Health Canada Quarterly Financial Report - For the quarter ended June 30, 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.

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 and Supplementary Estimates A for fiscal year 2015-2016, as well as budget adjustments approved by Treasury Board up to June 30, 2015.

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

Comparison of Net Budgetary Authorities and Expenditures for the Quarter Ended June 30, 2014 and June 30, 2015 (in millions of dollars)

Bar chart showing a comparison of net budgetary authorities and expenditures for the quarter ended June 30, 2014 and June 30, 2015 in millions of dollars.

2014-2015 Net Budgetary Authorities = 3,727; 2014-2015 Expenditures for the Quarter Ended June 30 = 1,133; 2015-2016 Net Budgetary Authorities = 3,734; 2015-2016 Expenditures for the Quarter Ended June 30 = 1,033.

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A. Significant Changes to Authorities

The following table provides a comparison of authorities by vote for the first quarter of the current and previous fiscal years.

Comparison of Authorities Available for Spending for the Year as at June 30 of Fiscal Years 2014-2015 and 2015-2016
Authorities available (in millions of dollars) 2014-2015 2015-2016 Variance
Vote 1 - Operating expenditures 1,775 1,778 3
Vote 5 - Capital expenditures 31 28 (3)
Vote 10 - Grants and contributions 1,684 1,678 (6)
Statutory 237 250 13
Total authorities 3,727 3,734 7

Authorities available for spending in fiscal year 2015-2016 were $3,734 million at the end of the first quarter as compared with $3,727 million at the end of the first quarter of 2014-2015, representing an increase of $7 million, or 0.2%. Although insignificant, this increase is primarily attributable to the following:

  • $63.5 million increase for the growth 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;
  • $23.1 million increase for the Renewal of the First Nations Water and Wastewater Action Plan;
  • $23.0 million increase for the Territorial Health Investment Fund;
  • $8.2 million increase for Preventing Prescription Drug Abuse; and,
  • $5.9 million increase in statutory authorities for disbursements to Canada Health Infoway Inc.

These increases are partially offset by the following decreases:

  • $140.8 million decrease for the sunsetting of funding in 2015-2016 for the Renewal of Federal Aboriginal Health Programs; and,
  • $6.0 million decrease for the sunsetting of funding in 2015-2016 for the Sir Frederick Banting Building Retrofit.

The fluctuations in authorities available for spending are most notable in the following standard objects: personnel; transportation and communications; professional and special services; and utilities, materials and supplies.

B. Significant Changes in Year to Date Expenditures

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

Comparison of Year to Date Expenditures for the Quarter Ended June 30 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 333 342 9
Vote 5 - Capital expenditures 1 2 1
Vote 10 - Grants and contributions 700 583 (117)
Statutory 99 106 7
Total year to date expenditures 1,133 1,033 (100)

During the first quarter of 2015-2016, total budgetary expenditures were $1,033 million compared with $1,133 million reported for the same period of 2014-2015, representing a decrease of $100 million or 8.9%, primarily in expenditures relating to grants and contributions.

Year to date net operating expenditures have increased by approximately $9 million or 2.7% when compared to the first quarter of 2014-2015. The significant variances in operating expenditures reported by standard object are as follows:

  • $24.4 million increase in personnel expenditures due primarily to the implementation of salary payment in arrears by the Government of Canada. As noted below, a one-time transition payment of $26.9 million was made instead of a normal pay cycle, resulting in lower than normal expenditures in the prior year;
  • $27.0 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,
  • $10.7 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.

There was a decrease in Vote 10 – Grants and contributions year to date expenditures of $117 million or 16.6%, primarily due to changes in timing of disbursements. The most significant items include:

  • $36.9 million related to the sunsetting of large programs within the First Nations and Inuit Health programs, which were renewed in a Treasury Board Submission at the beginning of 2015-2016; and,
  • $25.9 million related to contribution agreements with the Canadian Partnership Against Cancer and Canadian Institute for Health Information.

Statutory year to date expenditures have increased $6 million from $99 million in 2014-2015 to $105 million in 2015-2016, primarily due to an increase in employee benefit plan costs and transfer payments made to Canada Health Infoway Inc. which are disbursed in accordance with the cash flow needs of that organization.

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 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 budget reductions, operating 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, an augmented 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 approved by this committee to confirm that it has a plan in place to address the financial context.

