Canada Pension Plan Act to record the contributions, interests, investment income or loss from the CPP Investment Board, pension benefits and operating expenses of the CPP. It also records the amounts transferred to or received from the CPP Investment Board.

The revenues and expenses are recorded as increases and decreases to the liability. The detailed revenues, expenses, assets and liabilities are reported separately in the CPP consolidated audited financial statements. HRSDC's consolidated financial statements reflect only the year-end liability which represents the balance of the CPP deposit in the Consolidated Revenue Fund (CRF). Amounts on deposit in the CRF are transferred to the CPP Investment Board on a weekly basis. For the 2011 fiscal year-end that amount is $23.2 million ($174.8 million in 2010).

	2011	2010
	(in thousands of dollars)
Due to Canada Pension Plan, beginning of year	$174,785	$90,123
Receipts and other credits	59,203,887	56,823,252
Payments and other charges	(59,355,456)	(56,738,590)
	$23,216	$174,785

8. Accounts payable and accrued liabilities

The following table presents details of HRSDC’s accounts payable and accrued liabilities:

	2011	2010
	(in thousands of dollars)
Accounts payable to other government departments and agencies:
Income taxes payable to CRA	$147,363	$145,106
Other	105,905	347,362
	253,268	492,468
Accounts payable to external parties:
EI benefits payable to individuals	561,355	537,912
Other	384,497	307,785
	945,852	845,697
Accrued salaries and wages	41,469	37,533
Allowance for alternative payments for non-participating provinces to Canada Student Loans	179,141	157,800
Allowance for Guaranteed Loans under CSL (Note 5 (b))	6,055	8,591
Other accrued liabilities	10,358	2,123
	$1,436,143	$1,544,212

9. 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. The account is credited with interest, pursuant to section 21(2) of the Financial Administration Act. The Designated Amount Fund is co-administered by Aboriginal Affairs and Northern Development Canada, which is responsible for determining the eligibility of the clients requesting CEP, and HRSDC, which manages all the financial activities related to the Trust account, through Service Canada.

	2011	2010
	(in thousands of dollars)
Designated Amount Fund, beginning of year	$374,222	$433,232
Interest credited to the Trust account	2,505	1,004
Payments to eligible former students	(22,551)	(60,014)
	$354,176	$374,222

10. Government Annuities Account

HRSDC 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 account is valued on an actuarial basis each year, with the deficit or surplus charged or credited to the Consolidated Revenue Fund.

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 items transferred to non-tax revenues. The amounts of unclaimed annuities related to untraceable annuitants are transferred to non-tax revenues.

	2011	2010
	(in thousands of dollars)
Government Annuities, beginning of year	$243,456	$267,173
Receipts and other credits	15,870	17,446
Payments and other charges	(37,986)	(41,163)
	$221,340	$243,456

11. Employee future benefits

1. Pension benefits: HRSDC's employees participate in the Public Service Pension Plan, which is sponsored and administered by the government. 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 five consecutive years of earnings. The benefits are integrated with Canada/Quebec Pension Plans benefits and they are indexed to inflation.

   Both the employees and HRSDC contribute to the cost of the Plan. The 2011 expense amounts to $190.5 million ($208.9 million in 2010), which represents approximately 1.9 times (1.9 in 2010) the contributions by employees. HRSDC's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

2. Severance benefits: HRSDC provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:

   	2011	2010
   	(in thousands of dollars)
   Accrued benefit obligation, beginning of year	$310,625	$346,440
   Expense for the year	64,024	1,103
   Benefits paid during the year	(32,324)	(36,918)
   	$342,325	$310,625

12. Other liabilities

Labour Market Development Agreements: HRSDC entered into Labour Market Development Agreements (LMDA) with the governments of Ontario, British Columbia, Nova Scotia, Yukon and Newfoundland and Labrador. In these agreements, the design and delivery of the active employment benefits and support measures have been devolved to the provinces. These accounts were established to record deposits of payments from the provinces to HRSDC under the LMDA. The funding provided by the provinces is used by HRSDC to make payments to provincial LMDA clients.

Other: This category includes other accounts for which enabling legislation requires that revenues be earmarked and that related expenses are charged against these revenues. The expenses and revenues are recorded as increases and decreases to the liability accounts and are not reported as revenues and expenses of HRSDC.

