Health Canada Quarterly Financial Report - For the quarter ended September 30, 2016

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 programs 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 A.

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 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 2016-2017 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.

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 2016-2017, as well as budget adjustments approved by Treasury Board up to September 30, 2016.

A. Significant Changes to Authorities

The following table 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 and September 30 of Fiscal Years 2015-2016 and 2016-2017 (in millions of dollars)

Bar chart showing a comparison of authorities available for spending for the year as at June 30 and September 30 of fiscal years 2015-2016 and 2016-2017 in millions of dollars.

2015-2016 Authorities available as at June 30 = 3,734; 2015-2016 Authorities available as at September 30 = 3,798; 2016-2017 Authorities available as at June 30 = 3,960; 2016-2017 Authorities available as at September 30 = 4,011.

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

Comparison of authorities by vote for the second quarter of 2015-2016 and 2016-2017
Authorities available (in millions of dollars) 2015-2016 2016-2017 Variance
Vote 1 - Operating expenditures 1,835 1,869 34
Vote 5 - Capital expenditures 35 36 1
Vote 10 - Grants and contributions 1,678 1,887 209
Statutory 250 219 (31)
Total authorities 3,798 4,011 213

Authorities available for spending in fiscal year 2016-2017 were $4,011 million at the end of the second quarter as compared with $3,798 million at the end of the second quarter of 2015-2016, representing a net increase of $213 million, or 5.6%. This increase is primarily attributable to the following:

  • $114.4 million increase for health programs for Aboriginal populations;
  • $94.9 million increase for affordable housing and social infrastructure projects (Budget 2016);
  • $83.5 million increase for growth in First Nations and Inuit health programs and services;
  • $25.4 million increase to address climate change and air pollution (Budget 2016);
  • $16.9 million increase for the Implementation of the British Columbia Tripartite Framework Agreement on First Nation Health Governance;
  • $12.7 million increase to maintain and upgrade federal infrastructure assets (Budget 2016); and,
  • $12.0 million increase for the Canadian Foundation for Healthcare Improvement.

These increases are partially offset by the following decreases:

  • $56.5 million decrease for the sunsetting of funding in 2015-2016 for the Renewal of funding to implement the Indian Residential School Settlement Agreement;
  • $36.3 million decrease in statutory spending authority for disbursements to Canada Health Infoway Inc.;
  • $27.5 million decrease for the sunsetting of funding in 2015-2016 for the Clean Air Regulatory Agenda Funding (CARA);
  • $14.2 million decrease due to the re-profile of funding for the Brain Canada Foundation; and,
  • $13.1 million decrease in the department's Operating and Capital budget carry-forwards.

The fluctuations in authorities available for spending are most notable in the following standard objects: personnel; professional and special services; utilities, materials and supplies; acquisition of land, buildings and works; acquisition of machinery and equipment; 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 and September 30 of Fiscal Years 2015-2016 and 2016-2017 (in millions of dollars)

Bar chart showing a comparison of net budgetary authorities and year to date expenditures for the quarters ended June 30 and September 30 of Fiscal Years 2015-2016 and 2016-2017 in millions of dollars.

2015-2016 Net Budgetary Authorities = 3,798; 2015-2016 Year to date Expenditures to June 30 = 1,033; 2015-2016 Year to date Expenditures to September 30 = 1,935; 2016-2017 Net Budgetary Authorities = 4,011; 2016-2017 Year to date Expenditures to June 30 = 1,216; 2016-2017 Year to date Expenditures to September 30 = 2,059.

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

Comparison of Spending by Vote for the Quarter Ended September 30 of Fiscal Years 2015-2016 and 2016-2017
Year to date expenditures
(in millions of dollars)
2015-2016 2016-2017 Variance
Vote 1 - Operating expenditures 778 816 38
Vote 5 - Capital expenditures 5 2 (3)
Vote 10 - Grants and contributions 1,000 1,125 125
Statutory 152 116 (36)
Total year to date expenditures 1,935 2,059 124

At the end of the second quarter of 2016-2017, total budgetary expenditures were $2,059 million compared with $1,935 million reported for the same period of 2015-2016, representing an increase of $124 million or 6.4%.

