Health Canada Quarterly Financial Report - For the quarter ended September 30, 2024

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 2024-25 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 2024-25, as well as budget adjustments approved by Treasury Board up to September 30, 2024.

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

Bar chart showing a comparison of net budgetary authorities as at June 30 and September 30 of fiscal years 2023-24 and 2024-25 in millions of dollars.

2023-24 Authorities available as at June 30 = 6,975;
2023-24 Authorities available as at September 30 = 7,054;
2024-25 Authorities available as at June 30 = 9,028;
2024-25 Authorities available as at September 30 = 9,087.

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 2024-25 were $9,087 million at the end of the second quarter as compared with $7,054 million at the end of the second quarter of 2023-24, representing a net increase of $2,033 million, or 29%. This variance is primarily attributable to increases in funding related to the following:

• $1,987.1 million for the Canadian Dental Care Plan;
• $325.0 million to improve working conditions for personal support workers; and,
• $58.3 million for the renewal of the Canadian Drugs and Substances Strategy.

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

• $136.8 million in statutory authority for payments pursuant to the Dental Benefit Act for the interim Canada Dental Benefit;
• $69.9 million to improve mental health support and services through the Wellness Together Canada online platform;
• $61.7 million for Canada's Chemicals Management Regime;
• $17.8 million for Strengthening the Capacity and Transparency of the Pesticide Review Process;
• $17.5 million in the operating and capital budget carry-forwards as compared to previous fiscal year;
• $13.3 million for Bringing Innovation to Regulations through the implementation of the Agri-Food and Aquaculture Sector Regulatory Review Roadmap and the Health and Biosciences Sector Regulatory Review Roadmap; and,
• $12.7 million for Supporting the Mental Health of Those Most Affected by COVID-19.

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

B. Significant changes in year-to-date expenditures

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

Figure 2 - Text description

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 2023-24 and 2024-25 in millions of dollars.

2023-24 Net budgetary authorities = 7,054;
2023-24 Year-to-date expenditures to June 30 = 614;
2023-24 Year-to-date expenditures to September 30 = 1,114;
2024-25 Net budgetary authorities = 9,087;
2024-25 Year-to-date expenditures to June 30 = 2,938;
2024-25 Year-to-date expenditures to September 30 = 3,866.

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 2024-25, total budgetary expenditures were $3,866 million compared with $1,114 million reported for the same period of 2023-24, representing an increase of $2,752 million, or 247%.

Year-to-date net operating expenditures have increased by $637 million or 131% when compared to the second quarter of 2023-24. The increase is a result of the following significant and partially offsetting factors:

• Expenditures in relation to the Canadian Dental Care Plan (CDCP) including:
  • $580.6 million in payments for dental benefits;
  • $81.5 million in Professional and special services for program administration support and claims processing services provided by Employment and Social Development Canada and Sun Life Assurance Company of Canada; and,
  • $5.2 million decrease in Professional and special services for program administration support provided by Canada Revenue Agency as a result of the transition from the interim Canada Dental Benefit to CDCP;
• $34.1 million increase in Personnel expenditures primarily due to an increase in rates of pay for multiple public servant classification groups over the prior year, following updated collective agreements and annual salary increments for step progression and inflation adjustments;
• $26.4 million decrease in expenditures for psychologist and mental health services and information technology services related to the Wellness Together Canada online platform, as a result of the transition of mental health resources to the provinces and territories as Canada moves past the emergency phase of the global COVID-19 pandemic; and,
• $10.7 million increase in revenues, which results in a decrease in net operating expenditures. This variance largely reflects a fluctuation in timing of invoicing and collection of revenue from the Employee Assistance Program and an increase in revenues of a regulatory nature following annual fee increases in accordance with Section 4(1) of the Fees in Respect of Drugs and Medical Devices Order.

There was an increase in Vote 10 – Grants and contributions year-to-date expenditures of $2,243 million or 749%, 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:

• $2,150.2 million increase in contributions to provinces and territories for Shared Health Priorities, resulting from payments made earlier in the current fiscal year as compared to the prior year, according to the terms and conditions prescribed in the contribution agreements;
• $35.0 million increase in grants to territories for the Territorial Health Investment Fund;
• $32.3 million in contributions to Government of British Columbia for the National Strategy for Drugs for Rare Diseases Program;
• $22.1 million in contributions to Government of British Columbia to improve working conditions for personal support workers;
• $17.1 million increase in contributions to Canadian Partnership Against Cancer;
• $10.7 million increase in contributions to Government of Prince Edward Island for the Improving Affordable Access to Prescription Drugs Program; and,
• $9.8 million increase in contributions to Canadian Institute for Health Information; partially offset by,
• $21.0 million decrease in contributions to the Substance Use and Additions Program; and,
• $13.4 million decrease in contributions to Canada Health Infoway.

