Health Canada Quarterly Financial Report - For the quarter ended September 30, 2021

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. 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. 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 2021-22 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 2021-22, as well as budget adjustments approved by Treasury Board up to September 30, 2021.

A. Significant Changes to Authorities

The following graph provides a comparison of net budgetary authorities available for spending at the end of each quarter of the current and previous fiscal years.

Figure 1 - Text description

Comparison of Net Budgetary Authorities as at June 30 and September 30 of Fiscal Years 2020-21 and 2021-22 (in millions of dollars)

Bar chart showing a comparison of net budgetary authorities as at June 30 and September 30 of fiscal years 2020-21 and 2021-22 in millions of dollars.

2020-21 Authorities available as at June 30 = 2,790; 2020-21 Authorities available as at September 30 = 2,823; 2021-22 Authorities available as at June 30 = 4,869; 2021-22 Authorities available as at September 30 = 4,924.

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

Authorities available for spending in fiscal year 2021-22 are $4,924 million at the end of the second quarter as compared with $2,823 million at the end of the second quarter of 2020-21, representing a net increase of $2,101 million, or 74%. This increase is primarily attributable to the following:

• $1,003.9 million in funding for investments in long-term care (COVID-19);
• $355.1 million in funding for the creation of a critical drug reserve in collaboration with provinces and territories to support access to drugs which treat COVID-19 symptoms for Canadians;
• $250.0 million increase in funding to strengthen Canada's Home and Community Care and Mental Health and Addiction Services Initiative;
• $218.0 million in funding for the Safe Restart Agreement for the federal investments in testing, contact tracing and data management (COVID-19);
• $116.0 million in funding for drugs, medical devices and virtual care (COVID-19);
• $78.3 million in funding for regulatory and operational functions and to support critical COVID-19 focused operations;
• $53.0 million in funding for mental health and substance use in the context of COVID-19; and,
• $16.8 million increase in the Operating and Capital budget carry forwards compared to previous year.

The fluctuations in authorities available for spending are most notable in the following standard objects: transfer payments, professional and special services, personnel, acquisition of machinery and equipment, and revenues netted against expenditures for services of a regulatory nature and rights and privileges.

B. Significant Changes in Year-to-Date Expenditures

The following graph provides a comparison of net budgetary authorities and year-to-date spending by quarter for the current and previous fiscal years.

Figure 2 - Text description

Comparison of Net Budgetary Authorities and Year-to-Date Expenditures for the Quarters Ended June 30 and September 30 of Fiscal Years 2020-21 and 2021-22 (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 2020-21 and 2021-22 in millions of dollars.

2020-21 Net budgetary authorities = 2,823; 2020-21 Year-to-date expenditures to June 30 = 995; 2020-21 Year-to-date expenditures to September 30 = 1,352; 2021-22 Net budgetary authorities = 4,924; 2021-22 Year-to-date expenditures to June 30 = 1,120; 2021-22 Year-to-date expenditures to September 30 = 1,695.

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

At the end of the second quarter of 2021-22, total budgetary expenditures were $1,695 million compared with $1,352 million reported for the same period of 2020-21, representing an increase of $343 million or 25%.

Year-to-date net operating expenditures have increased by approximately $104 million or 28% when compared to the second quarter of 2020-21. The significant variances in operating expenditures are as follows:

• $59.1 million increase in personnel expenditures primarily due to increase in the number of personnel to address COVID-related initiatives, annual salary increments for inflation and step increases, and one-time payment to employees related to Phoenix damage;
• $39.5 million increase in professional and special services due mainly to an increase in psychologist and mental health services which were statutory expenditures in the prior year; and an increase in other professional services supporting COVID-19 initiatives including contact tracing, data collection and modelling, and supply chain support;
• $20.9 million increase in utilities, materials and supplies for the acquisition of pharmaceutical and other medicinal products related to the critical drug reserves initiative; and,
• $23.4 million increase in revenues, which results in a decrease in net operating expenditures, mainly the result of increased fees related to the drugs and medical devices regime, and change in timing of cash receipts for licensing applications, which can vary from year to year.

There was an increase in Vote 10 - Grants and contributions year-to-date expenditures of $256 million or 29%, resulting from the following offsetting factors:

• $224.1 million increase in contributions for Strengthening Canada's Home and Community Care and Mental Health and Addiction Services Initiative (Home Care and Mental Health) due mainly to an increased amount of funding available in 2021-22 and timing of payments;
• $21.3 million increase in contributions to Canada Health Infoway, due mainly to an increased amount of funding available in 2021-22 and timing of payments;
• $10.8 million increase in contributions for improving health care quality and patient safety, due mainly to timing of payments; and,
• $13.5 million decrease in grants due to timing of payments for the Territorial Health Investment Fund.

