Health Canada Quarterly Financial Report - For the quarter ended December 31, 2020

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. The accompanying Statement of Authorities includes the Department's spending authorities granted by Parliament, and those used by the Department consistent with the Main Estimates and Supplementary Estimates for the 2020-2021 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

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

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

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 Main Estimates, Supplementary Estimates A and Supplementary Estimates B for fiscal year 2020-2021, as well as budget adjustments approved by Treasury Board up to December 31, 2020.

A. Significant Changes to Authorities

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

Figure 1: Comparison of Net Budgetary Authorities as at June 30, September 30 and December 31 of Fiscal Years 2019-2020 and 2020-2021
Comparison of Net Budgetary Authorities as at June 30, September 30 and December 31 of Fiscal Years 2019-2020 and 2020-2021

Bar chart showing a comparison of net budgetary authorities as at June 30, September 30 and December 31 of fiscal years 2019-2020 and 2020-2021 in millions of dollars.

2019-2020 Authorities available as at June 30 = 2,482; 2019-2020 Authorities available as at September 30 = 2,547; 2019-2020 Authorities available as at December 31 = 2,678; 2020-2021 Authorities available as at June 30 = 2,790; 2020-2021 Authorities available as at September 30 = 2,823; 2020-2021 Authorities available as at December 31 = 4,009.

The following table provides a comparison of total authorities available by vote at the end of the third quarter of the current and previous fiscal years.

Comparison of Authorities Available for Spending for the Year as at December 31 of Fiscal Years 2019-2020 and 2020-2021

Authorities available
(in millions of dollars)
2019-2020 2020-2021 Variance
Vote 1 - Operating expenditures 925 1,272 347
Vote 5 - Capital expenditures 23 21 (2)
Vote 10 - Grants and contributions 1,556 2,059 503
Statutory 174 657 483
Total authorities 2,678 4,009 1,331

Authorities available for spending in fiscal year 2020-2021 are $4,009 million at the end of the third quarter as compared with $2,678 million at the end of the third quarter of 2019-2020, representing a net increase of $1,331 million, or 50%. This increase is primarily attributable to the following:

The increases in authorities are partially offset by the following decreases:

The fluctuations in authorities available for spending are most notable in the following standard objects: Transfer payments; Utilities, materials and supplies; Professional and special services; Personnel; Other subsidies and payments; and Acquisition of machinery and equipment.

B. Significant Changes in Year-to-Date Expenditures

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

Figure 2: Comparison of Net Budgetary Authorities and Year-to-Date Expenditures for the Quarters Ended June 30, September 30 and December 31 of Fiscal Years 2019-2020 and 2020-2021
Comparison of Net Budgetary Authorities and Year-to-Date Expenditures for the Quarters Ended June 30, September 30 and December 31 of Fiscal Years 2019-2020 and 2020-2021

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 2019-2020 and 2020-2021 in millions of dollars.

2019-2020 Net budgetary authorities = 2,678; 2019-2020 Year-to-date expenditures to June 30 = 899; 2019-2020 Year-to-date expenditures to September 30 = 1,264; 2019-2020 Year-to-date expenditures to December 31 = 2,162; 2020-2021 Net budgetary authorities = 4,009; 2020-2021 Year-to-date expenditures to June 30 = 995; 2020-2021 Year-to-date expenditures to September 30 = 1,352; 2020-2021 Year-to-date expenditures to December 31 = 2,364.

The following table provides a comparison of year-to-date spending by vote at the end of the third quarter of the current and previous fiscal years.

Comparison of Year-to-Date Expenditures for the Quarter Ended December 31 of Fiscal Years 2019-2020 and 2020-2021

Year-to-date expenditures
(in millions of dollars)
2019-2020 2020-2021 Variance
Vote 1 - Operating expenditures 669 551 (118)
Vote 5 - Capital expenditures 9 6 (3)
Vote 10 - Grants and contributions 1,372 1,619 247
Statutory 112 188 76
Total year-to-date expenditures 2,162 2,364 202

At the end of the third quarter of 2020-2021, total budgetary expenditures were $2,364 million compared with $2,162 million reported for the same period of 2019-2020, representing an increase of $202 million or 9%.

Year-to-date net operating expenditures have decreased by approximately $118 million or 18% when compared to the third quarter of 2019-2020. The significant variances in operating expenditures are as follows:

There was an increase in Vote 10 - Grants and contributions year-to-date expenditures of $247 million or 18%, resulting from the following offsetting factors:

Statutory year-to-date expenditures have increased by $76 million or 68% from $112 million in 2019-2020 to $188 million in 2020-2021 that is mainly comprised of the following offsetting components:

C. Quarterly Variances

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

Figure 3: Comparison of Quarterly Expenditures for the Quarters Ended June 30, September 30 and December 31 of Fiscal Years 2019-2020 and 2020-2021
Comparison of Quarterly Expenditures for the Quarters Ended June 30, September 30 and December 31 of Fiscal Years 2019-2020 and 2020-2021

Bar chart showing a comparison of quarterly expenditures for the quarters ended June 30, September 30 and December 31 of fiscal years 2019-2020 and 2020-2021 in millions of dollars.

