ARCHIVED - Future-oriented Financial Statements 2010-2011

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Statement of Management Responsibility

The introduction of Future-oriented Financial Statements is a Parliamentary direction for departments to provide enhanced financial information to external users. Health Canada has prepared a full set of Future-oriented Financial Statements which forecast results for the 2010-11 fiscal year and update 2009-10 projections. Responsibility for the compilation, content and presentation of the Future-oriented Financial Statements for the years ended March 31, 2010 and 2011 and all information contained in this statement rests with Health Canada's management. This future-oriented information has been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector. The Future-oriented Financial Statements and accompanying notes are submitted in Part III of the Estimates (Report on Plans and Priorities), and will be used in the Health Canada's Departmental Performance Report to compare with actual results.

Management is responsible for the integrity and objectivity of the information contained in the Future-oriented Financial Statements and for the process of developing forecasts and future projections. These forecasts and future projections are based upon information available and known to management at the time of development. They reflect current business and economic conditions, assume a continuation of current governmental priorities and are consistent with Health Canada's mandate and strategic objectives. Much of the future-oriented financial information uses best estimates, assumptions and judgment to derive forecasts and future projections while at the same time giving due consideration to materiality. At the time of preparation of this information, management believes these best estimates and assumptions to be reasonable. However, as with any use of best estimates and assumptions, there is a measure of uncertainty surrounding them. This uncertainty increases as the forecast horizon extends.

The actual results achieved for the fiscal year covered in the accompanying Future-oriented Financial Statements will vary from the information presented and these variations may be material.

Morris Rosenberg
Deputy Minister
Ottawa, Canada

Date:

Alfred Tsang
Chief Financial Officer
Ottawa, Canada

Date:

Future-oriented Statement of Operations (Unaudited)

For the year ended March 31 (in thousands of dollars)
2011 forecast 2010
Forecast
Accessible and Sustainable Health System Responsive to the Health Needs of Canadians Access to Safe and Effective Health Products and Food and Information for Healthy Choices Reduced Health and Environmental Risks from Products and Substances, and Healthy, Sustainable Living and Working Environments Better Health Outcomes and Reduction of Health Inequalities Between First Nations and Inuit and Other Canadians Internal Services Total Total
Expenses
Transfer payments 267,856 8,391 61,210 939,334 0 1,276,791 1,502,175
Salaries and wages 35,836 235,280 219,166 204,814 229,192 924,289 962,221
Professional and special services 9,164 9,222 72,946 290,778 31,530 413,641 480,690
Utilities, material and supplies 590 6,091 22,713 472,211 7,273 508,879 529,637
Travel - non-insured health patient 0 0 0 181,299 0 181,299 110,140
Accommodation 1,993 12,983 13,018 11,257 23,125 62,376 64,818
Travel and relocation 2,763 2,475 11,322 15,282 3,106 34,948 43,682
Purchased repair and maintenance 69 173 2,899 1,660 20,525 25,326 25,804
Communications 125 4,062 1,801 4,795 6,911 17,693 29,452
Amortization 0 2,369 1,809 2,869 15,290 22,338 26,165
Information 438 2,722 6,901 2,498 6,728 19,287 23,522
Other 103 778 367 835 3,409 5,491 4,530
Rentals 267 270 992 985 508 3,021 3,971
319,204 284,816 415,144 2,128,617 347,597 3,495,378 3,806,807
Revenues
Sales of goods and services              
Services of a regulatory nature 0 25,542 3,504 0 0 29,046 28,496
Rights and privileges 0 14,926 3,925 0 0 18,851 19,401
Services of a non-regulatory nature 0 4,129 18,068 7,267 682 30,146 30,240
Lease and use of public property 0 0 0 348 0 348 226
Revenues from fines 0 0 0 0 0 0 0
Interest 0 436 269 76 7 787 791
Other 0 0 2,042 135 0 2,177 2,005
0 45,032 27,808 7,826 689 81,355 81,159
Net cost of operations 319,204 239,784 387,336 2,120,791 346,909 3,414,023 3,725,648

