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TABLE 13: Human Resources and Social Development Canada Financial Statements for the year ended March 31, 2008

Human Resources and Social Development Canada

Financial Statements (Unaudited)
for the year ended March 31, 2008

Human Resources and Social Development Canada
Management Responsibility for unaudited Financial Statements

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2008 and all information contained in these unaudited financial statements rests with Human Resources and Social Development Canada (HRSDC) management. These financial statements have been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Some of the information in the financial statements is based on management's best estimates and judgments 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 to the Public Accounts of Canada and included in HRSDC's Departmental Performance Report is consistent with these financial statements.

Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, assets are safeguarded and transactions are in accordance with the Financial Administration Act, executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the organisation.

Management is also supported and assisted by programs of internal audit and evaluation services and audit committees. The HRSDC Management Audit and Evaluation Committee (MAEC) is a management committee that provides advice and guidance to the Deputy Minister on the results-driven accountability system of the department. The key responsibility of the MAEC is to exercise active supervision of core areas of departmental control and accountability. Also, Service Canada's Audit & Evaluation Committee (AEC) provides assurance on all key aspects of Service Canada's control frameworks and practices, the assessment of the effectiveness of its service delivery, and the relevance and appropriateness of the information used to support decision-making and reporting. The Office of the Auditor General has free and full access to the MAEC and AEC.

The financial statements of HRSDC have not been audited.

September 11, 2008

 

Human Resources and Social Development Canada
Statement of Operations (Unaudited)
For the Year Ended March 31

	2008	2007
	(in thousands of dollars)
Expenses (Note 4)
Social Investment	32,386,363	30,683,559
Labour Market	16,541,759	16,298,741
Children and Families	2,483,591	2,434,741
Learning	1,542,810	1,353,955
Seamless, Citizen-Centred Service	494,919	437,026
Integrity	171,549	199,152
Labour	147,627	147,186
Workplace Skills	131,496	86,785
Housing and Homelessness	116,757	171,989
Policy, Research and Communication	36,484	62,689
Collaborative, Networked Government Service	3,375	55,425
Total expenses	54,056,730	51,931,248
Revenues (Note 5)
Labour Market	18,906,696	19,129,307
Learning	576,896	498,281
Integrity	155,681	157,752
Seamless, Citizen-Centred Service	73,872	71,283
Social Investment	47,185	48,284
Policy, Research and Communication	2,683	2,632
Labour	2,340	2,239
Housing and Homelessness	677	1
Collaborative, Networked Government Service	26	-
Workplace Skills	23	-
Children and Families	9	-
Total revenues	19,766,088	19,909,779
Net cost of operations	34,290,642	32,021,469

The accompanying notes form an integral part of these financial statements

 

Human Resources and Social Development Canada
Statement of Financial Position (Unaudited)
At March 31

	2008	2007
	(in thousands of dollars)
Assets
Financial assets
Accounts receivable and advances (Note 6)	3,406,440	3,714,865
Canada Student Loans (Note 7)	8,746,860	7,960,945
Total financial assets	12,153,300	11,675,810
Non-financial assets
Prepaid expenses (Note 8)	17,769	16,573
Tangible capital assets (Note 9)	184,902	138,385
Total non-financial assets	202,671	154,958
Total	12,355,971	11,830,768
Liabilities
Accounts payable and accrued liabilities (Note 10)	1,869,120	1,238,732
Vacation pay and compensatory leave	65,991	53,068
Employee severance benefits (Note 11)	300,198	298,940
Lease obligations for tangible capital assets (Note 12)	1,424	-
Due to Canada Pension Plan (Note 13)	106,392	53,584
Designated Amount Fund - Trust Account (Note 14)	637,650	-
Government Annuities Account (Note 15)	292,987	319,295
Other liabilities (Note 16)	59,197	45,669
Total liabilities	3,332,959	2,009,288
Equity of Canada (Note 17)	9,023,012	9,821,480
Total	12,355,971	11,830,768

Contingent liabilities (Note 19)
Contractual obligations (Note 20)
Subsequent event (Note 22)

The accompanying notes form an integral part of these financial statements

 

Human Resources and Social Development Canada
Statement of Equity of Canada (Unaudited)
At March 31

