Health Canada Quarterly Financial Report - For the quarter ended December 31, 2016

Table of Contents

Introduction

Health Canada is the federal department responsible for helping Canadians maintain and improve their health. In keeping with the Department's commitment to making this country's population among the healthiest in the world as measured by longevity, lifestyle and effective use of the public health care system, its main responsibilities are as a regulator, a service provider, a catalyst for innovation, a funder, and an information provider. A summary of Health Canada's programs may be found in Part II of the Main Estimates. Health Canada administers the Canada Health Act which embodies national principles to ensure a universal and equitable publicly-funded health care system.

This quarterly financial report has been prepared by management as required by section 65.1 of the Financial Administration Act in the form and manner prescribed by the Treasury Board, and should be read in conjunction with the Main Estimates, Supplementary Estimates A, and Supplementary Estimates B.

This quarterly report has not been subject to an external audit or review.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting and using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities. The accompanying Statement of Authorities presents the spending authorities granted to Health Canada by Parliament and those used by the Department consistent with the Main Estimates and Supplementary Estimates for the 2016-2017 fiscal year.

The authority of Parliament is required before any money can be spent by the Government. Such authorities are given in the form of annually-approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

As part of the departmental performance reporting process, Health Canada prepares its annual departmental financial statements on a full accrual basis in accordance with Treasury Board accounting policies, which are based on Canadian public sector accounting standards. The spending authorities voted by Parliament remain on an expenditure basis.

Highlights of Fiscal Quarter and Fiscal Year to Date Results

This quarterly financial report reflects the results of the current fiscal period in comparison to the authorities provided in the combination of the Main Estimates, Supplementary Estimates A, and Supplementary Estimates B for fiscal year 2016-2017, as well as budget adjustments approved by Treasury Board up to December 31, 2016.

A. Significant Changes to Authorities

The following graph provides a comparison of net budgetary authorities available for spending for the year as at the end of each quarter of the current and previous fiscal years.

Comparison of Authorities Available for Spending for the Year as at June 30, September 30 and December 31 of Fiscal Years 2015-2016 and 2016-2017
(in millions of dollars)

Text equivalent

Comparison of Authorities Available for Spending for the Year as at June 30, September 30 and December 31 of Fiscal Years 2015-2016 and 2016-2017

Bar chart showing a comparison of authorities available for spending for the year as at June 30, September 30 and December 31 of fiscal years 2015-2016 and 2016-2017 in millions of dollars.

2015-2016 Authorities available as at June 30 = 3,734; 2015-2016 Authorities available as at September 30 = 3,798; 2015-2016 Authorities available as at December 31 = 3,897; 2016-2017 Authorities available as at June 30 = 3,960; 2016-2017 Authorities available as at September 30 = 4,011; 2016-2017 Authorities available as at December 31 = 4,236.

The following table provides a comparison of authorities by vote for the third quarter of the current and previous fiscal years.

Comparison of authorities by vote for the third quarter of 2015-2016 and 2016-2017
Authorities available (in millions of dollars) 2015-2016 2016-2017 Variance
Vote 1 – Operating expenditures 1,835 1,975 140
Vote 5 – Capital expenditures 35 37 2
Vote 10 – Grants and contributions 1,777 2,004 227
Statutory 250 220 (30)
Total authorities 3,897 4,236 339

Authorities available for spending in fiscal year 2016-2017 were $4,236 million at the end of the third quarter as compared with $3,897 million at the end of the third quarter of 2015-2016, representing a net increase of $339 million, or 8.7%. This increase is primarily attributable to the following:

  • $94.9 million increase for social infrastructure projects (Budget 2016);
  • $88.4 million increase to implement interim federal policy reforms related to Jordan's Principle – A Child-First Initiative;
  • $83.5 million increase for growth in First Nations and Inuit health programs and services;
  • $56.9 million increase for the Non-Insured Health Benefits program for First Nations and Inuit;
  • $17.0 million increase for the Canadian Foundation for Healthcare Improvement;
  • $16.9 million increase for the Implementation of the British Columbia Tripartite Framework Agreement on First Nation Health Governance;
  • $15.6 million increase for health programs for Aboriginal populations;
  • $12.7 million increase to maintain and upgrade federal infrastructure assets (Budget 2016); and,
  • $8.2 million increase to establish a Thalidomide Survivors Contribution program to provide financial and health support.

