Health Canada Quarterly Financial Report - For the quarter ended December 31, 2014
Table of Contents
- 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
- Budget 2012 Implementation
- Statement of Authorities (Unaudited)
- Departmental Budgetary Expenditures by Standard Object (Unaudited)
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, Supplementary Estimates A, Supplementary Estimates B, as well as Canada's Economic Action Plan 2012 (Budget 2012).
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 2014-2015 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.
The quarterly report has not been subject to an external audit or review.
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 2014-2015, as well as budget adjustments approved by Treasury Board up to December 31, 2014.
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 2013-2014 and 2014-2015
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 2013-2014 and 2014-2015 in millions of dollars.
2013-2014 Authorities available as at June 30 = 3,387; 2013-2014 Authorities available as at September 30 = 3,385; 2013-2014 Authorities available as at December 31= 3,909; 2014-2015 Authorities available as at June 30 = 3,727; 2014-2015 Authorities available as at September 30 = 3,795; 2014-2015 Authorities available as at December 31= 3,855.
The following table provides a comparison of authorities by vote at the end of the third quarter of the current and previous fiscal years.
|Authorities available (in millions of dollars)||2013-2014||2014-2015||Variance|
|Vote 1 - Operating expenditures||1,981||1,846||(135)|
|Vote 5 - Capital expenditures||26||36||10|
|Vote 10 - Grants and contributions||1,626||1,734||108|
Authorities available for spending in fiscal year 2014-2015 are $3,855 million at the end of the third quarter as compared with $3,909 million at the end of the third quarter of 2013-2014, representing a decrease of $54 million, or 1.4%. This decrease is primarily attributable to the following:
- $59.1 million in additional savings achieved from the completion of the three year implementation plan related to the Budget 2012 spending review;
- $33.2 million decrease due to spending authorities for paylist expenditures that were received in 2013-2014, where no such authorities have been requested to date in 2014-2015;
- $30.5 million decrease in amounts received for operating and capital budget carry forwards in 2014-2015;
- $20.2 million decrease in statutory spending authority for disbursements to Canada Health Infoway Inc.;
- $10.0 million decrease in Employee Benefit Plan due to a rate adjustment as directed by Treasury Board Secretariat; and,
- $7.4 million decrease in statutory spending authority as a result of the Shared Services Partnership agreement between Health Canada and the Public Health Agency of Canada (PHAC) to support the internal services provided by Health Canada to PHAC.
These decreases are partially offset by the following increases:
- $49.4 million increase due to the annual 3% growth in the First Nations and Inuit Health Envelope;
- $25.6 million increase in funding level for the Stabilization of the First Nations and Inuit Health programming funding as indicated in Budget 2013;
- $17.4 million increase in funding level related to the British Columbia Tripartite Framework agreement on the First Nation Health Governance for the transfer of the responsibility for First Nations health programming in British Columbia to the First Nations Health Authority; and,
- $14.0 million increase due to the renewal of funding for the Official Languages Health Contribution Program.
The fluctuations in authorities available for spending are most notable in the following standard objects: personnel, transportation and communications; professional and special services; utilities, materials and supplies; 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 2013-2014 and 2014-2015
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 2013-2014 and 2014-2015 in millions of dollars.
2013-2014 Net Budgetary Authorities = 3,385; 2013-2014 Year to date Expenditures to June 30 = 1,038; 2013-2014 Year to date Expenditures to September 30 = 1,928; 2013-2014 Year to date Expenditures to December 31 = 2,835; 2014-2015 Net Budgetary Authorities = 3,795; 2014-2015 Year to date Expenditures to June 30 = 1,133; 2014-2015 Year to date Expenditures to September 30 = 1,959; 2014-2015 Year to date Expenditures to December 31 = 2,846.
The following table provides a comparison of cumulative spending by vote for the third quarter of the current and previous fiscal years.
|Year to date expenditures (in millions of dollars)||2013-2014||2014-2015||Variance|
|Vote 1 - Operating expenditures||1,293||1,235||(58)|
|Vote 5 - Capital expenditures||9||10||1|
|Vote 10 - Grants and contributions||1,327||1,440||113|
|Total year to date expenditures||2,835||2,846||11|
At the end of the third quarter of 2014-2015, total budgetary expenditures were $2,846 million compared with $2,835 million reported for the same period of 2013-2014, representing an increase of $11 million or 0.4%, primarily in expenditures relating to grants and contributions.