	2008	2007
	(in thousands of dollars)
Equity of Canada, beginning of year	9,821,480	9,528,209
Transfer of opening balance to the Designated Account Fund (Note 14)	(1,817,392)	-
Equity of Canada after opening balance adjustment	8,004,088	9,528,209
Net cost of operations	(34,290,642)	(32,021,469)
Current year appropriations used (Note 3)	40,420,467	36,830,046
Revenue not available for spending	(780,939)	(667,361)
Change in net position in the Consolidated Revenue Fund (Note 3)	(4,365,783)	(3,879,559)
Services provided without charge by other government departments (Note 21)	35,821	34,746
Change in equity due to government reorganization (Note 18)	-	(3,132)
Equity of Canada, end of year (Note 17)	9,023,012	9,821,480

The accompanying notes form an integral part of these financial statements

 

Human Resources and Social Development Canada
Statement of Cash Flow (Unaudited)
For the Year Ended March 31

	2008	2007
	(in thousands of dollars)
Operating activities
Net cost of operations	34,290,642	32,021,469
Non-cash items:
Amortization of tangible capital assets	(50,819)	(61,054)
Services provided without charge by other government departments (Note 21)	(35,821)	(34,746)
Adjustments to tangible capital assets	(1,650)	(6,116)
Net loss on disposal of tangible capital assets	(35)	(249)
Variations in Statement of Financial Position:
Decrease in accounts receivable and advances	(308,425)	(647,748)
Increase in Canada Student Loans	785,915	932,880
Increase (decrease) in prepaid expenses	1,196	(6,768)
Decrease (increase) in liabilities	(1,323,671)	42,315
Transfer of opening balance to the Designated Amount Fund (Note 14)	1,817,392	-
Cash used by operating activities	35,174,724	32,239,983
Capital investment activities
Acquisitions of tangible capital assets	99,050	43,214
Proceeds from dispositions of tangible capital assets	(29)	(71)
Cash used by capital investment activities	99,021	43,143
Financing activities
Net cash provided by Government of Canada	35,273,745	32,283,126

The accompanying notes form an integral part of these financial statements

Human Resources and Social Development Canada
Notes to the Financial Statements (Unaudited)

1. Authority and objectives

The Department of Human Resources and Social Development Canada (HRSDC) 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.

HRSDC works to improve the standard of living and the quality of life of all Canadians by promoting a highly skilled and mobile workforce, as well as an efficient and inclusive labour market. It supports human capital development, labour market development and is dedicated to establishing a culture of life long learning for Canadians.

Service Canada (SC) is a branch of HRSDC and is the public's primary access point to many Government of Canada programs and services, providing better, one-stop service to more Canadians in more communities. SC will continue to bring federal services and benefits together making it easier for Canadians to receive more of the help they need in one place. SC integrates a range of services from a number of federal departments to form a single service delivery network.

HRSDC operates under a number of Acts and Regulations: Department of Human Resources and Skills Development Act, Old Age Security Act and Regulations, Employment Insurance Act and Regulations, Government Annuities Act, Canada Pension Plan Act and Regulations, Canada Student Financial Assistance Act and Regulations, Canada Student Loans Act and Regulations, Corporations and Labour Unions Returns Act, Section 16, and Regulations, Fair Wages and Hours of Labour Act and Regulations, Family Orders and Agreements Enforcement Assistance Act, Federal-Provincial Fiscal Arrangements Act, Status of the Artist Act, Part II and Regulations, Vocational Rehabilitation of Disabled Persons Act, Wages Liability Act, Canada Labour Code and Regulations, Employment Equity Act and Regulations, Labour Adjustment Benefits Act and Universal Child Care Benefit Act.

Human Resources and Social Development Canada achieves its objectives under eleven major programs:

Social Investment
Provides Canadians with pensions and benefits for retirement, death and disability through the Old Age Security Act and the Canada Pension Plan. It also includes Social Investment programs, policies and grants and contributions designed to ensure that children, families, seniors, communities and people with disabilities are provided with the knowledge, information and opportunities to move forward with their own solutions to social and economic challenge.

Labour Market
Comprised of the Employment Insurance and Labour Market Programs, Employment Insurance programs promote individual well being, economic stability, and a flexible labour market by providing temporary income support to unemployed workers who qualify under Part I of the Employment Insurance Act. Employment Insurance encompasses a wide range of benefits to address the needs of workers and the labour market, including Canadians who are sick, pregnant, or caring for a newborn or adopted child, as well as those who must care for a family member who is seriously ill with a significant risk of death.