These increases are partially offset by the following decreases:

  • $36.3 million decrease in statutory spending authority for disbursements to Canada Health Infoway Inc.; and,
  • $13.1 million decrease in the department's Operating and Capital budget carry-forwards.

The fluctuations in authorities available for spending are most notable in the following standard objects: personnel; transportation and communications; utilities, materials and supplies; acquisition of land, buildings and works; acquisition of machinery and equipment; and transfer payments.

B. Significant Changes in Year to Date Expenditures

The following graph provides a comparison of net budgetary authorities and cumulative spending by quarter for the current and previous fiscal years.

Comparison of Net Budgetary Authorities and Year to Date Expenditures for the Quarters Ended June 30, September 30 and December 31 of Fiscal Years 2015-2016 and 2016-2017
(in millions of dollars)

Text equivalent

Comparison of Net Budgetary Authorities and Year to Date Expenditures for the Quarters Ended June 30, September 30 and December 31 of Fiscal Years 2015-2016 and 2016-2017

Bar chart showing a comparison of net budgetary authorities and year to date expenditures for the quarters ended June 30, September 30 and December 31 of fiscal years 2015-2016 and 2016-2017 in millions of dollars.

2015-2016 Net budgetary authorities = 3,897; 2015-2016 Year to date expenditures to June 30 = 1,033; 2015-2016 Year to date expenditures to September 30 = 1,935; 2015-2016 Year to date expenditures to December 31 = 2,884; 2016-2017 Net budgetary authorities = 4,236; 2016-2017 Year to date expenditures to June 30 = 1,216; 2016-2017 Year to date expenditures to September 30 = 2,059; 2016-2017 Year to date expenditures to December 31 = 3,055.

The following table provides a comparison of cumulative spending by vote for the third quarter of the current and previous fiscal years.

Comparison of Spending by Vote for the Quarter Ended December 31 of Fiscal Years 2015-2016 and 2016-2017
Year to date expenditures
(in millions of dollars)
2015-2016 2016-2017 Variance
Vote 1 – Operating expenditures 1,241 1,308 67
Vote 5 – Capital expenditures 12 6 (6)
Vote 10 – Grants and contributions 1,439 1,582 143
Statutory 192 159 (33)
Total year to date expenditures 2,884 3,055 171

At the end of the third quarter of 2016-2017, total budgetary expenditures were $3,055 million compared with $2,884 million reported for the same period of 2015-2016, representing an increase of $171 million or 5.9%.

Year to date net operating expenditures have increased by approximately $67 million or 5.4% when compared to the third quarter of 2015-2016. The significant variances in operating expenditures reported by standard object are as follows:

  • $23.3 million increase in professional and special services due to:
    • an increase in cost and of demand for medical professional services associated with the Non-Insured Health Benefits program; and,
    • changes to the legal services funding model, which has resulted in a variation to the timing of expenditures made to the Department of Justice;
  • $20.6 million increase in transportation and communication primarily as a result of increased transportation costs for nurses and patients associated with the Non-Insured Health Benefits program, which are demand-driven and can vary from year to year; and,
  • $20.1 million increase in utilities, materials and supplies due primarily to an increase in expenses for pharmaceutical and medical supplies which are demand-driven and can vary from year to year.

There was an increase in grants and contributions year to date expenditures of $143 million or 9.9%, primarily due to:

  • $110.3 million increase in disbursements for First Nations and Inuit health programs including:
    • support of Social Infrastructure;
    • Non-Insured Health Benefit expenditures which are primarily demand-driven and can vary from year to year; and,
    • Mental Wellness program;
  • $12.0 million increase for disbursements to the Canadian Foundation for Health Improvement;
  • $11.2 million increase for disbursements to the Brain Canada Foundation; and,
  • $9.0 million increase for disbursements to the Thalidomide Survivors Contribution Program.

Statutory year to date expenditures have decreased $33 million or 17.4% from $192 million in 2015-2016 to $159 million in 2016-2017, primarily due to a decrease in transfer payments made to Canada Health Infoway Inc. which are disbursed in accordance with the cash flow needs of that organization.

C. Quarterly Variances

The following graph presents a comparison of quarterly spending by quarter and by fiscal year.

