Health Canada Quarterly Financial Report - For the quarter ended December 31, 2011

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 program activities 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 and Supplementary Estimates.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting as prescribed by Treasury Board Accounting Standard 1.3. 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 2010-11 and 2011-12 fiscal years. 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.

Parliamentary authority 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 in turn are based on Canadian generally accepted accounting principles for the public sector. However, the spending authorities voted by Parliament remain on an expenditure basis.

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

Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

This quarterly financial report reflects the results of the current fiscal period in relation to the Main Estimates and Supplementary Estimates for fiscal year 2011-12, as well as subsequent budget adjustments approved by Treasury Board up to December 31, 2011.

A. Significant Changes to Authorities

The following graph and table present a comparison of authorities available for spending for the year at the end of each quarter, by fiscal year.

Comparison of Authorities Available for Spending for the Year as at June 30, September 30 and December 31 of Fiscal Years 2010-11 and 2011-12
Comparison of Authorities Available for Spending for the Year as at December 31 of Fiscal Years 2010-11 and 2011-12
Authorities available (in millions of dollars)
2010-11
2011-12
Variance
Vote 1 - Net operating expenditures 2,036 2,160 124
Vote 5 - Capital expenditures 40 38 (2)
Vote 10 - Grants and contributions 1,543 1,485 (58)
Statutory 170 197 27
Total authorities 3,789 3,880 91

Authorities available for spending in fiscal year 2011-12 are $3,880 million at the end of the third quarter as compared with $3,789 million at the end of the third quarter of 2010-11, representing an increase of $91 million, or 2.4%. This increase is primarily attributable to the following:

  • $48.4 million of allotments received for pay list requirements as compared with $14.6 million received in 2010-11,
  • $91.5 million of allotments received for operating budget carry forwards as compared with $22.8 million received in 2010-11,
  • $22.3 million for Indian Envelope growth; and
  • $15.3 million in statutory authorities for disbursements to Canada Health Infoway Inc.

These increases are partially offset by a $67.5 million decrease in contributions funding for First Nations and Inuit health facilities and capital program. The $67.5 million was provided as part of Canada's Economic Action Plan announced in Budget 2009, and funded in fiscal years 2009-10 and 2010-11 only.

The fluctuations in authorities available for spending are most notable in the following standard objects: personnel; transportation and communications; professionals and special services; utilities, materials and supplies; transfer payments; and revenues netted against expenditures.

Planned re-spendable revenues to be netted against planned expenditures have increased by $59.6 million over the prior year. The Department updated its user fee regulations to ensure that they are appropriately aligned with expected increases in the cost of providing services. The revised regulations came into effect for 2011-12.

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 2010-11 and 2011-12

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

Comparison of Year to Date Expenditures for the Quarter Ended December 31 of Fiscal Years 2010-11 and 2011-12
Year to date expenditures (in millions of dollars)
2010-11
2011-12
Variance
Vote 1 - Net operating expenditures 1,300 1,349 49
Vote 5 - Capital expenditures 12 10 (2)
Vote 10 - Grants and contributions 1,096 1,085 (11)
Statutory 139 164 25
Total year to date expenditures 2,547 2,608 61

At the end of the third quarter of fiscal year 2011-12, the total year to date expenditures were $2,608 million, compared with $2,547 million reported in the same period of 2010-11, representing an increase of $61 million, or 2.4%.

Year to date Vote 1 net operating expenditures for 2011-12 were $1,349 million compared to $1,300 million in 2010-11, an increase of $49 million, or 3.8%. The majority of this increase is noted in personnel expenditures, and is primarily attributable to the liquidation of severance pay and termination benefits amounting to $35 million. Also contributing to the rise in personnel costs was an increase in the number of employees hired for cost recovery programs. This is partially offset by an increase in revenues netted against the vote due to revised user fee regulations which came into effect for fiscal year 2011-12.

Year to date Vote 10 grants and contributions expenditures decreased from $1,096 million in 2010-11 to $1,085 million in 2011-12, a reduction of $11 million or 1.0%. This decrease is primarily in the First Nations and Inuit health facilities and capital program.