Labour Market Programs provide programs and services that are funded from Departmental Reference Levels and for those programs established under Part II of the Employment Insurance Act the Employment Insurance Account. These enable Canadians, including unemployed adults and targeted groups, such as youth and Aboriginal Peoples, to develop their skills and encourage them to invest in themselves and become self-reliant and more adaptable to labour market changes.

Children and Families
Provides support to families to ensure all children have the best possible start in life; that parents have choice in childcare, to ensure the needs of those who provide care to loved ones are taken into account and that families' economic security is sustained. This activity also undertakes specific initiatives supported by multilateral agreements between the Federal Government and Provinces and Territories through programs such as the Canada's Universal Child Care Plan, the National Child Benefit, and Multilateral Framework on Early Learning and Child Care.

Learning
Assists Canadians to acquire the education and skills that will enable them to participate more fully in a knowledge-based economy and society. In doing so, the department works in close partnership with the provinces and territories, voluntary sector, financial institutions, service providers and other key stakeholders to increase awareness of and access to lifelong learning and literacy opportunities by reducing financial and non-financial barriers for today's and tomorrow's learners.

Seamless, Citizen-Centred Service
Develops service strategies, policies and research and delivers one-stop, easy-to-access, personalized services across integrated delivery channels - phone, Internet, and in-person - while ensuring needs, expectations, and priorities of citizens and communities are at the centre of the design and delivery of services and that the information gathered through service delivery about citizen and community needs informs the policy, program and service delivery development process.

Integrity
Enhances and strengthens the integrity of programs to ensure that the right person or organization receives the right service or benefit at the right time, and for the intended purpose. It implements the Social Insurance Number and the Social Insurance Registry as the foundation for a safe and secure common identifier, develops integrity risk management strategies that will address operational risk and lead to the reduction of payment errors, and processes grants and contributions, individual benefits and mail service requests.

Labour
Promotes and sustains stable industrial relations and a safe, fair, healthy, equitable and productive workplace within the federal labour jurisdiction. It collects and disseminates labour and workplace information, represents Canada at international labour activities, fosters constructive labour-management relationships and ensures that minimum labour standards and occupational health and safety protections are enforced.

Workplace Skills
Identifies, addresses and promotes workplace skills development through Workplace Partnerships, in collaboration with industry partners and stakeholders. Workplace Skills improves immigrant integration outcomes through Foreign Workers and Immigrants such as Foreign Credential Recognition, the Immigration Portal, and the Foreign Worker Program. Workplace Skills also develops and disseminates knowledge and information, which is vital to inform a well-functioning labour market through Skills and Labour Market Information, including National Occupational Classification, Essential Skills, and Labour Market Information.

Housing and Homelessness
Provides programs and services that assist communities in helping homeless individuals and families as well as those at risk of homelessness move towards self-sufficiency, thereby contributing to society and the economy. This is accomplished through partnerships with all levels of government, the voluntary and private sectors, foundations, faith-based communities and unions.

Policy, Research and Communication
Provides strategic policy leadership by promoting key human resources and social development policies of the Government of Canada, by developing and implementing key Departmental frameworks and strategies, and by engaging and collaborating with our partners and Canadians through public involvement and by advancing knowledge development.

Collaborative, Networked Government Service
Implements a government-wide, collaborative, networked business approach to delivering citizen-centred service to Canadians by working with other federal departments and agencies, other levels of government, and community partners, sharing information, adopting interoperable systems and infrastructures, providing secure management of citizen's personal information and respect of their privacy, and increasing the accuracy of the Social Insurance Registry through more timely and complete updates with vital statistics organizations.

2. Summary of significant accounting policies

The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Parliamentary appropriations - HRSDC is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the department do not parallel financial reporting according to generally accepted accounting principles as appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.

(b) 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 federal government.

(c) Change in net position in the Consolidated Revenue Fund - Represents the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non- respendable revenue recorded by the department. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

(d) Revenues:

• Employment Insurance (EI) Premiums are recognized as revenue in the period in which they are earned. EI Premiums earned in the period are measured from amounts assessed by the Canada Revenue Agency (CRA) and from estimates of amounts not assessed based on cash received. 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.
• Recoveries of Canada Pension Plan administration costs are recognized based on the services provided in the year.
• Other revenues are accounted for in the year in which the underlying transaction or event occurred that gave rise to the revenues.

(e) Expenses - Expenses are recorded on the accrual basis:

• Grants are recognized in the year in which the conditions for payment are met. In the case of grants that 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 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.
• Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
• Services that are provided without charge by other federal government departments for the employer's contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated costs.