Comparison of Quarterly Expenditures for the Quarters Ended June 30, September 30 and December 31 of Fiscal Years 2015-2016 and 2016-2017
(in millions of dollars)

Text equivalent

Comparison of Quarterly Expenditures for the Quarters Ended June 30, September 30 and December 31 of Fiscal Years 2015-2016 and 2016-2017

Bar chart showing a comparison of quarterly expenditures for the quarters ended June 30, September 30 and December 31 of fiscal years 2015-2016 and 2016-2017 in millions of dollars.

2015-2016 Expenditures for the quarter ended June 30 = 1,033; 2015-2016 Expenditures for the quarter ended September 30 = 902; 2015-2016 Expenditures for the quarter ended December 31 = 950; 2016-2017 Expenditures for the quarter ended June 30 = 1,216; 2016-2017 Expenditures for the quarter ended September 30 = 843; 2016-2017 Expenditures for the quarter ended December 31 = 995.

Expenditures in the third quarter of fiscal 2016-2017 were $995 million compared with $950 million for the third quarter of 2015-2016, representing an increase of $45 million or 4.8% in quarterly spending.

The increase in quarterly spending is due primarily to:

  • $12.7 million increase in transportation and communications resulting primarily from expenditures related to the Non-Insured Health Benefits program which are demand-driven and can vary from period to period;
  • $6.3 million increase in utilities, materials and supplies for pharmaceutical and medical supply costs resulting from increases in demand under the Non-Insured Health Benefits program; and,
  • $17.2 million increase in transfer payments related to the timing of disbursements for:
    • various First Nations and Inuit Health programs;
    • Brain Canada Foundation; and,
    • Official Languages Health Contribution Program.

Risks and Uncertainties

Health Canada is dedicated to enhancing the health and well-being of Canadians and operates in a dynamic and complex environment characterized by internal and external drivers of change which could potentially be disruptive to the Department's ability to achieve its objectives (e.g. new innovative products, technologies, substances, foods and emerging product categories, evolving relationships between First Nations and Inuit and various levels of government, unforeseen health crises, scientific and technological change, and cyber security).

Health Canada recognizes that its success in fulfilling its mandate is directly related to the effective management of risk. Sound risk management equips the Department to respond proactively to change and uncertainty by using risk-based information to support effective decision-making, resource allocation, and, ultimately, better results for Canadians. Additionally, it can lead to more effective service delivery, better project management, and an increase in value for money.

As a result, the Department employs integrated risk management tools, including the development of an annual Corporate Risk Profile and monitoring of risk management strategies, to proactively and systematically recognize, understand, accommodate and capitalize on new challenges and opportunities, with a focus on results. In addition, the Department has appropriate internal control systems in place, proportionate to the risks being managed.

Prudent management within a constrained fiscal environment and declining carry forwards, is required to manage potential impacts on departmental programs and services. Health Canada continues to manage through effective engagement across the Department, a sound governance structure, as well as through the use of longer-term planning. The Department's executive-level committee on Finance, Investment Planning and Transformation recommends overall direction for financial management and control, and ensures alignment of investments with departmental strategies and transformation initiatives. Each branch is required to have a multi-year financial management plan that has been reviewed by this committee to confirm that it has a plan in place to address the financial context.

Program expenditures experience natural fluctuations from year to year depending on a variety of factors beyond program control (e.g. drug pricing, location of provincial and territorial health services), thus creating risk. Growth in the Non-Insured Health Benefits program is based on 5% growth on actual (annual) expenditures from the prior fiscal year. Enhanced monitoring of expenditures is undertaken, including assessment of expenditures against projected spending as well as previous years' trends and available resources to manage these risks. Trend monitoring, cost management and planning are also in place and are reported regularly to senior management for decision making.

Significant Changes in Relation to Operations, Personnel and Programs

Mr. Pierre Sabourin was appointed to the position of Assistant Deputy Minister of the Health Products and Food Branch in October 2016.

There have been no other significant changes in relation to operations, personnel and programs during this quarter.