Year to date net operating expenditures have decreased by approximately $58 million or 4.5% when compared to the third quarter of 2013-2014. The significant variances in operating expenditures reported by standard object are as follows:
- $64.8 million decrease in personnel expenditures due primarily to:
- a change in the timing of recording salary expenditures incurred to date resulting from the implementation of salary payment in arrears by the Government of Canada;
- a decrease related to payments made during 2013-2014 for retroactive adjustments and the liquidation of severance and termination benefits payable from collective bargaining agreement settlements signed in the previous year; and,
- the resulting decrease in personnel costs following the transfer of regional employees to the First Nations Health Authority under the British Columbia Tripartite Framework Agreement;
- $24.2 million increase in other subsidies and payments due primarily to a one-time transition payment for implementing salary payment in arrears by the Government of Canada;
- $15.1 million increase in utilities, materials and supplies which includes non-insured health benefits which are demand driven and can fluctuate from one year to the next; and,
- $37.7 million in offsetting vote-netted revenues, which have increased primarily due to cost recovery arrangements as part of the Tripartite Framework Agreement with the First Nations Health Authority in British Columbia.
There was an increase in Vote 10 - Grants and contributions year to date expenditures of $113 million or 8.5%, primarily due to:
- $89.8 million increase in transfer payments following the signing of the British Columbia Tripartite Framework Agreement with the First Nations Health Authority;
- $9.4 million increase in contributions related to the renewal of funding for the Official Languages Health Contribution Program; and,
- the remaining increases due primarily to changes in timing of disbursements for some program agreements.
Statutory year to date expenditures have decreased $45 million or 22.0% from $206 million in 2013-2014 to $161 million in 2014-2015, primarily due to:
- $20.2 million decrease in transfer payments made to Canada Health Infoway Inc. which are disbursed in accordance with the cash flow needs of that organization; and,
- $17.8 million decrease as a result of timing of transactions recorded to allocate statutory expenditures incurred under the Shared Services Partnership agreement with PHAC.
C. Quarterly Variances
The following graph presents a comparison of quarterly spending by quarter and by fiscal year.
Description - Comparison of Quarterly Expenditures for the Quarters Ended June 30, September 30 and December 31 of Fiscal Years 2013-2014 and 2014-2015
Bar chart showing a comparison of quarterly expenditures for the quarters ended June 30, September 30 and December 31 of Fiscal Years 2013-2014 and 2014-2015 in millions of dollars.
2013-2014 Expenditures for the Quarter Ended June 30 = 1,038; 2013-2014 Expenditures for the Quarter Ended September 30 = 889; 2013-2014 Expenditures for the Quarter Ended December 31 = 908; 2014-2015 Expenditures for the Quarter Ended June 30 = 1,133; 2014-2015 Expenditures for the Quarter Ended September 30 = 826; 2014-2015 Expenditures for the Quarter Ended December 31 = 887.
Expenditures in the third quarter of fiscal 2014-2015 were $887 million compared with $908 million for the third quarter of 2013-2014, representing a decrease of $21 million or 2.3% in quarterly spending.
The decrease in quarterly spending is due primarily to:
- $23.3 million decrease in personnel costs mainly related to payments made during 2013-2014 for retroactive adjustments and the liquidation of severance and termination benefits payable from collective bargaining agreement settlements signed in the previous year; and,
- $10.6 million decrease in professional and special services mainly related to the timing of payments to PHAC under the Shared Services Partnership Agreement.
This decrease is offset by a $10.8 million increase in transportation and communications expenditures resulting from a change in timing of receipt and payment of invoices for non-insured patient travel. The non-insured health benefits program is demand driven and timing of expenditures can fluctuate significantly from one year to the next.