(f) Employee future benefits:

• Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. HRSDC 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 as provided for 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.

(g) Accounts receivable and advances -Accounts receivable and advances are stated at amounts that are expected to be ultimately realized. A provision is made for accounts receivable where recovery is considered uncertain.

(h) Canada Student Loans - Loans are recorded at original cost plus accrued interest receivable less reimbursements and valuation allowances. Interest revenue is accrued in the period earned for loans in good standing. Interest is not accrued on loans considered unrecoverable. An allowance is recorded for bad debts and debt reduction in repayment (DRR) for Canada Student Loans. The allowance is calculated using actuarial estimates that reflect the age of the accounts and their performance status.

(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 an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(j) 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. Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the asset as follows:

Asset Class	Amortization period
Machinery and equipment	5 years
Informatics hardware	5 years
Informatics software	3-5 years
Other equipment and furniture	5 years
Motor vehicles	5 years
Capital leases	Term of the lease
Leasehold improvements	Useful life of the improvements
Assets under construction	Once in service, in accordance with asset type

(k) Measurement uncertainty - The preparation of these financial statements in accordance with the Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the 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 allowances for doubtful accounts, the contingent liabilities, the liability for employee severance benefits, the EI premiums, the OAS benefit repayments and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. These estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary appropriations

HRSDC receives most of its operating funding through annual Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, HRSDC has different net costs of operations for the year on a government funding basis than on an accrual accounting basis. Furthermore, as a consolidated specified purpose account, the Employment Insurance (EI) account expenses and revenues recognized in HRSDC's statement of operations do not affect Parliamentary appropriations. The differences are reconciled in the following tables:

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

	2008	2007
	(in thousands of dollars)
Net cost of operations	34,290,642	32,021,469
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (less):
Net EI transactions (Note 17)	2,834,596	3,302,393
Services provided without charge by other government departments (Note 21)	(35,821)	(34,746)
Amortization	(50,819)	(61,054)
Bad debts (excluding EI bad debts)	(414,609)	(417,289)
Adjustments to grants and contributions	(36,204)	17,177
Refunds of program expenses	39,678	56,306
Justice Canada legal fees	-	(6,298)
Net loss on disposal of tangible capital assets	(35)	(249)
Revenues transferred under net voted authority	(2,978)	-
Revenues not respendable by the department	780,939	667,361
Decrease in prepaid expenses	(973)	(1,582)
Reclassification of tangible capital assets	(1,657)	5
Transfer of opening balance to the Designated Amount Fund (Note 14)	1,817,392	-
Decrease of allowance for loan guarantees and other allowances	7,630	9,229
Decrease (increase) in vacation pay and compensatory leave	(12,923)	4,271
Increase of severance pay accrual	(1,258)	(6,594)
	39,213,600	35,550,399
Adjustments for items not affecting net cost of operations but affecting appropriations:
Add (less):
Increase in prepaid expenses	1,728	973
Tangible capital assets acquisitions funded by current year appropriations	97,537	43,214
Canada Student Loans disbursed	1,099,489	1,231,928
Debt reduction and forgiveness of Canada Student Loans	8,023	3,504
Capital leases repayments	90	28
Current year appropriations used	40,420,467	36,830,046

(b) Appropriations provided and used:

	2008	2007
	(in thousands of dollars)
Vote 1 - Operating expenditures	2,531,434	655,567
Vote 5 - Grants and contributions	1,240,274	1,797,801
Vote 7 - Debt write-offs	407	424
Statutory amounts
Old Age Security	31,954,677	30,284,055
Universal Child Care Benefit	2,474,298	1,784,359
Canada Student loans	1,099,489	1,231,928
Other	1,363,641	1,884,880
	40,664,220	37,639,014
Less:
Available for use in subsequent years	(69)	(111)
Lapsed appropriations
Operating	(30,671)	(42,642)
Grants and contributions	(213,001)	(766,058)
Debt write-offs	(12)	(88)
Statutory	-	(69)
Current year appropriations used	40,420,467	36,830,046

(c) Reconciliation of net cash provided by Government to current year appropriations used:

	2008	2007
	(in thousands of dollars)
Net cash provided by Government	35,273,745	32,283,126
Revenue not available for spending by the department	780,939	667,361
	36,054,684	32,950,487
Change in net position in the Consolidated Revenue Fund:
Decrease in accounts receivable and advances	308,425	647,748
Increase in liabilities (other than the Canada Pension Plan)	1,270,863	54,952
Increase (decrease) in Canada Pension Plan	52,808	(97,267)
Net EI transactions (Note 17)	2,834,596	3,302,393
Other	(100,909)	(28,267)
	4,365,783	3,879,559
Current year appropriations used	40,420,467	36,830,046