			2011	2010
			(in thousands of dollars)
	LMDA	Other	Total	Total
Balance, beginning of year	$31,077	$33,430	$64,507	$43,366
Receipts and other credits	672,127	46,558	718,685	1,074,143
Payments and other charges	(684,470)	(51,673)	(736,143)	(1,053,002)
	$18,734	$28,315	$47,049	$64,507

13. Restricted Equity of Canada

Restricted and unrestricted Equity: A portion of HRSDC's equity is restricted for the EI Operating (EIO) Account. HRSDC's consolidated financial statements include transactions of the EIO Account in its revenues and expenses. The Equity of Canada is the net result of the surplus coming from the EIO Account being the "restricted equity" and the net equity resulting from HRSDC operations, excluding EI, being the "unrestricted equity".

The following table provides further details on the Equity of Canada:

	2011	2010
	(in thousands of dollars)
Restricted Equity for EI, beginning of year	$(4,935,693)	$57,170,981
Revenues under the EI program:
EI premiums	17,861,609	17,120,839
Penalties and interest on EI receivables	58,264	56,191
	17,919,873	17,177,030
Expenses under the EI program:
Benefits and support measures	19,849,684	21,585,940
Administration costs	1,959,806	2,083,254
Interest on the balance of the EI Account	–	93,980
	21,809,490	23,763,174
Net EI transactions before government funding	(3,889,617)	(6,586,144)
Funding – EI benefit enhancement measures	1,427,915	1,522,014
Net EI transactions	(2,461,702)	(5,064,130)
Closure of the EI Account as of December 31, 2008	–	(57,042,544)
Restricted Equity for EI, end of year	(7,397,395)	(4,935,693)
Unrestricted Equity of Canada before transfer from restricted Equity for EI	19,315,460	(40,543,102)
Transfer from closure of the EI Account as of December 31, 2008	–	57,042,544
Unrestricted Equity of Canada, end of year	19,315,460	16,499,442
Equity of Canada, end of year	$11,918,065	$11,563,749

The 2009 Budget included various temporary measures to support Canadian workers affected by the global economic downturn. The following table provides further details on the EI benefit enhancement measures:

	2011	2010
	(in thousands of dollars)
Increase in regular benefits duration – extra five weeks	$796,053	$795,769
EI training programs – LMDA increased funding	500,000	500,000
Worksharing	48,967	211,238
New measures for long-tenured workers – career transition assistance	82,895	15,007
	$1,427,915	$1,522,014

The cost of these enhancement measures is not funded from the EIO Account, but provided through HRSDC. EI benefit enhancement measures funding amounted to $1,427.9 million for 2011 ($1,522.0 million in 2010). This amount is eliminated at the HRSDC consolidated level.

14. Contingent liabilities

Claims, litigations and grievances have been made against HRSDC in the normal course of operations. These include items with pleading amounts and other for which no amount is specified. Some of these potential liabilities 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 in the consolidated financial statements. Based on HRSDC's legal assessment of a potential liability, a liability in the amount of $0.1 million was recorded at March 31, 2011 ($0.2 million in 2010).

In addition, there is another potential liability for losses on Guaranteed Loans under CSL in the amount of $29.0 million ($41.8 million in 2010) as detailed in Note 5 (b).

15. Contractual obligations

The nature of HRSDC's activities can result in some large multi-year contracts and obligations whereby HRSDC 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:

	2012	2013	2014	2015	2016 and thereafter	Total
(in thousands of dollars)
Transfer payments	3,260,114	1,017,335	796,399	248,901	–	$5,322,749
Operating and Maintenance leases	95,406	57,648	27,462	–	–	180,516
	3,355,520	1,074,983	823,861	248,901	–	$5,503,265

16. Related party transactions

HRSDC is related as a result of common ownership to all government departments, agencies, and Crown corporations. HRSDC enters into transactions with these entities in the normal course of business and on normal trade terms.

During the year, HRSDC received and provided common services which were obtained or delivered without charge from other government departments as disclosed below.

1. Common services provided without charge by other government departments:

   During the year, HRSDC 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 in the HRSDC's Consolidated Statement of Operations as follows:

   	2011	2010
   	(in thousands of dollars)
   Employers’ contribution to the health and dental insurance plans paid by Treasury Board Secretariat	$43,781	$43,698
   Legal services provided by Justice Canada	4,383	5,164
   	$48,164	$48,862

   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 Works and Government Services Canada and audit services provided by the Office of the Auditor General are not included in HRSDC’s Consolidated Statement of Operations.

