Health Canada Quarterly Financial Report - For the quarter ended June 30, 2023

Table of Contents

• Introduction
• Basis of Presentation
• Highlights of Fiscal Quarter and Fiscal Year-to-Date Results
• Risks and Uncertainties
• Significant Changes in Relation to Operations, Personnel and Programs
• Statement of Authorities (unaudited)
• Departmental Budgetary Expenditures by Standard Object (unaudited)

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. Health Canada administers the Canada Health Act which embodies national principles to ensure a universal and equitable publicly-funded health care system. A summary of Health Canada's programs may be found in Part II of the Main Estimates.

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. The accompanying Statement of Authorities includes the Department's spending authorities granted by Parliament, and those used by the Department consistent with the Main Estimates and Supplementary Estimates for the 2023-24 fiscal year. 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.

The authority of Parliament is required before money can be spent by the Government. Approvals 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.

The Department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, 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 Main Estimates and Supplementary Estimates A for fiscal year 2023-24, as well as budget adjustments approved by Treasury Board up to June 30, 2023.

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.

A. Significant Changes to Authorities

The following table provides a comparison of total authorities available by vote at the end of the first quarter of the current and previous fiscal years.

Authorities available for spending in fiscal year 2023-24 were $6,975 million at the end of the first quarter as compared with $5,687 million at the end of the first quarter of 2022-23, representing a net increase of $1,288 million, or 23%. This variance is primarily attributable to the following increases:

• $2,630.5 million in funding to improve health care for Canadians (Budget 2023);
• $479.6 million in funding to develop a national strategy for high-cost drugs for rare diseases;
• $355.1 million in funding for the implementation of the interim Canada Dental Benefit Plan and payments pursuant to the Dental Benefit Act;
• $131.1 million in funding for the renewal of the federal framework for the legalization and regulation of cannabis in Canada; and,
• $69.9 million in funding to improve mental health supports and services.

These increases in authorities are partially offset by the following decreases:

• $1,788.0 million in statutory authority for expenditures in relation to COVID-19 tests;
• $500.0 million in funding to support emergency measures related to the pandemic;
• $36.7 million in funding related to Canada Health Infoway;
• $22.5 million in funding to support innovative approaches to COVID-19 testing; and,
• $20.0 million in funding for Safe Restart Agreements.

The fluctuations in authorities available for spending are most notable in the following standard objects: Transfer payments; Utilities, materials and supplies; Personnel; and Professional and special services.

B. Significant Changes in Year-to-Date Expenditures

The following table provides a comparison of year-to-date spending by vote at the end of the first quarter of the current and previous fiscal years.

At the end of the first quarter of 2023-24, total budgetary expenditures were $614 million compared with $554 million reported for the same period of 2022-23, representing an increase of $60 million, or 11%.

Year-to-date net operating expenditures have decreased by approximately $13 million or 7% when compared to the first quarter of 2022-23. The decrease is mainly a result of increases in revenues, which results in a decrease in net operating expenditures. Such variances include an $8.0 million increase in revenues from the Employee Assistance Program, due mostly to a change in timing of cash receipts for services provided.

There was an increase in Vote 10 - Grants and contributions year-to-date expenditures of $25 million or 17%, primarily a result of several offsetting factors including timing of payments made to recipients and changes in amount of funding available. Significant variances from the prior year are as follows:

• $22.9 million increase in contributions related to payments to the Terry Fox Research Institute;
• $8.5 million increase in contributions to the Canadian Institute for Health Information; and,
• $9.9 million decrease in contributions to Canada Health Infoway.

Statutory year-to-date expenditures have increased by $47 million or 21% from $229 million in 2022-23 to $277 million in 2023-24, primarily as a result of the following offsetting factors:

• $243.1 million increase in statutory spending for payments to recipients and advance payments to Canada Revenue Agency through an administrative arrangement to provide payments to recipients under the interim Canada Dental Benefit Plan; and,
• $194.7 million decrease in statutory spending for expenditures in relation to COVID-19 tests.

Risks and Uncertainties

Health Canada operates in a complex and dynamic environment, facing several challenges as it works to deliver results for Canadians. Many of these challenges - such as the overdose crisis, public health events like the COVID-19 pandemic, global supply chain issues, and climate change - are beyond the sole control of the Department and involve working collaboratively with federal partners, provinces and territories (P/Ts), Indigenous organizations, industry and international regulators.

Health Canada regulates health products and controlled substances, and supports innovation, digital health solutions and information sharing in Canada's health system to help Canadians maintain and improve their health. The Department also provides national leadership to foster sustainable health care systems that ensure access for Canadians to appropriate and effective health care. These systems are facing numerous challenges in terms of sustainability, access to services, and service delivery. Although health care delivery is primarily under P/T jurisdiction with funding administered via the Canada Health Transfer, the Department plays an important role in supporting P/Ts with their health care and health system priorities by advancing the Government's Working Together to Improve Health Care for Canadians plan, which provides new funding to P/Ts to support shared priorities.

Health Canada's priorities continue to focus on how government investments can protect the health and safety of Canadians. As such, there are corporate and program risks related to the rapid delivery of government commitments, programs and services. As per its Risk Management Policy, the Department uses a consistent approach to risk management, and maintains a comprehensive and up-to-date Corporate Risk Profile, to support risk-based decision-making.

Health Canada closely monitors its environment and operations to manage its corporate risks, ensure appropriate mitigation strategies are in place, and allocates and reallocates resources, as required. Sound risk management also supports effective service delivery, better project management, an increase in value for money, and ultimately better results for Canadians.

The Department manages risks and uncertainty through effective engagement across the organization with agile and sound governance structures, as well as long-term planning. The executive-level committee on Finance, Investment Projects and Transformation recommends overall direction for financial management and control, and ensures alignment of investments with departmental strategies and transformation initiatives.

In this post-pandemic environment, Health Canada will closely monitor departmental risks associated with health and system challenges that were exacerbated by COVID-19 and ensure additional mitigation strategies are being put in place for future health emergencies, such as those linked to climate change events.

Significant Changes in Relation to Operations, Personnel and Programs

Mr. Eric Costen was appointed Associate Deputy Minister of Health Canada effective June 26, 2023.

There have been no other significant changes in relation to operations, personnel and programs during this quarter.

Approved by:

Original signed by Stephen Lucas
Stephen Lucas
Deputy Minister
Ottawa, Canada
Date: August 22, 2023

Original signed by Serena Francis
Serena Francis
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: August 17, 2023

Statement of Authorities (unaudited)

Departmental Budgetary Expenditures by Standard Object (unaudited)