4. Expenses

	2008	2007
	(in thousands of dollars)
Benefits and transfer payments
Individuals	35,324,453	32,786,425
EI benefits and support measures	14,292,553	14,077,937
Non-profit organizations	675,433	694,845
Other levels of government within Canada	401,963	1,026,411
Industry	17,539	30,367
Other countries and international organizations	2,461	2,645
Total transfer payments	50,714,402	48,618,630
Operating
Salaries and benefits	1,687,236	1,719,636
Professional and special services	487,412	421,227
Bad debts on Canada Student Loans	394,943	409,175
Administration costs related to EI	220,701	229,259
Accommodations	174,735	170,729
Bad debts	100,758	107,085
Transportation	93,410	81,612
Amortization	50,819	61,054
Materials and supplies	42,136	22,663
Communications services	41,850	41,351
Repair and maintenance	35,418	34,351
Other	12,910	14,476
Total operating expenses	3,342,328	3,312,618
Total expenses	54,056,730	51,931,248

The operating expenditures of HRSDC include the consolidated expenditures of the EI account, which amount to $1,768.6 million ($1,736.6 million in 2007).

5. Revenues

	2008	2007
	(in thousands of dollars)
Employment Insurance account:
Employment Insurance (EI) premiums	16,877,137	17,109,171
Interest on the balance of the EI account	1,926,315	1,912,249
Penalties and interest on EI receivables	92,261	95,550
Subtotal EI revenues	18,895,713	19,116,970
Interest on Canada Student Loans	575,884	497,421
Recovery of Canada Pension Plan administration costs	275,146	278,911
Other revenues	19,345	16,477
Total revenues	19,766,088	19,909,779

6. Accounts receivable and advances

	2008	2007
	(in thousands of dollars)
Accounts receivable from other federal government departments and agencies:
EI premiums and benefit repayments receivable from the Canada Revenue Agency	1,297,779	1,253,655
Old Age Security benefit repayments receivable from the Canada Revenue Agency	963,097	1,087,336
Other	152,640	385,001
	2,413,516	2,725,992
Accounts receivable external to the Government:
EI overpayments to be recovered	508,750	481,792
EI penalties	168,466	172,741
Accrued interest on loans receivable	462,934	443,893
Other	637,235	594,051
	1,777,385	1,692,477
Total accounts receivable	4,190,901	4,418,469
Less: Allowance for doubtful accounts on external accounts receivable	(797,652)	(716,737)
Net accounts receivable	3,393,249	3,701,732
Advances to Provincial Workers Compensation	13,080	13,013
Advances to employees	111	120
Total accounts receivable and advances	3,406,440	3,714,865

7. Canada Student Loans

Loans issued on or after August 1, 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. Direct Loans and the Risk-Shared Loans under this act are provided interest-free to full-time students and afterwards bear interest at either a variable rate of 2.5% above the prime rate or a fixed rate of 5.0% above the prime rate. The maximum repayment period is 10 years and up to 15 years for borrowers that are eligible for a revision of terms.

Loans issued prior to August 1, 2000 include loans outstanding which are amounts related to student loans subrogated to the Crown under the Canada Student Loans Act and under the Canada Student Financial Assistance Act. The Guaranteed Loans under the Canada Student Loans Act are provided interest-free to full-time students and afterwards bear interest as set by the Canada Student Loans Program. The maximum repayment period is 10 years and up to 15 years for borrowers that are eligible for a revision of terms.

An allowance is recorded to provide for bad debts and debt reduction in repayment (DRR) for Canada Student Loans. The allowance rate is determined according to an actuarial estimate based on the age of the accounts and their performance status. For the year ended March 31, 2008, the rate was established at 14.8% (14.6% in 2007) of the disbursements incurred since the beginning of the program for bad debts and at 0.7% (0.7% in 2007) of the same amount for DRR. The allowance for bad debts is calculated on a monthly basis.