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 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 Paul Glover for
Simon Kennedy
Deputy Minister
Ottawa, Canada
Date: August 13, 2015

Original signed by Jamie Tibbetts
Assistant Deputy Minister and
Chief Financial Officer
Ottawa, Canada
Date: August 13, 2015

Statement of Authorities (Unaudited)

Fiscal year 2015-2016 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2016Table 1 footnote 1 Used during the quarter ended June 30, 2015 Year to date used at quarter-end

Table 1 footnotes

Table 1 footnote 1

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

Return to table 1 footnote 1 referrer

Vote 1 - Operating expenditures 1,777,988 341,864 341,864
Vote 5 - Capital expenditures 28,035 2,268 2,268
Vote 10 - Grants and contributions 1,678,425 583,321 583,321
(S) Contributions to employee benefit plans 122,777 30,694 30,694
(S) Minister of Health - Salary and motor car allowance 82 21 21
(S) Spending of proceeds from the disposal of surplus Crown assets 384 10 10
(S) Refunds of amounts credited to revenues in previous years 167 167 167
(S) Canada Health Infoway Inc. 74,222 74,222 74,222
(S) Collection agency fees 2 2 2
(S) Court awards 13 13 13
(S) Transfer payments in connection with the Budget Implementation Act 255 255 255
(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 - -
Total authorities 3,733,813 1,032,837 1,032,837
Fiscal year 2014-2015 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2015Table 2 footnote 1 Used during the quarter ended June 30, 2014 Year to date used at quarter-end

Table 2 footnotes

Table 2 footnote 1

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

Return to table 2 footnote 1 referrer

Vote 1 - Operating expenditures 1,774,857 332,791 332,791
Vote 5 - Capital expenditures 31,656 1,486 1,486
Vote 10 - Grants and contributions 1,683,745 699,729 699,729
(S) Contributions to employee benefit plans 115,511 28,877 28,877
(S) Minister of Health - Salary and motor car allowance 80 20 20
(S) Spending of proceeds from the disposal of surplus Crown assets 606 4 4
(S) Refunds of amounts credited to revenues in previous years 435 435 435
(S) Canada Health Infoway Inc. 68,364 68,364 68,364
(S) Collection agency fees 2 2 2
(S) Court awards 45 45 45
(S) Transfer payments in connection with the Budget Implementation Act 723 723 723
(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 626 626
Total authorities 3,727,487 1,133,102 1,133,102

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 June 30, 2015 Year to date used at quarter-end
Expenditures:
Personnel 880,640 193,361 193,361
Transportation and communications 256,509 36,767 36,767
Information 13,373 743 743
Professional and special services 510,961 77,264 77,264
Rentals 6,646 1,261 1,261
Repair and maintenance 19,931 1,758 1,758
Utilities, materials and supplies 535,365 106,887 106,887
Acquisition of land, buildings and works 1,114 2,130 2,130
Acquisition of machinery and equipment 26,922 5,897 5,897
Transfer payments 1,752,902 657,798 657,798
Other subsidies and payments 8,776 315 315
Total gross budgetary expenditures 4,013,139 1,084,181 1,084,181
Less revenues netted against expenditures:
Rights and privileges 56,495 6,541 6,541
Services non-regulatory 164,037 35,121 35,121
Services regulatory 58,794 9,496 9,496
Services to other government departments - 186 186
Total revenues netted against expenditures 279,326 51,344 51,344
Total net budgetary expenditures 3,733,813 1,032,837 1,032,837
Fiscal year 2014-2015 (in thousands of dollars)
Standard Object Planned expenditures for the year ending March 31, 2015 Expended during the quarter ended June 30, 2014 Year to date used at quarter-end
Expenditures:
Personnel 842,617 168,953 168,953
Transportation and communications 213,458 31,969 31,969
Information 27,294 555 555
Professional and special services 741,666 75,964 75,964
Rentals 22,234 2,708 2,708
Repair and maintenance 34,315 1,807 1,807
Utilities, materials and supplies 330,180 96,158 96,158
Acquisition of land, buildings and works 8,839 827 827
Acquisition of machinery and equipment 22,817 5,427 5,427
Transfer payments 1,752,832 768,816 768,816
Other subsidies and payments 2,191 27,282 27,282
Total gross budgetary expenditures 3,998,443 1,180,466 1,180,466
Less revenues netted against expenditures:
Rights and privileges 55,209 11,177 11,177
Services non-regulatory 158,015 28,977 28,977
Services regulatory 57,732 7,210 7,210
Total revenues netted against expenditures 270,956 47,364 47,364
Total net budgetary expenditures 3,727,487 1,133,102 1,133,102
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