The accompanying notes are an integral part of the financial statements

Future-oriented Statement of Financial Position (Unaudited)

2011 2010
As at March 31 Forecast Forecast
(in thousands of dollars)
Assets
Financial assets
Accounts receivable and advances 33,606 30,118
33,606 30,118
Non-financial assets
Prepaid expenses 11,200 11,200
Tangible capital assets (Note 6) 177,728 165,027
188,928 176,227
Total Assets 222,534 206,345
Liabilities and Equity of Canada
Liabilities
Accounts payable and accrued liabilities 490,649 449,704
Vacation pay and compensatory leave 46,347 44,305
Deferred revenue 2,323 2,039
Employee severance benefits (Note 7) 226,363 210,865
Other liabilities (Note 8) 104,773 180,625
  870,455 887,538
Equity of Canada (647,921) (681,193)
Total Liabilities and Equity of Canada 222,534 206,345

Contingent Liabilities (Note 9)
Contractual Obligations (Note 10)
The accompanying notes are an integral part of the financial statements

Future-oriented Statement of Equity (Unaudited)

For the year ended March 31 2011 2010
(in thousands of dollars) Forecast Forecast
Equity of Canada, beginning of year (681,193) (796,264)
Net cost of operations (3,414,023) (3,725,648)
Current year appropriations used (Note 5) 3,419,376 3,648,518
Revenue not available for spending (11,730) (11,534)
Change in net position in the Consolidated Revenue Fund (81,602) 83,644
Services provided without charge by other government departments (Note 11) 121,251 120,092
Equity of Canada, end of year (647,921) (681,193)

The accompanying notes are an integral part of the financial statements

Future-oriented Statement of Cash Flow (Unaudited)

For the year ended March 31 2011 2010
(in thousands of dollars) Forecast Forecast
Operating transactions
Net cost of operations 3,414,023 3,725,648
Non-cash items:
Amortization of tangible capital assets (Note 6) (22,338) (26,165)
Gain (loss) on disposal of capital and non-capital assets 0 1,421
Services provided without charge by other government departments (Note 11) (121,251) (120,092)
Variations in Statement of Financial Position:
Increase in accounts receivable, advances and prepaids 3,488 7,202
Decrease in liabilities 17,083 82,212
Cash used by Operating Activities 3,291,006 3,668,805
Capital investment activities
Acquisitions of tangible capital assets (Note 6) 37,718 53,242
Cash used by Investment Activities 37,718 53,242
Financing Activities
Net cash provided by Government of Canada (3,328,724) (3,722,048)
Cash used by Financing Activities (3,328,724) (3,722,048)

The accompanying notes are an integral part of the financial statements

Notes to the Future-oriented Financial Statements (Unaudited)

1. Authority and purpose

The Department of Health was established effective July 12, 1996 under the Department of Health Act to participate in the promotion and preservation of the health of the people of Canada. It is named in Schedule I of the Financial Administration Act and reports through the Minister of Health. Priorities and reporting are aligned under the following strategic outcomes and related program activities:

Strategic Outcome 1: Accessible and sustainable health system responsive to the health needs of Canadians

Canadian Health System

This program activity provides strategic policy advice on health care issues such as improved access, quality and integration of health care services to better meet the health needs of Canadians wherever they live or whatever their financial circumstances. The objective is pursued mindful of long-term equity, sustainability and affordability considerations and in close collaboration with provinces and territories, health professionals, administrators, other key stakeholders and citizens.

Improved access, quality and integration of health services administration is achieved through investments in the health system and in health system renewal, for instance by reducing wait times for essential services, by working with provinces and territories to ensure that the principles of the Canada Health Act are respected, by developing health information and health measures for Canadians, by meeting the health and health access needs of specific groups such as women and official language minority communities, and by ensuring the implementation of agreements between federal/provincial/territorial Ministers of Health.