	2008	2007
	(in thousands of dollars)
Direct Loans	10,530,466	9,430,977
Guaranteed Loans	368,595	435,395
Risk-Shared Loans	170,906	201,720
Unamortized discount on defaulted risk-shared loans	(162,361)	(191,635)
Allowance for doubtful accounts	(2,160,746)	(1,915,512)
Total Canada Student Loans	8,746,860	7,960,945

Guaranteed and Risk-Shared loans write-offs for the year ended March 31, 2008 were $95.4 million ($159 million in 2007) and payments received while the account was in write-off status were $0.2 million ($0.3 million in 2007).

8. Prepaid expenses

Prepaid expenses are comprised of prepaid transfer payments and prepaid operational expenses. Prepaid transfer payments are made when it is necessary to meet program objectives and it is permitted under the related agreement. Prepayments of transfer payments do not exceed the expenditures expected to be incurred by the recipient during the first month of the following fiscal year. Prepaid operational expenses include postage, rent, maintenance fees, legal fees and other miscellaneous expenses.

	2008	2007
	(in thousands of dollars)
Transfer payments	16,041	15,600
Operational expenses	1,728	973
Total prepaid expenses	17,769	16,573

 

9. Tangible capital assets (in thousands of dollars)

	Cost				Accumulated amortization
Class	Opening balance	Acquisitions	Disposal, write-offs and adjustments	Closing balance	Opening balance	Amortization	Disposal, write-offs and adjustments	Closing balance	2008 Net book value	2007 Net book value
Machinery & equipment	2,324	54	(14)	2,364	1,747	245	(14)	1,978	386	577
Informatics hardware	188,168	8,499	(2,485)	194,182	170,367	7,592	(1,610)	176,349	17,833	17,801
Informatics software	162,373	47,048	(767)	208,654	114,921	23,871	—	138,792	69,862	47,452
Other equipment & furniture	8,688	404	(463)	8,629	5,894	942	(379)	6,457	2,172	2,794
Motor vehicles	7,236	248	(223)	7,261	5,684	736	(235)	6,185	1,076	1,552
Capital lease - office equipment	—	1,513	—	1,513	—	107	—	107	1,406	—
Capital lease - other equipment	1,136	—	(823)	313	1,136	—	(823)	313	—	—
Assets under construction for in-house developed software	23,534	29,510	—	53,044	—	—	—	—	53,044	23,534
Leasehold improvements	155,069	11,774	—	166,843	110,394	17,326	—	127,720	39,123	44,675
Total tangible capital assets:	548,528	99,050	(4,775)	642,803	410,143	50,819	(3,061)	457,901	184,902	138,385

Amortization expense for the year ended March 31, 2008 is $50.8 million ($61.1 million in 2007).

10. Accounts payable and accrued liabilities

	2008	2007
	(in thousands of dollars)
Accounts payable and accrued liabilities to other federal government departments and agencies	1,018,893	299,487
Accounts payable and accrued liabilities to external parties	641,300	735,686
Accrued salaries and wages	103,559	92,890
Allowance for alternative payments for non-participating provinces to Canada Student Loans	76,949	78,835
Allowance for loan guarantees (Note 19)	21,649	29,279
Other payables and accrued liabilities	6,770	2,555
Total accounts payable and accrued liabilities	1,869,120	1,238,732

11. Employee benefits

(a) Pension benefits: The department's employees participate in the Public Service Pension 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 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 the department contribute to the cost of the Plan. The expense for the year ended March 31, 2008 amounts to $173.7 million ($167.7 million in 2007), which represents approximately 2.1 times the contributions by employees (2.2 in 2007). The department'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.

(b) Severance benefits: The department provides severance benefits to its employees based on eligibility, years of service and final salary. The severance benefit liability is based on a percentage provided by Treasury Board, applied to the eligible payroll as at March 31. Treasury Board determines the percentage based on an actuarial evaluation of the future liability for the entire government's eligible employees. The rate as at March 31, 2008 was 23.27% (23.64% at March 31, 2007). These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows:

	2008	2007
	(in thousands of dollars)
Accrued benefit obligation, beginning of year	298,940	292,346
Expense for the year	31,405	53,209
Benefits paid during the year	(30,147)	(46,615)
Accrued benefit obligation, end of year	300,198	298,940

12. Lease obligations for tangible capital assets

HRSDC has entered into agreements to rent office equipment under capital lease with a cost of $1.5 million and an accumulated amortization of $0.1 million as at March 31, 2008 (Note 9). As per the lease agreements, the obligations for the upcoming years include the following:

Maturing year	2008
	(in thousands of dollars)
2009	391
2010	391
2011	391
2012	372
2013 and thereafter	171
Total future minimum lease payments	1,716
Less: imputed interest (7 % to 10 %)	(292)
Balance of obligations under leased tangible capital assets	1,424

13. Due to Canada Pension Plan (CPP)

The Minister of HRSDC, on behalf of the Government of Canada, is responsible for the administration of the Canada Pension Plan. The financial activities of the Canada Pension Plan (the Plan) are not part of HRSDC's reporting entity because it is under joint control of the federal and the participating provincial governments. Established in 1965, the CPP operates in all parts of Canada, except in Quebec, which operates a comparable program.