Approved by:

Original signed by Simon Kennedy
Simon Kennedy
Deputy Minister
Ottawa, Canada
Date: February 20, 2017

Original signed by Randy Larkin
Randy Larkin
Assistant Deputy Minister & Chief Financial Officer
Ottawa, Canada
Date: February 14, 2017

Statement of Authorities (Unaudited)

Fiscal year 2016-2017 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2017* Used during the quarter ended December 31, 2016 Year to date used at quarter-end
* Includes only Authorities available for use and granted by Parliament at quarter end
(S) – Statutory Vote
Vote 1 – Operating expenditures 1,974,784 492,663 1,308,465
Vote 5 – Capital expenditures 36,587 3,590 5,971
Vote 10 – Grants and contributions 2,003,665 456,627 1,581,663
(S) Contributions to employee benefit plans 130,109 31,341 94,023
(S) Minister of Health – Salary and motor car allowance 84 35 56
(S) Spending of proceeds from the disposal of surplus Crown assets 356 7 74
(S) Refunds of amounts credited to revenues in previous years 125 20 126
(S) Canada Health Infoway Inc. 37,878 - 37,878
(S) Collection agency fees 1 - 1
(S) Transfer payments in connection with the Budget Implementation Act 747 358 747
(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 10,810 25,644
Total authorities 4,235,799 995,451 3,054,648
 
Fiscal year 2015-2016 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2016* Used during the quarter ended December 31, 2015 Year to date used at quarter-end
* Includes only Authorities available for use and granted by Parliament at quarter end
(S) – Statutory Vote
Vote 1 – Operating expenditures 1,835,136 463,675 1,241,469
Vote 5 – Capital expenditures 34,629 6,609 11,626
Vote 10 – Grants and contributions 1,777,255 439,441 1,439,329
(S) Contributions to employee benefit plans 122,777 30,694 92,083
(S) Minister of Health – Salary and motor car allowance 82 7 48
(S) Spending of proceeds from the disposal of surplus Crown assets 516 5 24
(S) Refunds of amounts credited to revenues in previous years 302 102 302
(S) Canada Health Infoway Inc. 74,222 - 74,222
(S) Collection agency fees 6 4 6
(S) Court awards 13 - 13
(S) Transfer payments in connection with the Budget Implementation Act 712 269 713
(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 9,035 24,604
Total authorities 3,897,113 949,841 2,884,439

Departmental Budgetary Expenditures by Standard Object (Unaudited)

Fiscal year 2016-2017 (in thousands of dollars)
Standard Object Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended December 31, 2016 Year to date used at quarter-end
Expenditures:      
Personnel 909,742 234,128 633,354
Transportation and communications 300,619 72,943 175,293
Information 13,715 1,722 3,533
Professional and special services 544,106 124,245 338,819
Rentals 8,978 2,240 9,189
Repair and maintenance 24,247 2,815 7,787
Utilities, materials and supplies 640,244 141,649 394,395
Acquisition of land, buildings and works 24,773 1,041 1,648
Acquisition of machinery and equipment 11,760 11,701 26,945
Transfer payments 2,042,290 456,984 1,620,288
Other subsidies and payments 3,207 4,932 10,457
Total gross budgetary expenditures 4,523,681 1,054,400 3,221,708
Less revenues netted against expenditures:      
Rights and privileges 57,570 13,136 28,275
Services non-regulatory 170,447 34,524 106,508
Services regulatory 59,865 10,148 30,993
Services other government departments - 1,141 1,284
Total revenues netted against expenditures 287,882 58,949 167,060
Total net budgetary expenditures 4,235,799 995,451 3,054,648
 
Fiscal year 2015-2016 (in thousands of dollars)
Standard Object Planned expenditures for the year ending March 31, 2016 Expended during the quarter ended December 31, 2015 Year to date used at quarter-end
Expenditures:      
Personnel 879,176 234,430 633,912
Transportation and communications 267,358 60,232 154,664
Information 13,938 1,783 5,427
Professional and special services 534,041 121,309 315,790
Rentals 6,927 3,139 8,633
Repair and maintenance 20,774 4,242 9,344
Utilities, materials and supplies 558,125 135,393 374,251
Acquisition of land, buildings and works 1,375 3,552 7,648
Acquisition of machinery and equipment 33,254 10,145 24,462
Transfer payments 1,852,189 439,709 1,514,263
Other subsidies and payments 9,147 (103) 2,326
Total gross budgetary expenditures 4,176,304 1,013,831 3,050,720
Less revenues netted against expenditures:      
Rights and privileges 56,433 14,042 27,053
Services non-regulatory 164,033 38,946 107,187
Services regulatory 58,725 10,974 31,827
Services to other government departments - 28 214
Total revenues netted against expenditures 279,191 63,990 166,281
Total net budgetary expenditures 3,897,113 949,841 2,884,439
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