Human Resources and Skills Development Canada
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Human Resources and Skills Development Canada

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Human Resources and Skills Development Canada

Consolidated Future-oriented Statement of Operations for the year ending March 31, 2012

Human Resources and Skills Development Canada
Statement of Management Responsibility

Departmental management is responsible for this consolidated future-oriented statement of operations, including responsibility for the appropriateness of the assumptions on which this statement is prepared. This statement is based on the best information available and assumptions adopted as at January 19, 2011 and reflects the plans described in the Report on Plans and Priorities.

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

Ian Shugart
Deputy Minister
Human Resources and Skills Development Canada

Gatineau, Canada
January 26, 2011

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Human Resources and Skills Development Canada
Consolidated Future-oriented Statement of Operations
for the year ending March 31
Estimated
Results
2011		 Forecast
2012
(in thousands of dollars)
Segmented information (Note 8)
The accompanying notes are an integral part of this consolidated future-oriented statement of operations.
Expenses
Income Security 36,436,480 38,261,471
Skills and Employment 24,193,703 22,637,406
Social Development 2,896,187 2,890,322
Learning 2,324,329 2,327,828
Internal Services 411,513 414,905
Integrity and Processing 391,693 339,500
Citizen-Centred Service 263,394 248,796
Labour 128,253 112,762
67,045,552 67,232,990
Revenues
Skills and Employment 18,208,067 19,504,329
Learning 396,297 495,479
Integrity and Processing 133,285 106,063
Internal Services 100,999 84,290
Citizen-Centred Service 70,102 60,737
Income Security 30,692 28,647
Labour 3,476 3,423
18,942,918 20,282,968
Net cost of operations 48,102,634 46,950,022
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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 and Universal Child Care Benefit Act.

Human Resources and Skills Development Canada achieves its objectives under eight major program activities: Income Security, Skills and Employment, Social Development, Learning, Internal Services, Integrity and Processing, Citizen-Centred Service and Labour. For full descriptions of program activities, see Section II of the Report on Plans and Priorities (RPP).

The financial activities of the Canada Pension Plan (CPP) are not part of HRSDC's reporting entity as the CPP is under joint control of the federal and the participating provincial and territorial governments.

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2. Significant assumptions

The consolidated future-oriented statement of operations has been prepared on the basis of the government priorities and the plans of the department as described in the RPP.

The main assumptions are as follows:

  1. The department's activities will remain substantially the same as for the previous year.
  2. Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue.
  3. Estimated year end information for 2010-2011 is used as the opening position for the 2011-2012 forecasts.

These assumptions are adopted as at January 19, 2011.

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3. Variations and Changes to the Forecast Consolidated Financial Information

While every attempt has been made to accurately forecast final results for the remainder of 2010-2011 and for 2011-2012, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this consolidated future-oriented statement of operations, HRSDC has made estimates and assumptions concerning the future. These estimates and judgements may differ from the subsequent actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the consolidated future-oriented statement of operations and the historical consolidated financial statement of operations include:

  1. The timing and amounts of acquisitions and disposals of capital assets may affect gains/losses and amortization expense.
  2. Economic conditions may affect both the amount of revenue earned and the collectability of loan receivables.
  3. Further changes to the budget through additional new initiatives or technical adjustments later in the year.

Once the RPP is presented, HRSDC will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates.

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4. Summary of Significant Accounting Policies

This consolidated future-oriented statement of operations has 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 future-oriented statement of operations are not necessarily the same as those provided through authorities from Parliament. Note 5 provides a reconciliation between the bases of reporting.
  2. Consolidation – This consolidated future-oriented statement of operations includes the transactions of the Employment Insurance 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. Revenues – Revenues are presented on the accrual basis:
    • Employment Insurance (EI) premiums are recognized as revenue in the period in which they are earned.
    • Interest revenues on student loans are recognized in the year they are earned. Interest is not recorded on impaired loans.
    • Recoveries of Canada Pension Plan 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.
  4. 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 statement of operations.
    • 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.
  5. 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.
  6. Canada Student Loans – The allowances for bad debts on Direct Loans and on the Repayment Assistance Plan (RAP) for Canada Student Loans are calculated based on rates determined according to an actuarial estimate. The allowances for bad debts on Guaranteed and Risk-Shared Loans are 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.
  7. 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:

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 not amortized until they become available for use.

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5. Parliamentary Authorities

HRSDC receives most of its funding through annual Parliamentary authorities. Items recognized in the future-oriented consolidated statement of operations and the future-oriented 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 Employment Insurance 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:

  1. Authorities requested:
     
    Estimated
    2011    		 Forecast
    2012
    (in thousands of dollars)
    Authorities requested
    Vote 1 – Operating expenditures 765,916 701,267
    Vote 5 – Grants and contributions 2,179,343 1,902,449
    Vote 7 – Debt Write Off 149,542 -
    Statutory amounts 43,974,789 42,971,410
    Forecast authorities available 47,069,590 45,575,126

    Forecast authorities requested for the year ending March 31, 2012 are based on the planned spending amounts presented in the 2011-2012 RPP. Estimated authorities requested for the year ending March 31, 2011 include amounts presented in the 2010-2011 Main Estimates and Supplementary Estimates (A), (B) and (C).

  2. Reconciliation of net cost of operations to requested authorities:
     
    Estimated
    2011    		 Forecast
    2012
    (in thousands of dollars)
    Net cost of operations 48,102,634 46,950,022
    Adjustments for items affecting net cost of operations but not affecting authorities:
    Bad debts (excluding EI bad debts) (230,281) (382,418)
    Refunds of program expenses 55,413 55,413
    Revenue not available for spending 404,237 506,742
    Allowance for forgiveness of Canada Student Loans (41,123) (38,055)
    Amortization of tangible capital assets (56,594) (53,720)
    Increase in allowance for alternative payments for non-participating provinces to CSL (167,075) (167,194)
    Net EI transactions (988,482) (1,299,875)
    Services provided without charge by other government departments (Note 7) (48,760) (44,362)
    Increase in accrued liabilities and other adjustments (30,786) (24,164)
    46,999,183 45,502,389
    Adjustments for items not affecting net cost of operations but affecting authorities:
    Acquisitions of tangible capital assets in-house developed 70,407 72,737
    Forecast authorities available 47,069,590 45,575,126
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6. 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 forecast expenses are $217.3 million in 2010-2011 and $225.9 million in 2011-2012, which represents approximately 1.9 times 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, estimated as at March 31, is as follows:
     
    Estimated Results
    2011    		 Forecast
    2012
    (in thousands of dollars)
    Accrued benefit obligation, beginning of year 310,625 309,939
    Expense for the year 37,635 10,045
    Expected benefits payments during the year (38,321) (39,777)
    309,939 280,207
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7. 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.

HRSDC receives and provides common services which are 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 is forecasted to receive 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 recognized in the HRSDC's consolidated future-oriented statement of operations as follows:

     
    Estimated Results
    2011    		 Forecast
    2012
    (in thousands of dollars)
    Employers' contribution to the health and dental insurance plans paid by Treasury Board Secretariat 44,460 39,234
    Legal services provided by Justice Canada 4,300 5,128
    48,760 44,362

    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 future-oriented statement of operations.

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

    HRSDC is forecasted to provide services without charge to other government departments, related to the provision of workers' compensation services, in the amount of $30.1 million in 2010-2011 and $30.9 million in 2011-2012.

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8. Segmented information

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 4. The following table presents the forecasted expenses and revenues for the main program activities, by major object of expenses and by major type of revenues. The segment future-oriented results for the period are as follows:

Table: Segmented information

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Date Modified:
2012-04-16