Statutory year to date expenditures have increased from $139 million in 2010-11 to $164 million in 2011-12, an increase of $25 million or 18%. The most significant element of this variance is an increase in year to date expenditures made to Canada Health Infoway Inc. of $15 million. The payments for this statutory grant are expended according to the cash flow requirements requested by that organization for the fiscal year.

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 2010-11 and 2011-12

Expenditures in the third quarter of fiscal 2011-12 were $866 million compared with $818 million for the third quarter of 2010-11, representing an increase of $48 million or 5.9% in quarterly spending. This increase reflects the timing of authorities becoming available for spending through Supplementary Estimates. In 2010-11 the Department received more through Supplementary Estimates A as opposed to Supplementary Estimates B, whereas in 2011-12, the reverse was the case.

Risks and Uncertainties

At Health Canada, risk management is a fundamental underpinning of good management and decision making. Canadians expect the department to be well managed and for its leaders to be accountable for the prudent stewardship of public funds, the safeguarding of public assets and the effective, efficient and economical use of its public resources. One of the principles that guides effective financial management is risk management. The department is responsible to ensure that effective and efficient systems of internal controls are in place, and that these controls are proportionate to the risks they aim to mitigate while at the same time supporting the achievement of its departmental program objectives.

The Department is operating in a dynamic environment characterized by internal and external drivers of change including: user fee and cost recovery models, new funding approved through Supplementary Estimates etc. Proactive, ongoing risk management in decision making is required to minimize any adverse impacts on services, program delivery, and the Department's overall capacity to deliver services to Canadians. Management is applying sound risk-based management to the financial stewardship of its departmental resources. In 2011-12, investment plan priorities were established and approved by senior management.

Included in Vote 1 net operating authorities are anticipated re-spendable revenues relating to the revised user fee regulations which came into effect for fiscal year 2011-12. This revenue model adds an element of risk to the Department's financial management environment should these user fees not be realized by year end.

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-11 levels for the fiscal years 2011-12 and 2012-13. The impact on departmental activities continues to be managed through a variety of mitigation strategies.

Significant Changes in Relation to Operations, Personnel and Programs

Shared Services Canada was created effective August 4, 2011, pursuant to  section 31.1 of the Financial Administration Act and Order in Council P.C. 2011-0877. Shared Services Canada's mandate is to streamline and reduce duplication of information technology services in the federal government in order to reduce costs, improve services, and leverage capacity in the public and private sectors through pooled resources and greater buying power.

As a result, Health Canada transferred the control and supervision of operational domains related to email and network services to Shared Services Canada, including telecommunications for voice and data. Approximately 255 Health Canada employees associated with the delivery of these services were transferred to the new department. During this transition period, Health Canada's Quarterly Financial Report continues to include financial information related to the transferred services.

There have been no other significant changes in relation to operations, personnel and programs over the last year.

Approved by:

Glenda Yeates
Deputy Minister
Ottawa, Canada
Date: February 29, 2012

Jamie Tibbetts
Chief Financial Officer
Ottawa, Canada
Date: February 29, 2012

Statement of Authorities (unaudited)

Fiscal year 2011-12 (in thousands of dollars)
Authority
Total available for use for the year ending March 31, 2012 Footnote *
Used during the quarter ended December 31, 2011
Year to date used at quarter-end

Footnotes

Footnote 1

Includes only Authorities available for use and granted by Parliament at quarter end

Return to footnote * referrer

Footnote 2

Statutory Vote

(S)

Vote 1 - Net operating expenditures 2,160,056 472,515 1,349,091
Vote 5 - Capital expenditures 37,661 8,057 10,424
Vote 10 - Grants and contributions 1,484,938 351,986 1,084,667
(S) Contributions to employee benefit plans 134,151 33,538 100,613
(S) Minister of Health - Salary and motor car allowance 78 19 58
(S) Spending of proceeds from the disposal of surplus Crown assets 233 14 70
(S) Refunds of amounts credited to revenues in previous years 676 165 676
(S) Canada Health Infoway Inc. 62,387 0 62,387
(S) Collection agency fees 19 3 19
(S) Court awards 26 26 26
Total authorities 3,880,225 866,323 2,608,031
 