Year to date net operating expenditures have increased by approximately $38 million or 4.9% when compared to the second quarter of 2015-2016. The significant variances in operating expenditures reported by standard object are as follows:

  • $7.9 million increase in transportation and communication primarily as a result of increased transportation costs for nurses and patients associated with the Non-Insured Health Benefits program, which are demand-driven and can vary from year to year;
  • $19.5 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;
    • changes to the legal services funding model, which has resulted in a variation to the timing of expenditures made to the Department of Justice; and,
  • $13.9 million increase in utilities, materials and supplies due primarily to an increase in expenses for pharmaceutical and medical supplies which are demand-driven and can vary from year to year.

There was an increase in Vote 10 - Grants and contributions year to date expenditures of $125 million or 12.5%, primarily due to:

  • $99.2 million increase in disbursements for First Nations and Inuit health programs including:
    • enhancement of health research;
    • an annual escalation to the British Columbia Tripartite Framework Agreement with the First Nations Health Authority;
    • Non-Insured Health Benefit expenditures which are primarily demand-driven and can vary from year to year; and,
    • support of the Health System Integration Fund and Aboriginal Health Human Resources initiative;
  • $16.8 million increase related to the timing of disbursements to the Canadian Partnership Against Cancer; and,
  • $12.0 million increase for disbursements to the Canadian Foundation for Healthcare Improvement.

Statutory year to date expenditures have decreased $36 million or 23.6% from $152 million in 2015-2016 to $116 million in 2016-2017, primarily due to a decrease in transfer payments made to Canada Health Infoway Inc. which are disbursed in accordance with the cash flow needs of that organization.

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 2015-2016 and 2016-2017 (in millions of dollars)

Bar chart showing a comparison of quarterly expenditures for the quarters ended June 30 and September 30 of Fiscal Years 2015-2016 and 2016-2017 in millions of dollars.

2015-2016 Expenditures for the quarter ended June 30 = 1,033; 2015-2016 Expenditures for the quarter ended September 30 = 902; 2016-2017 Expenditures for the quarter ended June 30 = 1,216; 2016-2017 Expenditures for the quarter ended September 30 = 843.

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Expenditures in the second quarter of fiscal 2016-2017 were $843 million compared with $902 million for the second quarter of 2015-2016, representing a decrease of $59 million or 6.5% in quarterly spending.

The decrease in quarterly spending is due primarily to:

  • $19.0 million decrease in professional and special services comprised of:
    • expenditures related to the Non-Insured Health Benefits program which are demand-driven and can vary from period to period; and,
    • changes to the legal services funding model, which has resulted in a variation to the timing of expenditures made to the Department of Justice;
  • $21.4 million decrease in utilities, materials and supplies for pharmaceutical and medical supply costs resulting from increases in demand under the Non-Insured Health Benefits program; and,
  • $15.4 million decrease in transfer payments related to the timing of disbursements for:
    • Canadian Partnership Against Cancer;
    • Canadian Blood Services; and,
    • Canadian Institute for Health Information.

Expenditures reported for professional and special services and utilities, materials and supplies in quarter one reflected an increase in spending as a result of demand-driven variances experienced in the Non-Insured Health Benefits program. Although the above-noted second quarter year-over-year expenditure variances indicate a decrease in these standard objects, combined with the quarter one expenditures, the year-to-date expenditures reflect an overall increase.

Risks and Uncertainties

Health Canada is dedicated to enhancing the health and well-being of Canadians and 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).

Health Canada 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.

As a result, the Department employs integrated risk management tools, including the development of an annual Corporate Risk Profile and monitoring of risk management strategies, to proactively and systematically recognize, understand, accommodate and capitalize on new challenges and opportunities, with a focus on results. In addition, the Department has appropriate internal control systems in place, proportionate to the risks being managed.

Prudent management within a constrained fiscal environment 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. 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.

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. Growth in the Non-Insured Health Benefits program is based on 5% growth on actual (annual) expenditures from the prior fiscal year. 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

Ms. Jennifer Hollington was appointed to the position of Assistant Deputy Minister of the Communications and Public Affairs Branch in September 2016.

There have been no other 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: November 24, 2016

Original signed by Randy Larkin
Randy Larkin
Assistant Deputy Minister and
Chief Financial Officer
Ottawa, Canada
Date: November 24, 2016

Statement of Authorities (Unaudited)

Fiscal year 2016-2017 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2017Table 1 footnote * Used during the quarter ended September 30, 2016 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