Risks and Uncertainties
Health Canada, as a public sector organization, is dedicated to enhancing the health and well-being of Canadians and recognizes that its success in fulfilling its mandate is directly related to the effective management of risk. The Department employs integrated risk management tools to proactively, systematically and continuously recognize, understand, accommodate and capitalize on new challenges and opportunities, with a focus on results. The Department has effective internal control systems in place, proportionate to the risks being managed.
In a dynamic and complex environment characterized by internal and external drivers of change in Canada and abroad (e.g. new innovative products, technologies, substances, foods and emerging product categories, evolving relationships between First Nations and Inuit and various levels of government, government-wide fiscal restraint), these factors are monitored to ensure departmental readiness to respond proactively, should any of these factors begin to impact on the Department's ability to deliver on its objectives. Effective risk management equips Health Canada 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 effective service delivery, better project management, and an increase in value for money.
Prudent management within the financial context of budget reductions, operating freezes and declining carry forwards, is required to limit impacts on departmental programs and services. Health Canada continues to manage through effective engagement across the Department, augmented governance structure, as well as through the use of longer-term planning. As such, the Department established the executive-level committee on Finance, Investment Planning and Transformation with the mandate to recommend overall direction for financial management and control, and ensure alignment of investments with departmental strategies and transformation initiatives.
As of Budget 2013, growth in the First Nations and Inuit health, Non-Insured Health Benefits Program is based on 5% growth on actual (annual) expenditures from the prior fiscal year. Program expenditures endure 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. 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
There have been no significant changes in relation to operations, personnel and programs during this quarter.
Budget 2012 Implementation
This section provides an overview of the savings measures announced in Budget 2012.
Health Canada conducted a comprehensive review of its operating and program spending. It placed priority on preserving activities central to its core mandate as a regulator, a service provider for First Nations and Inuit, and a leader in health care policy.
In 2012-2013, the first year of implementation, Health Canada achieved savings of approximately $74.2 million. Savings have increased to $138.5 million in 2013-2014 and will result in ongoing savings of $197.6 million in 2014-2015.
Administrative Efficiencies and Rationalization of Structures and Functions (Internal Transformation)
Many changes are internal to Health Canada, and savings are being generated across all Health Canada branches. These include: consolidating operations; reducing and consolidating strategic policy work; consolidating and focusing on research and laboratory work and space; simplifying grants and contributions administration; and, achieving administrative and operational efficiencies throughout the Department.
These initiatives are achieving ongoing savings of $108.4 million.
Health Canada and PHAC have consolidated several common internal services. A wide range of services, including human resources, information technology, communications, audit, evaluation, and certain financial functions have been merged into new units to serve both Health Canada and PHAC.
This initiative is achieving ongoing savings of $17.9 million.
Grants and Contributions (G&Cs)
Grants and contributions funding will be concentrated in areas that have continued relevance to Canadians, align with the priorities of the Department and the Government, and have the most potential for success.
For pan-Canadian health organizations, Health Canada has reduced funding for most by 5% and has encouraged them to achieve savings through administrative efficiencies and reduced overhead.
Funding for the Health Care Policy Contribution Program has been reduced and targeted on key and emerging issues. Funding for the Women's Health Contribution Program has been eliminated as part of the Economic Action Plan 2012.
Recognizing that smoking is at an all-time low in Canada and that provincial, territorial and municipal governments have taken on a greater role in reducing tobacco use, funding for the Federal Tobacco Control Strategy has been reduced. Health Canada's efforts have been refocused to concentrate on more vulnerable populations such as First Nations and Inuit, whose communities have the highest smoking rates in Canada.
Grants and contributions funding in First Nations and Inuit Health are now focused on direct service delivery. Funding reductions are limited to areas such as research, building capacity, developing partnerships and networking in order to preserve front-line delivery services.
These initiatives are achieving ongoing savings of $58.5 million.
Streamlining Regulatory Operations and Administration
Core regulatory responsibilities for a variety of products, including drugs, food, consumer products and pesticides are maintained. Each of Health Canada's three regulatory branches is refocusing research on priority areas as well as restructuring some regulatory and policy operations in keeping with red tape reduction efforts.
These initiatives are achieving ongoing savings of $12.8 million.
