Health Canada Quarterly Financial Report - For the quarter ended June 30, 2017

Authorities available for spending in fiscal year 2017-2018 were $4,357 million at the end of the first quarter as compared with $3,960 million at the end of the first quarter of 2016-2017, representing a net increase of $397 million, or 10.0%. This increase is primarily attributable to the following:

• $154.9 million increase for Jordan's Principle interim reforms which will increase social and health services for First Nations children;
• $90.9 million increase for growth in First Nations and Inuit health programs and services;
• $58.2 million increase to continue to fulfill Canada's obligations under the Indian Residential Schools Settlement Agreement;
• $38.2 million increase to support infrastructure and programs for Indigenous early learning and child care;
• $29.0 million increase for Canada Health Infoway for the implementation of e-prescribing technology and telehomecare;
• $24.6 million increase to provide immediate and targeted mental wellness support to First Nations and Inuit;
• $21.2 million increase for the Canada Brain Research Fund; and,
• $19.9 million increase to maintain and upgrade federal infrastructure assets.

These increases are partially offset by the following decreases:

• $20.0 million decrease in funding for the Territorial Health Investment Fund as this program sunset in 2016-2017, but was renewed under Budget 2017 with funding expected later in 2017-2018;
• $12.0 million decrease in statutory spending authority for disbursements to Canada Health Infoway Inc.; and,
• $10.9 million decrease for Budget 2016 reductions in professional services, advertising and travel.

The fluctuations in authorities available for spending are most notable in the following standard objects: personnel; transportation and communications; professional and special services; utilities, materials and supplies; acquisition of land, buildings and works; acquisition of machinery and equipment; transfer payments; and revenues netted against expenditures for services of a non-regulatory nature.

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.

During the first quarter of 2017-2018, total budgetary expenditures were $1,273 million compared with $1,216 million reported for the same period of 2016-2017, representing an increase of $57 million or 4.7%.

Year to date net operating expenditures have increased by approximately $15 million or 3.4% when compared to the first quarter of 2016-2017. The significant variances in operating expenditures reported by standard object are as follows:

• $30.4 million increase in overall net expenditures due to a decrease in vote netted revenues from the First Nations Health Authority for which the revenue collection authority had expired and new authorities were not yet approved; and,
• $10.8 million increase in personnel costs due to retroactive salary payments resulting from the signing of collective agreements.

These increases are partially offset by:

• $14.5 million decrease in utilities, materials and supplies due to timing of expenditures for pharmaceutical and medical supplies which are demand-driven and can vary from year to year; and,
• $10.3 million decrease in professional and special services due to the timing of expenditures to the Public Health Agency of Canada under the Shared Services Partnership Agreement.

There was an increase in Vote 10 - Grants and contributions year to date expenditures of $56 million or 7.8%, primarily due to:

• $84.6 million increase in disbursements for First Nations and Inuit health programs including:
  • support of social infrastructure and programs for Indigenous early learning and child care;
  • Non-Insured Health Benefit expenditures which are primarily demand-driven and can vary from year to year;
  • Jordan's Principle - A Child-First Initiative; and,
  • immediate and targeted mental wellness support to First Nations and Inuit;
• $14.5 million increase in contributions to Canada Health Infoway; and,
• $7.4 million increase in contributions to support the Mental Health Commission of Canada.

These increases are partially offset by the following decreases:

• $35.0 million decrease in contributions due to timing of disbursements to the Canadian Partnership Against Cancer, Canadian Foundation for Health Improvement and the Canada Brain Research Fund;
• $12.6 million decrease in disbursements for the Territorial Health Investment Fund as this program sunset in 2016-2017 but was renewed under Budget 2017 with funding expected later in 2017-2018; and,
• $6.6 million decrease in contributions for the Official Language Health Contribution Program due to reduced authorities and timing of disbursements.

Statutory year to date expenditures have decreased $14 million or 19.7% from $70 million in 2016-2017 to $56 million in 2017-2018, 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.

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. 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. Suzy McDonald was appointed Assistant Deputy Minister of the Opioid Response Team in May 2017.

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:  August 17, 2017

Original signed by Randy Larkin
Randy Larkin
Assistant Deputy Minister and
Chief Financial Officer
Ottawa, Canada
Date: August 14, 2017