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

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 2017-2018 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 2017-2018, as well as budget adjustments approved by Treasury Board up to June 30, 2017.

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 of Fiscal Years 2016-2017 and 2017-2018

Comparison of Net Budgetary Authorities and Expenditures for the Quarter Ended June 30 of Fiscal Years 2016-2017 and 2017-2018

Figure - Text Description

Bar chart showing a comparison of net budgetary authorities and expenditures for the quarter ended June 30 of Fiscal Years 2016-2017 and 2017-2018 in millions of dollars.

2016-2017 Net Budgetary Authorities = 3,960; 2016-2017 Expenditures for the Quarter Ended June 30 = 1,216; 2017-2018 Net Budgetary Authorities = 4,357; 2017-2018 Expenditures for the Quarter Ended June 30 = 1,273.

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 2016 – 2017 and 2017 – 2018
Authorities available (in millions of dollars) 2016-2017 2017-2018 Variance
Vote 1 - Operating expenditures 1,822 1,957 135
Vote 5 - Capital expenditures 32 38 6
Vote 10 - Grants and contributions 1,887 2,165 278
Statutory 219 197 (22)
Total authorities 3,960 4,357 397

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.

Comparison of Year to Date Expenditures for the Quarter Ended June 30 of Fiscal Years 2016 – 2017 and 2017 – 2018
Year to date expenditures (in millions of dollars) 2016-2017 2017-2018 Variance
Vote 1 - Operating expenditures 422 437 15
Vote 5 - Capital expenditures - - -
Vote 10 - Grants and contributions 724 780 56
Statutory 70 56 (14)
Total year to date expenditures 1,216 1,273 57

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

Statement of Authorities (Unaudited)

Fiscal year 2017-2018 (in thousands of dollars)
Authority Total available for use for the year ending
March 31, 2018Footnote *
Used during the quarter ended
June 30, 2017
Year to date used at quarter-end
Table Note 1

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

Return to table note * referrer

Vote 1 - Operating expenditures 1,956,731 436,963 436,963
Vote 5 - Capital expenditures 37,540 401 401
Vote 10 - Grants and contributions 2,164,870 780,130 780,130
(S) Contributions to employee benefit plans 120,137 29,861 29,861
(S) Minister of Health - Salary and motor car allowance 84 21 21
(S) Spending of proceeds from the disposal of surplus Crown assets 15 2 2
(S) Refunds of amounts credited to revenues in previous years 79 79 79
(S) Canada Health Infoway Inc. 25,848 25,848 25,848
(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 - -
Total authorities 4,356,767 1,273,305 1,273,305
Fiscal year 2016 – 2017 (in thousands of dollars)
Authority Total available for use for the year ending
March 31, 2017Footnote *
Used during the quarter ended
June 30, 2016
Year to date used at quarter-end
Table Note 2

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

Return to table note * referrer

Vote 1 - Operating expenditures 1,822,509 422,421 422,421
Vote 5 - Capital expenditures 31,631 59 59
Vote 10 - Grants and contributions 1,887,055 723,904 723,904
(S) Contributions to employee benefit plans 129,095 31,341 31,341
(S) Minister of Health - Salary and motor car allowance 84 7 7
(S) Spending of proceeds from the disposal of surplus Crown assets 207 54 54
(S) Refunds of amounts credited to revenues in previous years 52 52 52
(S) Canada Health Infoway Inc. 37,878 37,878 37,878
(S) Collection agency fees 1 1 1
(S) Transfer payments in connection with the Budget Implementation Act 195 195 195
(S) Spending of revenues pursuant to section 4.2 of the Department of Health Act 51,463 - -
Total authorities 3,960,170 1,215,912 1,215,912

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, 2018 Expended during the quarter ended June 30, 2017 Year to date used at quarter-end
Expenditures:
Personnel 913,751 200,762 200,762
Transportation and communications 251,082 48,570 48,570
Information 16,688 1,288 1,288
Professional and special services 521,533 102,569 102,569
Rentals 9,729 1,307 1,307
Repair and maintenance 19,934 1,652 1,652
Utilities, materials and supplies 589,842 127,627 127,627
Acquisition of land, buildings and works 7,354 - -
Acquisition of machinery and equipment 29,988 7,668 7,668
Transfer payments 2,190,718 805,978 805,978
Other subsidies and payments 3,472 2,348 2,348
Total gross budgetary expenditures 4,554,091 1,299,769 1,299,769
Less revenues netted against expenditures:
Rights and privileges 61,563 11,552 11,552
Services non-regulatory 72,822 2,991 2,991
Services regulatory 62,939 11,799 11,799
Services other government departments - 122 122
Total revenues netted against expenditures 197,324 26,464 26,464
Total net budgetary expenditures 4,356,767 1,273,305 1,273,305
Fiscal year 2016 – 2017 (in thousands of dollars)
Standard Object Planned expenditures for the year ending March 31, 2017 Expended during the quarter ended June 30, 2016 Year to date used at quarter-end
Expenditures:
Personnel 903,657 188,955 188,955
Transportation and communications 262,128 46,964 46,964
Information 13,232 608 608
Professional and special services 498,680 115,759 115,759
Rentals 8,670 3,644 3,644
Repair and maintenance 23,694 1,378 1,378
Utilities, materials and supplies 578,153 142,176 142,176
Acquisition of land, buildings and works 21,823 23 23
Acquisition of machinery and equipment 9,754 6,715 6,715
Transfer payments 1,925,128 761,977 761,977
Other subsidies and payments 3,206 1,322 1,322
Total gross budgetary expenditures 4,248,125 1,269,521 1,269,521
Less revenues netted against expenditures:
Rights and privileges 57,620 7,750 7,750
Services non-regulatory 170,448 34,647 34,647
Services regulatory 59,887 11,212 11,212
Total revenues netted against expenditures 287,955 53,609 53,609
Total net budgetary expenditures 3,960,170 1,215,912 1,215,912
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