ARCHIVED - Health Canada Quarterly Financial Report - For the quarter ended September 30, 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 for fiscal year 2011-12 and subsequent budget adjustments approved by Treasury Board up to September 30, 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 and September 30 of Fiscal Years 2010-11 and 2011-12
Comparison of Authorities Available for Spending for the Year as at September 30 of Fiscal Years 2010-11 and 2011-12
Authorities available (in thousands of dollars) 2010-11 2011-12 Variance
Vote 1 - Net operating expenditures 2,011,667 1,860,580 (151,087)
Vote 5 - Capital expenditures 38,576 32,666 (5,910)
Vote 10 - Grants and contributions 1,510,370 1,444,698 (65,672)
Statutory 170,663 197,362 26,699
Total authorities 3,731,276 3,535,306 (195,970)

Authorities available for spending in fiscal year 2011-12 are $3.535 billion at the end of the second quarter as compared with $3.731 billion at the end of the second quarter of 2010-11, representing a reduction of $196 million, or 5.3%. This decrease is primarily due to the sunsetting of programs including First Nations and Inuit Health Services Program Integrity, Chemical Management Plan, Clean Air Regulatory Agenda, Federal Contaminated Sites Action Plan and Adaptation to Climate Change, which the Department is currently seeking to renew through the 2011-12 Supplementary Estimates 'B'.

Partially offsetting this decrease are increases for:

  • $94.1M in budget carry forwards from the prior year;
  • $34.3M in additional allotments received for pay list requirements for the liquidation of severance pay and termination benefits stemming from changes in collective agreements; and
  • $15.3M in statutory authorities for disbursements to Canada Health Infoway Inc.

The fluctuations are most notable in the following standard objects; personnel, professional 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 and September 30 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 September 30 of Fiscal Years 2010-11 and 2011-12
Year to date expenditures (in thousands of dollars) 2010-11 2011-12 Variance
Vote 1 - Net operating expenditures 854,615 876,576 21,961
Vote 5 - Capital expenditures 5,749 2,367 (3,382)
Vote 10 - Grants and contributions 760,179 732,681 (27,498)
Statutory 108,722 130,084 21,362
Total year to date expenditures 1,729,265 1,741,708 12,443

At the end of the second quarter of fiscal year 2011-12, the total year to date expenditures were $1.742 billion, compared with $1.729 billion reported in the same period of 2010-11, representing an increase of $12.4 million, or 0.8%.

Year to date Vote 1 net operating expenditures for 2011-12 were $876.6 million compared to $854.6 million in 2010-11, an increase of $22.0 million, or 2.6%. The majority of this increase occurred during the second quarter in personnel expenditures and is attributable to the liquidation of severance pay and termination benefits amounting to $27.1 million. Also contributing to the increase in personnel costs was an increase in the number of employees and effect of annual increments in accordance with collective agreements. Offsetting these Vote 1 increases in personnel spending are decreases in expenditures for professional and special services, relating to the impact of sunsetting programs and increases in vote-netting revenues realized as a result of increased user fees.

Year to date Vote 10 grants and contributions expenditures decreased from $760.2 million in 2010-11 to $732.7 million in 2011-12, a reduction of $27.5 million or 3.6%. This resulted from sunsetting programs including the Canada Economic Action Plan in 2010-11 and changes in the timing of expenditures made to recipients as compared with the prior year.

Statutory year to date expenditures have increased from $108.7 million in 2010-11 to $130.1 million in 2011-12, an increase of $21.4 million or 19.7%. The most significant element of this variance is an increase in year to date expenditures made to Canada Health Infoway Inc. of $15.3 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 and September 30 of Fiscal Years 2010-11 and 2011-12

Expenditures in the second quarter of fiscal 2011-12 were $868.0 million compared with $930.3 million for the second quarter of 2010-11, representing a decrease of $62.3 million or 6.7% in quarterly spending. This variance in spending for the most part reflects the change in timing of disbursements made to Canada Health Infoway Inc.

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 such as user fee and cost recovery models and 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. 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. Management is applying sound risk based management to the financial stewardship of its departmental resources.

Significant Changes in Relation to Operations, Personnel and Programs

The Department is pleased to report that it signed the British Columbia Tripartite Framework Agreement on Health Governance between the Federal Government, the Province of British Columbia and the First Nations of British Columbia. The Framework Agreement signed on October 13, 2011 is the legal agreement that sets in motion the process for transferring Health Canada's role in designing and delivering health programs and services to First Nations in BC to a new First Nations Health Authority, which is expected to be completed by 2013-14.