Statutory year-to-date expenditures have decreased by $17 million or 15% from $113 million in 2020-21 to $96 million in 2021-22 that is mainly comprised of the following offsetting components:

• $30.9 million decrease in statutory spending for COVID-19 initiatives including professional and special services for psychologist and mental health services, which are voted expenditures in 2021-22; and,
• $11.8 million increase in information services mainly due to advertising services for public announcements regarding COVID-19 on behalf of the Public Health Agency of Canada under the Shared Services Partnership agreement.

C. Quarterly Variances

The following graph presents a comparison of quarterly spending by quarter and by fiscal year.

Figure 3 - Text description

Comparison of Quarterly Expenditures for the Quarters Ended June 30 and September 30 of Fiscal Years 2020-21 and 2021-22 (in millions of dollars)

Bar chart showing a comparison of quarterly expenditures for the quarters ended June 30 and September 30 of fiscal years 2020-21 and 2021-22 in millions of dollars.

2020-21 Expenditures for the quarter ended June 30 = 995; 2020-21 Expenditures for the quarter ended September 30 = 358; 2021-22 Expenditures for the quarter ended June 30 = 1,120; 2021-22 Expenditures for the quarter ended September 30 = 575.

Expenditures in the second quarter of fiscal year 2021-22 were $575 million compared with $358 million for the second quarter of 2020-21, representing an increase of $217 million or 61% in quarterly spending.

The increase in quarterly spending is due primarily to:

• $149.4 million increase in grants and contributions resulting from the following components on payments, including:
  • $93.2 million increase for Strengthening Canada's Home and Community Care and Mental Health and Addiction Services Initiative (Home Care and Mental Health); and,
  • $49.9 million increase for Canada Health Infoway.
• $34.4 million increase in personnel expenditures primarily due to increase in the number of personnel to address COVID-related initiatives, annual salary increments for inflation and step increases, and one-time payment to employees related to Phoenix damage;
• $11.5 million increase in information services mainly due to advertising services in public announcements regarding COVID-19 on behalf of the Public Health Agency of Canada under the Shared Services Partnership agreement;
• $14.7 million increase in acquisition of machinery and equipment due to timing differences on payments; and,
• $7.6 million increase in utilities, materials and supplies mainly due to the acquisition of pharmaceutical and other medicinal products related to the critical drug reserves initiative.

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 COVID-19 pandemic and the opioid overdose crisis - are beyond the sole control of the Department and involve working collaboratively with federal partners, provinces and territories, Indigenous organizations, industry and international regulators.

COVID-19 challenged Canadians and health systems across the country adding pressure on health care resources and increased the demand and urgency for health care products, including COVID-19 vaccines, treatments and medical devices. It has also negatively affected the mental health of many Canadians; disproportionally impacted those living in long-term care homes; worsened the opioid overdose crisis; and intensified the demand for surge capacity for front line workers and scientific experts.

In response, Health Canada mobilized and leveraged its resources to minimize the impacts of COVID-19 on Canadians' health and safety. The Department implemented innovative and agile regulatory measures to approve clinical trials, vaccines, treatments and therapies; and, supported provinces and territories through targeted funding and investments in virtual care, long-term care, and testing and contact tracing. It also launched digital platforms in areas ranging from mental health to delivering critical information to the public.

Health Canada employees continued delivering on other health initiatives to support Canadians, while also adapting to remote work. The Department adopted new technologies for collaboration and remote work, and introduced comprehensive strategies to protect public servants' mental health and wellness during this challenging time. Health Canada will continue to adapt approaches to ensure organizational resilience and agility in this rapidly changing context.

All levels of government adjusted to the changing needs and expectations of Canadians and leveraged technological advances to improve quality of care and health outcomes. As a partner in the national health care system, the Department works closely with provincial and territorial governments and stakeholders to develop national approaches to health systems issues and to promote the pan-Canadian adoption of best practices.

The increased pace of scientific and technological innovation, globalization, and the complexity of the global supply chain is a key challenge for regulators. Effectively regulating new, innovative and complex products, substances, food and emerging product categories in a global marketplace requires a global approach. As such, Health Canada focused on creating and strengthening relationships with domestic and international partners in order to leverage cooperation and best practices, and accelerate regulatory reviews.

Health Canada has a well-established risk management process that enables the Department to be proactive and quickly respond to change and uncertainty. The Department utilizes an integrated risk management framework and tools, and maintains an up-to-date Corporate Risk Profile, to support a risk-based decision process to enable ongoing operations, mitigate risks and capitalize on opportunities to achieve results for Canadians.

In addition, Health Canada has appropriate internal control systems in place, proportionate to the risks being managed. The Department manages through effective engagement across the organization with agile and sound governance structures, as well as long-term planning. Health Canada'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.

Significant Changes in Relation to Operations, Personnel and Programs

Serena Francis was appointed Assistant Deputy Minister and Chief Financial Officer on September 7, 2021.

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: November 20, 2021

Original signed by Serena Francis
Serena Francis
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: November 17, 2021

Statement of Authorities (unaudited)

Departmental Budgetary Expenditures by Standard Object (Unaudited)