Return to table 1 footnote * referrer

Table 1 footnote 2

Statutory Vote

Return to table 1 footnote (S) referrer

Vote 1 - Operating expenditures 1,868,807 393,381 815,802
Vote 5 - Capital expenditures 35,969 2,322 2,381
Vote 10 - Grants and contributions 1,887,055 401,132 1,125,036
Table 1 footnote (S) Contributions to employee benefit plans 129,095 31,341 62,682
Table 1 footnote (S) Minister of Health - Salary and motor car allowance 84 14 21
Table 1 footnote (S) Spending of proceeds from the disposal of surplus Crown assets 295 13 67
Table 1 footnote (S) Refunds of amounts credited to revenues in previous years 106 54 106
Table 1 footnote (S) Canada Health Infoway Inc. 37,878 - 37,878
Table 1 footnote (S) Collection agency fees 1 - 1
Table 1 footnote (S) Transfer payments in connection with the Budget Implementation Act 389 194 389
Table 1 footnote (S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 14,834 14,834
Total authorities 4,011,142 843,285 2,059,197
Fiscal year 2015-2016 (in thousands of dollars)
Authority Total available for use for the year ending March 31, 2016Table 2 footnote * Used during the quarter ended September 30, 2015 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

Return to table 2 footnote * referrer

Table 2 footnote 2

Statutory Vote

Return to table 2 footnote (S) referrer

Vote 1 - Operating expenditures 1,835,136 435,930 777,794
Vote 5 - Capital expenditures 34,629 2,749 5,017
Vote 10 - Grants and contributions 1,678,425 416,567 999,888
Table 2 footnote (S) Contributions to employee benefit plans 122,777 30,695 61,389
Table 2 footnote (S) Minister of Health - Salary and motor car allowance 82 20 41
Table 2 footnote (S) Spending of proceeds from the disposal of surplus Crown assets 427 9 19
Table 2 footnote (S) Refunds of amounts credited to revenues in previous years 200 33 200
Table 2 footnote (S) Canada Health Infoway Inc. 74,222 - 74,222
Table 2 footnote (S) Collection agency fees 2 - 2
Table 2 footnote (S) Court awards 13 - 13
Table 2 footnote (S) Transfer payments in connection with the Budget Implementation Act 444 189 444
Table 2 footnote (S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 15,569 15,569
Total authorities 3,797,820 901,761 1,934,598

Departmental Budgetary Expenditures by Standard Object (Unaudited)

Fiscal year 2016-2017 (in thousands of dollars)
Standard Object Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended September 30, 2016 Year to date used at quarter-end
Expenditures:
Personnel 903,657 210,271 399,226
Transportation and communications 271,048 55,386 102,350
Information 13,666 1,203 1,811
Professional and special services 515,093 98,815 214,574
Rentals 8,960 3,305 6,949
Repair and maintenance 24,246 3,594 4,972
Utilities, materials and supplies 597,930 110,570 252,746
Acquisition of land, buildings and works 24,773 584 607
Acquisition of machinery and equipment 11,142 8,529 15,244
Transfer payments 1,925,322 401,327 1,163,304
Other subsidies and payments 3,206 4,203 5,525
Total gross budgetary expenditures 4,299,043 897,787 2,167,308
Less revenues netted against expenditures:
Rights and privileges 57,573 7,389 15,139
Services non-regulatory 170,448 37,337 71,984
Services regulatory 59,880 9,633 20,845
Services other government departments - 143 143
Total revenues netted against expenditures 287,901 54,502 108,111
Total net budgetary expenditures 4,011,142 843,285 2,059,197
Fiscal year 2015-2016 (in thousands of dollars)
Standard Object Planned expenditures for the year ending March 31, 2016 Expended during the quarter ended September 30, 2015 Year to date used at quarter-end
Expenditures:
Personnel 880,640 206,121 399,482
Transportation and communications 267,358 57,665 94,432
Information 13,938 2,901 3,644
Professional and special services 532,573 117,217 194,481
Rentals 6,927 4,233 5,494
Repair and maintenance 20,774 3,344 5,102
Utilities, materials and supplies 558,036 131,971 238,858
Acquisition of land, buildings and works 1,375 1,966 4,096
Acquisition of machinery and equipment 33,254 8,420 14,317
Transfer payments 1,753,091 416,756 1,074,554
Other subsidies and payments 9,147 2,114 2,429
Total gross budgetary expenditures 4,077,113 952,708 2,036,889
Less revenues netted against expenditures:
Rights and privileges 56,481 6,470 13,011
Services non-regulatory 164,034 33,120 68,241
Services regulatory 58,778 11,357 20,853
Services to other government departments - - 186
Total revenues netted against expenditures 279,293 50,947 102,291
Total net budgetary expenditures 3,797,820 901,761 1,934,598
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