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: November 25, 2011

Jamie Tibbetts
Chief Financial Officer
Ottawa, Canada
Date: November 25, 2011

Statement of Authorities (unaudited)

Fiscal year 2011-12 (in thousands of dollars)
Total available for use for the year ending March 31, 2012* Used during the quarter ended September 30, 2011 Year to date used at quarter-end

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

(S) - Statutory Vote

Vote 1 - Net operating expenditures 1,860,580 501,064 876,576
Vote 5 - Capital expenditures 32,666 2,185 2,367
Vote 10 - Grants and contributions 1,444,698 331,132 732,681
(S) Contributions to employee benefit plans 134,151 33,537 67,075
(S) Minister of Health - Salary and motor car allowance 78 20 39
(S) Spending of proceeds from the disposal of surplus Crown assets 219 8 56
(S) Refunds of amounts credited to revenues in previous years 511 19 511
(S) Canada Health Infoway Inc. 62,387 0 62,387
(S) Collection agency fees 16 2 16
Total authorities 3,535,306 867,967 1,741,708
Fiscal year 2010-11 (in thousands of dollars)
Total available for use for the year ending March 31, 2011* Used during the quarter ended September 30, 2010 Year to date used at quarter-end

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

(S) - Statutory Vote

Vote 1 - Net operating expenditures 2,011,667 471,891 854,615
Vote 5 - Capital expenditures 38,576 4,174 5,749
Vote 10 - Grants and contributions 1,510,370 376,324 760,179
(S) Contributions to employee benefit plans 122,825 30,707 61,413
(S) Minister of Health - Salary and motor car allowance 79 20 39
(S) Spending of proceeds from the disposal of surplus Crown assets 498 1 9
(S) Refunds of amounts credited to revenues in previous years 164 109 164
(S) Canada Health Infoway Inc. 47,092 47,092 47,092
(S) Collection agency fees 5 2 5
Total authorities 3,731,276 930,320 1,729,265

Departmental Budgetary Expenditures by Standard Object (unaudited)

Fiscal year 2011-12 (in thousands of dollars)
  Planned expenditures
for the year ending March 31, 2012*
Expended during the quarter ended
September 30, 2011
Year to date used at
quarter-end

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

Expenditures:
Personnel 913,820 273,859 486,044
Transportation and communications 258,452 52,460 88,123
Information 17,717 1,503 1,838
Professional and special services 439,495 102,491 171,198
Rentals 19,446 3,101 6,339
Repair and maintenance 44,327 8,314 19,831
Utilities, materials and supplies 414,690 109,897 199,523
Acquisition of lands, buildings and works 6,415 656 697
Acquisition of machinery and equipment 40,674 7,352 12,231
Transfer payments 1,507,085 331,257 795,214
Other subsidies and payments 2,381 (771) (3,683)
Total gross budgetary expenditures 3,664,502 890,119 1,777,355
 
Less revenues netted against expenditures:
Rights and privileges 52,165 7,863 11,954
Services non-regulatory 21,876 4,359 7,730
Services regulatory 55,155 9,930 15,963
Total revenues netted against expenditures 129,196 22,152 35,647
 
Total net budgetary expenditures 3,535,306 867,967 1,741,708
Fiscal year 2010-11 (in thousands of dollars)
  Planned expenditures
for the year ending March 31, 2011*
Expended during the quarter ended
September 30, 2010
Year to date used at
quarter-end
Expenditures:

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

Personnel 882,148 240,873 450,985
Transportation and communications 235,391 47,302 84,084
Information 28,761 1,489 1,948
Professional and special services 496,180 104,063 178,925
Rentals 16,630 5,119 8,702
Repair and maintenance 49,165 6,448 17,595
Utilities, materials and supplies 476,453 106,596 195,968
Acquisition of lands, buildings and works 4,256 869 1,783
Acquisition of machinery and equipment 52,590 7,939 13,141
Transfer payments 1,557,462 423,619 807,474
Other subsidies and payments 1,865 696 (2,073)
Total gross budgetary expenditures 3,800,901 945,013 1,758,532
 
Less revenues netted against expenditures:
Rights and privileges 20,556 2,889 9,063
Services non-regulatory 21,434 5,669 6,967
Services regulatory 27,635 6,135 13,237
Total revenues netted against expenditures 69,625 14,693 29,267
 
Total net budgetary expenditures 3,731,276 930,320 1,729,265
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