Canadian Assisted Human Reproduction

This program activity implements the Assisted Human Reproduction (AHR) Act, whose objective is to protect and promote human health, safety, dignity and human rights in the use of AHR technologies. It develops policies and regulations in the area of assisted human reproduction. The science of AHR evolves rapidly and, as a result, the program activity engages stakeholders on an ongoing basis to find a balance between the needs of patients who use these technologies to help them build their families, the children born from these technologies and the providers of these services with health and safety as the overriding factors. The goal of the policies and regulations is developing a responsive regulatory regime which is a leader both domestically and in the international AHR community, and reflects the objectives put forward in the AHR Act. The program activity gathers input from stakeholders, including the provinces, to ensure a pan-Canadian approach.

International Health Affairs

Health Canada works internationally through leadership, partnerships and collaboration to fulfill its federal mandate of striving to make Canada's population among the healthiest in the world. International Affairs serves as the department's focal point to initiate, coordinate, and monitor departmental policies, strategies and activities that help promote Canadian priorities and values on the international health agenda. International collaboration on global health issues is important given that the health of Canadians is influenced significantly by public health risks originating from other countries. Global issues such as pandemic influenza preparedness, HIV/AIDS strategies and global health security are critical initiatives that are discussed with key external health partners such as the World Health Organization (WHO) and the Pan American Health Organization (PAHO).

Countries and international organizations want to connect quickly to information about Canada's health care system and initiatives. The international affairs program activity strives to share Canada's best policies and practices with other countries, and assists in the development of bilateral agreements with numerous countries on important health issues. This program activity delivers strategic policy advice on international health issues to the Minister of Health, senior management and the Health Portfolio, including appropriate representation at international for a concerning the health portfolio. It also manages grants to non-profit organizations for projects in the domain of international health that are aligned with Canada's priorities in global health.

Strategic Outcome 2: Access to Safe and Effective Health Products and Food and Information for Healthy Choices

Health Products

The Health Products program activity is responsible for a broad range of health protection and promotion activities that affect the everyday lives of Canadians. As the federal authority responsible for the regulation of health products, the program activity evaluates and monitors the safety, quality and effectiveness of drugs (human and animal), biologics, medical devices, and natural health products, under the authority of the Food and Drugs Act and Regulations, as well as the Department of Health Act. The program activity also provides timely, evidence-based and authoritative information to key stakeholders (including but not limited to: health care professionals such as physicians, pharmacists and practitioners such as herbalists, naturopathic doctors, Traditional Chinese Medicine (TCM) practitioners) and members of the public to enable them to make informed decisions and healthy choices.

Food and Nutrition

The Food and Nutrition program activity establishes policies, regulations and standards related to the safety and nutritional quality of food. Food safety standards-quality are enforced by the Canadian Food Inspection Agency (CFIA). The legislative framework for food is found in the Food and Drugs Act and Regulations, the Canadian Food Inspection Agency Act and the Department of Health Act. The program activity also promotes the nutritional health and well-being of Canadians by collaboratively defining, promoting and implementing evidence-based nutrition policies and standards. As the focal point and authoritative source for nutrition and healthy eating policy and promotion, the program activity disseminates timely, evidence-based and authoritative information to Canadians and stakeholders to enable them to make informed decisions and healthy choices.

Strategic Outcome 3: Reduced Health and Environmental Risks from Products and Substances, and Healthy, Sustainable Living and Working Environments

Sustainable Environmental Health

The environment continues to be a key determinant of health for all Canadians. This program activity promotes and protects the health of Canadians by identifying, assessing and managing health risks posed by environmental factors in living, working and recreational environments. The scope of activities includes: research on drinking water quality, air quality, contaminated sites, toxicology and climate change; clean air programming and regulatory activities; risk assessment and management of: chemical substances, environmental noise, environmental electromagnetic frequencies, products of biotechnology and products of other new and emerging technologies (including nanotechnology); solar ultraviolet radiation; preparedness for nuclear and environmental disasters as well as working with the passenger conveyance industry to protect the travelling public.