The CPP account (the Account) was established in the accounts of Canada by the CPP Act to record the contributions, interests, pensions and benefits and operating expenses of the Plan. 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 Account. The detailed revenues, expenses, assets and liabilities are reported in the CPP distinct set of Consolidated Audited Financial Statements. HRSDC's financial statements reflect only the year-end liability which represents the balance of the CPP assets on deposit in the Consolidated Revenue Fund. For the 2008 fiscal year end that amount is $106.4 million ($53.6 million in 2007).

	2008	2007
	(in thousands of dollars)
Due to Canada Pension Plan, beginning of year	53,584	150,851
Receipts and other credits	52,116,823	59,563,344
Payments and other charges	(52,064,015)	(59,660,611)
Due to Canada Pension Plan, end of year	106,392	53,584

14. 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 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 Indian Residential Schools Resolution Canada and Human Resources and Social Development Canada, through the Service Canada initiative.

	2008
	(in thousands of dollars)
Designated Amount Fund, beginning of year	-
Transfer of opening balance	1,817,392
Receipts and other credits	19,524
Payments and other charges	(1,199,266)
Designated Amount Fund, end of year	637,650

15. 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, and 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.

	2008	2007
	(in thousands of dollars)
Government Annuities, beginning of year	319,295	347,337
Receipts and other credits	21,042	22,765
Payments and other charges	(47,350)	(50,807)
Government Annuities, end of year	292,987	319,295

16. Other liabilities

Labour Market Development Agreement - Ontario: HRSDC and the Government of Ontario (Ontario) entered into a Labour Market Development Agreement on January 1st, 2007 where the design and delivery of the active employment benefits and support measures have been devolved to the province. Funds received from Ontario to support interim administrative agreements are segregated and used specifically for that purpose.

Civil Service Insurance Fund: This account was established by the Civil Service Insurance Act, introduced to enable the Minister of Finance to contract with a person appointed to a permanent position in any branch of the public service for the payment of certain death benefits. No new contracts have been entered into since 1954, when the Supplementary Death Benefit Plan for the Public Service and Canadian Forces was introduced as part of the Public Service Superannuation Act and the Canadian Forces Superannuation Act, respectively. As of April 1st, 1997, HRSDC assumed responsibility for the administration and the actuarial valuation of the Civil Service Insurance Act.

Other liabilities: 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.

	2008	2007
	(in thousands of dollars)
Labour Market Development Agreement - Ontario	42,975	30,780
Civil Service Insurance Fund	5,966	6,133
Other liabilities	10,256	8,756
Total other liabilities	59,197	45,669

17. Equity of Canada

The department includes transactions of the Employment Insurance (EI) program in its revenues and expenses. The Employment Insurance Act and regulations requires that the employer and employee contributions and related revenue be segregated and that related expenses be charged against this revenue. The contributions towards the EI program can only be used for the purposes identified in the Employment Insurance Act. The Equity of Canada is the net result of the surplus coming from the EI Account being the "restricted equity" and the deficit coming from the departmental operations (other than EI) being the "unrestricted equity".

	2008	2007
	(in thousands of dollars)
Restricted Equity for EI, opening balance	54,118,655	50,816,262
Revenues under the EI program	18,895,713	19,116,970
Expenses under the EI program	(16,061,117)	(15,814,577)
	2,834,596	3,302,393
Restricted Equity for EI, closing balance	56,953,251	54,118,655
Unrestricted Equity	(47,930,239)	(44,297,175)
Equity of Canada	9,023,012	9,821,480

18. Government reorganization

On September 12, 2005 the Prime Minister announced a significant reorganization of government. Effective April 1, 2006 Public Works and Government Services Canada (PWGSC) transferred the Public Access Programs which includes the following four areas: Canada Site, Publiservice, Canada Enquiry Centre, and Gateways and Clusters; to the department under the Service Canada initiative. The net impact of the transfer of the assets and the liabilities was a reduction of $3.1 million of the equity as at April 1, 2006.

