Health Canada Quarterly Financial Report - For the quarter ended December 31, 2015

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, Supplementary Estimates A and Supplementary Estimates B.

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 2015-2016 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 2015-2016, as well as budget adjustments approved by Treasury Board up to December 31, 2015.

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.

(in millions $)

The following table provides a comparison of authorities by vote for 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 2014-2015 and 2015-2016
Authorities available (in millions of dollars) 2014-2015 2015-2016 Variance
Vote 1 - Operating expenditures 1,846 1,835 (11)
Vote 5 - Capital expenditures 36 35 (1)
Vote 10 - Grants and contributions 1,734 1,777 43
Statutory 239 250 11
Total authorities 3,855 3,897 42

Authorities available for spending in fiscal year 2015-2016 were $3,897 million at the end of the third quarter as compared with $3,855 million at the end of the third quarter of 2014-2015, representing a net increase of $42 million, or 1.1%.  This increase is primarily attributable to the following:

  • $21.0 million net increase in First Nations and Inuit Health programs and services;
  • $29.3 million increase for the Implementation of the British Columbia Tripartite Framework Agreement on First Nation Health Governance for the transfer to the First Nations Health Authority; and,
  • $8.2 million increase for Preventing Prescription Drug Abuse.

These increases are partially offset by the following decreases:

  • $6.0 million decrease for the expiry of budgetary spending authorities in 2015-2016 for the Sir Frederick Banting Building Retrofit;
  • $5.5 million decrease for funding related to government advertising programs; and,
  • $5.4 million decrease for the expiry of budgetary spending authorities in 2015-2016 for the Continued Support for Labrador Innu Health Programs.

The fluctuations in authorities available for spending are most notable in the following standard objects: 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.

(in millions $)

Comparison of Year to Date Expenditures for the Quarter Ended December 31 of Fiscal Years 2014-2015 and 2015-2016
Year to date expenditures
(in millions of dollars)
2014-2015 2015-2016 Variance
Vote 1 - Operating expenditures 1,235 1,241 6
Vote 5 - Capital expenditures 10 12 2
Vote 10 - Grants and contributions 1,440 1,439 (1)
Statutory 161 192 31
Total year to date expenditures 2,846 2,884 38

At the end of the third quarter of 2015-2016, total budgetary expenditures were $2,884 million compared with $2,846 million reported for the same period of 2014-2015, representing an increase of $38 million or 1.3%, primarily for statutory expenditures.

Year to date net operating expenditures have increased by approximately $6 million or 0.5% when compared to the third quarter of 2014-2015.  The significant variances in operating expenditures reported by standard object are as follows:

  • $13.5 million increase in transportation and communication as a result of increased cost and higher demand for transportation related to nurses and patients associated with the Non-Insured Health Benefits program as compared with the prior year;
  • $15.2 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,
  • $40.0 million increase in utilities, materials and supplies due to an increase in expenses for pharmaceutical and medical supplies which are demand-driven and can vary from year to year.

These increases are partially offset by:

  • $16.4 million decrease in personnel expenditures due primarily to the timing of recording of expenditures in relation to the spending of revenues collected under the Shared Services Partnership agreement with the Public Health Agency of Canada;
  • $25.5 million decrease in other subsidies and payments due primarily to the one-time transition payment for implementing salary payment in arrears by the Government of Canada in the prior year; and,
  • $14.8 million increase in revenues netted against expenditures related primarily to the recovery of costs associated with the Non-Insured Health Benefits program, which have increased as noted above.

There were no noteworthy variances in Vote 10 - Grants and contributions year-to-date expenditures.

Statutory year to date expenditures have increased $31 million or 19.4% from $161 million in 2014-2015 to $192 million in 2015-2016, primarily due to the timing of recording of expenditures in relation to the spending of revenues collected under the Shared Services Partnership agreement.

C. Quarterly Variances

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

(in millions $)

Expenditures in the third quarter of fiscal 2015-2016 were $950 million compared with $887 million for the third quarter of 2014-2015, representing an increase of $63 million or 7.1% in quarterly spending.

The increase in quarterly spending is due primarily to:

  • $15.2 million increase in utilities, materials and supplies related to pharmaceutical and medical supply costs resulting from increases in demand under the Non-Insured Health Benefits Program; and,
  • $46.5 million increase in transfer payments related to the timing of disbursements relating to various First Nations and Inuit Health programs.

Risks and Uncertainties

Health Canada 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.  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.

Health Canada 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).

The Department employs integrated risk management tools to proactively and systematically recognize, understand, accommodate and capitalize on new challenges and opportunities, with a focus on results.  In addition, the Department has effective internal control systems in place, proportionate to the risks being managed.

Prudent management within the financial context of operating budget freezes 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.  As such, 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.

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 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.  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.

Approved by:

Original signed by Simon Kennedy

Simon Kennedy
Deputy Minister
Ottawa, Canada
Date: February 15, 2016

Original signed by Jamie Tibbetts

Jamie Tibbetts
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: February 11, 2016

Statement of Authorities (Unaudited)

Fiscal year 2015-2016 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2016Table 3 footnote * Used during the quarter ended December 31, 2015 Year to date used at quarter-end

Table 3 footnotes

Table 3 footnote *

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

Return to table 3 footnote * referrer

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
Fiscal year 2014-2015 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2015Table 4 footnote * Used during the quarter ended December 31, 2014 Year to date used at quarter-end

Table 4 footnotes

Table 4 footnote *

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

Return to table 4 footnote * referrer

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
Total authorities 3,854,982 886,995 2,846,490

Departmental Budgetary Expenditures by Standard Object (Unaudited)

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
Fiscal year 2014-2015 (in thousands of dollars)
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
Expenditures:
Personnel 850,936 231,417 634,207
Transportation and communications 226,720 61,827 141,142
Information 28,958 5,086 7,220
Professional and special services 771,455 111,015 296,062
Rentals 23,116 4,260 10,289
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
Transfer payments 1,803,178 393,231 1,509,809
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 non-regulatory 158,006 33,446 96,985
Services regulatory 57,701 10,233 26,586
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
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