Health Canada Quarterly Financial Report - For the quarter ended December 31, 2022

Table of Contents

• Introduction
• Basis of Presentation
• Highlights of Fiscal Quarter and Fiscal Year-to-Date Results
• Risks and Uncertainties
• Significant Changes in Relation to Operations, Personnel and Programs
• Statement of Authorities (unaudited)
• Departmental Budgetary Expenditures by Standard Object (unaudited)

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. Health Canada administers the Canada Health Act which embodies national principles to ensure a universal and equitable publicly-funded health care system. A summary of Health Canada's programs may be found in Part II of the Main Estimates.

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 2022-23 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 2022-23, as well as budget adjustments approved by Treasury Board up to December 31, 2022.

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 - Text description

Bar chart showing a comparison of net budgetary authorities as at June 30, September 30 and December 31 of fiscal years 2021-22 and 2022-23 in millions of dollars.

2021-22 Authorities available as at June 30 = 4,869; 2021-22 Authorities available as at September 30 = 4,924; 2021-22 Authorities available as at December 31 = 5,530; 2022-23 Authorities available as at June 30 = 5,687; 2022-23 Authorities available as at September 30 = 5,758; 2022-23 Authorities available as at December 31 = 6,246.

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.

Authorities available for spending in fiscal year 2022-23 were $6,246 million at the end of the third quarter as compared with $5,530 million at the end of the third quarter of 2021-22, representing a net increase of $716 million, or 13%. This variance is primarily attributable to the following increases:

• $1,789.1 million in statutory funding for the procurement of additional rapid test kits (COVID-19);
• $606.9 million in funding to support long-term care, improved access to palliative care, and safe access to medical assistance in dying;
• $500.0 million in funding to support emergency measures related to the pandemic (COVID-19);
• $298.5 million in statutory funding for the Canada Dental Benefit program;
• $19.7 million increase in the Operating and Capital budget carry forwards compared to previous year;
• $12.4 million in funding to address the opioid crisis and substance use; and,
• $10.8 million in funding for the construction of Plasma Collection Sites.

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

• $1,002.7 million in funding for investments in long-term care (COVID-19);
• $386.0 million in Treasury Board Central Vote 5 funding to procure rapid test kits (COVID-19);
• $355.1 million in funding for the creation of a critical drug reserve in collaboration with provinces and territories to support access to drugs which treat COVID-19 symptoms for Canadians;
• $300.0 million in funding to strengthen Canada's Home and Community Care and Mental Health and Addiction Services Initiative;
• $198.0 million in funding for the Safe Restart Agreement for federal investments in testing, contact tracing and data management (COVID-19);
• $115.9 million in funding for drugs, medical devices and virtual care (COVID-19);
• $105.0 million in funding for Implementing a New Federal Framework for Legalization and Regulation of Cannabis; and,
• $79.5 million in funding for regulatory and operational functions and to support critical COVID-19 focused operations.

The fluctuations in authorities available for spending are most notable in the following standard objects: Utilities, materials and supplies; Transfer payments; Other subsidies and payments; Personnel; and Professional and special services. Fluctuations are also noted in authorities for revenues netted against expenditures for Rights and privileges.

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 - Text description

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 2021-22 and 2022-23 in millions of dollars.

2021-22 Net budgetary authorities = 5,530; 2021-22 Year-to-date expenditures to June 30 = 1,120; 2021-22 Year-to-date expenditures to September 30 = 1,695; 2021-22 Year-to-date expenditures to December 31 = 3,103; 2022-23 Net budgetary authorities = 6,246; 2022-23 Year-to-date expenditures to June 30 = 554; 2022-23 Year-to-date expenditures to September 30 = 1,376; 2022-23 Year-to-date expenditures to December 31 = 2,770.

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.

At the end of the third quarter of 2022-23, total budgetary expenditures were $2,770 million compared with $3,103 million reported for the same period of 2021-22, representing a decrease of $333 million, or 11%.

Year-to-date net operating expenditures have decreased by approximately $132 million or 17% when compared to the third quarter of 2021-22. The significant variances in operating expenditures are as follows:

• $94.4 million decrease in utilities, materials and supplies, primarily due to an advance payment in 2021-22 for the procurement of rapid test kits, and the acquisition of pharmaceutical and other medicinal products related to the Critical Drug Reserve initiative in 2021-22; and,
• $29.9 million decrease in professional and special services, primarily for services supporting COVID-19 initiatives such as contact tracing and data management and due to timing of expenditures under the Shared Services Partnership Agreement with the Public Health Agency of Canada.

There was a decrease in Vote 10 – Grants and contributions year-to-date expenditures of $1,446 million or 68% primarily a result of several offsetting factors, including changes in amount of funding available and timing of payments made to recipients. Significant variances from the prior year are as follows:

• $1,282.1 million decrease in contributions for strengthening Canada's Home and Community Care and Mental Health and Addiction Initiative (Home Care and Mental Health);
• $106.9 million decrease in contributions for the Safe Restart Agreement for federal investments in testing, contact tracing and data management (COVID-19);
• $61.6 million decrease in contributions to Canada Health Infoway;
• $49.0 million decrease in contributions for Virtual Care Services;
• $20.6 million increase in contributions for the Substance Use and Addictions Program;
• $14.5 million increase in contributions for the Health Care Policy Contribution Program;
• $10.7 million increase in contributions reflecting funding for the new Improving Affordable Access to Prescription Drugs Program; and,
• $7.1 million increase in payments made for the Territorial Health Investment Fund.