2. Common services provided without charge to other government departments:

   During the year, HRSDC provided services without charge to other government departments, related to the provision of workers’ compensation services, in the amount of $31.5 million in 2011 ($34.3 million as at March 31, 2010).

3. Other transactions with related parties:

   HRSDC, through Service Canada, acts as a focal point for government access to Canadians. As a result, HRSDC has entered into several agreements with other federal government departments designed to provide Canadians with better access to programs and services. HRSDC also enters into transactions with government departments, agencies and Crown corporations in the normal course of business. The revenues and expenses related to these transactions are as follows:

   	2011	2010
   	(in thousands of dollars)
   Expenses –Other government departments and agencies	$560,947	$565,055
   Revenues –Other government departments and agencies	$8,652	$8,291

17. Segmented information

(in thousands of dollars)

Presentation by segment is based on HRSDC’s program activity architecture. 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 by program activity, by major object of expenses and by major type of revenues. The segment results for the period are as follows:

Table: Segmented information

	Income Security	Skills and Employment	Social Development	Learning	Internal Services	Integrity & Processing	Citizen-Centred Service	Labour	2011 Total	2010 Total
Benefits and transfer payments
Individuals	$35,757,738	$107,973	$2,642,451	$1,462,466	-	-	-	$898	$39,971,526	$38,853,634
EI benefits and support measures	-	19,849,684	-	-	-	-	-	-	19,849,684	21,585,940
Other	-	1,779,158	214,030	308,213	-	-	-	2,009	2,303,410	2,026,412
	35,757,738	21,736,815	2,856,481	1,770,679	-	-	-	2,907	62,124,620	62,465,986
Operating expenses
Salaries and benefits	33,801	264,834	48,926	36,533	510,888	660,389	375,892	94,775	2,026,038	2,020,597
Professional and special services	11,213	224,189	3,284	96,635	97,342	46,988	58,958	12,171	550,780	525,675
Bad debts	17,578	41,854	2,007	374,919	26,435	-	-	156	462,949	261,350
Accommodation and rentals	793	975	246	58	214,650	1,206	1,742	404	220,074	225,584
EI administration costs charged by CRA	-	195,713	-	-	-	-	-	-	195,713	190,706
Transportation and telecommunication	4,118	9,880	1,639	1,380	46,764	40,566	35,628	3,887	143,862	146,514
Furniture, material and equipment	483	2,018	962	375	44,639	5,154	12,583	814	67,028	63,351
Amortization	57	106	3	11	26,975	496	35,337	234	63,219	51,580
Other	525	2,070	718	717	-	9,706	39,398	209	53,343	25,728
Interest on the balance of the EI Account	-	-	-	-	-	-	-	-	-	93,980
	68,568	741,639	57,785	510,628	967,693	764,505	559,538	112,650	3,783,006	3,605,065
	35,826,306	22,478,454	2,914,266	2,281,307	967,693	764,505	559,538	115,557	65,907,626	66,071,051
Revenues
Employment Insurance (Note 13)	-	17,919,873	-	-	-	-	-	-	17,919,873	17,177,030
Interest on Canada Student Loans	-	-	-	461,377	-	-	-	-	461,377	389,403
Recovery of CPP administration costs	39,869	-	-	-	94,433	152,553	44,563	-	331,418	308,440
Other	269	8,624	38	903	2,094	23	9,679	3,194	24,824	23,009
	40,138	17,928,497	38	462,280	96,527	152,576	54,242	3,194	18,737,492	17,897,882
Net cost of operations	$35,786,168	$4,549,957	$2,914,228	$1,819,027	$871,166	$611,929	$505,296	$112,363	$47,170,134	$48,173,169

18. Subsequent event

Subsequent to March 31, 2011, two Quebec Unions filed a claim with the Quebec Superior Court against Her Majesty the Queen contesting the constitutional validity of certain provisions of the Jobs and Economic Growth Act enacted in 2010 relating to amendments to the Employment Insurance Act. The outcome of this claim is not determinable at this time.

19. Comparative information

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

Primary navigation (left column)

Date Modified:

2011-11-02