2019-2020 Expenditures for the quarter ended June 30 = 899; 2019-2020 Expenditures for the quarter ended September 30 = 366; 2019-2020 Expenditures for the quarter ended December 31 = 897; 2020-2021 Expenditures for the quarter ended June 30 = 995; 2020-2021 Expenditures for the quarter ended September 30 = 358; 2020-2021 Expenditures for the quarter ended December 31 = 1,011.

Expenditures in the third quarter of fiscal year 2020-2021 were $1,011 million compared with $897 million for the third quarter of 2019-2020, representing an increase of $114 million or 13% in quarterly spending.

The increase in quarterly spending is primarily attributable to:

Risks and Uncertainties

Health Canada is dedicated to enhancing the health and well-being of Canadians. It operates in a dynamic and complex environment, facing several challenges as it works to deliver results for Canadians. Its organizational environment is characterized by both internal and external drivers of change, which could potentially be disruptive to the Department's ability to achieve its objectives, for example: unforeseen health crises such as the 2019 coronavirus disease (COVID-19) pandemic; new innovative products, technologies, substances, foods, and emerging product categories; evolving relationships between various levels of government; scientific and technological change; and cyber security.

The Department monitors and responds to health concerns, originating at home and internationally, that affect the health and safety of Canadians. This includes events such as the COVID-19 outbreak, which continues to challenge Canadians and health systems across the country, adding pressure on health care resources. COVID-19 is having a dramatic impact on global supply chains, the speed at which we regulate products, organizational operations, the workforce, and business strategies. As the pandemic evolves rapidly, Health Canada continues to mobilize and leverage every resource and implement innovative methods to deliver on its mandate and minimize the long-lasting impacts of COVID-19 on Canadians' health and safety.

The COVID-19 pandemic has reminded everyone of the risks associated with major health events. Health Canada is working closely with the Public Health Agency of Canada, other organizations within the federal Health Portfolio, Provinces, Territories and other levels of government, Indigenous organizations, industry, health professionals and international regulatory counterparts, to contribute to the global response to this latest public health challenge.

Health Canada recognizes that successfully fulfilling its mandate is directly related to 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. Additionally, it can lead to more effective service delivery, better project management, an increase in value for money, and ultimately better results for Canadians.

As a result, the Department employs integrated risk management frameworks and tools, including a comprehensive and up-to-date Corporate Risk Profile, 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 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 long-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.

Program expenditures experience natural fluctuations from year to year depending on a variety of factors beyond program control (e.g., emerging health events such as the COVID-19 pandemic), thus creating risk. For example, since the start of the COVID-19 outbreak in Canada, the Chief Financial Officer Branch at Health Canada has been a strategic partner and enabler with regard to the Department's response to this public health crisis.

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. 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

A. Operations and Personnel

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

B. Programs

Funding related to the following new program/existing program changes in response to the COVID-19 pandemic was authorized during the quarter:

Funding to Support Medical Research

The Government of Canada has committed funding to ensure Canadians have access to the drugs they need to treat the symptoms of COVID-19.

Ensuring an Ongoing Effective Regulatory Response

Health Canada will receive $37.2 million over two years to support the Department's ongoing regulatory response to the pandemic. These investments will continue to facilitate timely access to safe drugs and medical devices that combat COVID-19, such as vaccines, treatments and diagnostic devices, and support effective compliance and enforcement.

Leading the Whole-of-Government Response

Health Canada and the Public Health Agency of Canada are continuing to provide national leadership to Canada's domestic response to the COVID-19 pandemic. This has included supporting increased strategy, integration and analytical capacity to support decision-making by the Minister of Health, the Health Portfolio and the Cabinet Committee on COVID-19, and informing the measured reopening of the economy and society through effective policy advice. As such, the Government of Canada committed $15.0 million to Health Canada to support the ongoing protection of the health and safety of Canadians, foster economic resilience during reopening and recovery, assist in maintaining domestic and international reputations and provide continuity in government operations.

Safe Restart Agreement

In July 2020, the Prime Minister announced the Safe Restart Agreement with the objective to ensure that Canada has the resources and information it needs to reopen the economy safely. As part of the Safe Restart Agreement, the Government of Canada has committed $303.4 million to Health Canada for testing-related activities, to support contact tracing activities, and to support data management.