Through planning and regular reporting on progress, Health Canada is managing the financial risks associated with achieving the reductions required as a result of Budget 2012. Sound management and focus on service delivery provides assurance that reduction plans are being achieved.
Date: February 11, 2015
Assistant Deputy Minister and
Chief Financial Officer
Date: February 11, 2015
Statement of Authorities (Unaudited)
|Authority||Total available for use for the year ending March 31, 2015Table 1 footnote 1||Used during the quarter ended December 31, 2014||Year to date used at quarter-end|
|Vote 1 - Operating expenditures||1,846,148||456,582||1,235,281|
|Vote 5 - Capital expenditures||35,927||4,995||10,050|
|Vote 10 - Grants and contributions||1,733,732||393,231||1,440,364|
|(S) Contributions to employee benefit plans||116,572||28,878||86,633|
|(S) Minister of Health - Salary and motor car allowance||80||20||60|
|(S) Spending of proceeds from the disposal of surplus Crown assets||766||26||49|
|(S) Refunds of amounts credited to revenues in previous years||631||80||631|
|(S) Canada Health Infoway Inc.||68,364||-||68,364|
|(S) Collection agency fees||10||7||10|
|(S) Court awards||207||43||207|
|(S) Transfer payments in connection with the Budget Implementation Act||1,082||-||1,082|
|(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act||51,463||3,133||3,759|
Table 1 footnotes
|Authority||Total available for use for the year ending March 31, 2014Table 2 footnote 1||Used during the quarter ended December 31, 2013||Year to date used at quarter-end|
|Vote 1 - Operating expenditures||1,980,500||454,439||1,292,808|
|Vote 5 - Capital expenditures||26,177||6,076||9,199|
|Vote 10 - Grants and contributions||1,625,791||393,530||1,327,117|
|(S) Contributions to employee benefit plans||127,916||31,665||94,994|
|(S) Minister of Health - Salary and motor car allowance||79||20||59|
|(S) Spending of proceeds from the disposal of surplus Crown assets||676||55||118|
|(S) Refunds of amounts credited to revenues in previous years||879||244||879|
|(S) Canada Health Infoway Inc.||88,548||-||88,548|
|(S) Collection agency fees||11||9||11|
|(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act||58,860||21,593||21,593|
Table 2 footnotes
Departmental Budgetary Expenditures by Standard Object (Unaudited)
|Standard Object||Planned expenditures for the year ending March 31, 2015||Expended during the quarter ended December 31, 2014||Year to date used at quarter-end|
|Transportation and communications||226,720||61,827||141,142|
|Professional and special services||771,455||111,015||296,062|
|Repair and maintenance||35,146||4,967||11,077|
|Utilities, materials and supplies||347,855||120,209||334,224|
|Acquisition of land, buildings and works||9,815||2,353||4,886|
|Acquisition of machinery and equipment||26,112||8,008||21,245|
|Other subsidies and payments||2,452||(137)||27,829|
|Total gross budgetary expenditures||4,125,743||942,236||2,997,990|
|Less revenues netted against expenditures:|
|Rights and privileges||55,054||11,586||27,929|
|Services to other government departments||-||(24)||-|
|Total revenues netted against expenditures||270,761||55,241||151,500|
|Total net budgetary expenditures||3,854,982||886,995||2,846,490|
|Standard Object||Planned expenditures for the year ending March 31, 2014||Expended during the quarter ended December 31, 2013||Year to date used at quarter-end|
|Transportation and communications||353,785||51,054||133,415|
|Professional and special services||554,218||121,574||303,375|
|Repair and maintenance||40,299||5,624||12,568|
|Utilities, materials and supplies||523,654||115,790||319,365|
|Acquisition of land, buildings and works||1,555||1,110||2,021|
|Acquisition of machinery and equipment||24,621||9,563||23,636|
|Other subsidies and payments||11,218||91||3,417|
|Total gross budgetary expenditures||4,178,478||960,011||2,949,079|
|Less revenues netted against expenditures:|
|Rights and privileges||54,622||12,788||28,982|
|Total revenues netted against expenditures||269,041||52,380||113,753|
|Total net budgetary expenditures||3,909,437||907,631||2,835,326|
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