Statutory year-to-date expenditures have decreased by $130 million or 40% from $325 million in 2023-24 to $195 million in 2024-25, primarily as a result of the following factors:

• $136.8 million decrease in statutory spending for payments to recipients and advance payments to Canada Revenue Agency through an administrative arrangement to provide payments to recipients pursuant to the Dental Benefit Act under the interim Canada Dental Benefit, which ended on June 30, 2024; and,
• $2.9 million decrease in statutory spending for Professional and special services, Personnel services, and Information services in relation to COVID-19 tests, for which the responsibility was transferred to the Public Health Agency of Canada in February 2024; partially offset by,
• $10.4 million increase in statutory spending for costs incurred by Health Canada on behalf of the Public Health Agency of Canada under the Shared Services Partnership agreement, due to a change in timing and amount in allocation of expenditures pursuant to Section 4.2 of the Department of Health Act.

C. Quarterly variances

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

Figure 3 - Text description

Bar chart showing a comparison of quarterly expenditures for the quarters ended June 30 and September 30 of fiscal years 2023-24 and 2024-25 in millions of dollars.

2023-24 Expenditures for the quarter ended June 30 = 614;
2023-24 Expenditures for the quarter ended September 30 = 500;
2024-25 Expenditures for the quarter ended June 30 = 2,938;
2024-25 Expenditures for the quarter ended September 30 = 928.

Expenditures in the second quarter of fiscal year 2024-25 were $928 million compared with $500 million for the second quarter of 2023-24, representing an increase of $428 million or 86% in quarterly spending.

The increase in quarterly spending is primarily due to:

• $423.5 million increase in payments to Sun Life Assurance Company of Canada for dental benefits, in relation to the Canadian Dental Care Plan;
• $20.2 million increase in Professional and special services for program administration support and claims processing services provided by Employment and Social Development Canada and Sun Life Assurance Company of Canada; and,
• $18.2 million increase in Personnel expenditures due to increases in salaries and wages following current year updates to the rates of pay for multiple public servant classification groups; and partially offset by,
• $12.2 million decrease in Professional and special services for change in timing of expenditures to the Public Health Agency of Canada for services provided under the Shared Services Partnership Agreement;
• $8.7 million decrease in Professional and special services, mainly due to decrease in expenditures for psychologist and mental health services related to the Wellness Together Canada online platform;
• $5.2 million decrease in Professional and special services for program administration support by Canada Revenue Agency as a result of the transition from the interim Canada Dental Benefit to CDCP; and,
• $10.2 million increase in revenues, which effectively decreases net operating expenditures, due to a fluctuation in timing of invoicing and collection of revenue from the Employee Assistance Program.

The quarterly expenditures reported by standard object in 2023-24 include an accounting reclassification of $125.3M in advance payments from Other subsidies and payments to Transfer payments to reflect the disbursement by Canada Revenue Agency to recipients for benefit payments during the quarter, under the interim Canada Dental Benefit.

Risks and uncertainties

Health Canada operates in a complex and dynamic environment, facing several challenges as it works to deliver results for Canadians. These challenges – including health workforce shortages, affordability of health services, substance use-related harms, global supply chain disruptions, combating misinformation and disinformation, fostering inclusivity, and the impacts of climate change – are beyond the sole control of the Department. Addressing such complex issues requires collaboration with federal partners, provinces and territories (P/Ts), Indigenous organizations, non-governmental stakeholders, 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 support P/Ts on 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.

The Department closely monitors its environment and operations to manage its corporate risks, ensures 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.

Health Canada 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.

Significant changes in relation to operations, personnel and programs

On June 17, 2024, the Prime Minister announced the appointment of Mr. Greg Orencsak as Deputy Minister of Health Canada, effective August 19, 2024.

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

Approved by:

Original signed by Greg Orencsak
Greg Orencsak
Deputy Minister
Ottawa, Canada
Date: November 20, 2024

Original signed by Serena Francis
Serena Francis
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: November 18, 2024

Statement of authorities (unaudited)

Departmental budgetary expenditures by standard object (unaudited)