Statutory year-to-date expenditures have increased by $1,245 million or 797% from $156 million in 2021-22 to $1,401 million in 2022-23, primarily as a result of the following factors:

• $985.8 million increase in statutory spending for expenditures in relation to COVID-19 tests;
• $250.0 million increase in statutory spending for an advance payment to Canada Revenue Agency through an administrative arrangement to provide payments to individuals under the Canada Dental Benefit program; and,
• $9.4 million increase in expenditures incurred on behalf of the Public Health Agency of Canada under the Shared Services Partnership agreement, primarily for an increase in personnel and professional and special services expenditures, and offset by a decrease in communications expenditures related to public announcements for COVID-19.

C. Quarterly Variances

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

Figure 3 - Text description

Bar chart showing a comparison of quarterly expenditures for the quarters ended June 30, September 30 and December 31 of fiscal years 2021-22 and 2022-23 in millions of dollars.

2021-22 Expenditures for the quarter ended June 30 = 1,120; 2021-22 Expenditures for the quarter ended September 30 = 575; 2021-22 Expenditures for the quarter ended December 31 = 1,408; 2022-23 Expenditures for the quarter ended June 30 = 554; 2022-23 Expenditures for the quarter ended September 30 = 821; 2022-23 Expenditures for the quarter ended December 31 = 1,394.

Expenditures in the third quarter of fiscal year 2022-23 were $1,394 million compared with $1,408 million for the third quarter of 2021-22, representing a decrease of $14 million or 1% in quarterly spending.

The decrease in quarterly spending is primarily due to the following offsetting factors:

• $567.1 million decrease in grants and contributions expenditures is primarily due to:
  • timing differences in payments and decreased amount of funding in 2022-23 for Strengthening Canada's Home and Community Care and Mental Health and Addiction Initiative (Home Care and Mental Health);
  • decreases in funding in 2022-23 for the Safe Restart Agreement for federal investments in testing, contact tracing and data management (COVID-19) and for Virtual Care Services; and,
  • offset by an increase in funding for Substance Use and Addictions Program in 2022-23;
• $72.5 million decrease in advance payments for the procurement of rapid test kits (COVID-19);
• $413.3 million increase in statutory spending for expenditures in relation to COVID-19 tests;
• $250.0 million increase in statutory spending for an advance payment to Canada Revenue Agency under an administrative arrangement to provide payments to individuals under the Canada Dental Benefit program; and,
• $8.8 million increase in revenues, due primarily to timing of when invoices for services of a regulatory nature were processed and cash receipts were received.

Risks and Uncertainties

Health Canada operates in a complex and dynamic environment, facing several challenges as it works to deliver results for Canadians. Many of these challenges – such as the COVID-19 pandemic, global supply chain issues, and the opioid overdose crisis – are beyond the sole control of the Department and involve working collaboratively with federal partners, provinces and territories (P/T), Indigenous organizations, industry and international regulators.

Health Canada regulates health products and controlled substances and supports innovation and information sharing in Canada's health system to help Canadians maintain and improve their health. The Department also provides national leadership to foster sustainable health care systems that ensure access for Canadians to appropriate and effective health care. These systems are facing numerous challenges in terms of service delivery. Although health care delivery is primarily under P/T jurisdiction, the Department plays an important role in supporting P/T with their health care and health system priorities by providing additional funding beyond that provided through the Canada Health Transfer by the Department of Finance for health programs and health system modernization.

Health Canada's priorities continue to focus on how government investments can protect the health and safety of Canadians. As such, there are corporate and program risks related to the rapid delivery of government commitments, programs and services. The Department uses a risk management framework and tools, and maintains a comprehensive and up-to-date Corporate Risk Profile, to support risk-based decision-making.

Health Canada closely monitors its environment and operations to manage its corporate risks, ensures appropriate mitigation strategies are in place, and allocates and reallocates resources, as required. Sound risk management also supports effective service delivery, better project management, an increase in value for money, and ultimately better results for Canadians.

The Department manages risks and uncertainty through effective engagement across the organization with agile and sound governance structures, as well as long-term planning. The executive-level committee on Finance, Investment Projects and Transformation recommends overall direction for financial management and control, and ensures alignment of investments with departmental strategies and transformation initiatives.

As we emerge from the pandemic, Health Canada will closely monitor departmental risks associated with COVID-19, as well as its environment and operations, ensure appropriate mitigation strategies are in place, and effectively deliver results.

Significant Changes in Relation to Operations, Personnel and Programs

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

Approved by:

Original signed by Stephen Lucas
Stephen Lucas
Deputy Minister
Ottawa, Canada
Date: February 19, 2023

Original signed by Serena Francis
Serena Francis
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: February 14, 2023

Statement of Authorities (unaudited)

Departmental Budgetary Expenditures by Standard Object (unaudited)