Health Canada Quarterly Financial Report - For the quarter ended December 31, 2023

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 2023-24 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 2023-24, as well as budget adjustments approved by Treasury Board up to December 31, 2023.

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.

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 2023-24 were $7,471 million at the end of the third quarter as compared with $6,246 million at the end of the third quarter of 2022-23, representing a net increase of $1,225 million, or 20%. This variance is primarily attributable to the increases related to the following fundings:

• $2,630.5 million to improve health care for Canadians (Budget 2023);
• $479.6 million to develop a national strategy for high-cost drugs for rare diseases;
• $331.2 million for Canadian Dental Care Plan administration and benefit payments pursuant to the Dental Benefit Act;
• $131.1 million for the renewal of the federal framework for the legalization and regulation of cannabis in Canada; and,
• $49.3 million for collective agreements.

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

• $1,785.2 million in statutory authority for expenditures in relation to COVID-19 tests;
• $500.0 million to support emergency measures related to the pandemic;
• $36.7 million related to Canada Health Infoway;
• $22.5 million to support innovative approaches to COVID-19 testing; and,
• $20.0 million for Safe Restart Agreements.

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

B. Significant changes in year-to-date expenditures

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

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 2023-24, total budgetary expenditures were $2,106 million compared with $2,770 million reported for the same period of 2022-23, representing a decrease of $664 million, or 24%.

Year-to-date net operating expenditures have increased by $55 million or 8% when compared to the third quarter of 2022-23. The increase is a result of several significant and offsetting factors:

• $61.4 million increase in Personnel expenditures due to increase in salaries and wages following current year updates to the rates of pay for multiple public servant classification groups;
• $12.8 million increase in Professional and special services primarily due to current year expenditures for program administrative services provided by Canada Revenue Agency under the interim Canada Dental Benefit Plan; and,
• $24.0 million increase in revenues, which results in a decrease in net operating expenditures. This variance reflects increased fees as per Section 4(1) of the Fees in Respect of Drugs and Medical Devices Order, as well as timing difference in invoicing for regulatory revenues from the Drug and Medical Devices administrative programs and revenue for hosting services provided to Indigenous Services Canada and Patented Medicine Prices Review Board for a financial system platform (SAP).

There was an increase in Vote 10 - Grants and contributions year-to-date expenditures of $160 million or 23%, primarily a result of several offsetting factors including timing of payments made to recipients and changes in amount of funding available. Significant variances from the prior year are as follows:

• $331.0 million increase in contributions to provinces and territories for Shared Health Priorities resulting from additional funding from Budget 2023;
• $23.3 million increase in contributions to Canada Health Infoway;
• $12.0 million increase in contributions to the Canadian Institute for Health Information;
• $9.9 million increase in contributions to the Canadian Agency for Drugs and Technologies in Health;
• $8.9 million increase in contributions to the Terry Fox Research Institute;
• $212.3 million decrease in contributions to strengthen Canada's Home and Community Care and Mental Health and Addiction Services Initiative; and,
• $16.7 million decrease in contributions to Canadian Partnership Against Cancer.

Statutory year-to-date expenditures have decreased by $883 million or 63% from $1,401 million in 2022-23 to $518 million in 2023-24, primarily as a result of the following offsetting factors:

• $981.8 million decrease in statutory spending for expenditures for Utilities, materials and supplies and Professional and special services in relation to COVID-19 tests; and,
• $93.1 million increase in statutory spending for payments to recipients and advance payments to Canada Revenue Agency through an administrative arrangement to provide payments to recipients under the interim Canada Dental Benefit Plan.

C. Quarterly variances

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

Expenditures in the third quarter of fiscal year 2023-24 were $991 million compared with $1,394 million for the third quarter of 2022-23, representing a decrease of $403 million or 29% in quarterly spending.

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

• $412.1 million decrease in statutory expenditures for Utilities, materials and supplies and Professional and special services for expenditures in relation to COVID-19 tests;
• $150.0 million decrease in statutory spending for payments to recipients and advance payments to Canada Revenue Agency through an administrative arrangement to provide payments to recipients under the interim Canada Dental Benefit Plan;
• $107.2 million increase in grants and contributions, mainly due to timing differences in payments made to recipients and changes in amount of funding available, notably an increase in contributions to the Government of British Columbia for Shared Health Priorities, offset by decreases in contributions to the Government of Quebec, the Government of New Brunswick, and Canada Health Infoway; and,
• $58.2 million increase in Personnel expenditures due to increases in salaries and wages and related cost for employee benefit plans following current year updates to the rates of pay for multiple public servant classification groups.

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 health care worker crisis, substance use-related harms, global supply chain issues, and climate change – are beyond the sole control of the Department. Solving complex challenges involves working collaboratively with federal partners, non-governmental stakeholders, provinces and territories (P/Ts), Indigenous organizations, industry and international regulators.

Health Canada regulates health products and controlled substances, and supports innovation, digital health solutions 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 sustainability, access to services, and service delivery. Although health care delivery is primarily under P/T jurisdiction with funding administered via the Canada Health Transfer, the Department plays an important role in supporting P/Ts with their health care and health system priorities by advancing the Government's Working Together to Improve Health Care for Canadians plan, which provides new funding to support P/Ts on shared priorities.

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. As per its Risk Management Policy, the Department uses a consistent approach to risk management, and maintains a comprehensive and up-to-date Corporate Risk Profile, to support risk-based decision-making.

The Department closely monitors its environment and operations to manage its corporate risks, ensure 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.

Health Canada 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.

In this post-pandemic environment, Health Canada will closely monitor departmental risks associated with health and system challenges that were exacerbated by COVID-19 and ensure additional mitigation strategies are being put in place for future health emergencies, such as those linked to climate change events.

Significant changes in relation to operations, personnel and programs

On December 11, 2023, the Government of Canada announced roll-out of the Canadian Dental Care Plan (CDCP). The CDCP will be administered by Health Canada in collaboration with Employment and Social Development Canada, through Service Canada, and Sun Life.

There have been no other 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 10, 2024

Original signed by Serena Francis
Serena Francis
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: February 9, 2024

Statement of authorities (unaudited)

Departmental budgetary expenditures by standard object (unaudited)