19. Contingent Liabilities

(a) Claims and litigation

Two legal proceedings have been filed against Her Majesty the Queen contesting on substantially similar grounds, the constitutional validity of parts of the Employment Insurance Act. In particular, certain provisions relating to the setting of premiums and the size of the accumulated surplus in the EI Account are being challenged. The government won the case at trial and the appeal filed by two Unions. In April 2007, the Supreme Court of Canada granted the Unions' leave to appeal and a hearing was held on May 13, 2008 - a final decision is not expected before the fall of 2008.

In addition to the aforementioned, other claims, litigations and grievances have been made against the department in the normal course of operations. 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 financial statements. Based on Justice Canada's legal assessment of potential liability, no liability was recorded at March 31, 2008.

(b) Loan guarantees

A provision for losses on loan guarantees is recorded in the accounts 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 determined by taking into consideration historical loss experience and current economic conditions. The increase or decrease in the allowance for loan losses between years is recorded in operating expenses. As at March 31, 2008, HRSDC has guaranteed the following debt:

	Authorized Limit	Contingent Liability
	(in thousands of dollars)
Guaranteed loans under the Canada Student Loans Act	10,781,963	129,560

Under the Canada Student Loans Act, HRSDC guarantees loans made by banks, credit unions, and certain other companies to qualifying students. The terms of repayment are established on the basis of the attendance at a designated educational institution. As at March 31, 2008, HRSDC has an allowance for loan losses of $21.6 million for these guarantees ($29.2 million as at March 31, 2007).

20. Contractual Obligations

The nature of the HRSDC's activities can result in some large multi-year contracts and obligations whereby HRSDC will be obligated to make future payments when the goods/services are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:

	2009	2010	2011	2012	2013 and thereafter	Total
	(in thousands of dollars)
Transfer payments	972,245	209,936	36,914	81	-	1,219,176
Operating and Maintenance	120,000	68,000	63,000	52,000	3,000	306,000
Total contractual obligations	1,092,245	277,936	99,914	52,081	3,000	1,525,176

21. Related party transactions

HRSDC is related in terms of common ownership to all Government of Canada departments, agencies and Crown Corporations. The department enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the department received services that were obtained without charge from other federal government departments as presented in part (a).

(a) Services provided without charge:

During the year, HRSDC received services without charge from other federal government departments. These services include the employers' contribution to the health and dental insurance plans and legal fees. These services without charge have been recognized in the department's statement of operations as follows:

	2008	2007
	(in thousands of dollars)
Employers' contributions to the health and dental insurance plans paid by Treasury Board Secretariat	32,107	29,600
Legal services provided by Justice Canada	3,714	5,146
Total services provided without charge	35,821	34,746

The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these services on behalf of all without charge. The costs of these services, which include 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 as an expense in the department's Statement of Operations.

(b) Agreements with other federal government departments:

HRSDC, through the Service Canada (SC) initiative, 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. As of March 31, 2008, SC had entered into agreements with the following departments: Agriculture and Agri-Food Canada, Citizenship and Immigration Canada, Canada Border Services Agency, Public Works and Government Services Canada, Passport Canada, Transport Canada, Veterans Affairs Canada, Department of National Defence, Public Service Commission, Royal Canadian Mounted Police, Canadian Heritage, Office of Indian Residential Schools Resolutions Canada, Department of Fisheries and Oceans and Canada Revenue Agency.

22. Subsequent event

The legislation to create the Canada Employment Insurance Financing Board came into force on June 20, 2008. The mandate of the Board is to manage a financial reserve and to set the Employment Insurance premium rate.

The Canada Employment Insurance Financing Board's specific responsibilities are: managing a separate EI account where any excess premiums from a given year will be held and invested until they are used to reduce premium rates in subsequent years; implementing an improved EI premium rate-setting mechanism that will ensure that EI revenues and expenditures break even over time and contribute to the relative stability of premium rates by limiting year to year changes in EI premiums to 15 cents; and maintaining a $2 billion cash reserve as a contingency fund that will support relative premium rate stability.

As such, the responsibilities of the new Board will pertain only to the financing of the EI program. The Government of Canada and the existing EI Commission will continue to have full responsibility related to EI benefits and program delivery, including eligibility and benefit levels.

23. Comparative information

Comparative figures have been reclassified to conform to the current year's presentation.

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