Fiscal year 2010-11 (in thousands of dollars)
Authority
Total available for use for the year ending March 31, 2011 Footnote *
Used during the quarter ended December 31, 2010
Year to date used at quarter-end

Footnotes

Footnote 1

Includes only Authorities available for use and granted by Parliament at quarter end

Return to footnote * referrer

Footnote 2

Statutory Vote

(S)

Vote 1 - Net operating expenditures 2,035,679 444,995 1,299,610
Vote 5 - Capital expenditures 40,081 6,782 12,531
Vote 10 - Grants and contributions 1,542,740 335,387 1,095,566
(S) Contributions to employee benefit plans 122,825 30,706 92,119
(S) Minister of Health - Salary and motor car allowance 79 19 58
(S) Spending of proceeds from the disposal of surplus Crown assets 508 10 19
(S) Refunds of amounts credited to revenues in previous years 186 21 185
(S) Canada Health Infoway Inc. 47,092 0 47,092
(S) Collection agency fees 11 6 11
(S) Court awards 0 0 0
Total authorities 3,789,201 817,926 2,547,191

Pursuant to section 31.1 of the Financial Administration Act and Order in Council P.C. 2011-1297 effective November 15, 2011, all unexpended money relating to the new Shared Services Canada (operating and capital) has been deemed to be appropriated resulting in a reduction for the same amount in Health Canada's Vote 1 and Vote 5.

Departmental Budgetary Expenditures by Standard Object (unaudited)

Fiscal year 2011-12 (in thousands of dollars)
Standard Object
Planned expenditures for the year ending March 31, 2012 Footnote *
Expended during the quarter ended December 31, 2011
Year to date used at quarter-end

Footnotes

Footnote 1

Includes only Authorities available for use and granted by Parliament at quarter end

Return to footnote * referrer

Expenditures:
Personnel 973,860 226,796 712,840
Transportation and communications 298,424 55,133 143,256
Information 28,292 2,823 4,661
Professional and special services 519,301 120,463 291,661
Rentals 22,796 3,489 9,828
Repair and maintenance 53,477 8,912 28,743
Utilities, materials and supplies 510,639 115,316 314,839
Acquisition of lands, buildings and works 7,164 428 1,125
Acquisition of machinery and equipment 44,920 9,978 22,209
Transfer payments 1,546,750 351,986 1,147,200
Other subsidies and payments 3,798 (3,311) (6,994)
Total gross budgetary expenditures 4,009,421 892,013 2,669,368
Less revenues netted against expenditures:
Rights and privileges 52,165 14,254 26,208
Services non-regulatory 21,876 3,954 11,684
Services regulatory 55,155 7,482 23,445
Total revenues netted against expenditures 129,196 25,690 61,337
Total net budgetary expenditures 3,880,225 866,323 2,608,031
 
Fiscal year 2010-11 (in thousands of dollars)
Standard Object
Planned expenditures for the year ending March 31, 2011 Footnote *
Expended during the quarter ended December 31, 2010
Year to date used at quarter-end

Footnotes

Footnote 1

Includes only Authorities available for use and granted by Parliament at quarter end

Return to footnote * referrer

Expenditures:
Personnel 890,514 210,675 661,660
Transportation and communications 237,941 51,311 135,395
Information 29,637 3,018 4,966
Professional and special services 502,397 115,380 294,305
Rentals 17,272 3,072 11,774
Repair and maintenance 50,917 5,893 23,488
Utilities, materials and supplies 479,843 109,874 305,842
Acquisition of lands, buildings and works 4,482 751 2,534
Acquisition of machinery and equipment 53,869 9,205 22,346
Transfer payments 1,589,832 335,341 1,142,815
Other subsidies and payments 2,122 (3,511) (5,584)
Total gross budgetary expenditures 3,858,826 841,009 2,599,541
Less revenues netted against expenditures:
Rights and privileges 20,556 10,876 19,939
Services non-regulatory 21,434 5,139 12,106
Services regulatory 27,635 7,068 20,305
Total revenues netted against expenditures 69,625 23,083 52,350
Total net budgetary expenditures 3,789,201 817,926 2,547,191
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