Approved by:

Original signed by Stephen Lucas
Stephen Lucas
Deputy Minister
Ottawa, Canada
Date: February 26, 2021

Original signed by Edward de Sousa
Edward de Sousa
Acting Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: February 19, 2021

Statement of Authorities (unaudited)

Fiscal year 2020-2021 (in thousands of dollars)

Authority Total available for use for the year ending
March 31, 2021*
Used during the quarter ended December 31, 2020 Year-to-date used at quarter-end
Vote 1 - Operating expenditures 1,272,280 182,323 551,319
Vote 5 - Capital expenditures 21,307 4,860 5,801
Vote 10 - Grants and contributions 2,059,352 749,208 1,618,927
(S) Contributions to employee benefit plans 120,932 27,840 83,520
(S) Minister of Health - Salary and motor car allowance 89 22 67
(S) Collection Agency Fees 11 6 11
(S) Payment pursuant to section 24(1) of the Financial Administration Act 23 11 23
(S) Spending of proceeds from the disposal of surplus Crown assets 186 - -
(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 27,305 53,452
(S) Payments to support Canada's initial response to COVID-19 pursuant to the Public Health Events of National Concern Payments Act 4,952 1,605 4,508
(S) Payments for drugs, medical devices and virtual care pursuant to the Public Health Events of National Concern Payments Act 151,928 6,941 34,977
(S) Safe Restart Agreement 18,500 2,052 2,052
(S) Medical Research 08,372 9,199 9,199
Total authorities 4,009,395 1,011,372 2,363,856

* Includes only Authorities available for use and granted by Parliament at quarter end
(S) - Statutory Vote

Fiscal year 2019-2020 (in thousands of dollars)

Authority Total available for use for the year ending
March 31, 2020*
Used during the quarter ended
December 31, 2019
Year-to-date used at quarter-end
Vote 1 - Operating expenditures 925,358 226,783 668,426
Vote 5 - Capital expenditures 22,857 4,474 9,365
Vote 10 - Grants and contributions 1,556,438 620,892 1,371,751
(S) Contributions to employee benefit plans 111,200 26,399 79,196
(S) Minister of Health - Salary and motor car allowance 88 22 66
(S) Collection Agency Fees 23 5 23
(S) Spending of proceeds from the disposal of surplus Crown assets 119 - -
(S) Refunds of amounts credited to revenues in previous years 59 - 59
(S) Canada Health Infoway Inc. 10,131 - 10,131
(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 18,447 22,487
Total authorities 2,677,736 897,022 2,161,504

* Includes only Authorities available for use and granted by Parliament at quarter end
(S) - Statutory Vote

Departmental Budgetary Expenditures by Standard Object (unaudited)

Fiscal year 2020-2021 (in thousands of dollars)

Standard Object Planned expenditures for the year ending March 31, 2021 Expended during the quarter ended December 31, 2020 Year-to-date
used at
quarter-end
Expenditures:
Personnel 967,276 218,020 637,403
Transportation and communications 21,566 1,067 3,181
Information 28,022 10,333 29,022
Professional and special services 303,008 42,711 130,244
Rentals 16,516 5,942 11,928
Repair and maintenance 15,760 3,398 6,935
Utilities, materials and supplies 489,057 4,627 8,124
Acquisition of land, buildings and works 2,375 1,437 1,561
Acquisition of machinery and equipment 64,972 26,287 33,271
Transfer payments 2,259,352 749,219 1,618,950
Other subsidies and payments 10,334 1,255 6,258
Total gross budgetary expenditures 4,178,238 1,064,296 2,486,877
Less revenues netted against expenditures:
Rights and privileges 37,150 19,528 23,674
Services of a non-regulatory nature 30,896 7,055 21,779
Services of a regulatory nature 95,098 26,341 77,568
Other fees and charges 5,699 - -
Total revenues netted against expenditures 168,843 52,924 123,021
Total net budgetary expenditures 4,009,395 1,011,372 2,363,856

Fiscal year 2019-2020 (in thousands of dollars)

Standard Object Planned expenditures for the year ending March 31, 2020 Expended during the quarter ended December 31, 2019 Year-to-date used at quarter-end
Expenditures:
Personnel 899,077 241,882 609,424
Transportation and communications 26,035 5,216 11,215
Information 26,766 7,100 15,659
Professional and special services 148,529 37,104 96,741
Rentals 22,140 6,370 12,526
Repair and maintenance 17,846 4,260 8,063
Utilities, materials and supplies 29,024 4,930 11,453
Acquisition of land, buildings and works - 907 3,896
Acquisition of machinery and equipment 27,525 4,583 9,060
Transfer payments 1,566,569 620,892 1,381,881
Other subsidies and payments 73,847 803 96,011
Total gross budgetary expenditures 2,837,358 934,047 2,255,929
Less revenues netted against expenditures:
Rights and privileges 28,689 10,027 12,505
Services non-regulatory 30,386 5,737 18,907
Services regulatory 100,547 15,664 57,304
Services to other government departments - 5,597 5,709
Total revenues netted against expenditures 159,622 37,025 94,425
Total net budgetary expenditures 2,677,736 897,022 2,161,504
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