Under the Chemical Management Plan, Health Canada assesses and regulates chemicals used in industrial and consumer products. Other activities include: implementing a national bio-monitoring system; developing risk management performance agreements with industry sectors; and, strengthening the assessment and management of risks to human health posed by pharmaceuticals, personal care and consumer products, cosmetics and food. Finally, enhanced communications and outreach activities allow Canadians to make better informed decisions about limiting their exposure to potential environmental hazards. Relevant Act includes the Canadian Environmental Protection Act.

Consumer Products

Health Canada identifies, assesses, manages and communicates to Canadians the health and safety risks associated with consumer products (including domestic, industrial and clinical use products), cosmetics and radiation emitting devices. This is achieved through research, risk assessments and the development of risk management strategies to minimize the exposure of Canadians to potentially hazardous products. Also included are regulatory monitoring and compliance activities as well as information, education and guidance aimed at both industry and the public. Relevant acts include: consumer products (Hazardous Products Act), cosmetics (Food and Drugs Act) and radiation emitting devices (Radiation Emitting Devices Act).

Workplace Health

This program activity provides services to protect the health and safety of the federal public sector, visiting dignitaries, and others. Specific programs include: the provision of occupational health services to federal employees; delivery of the Employee Assistance Program; emergency health services to Internationally Protected Persons; dosimetry services (the measurement of personal, occupational exposure to radiation through the reading of "dosimeters" or plaques enclosed in special holders worn by the user for specified periods); and, Workplace Hazardous Materials Information System (WHMIS) a national hazard communication standard, including worker education, inspector training, and standards for cautionary labels.

Substance Use and Abuse

Through regulatory, programming and educational activities, Health Canada seeks to improve health outcomes by reducing and preventing tobacco consumption and combating alcohol and drug abuse. Through the Tobacco Act and its regulations, Health Canada regulates aspects of the manufacture and sale of tobacco. It also leads the Federal Tobacco Control Strategy - the goals of which are to: further reduce the prevalence of smoking; decrease the number of cigarettes sold; increase compliance with sales-to-youth laws; reduce exposure to second hand smoke; and, continue to explore ways to regulate the product.

Health Canada administers the Controlled Drugs and Substances Act (CDSA) and its regulations. Through four regional labs, Health Canada provides expert scientific advice and drug analysis services to law enforcement agencies. The Marihuana Medical Access Regulations and related programs control the authorization for use and cultivation of marihuana by those suffering from grave and debilitating illnesses. Health Canada is a partner in the government's anti-drug strategy which includes: prevention programming aimed at youth; facilitating access to treatment programs; compliance and enforcement activities related to controlled substances and precursor chemicals; and, increased resources to Drug Analysis Services commensurate with the increase in law enforcement resources.

Pesticide Regulation

To help prevent unacceptable risks to people and the environment, and facilitate access to sustainable pest management tools, Health Canada, through the Pest Management Regulatory Agency, regulates the importation, sale and use of pesticides under the federal authority of the Pest Control Products Act (PCPA) and Regulations.

Strategic Outcome 4: Better Health Outcomes and Reduction of Health Inequalities Between First Nations and Inuit and Other Canadians

First Nations and Inuit Health Programming and Services

The provision of health programs and services by Health Canada to First Nations and Inuit is rooted in the Federal Indian Health Policy. The department provides health programs and services to First Nations and Inuit as a matter of policy, using the Annual Appropriations Act to obtain Parliamentary approval. Together with First Nations and Inuit and other health partners, the First Nations and Inuit Health Branch through it's regional offices, delivers public health and community health programs on-reserve, these include environmental health and communicable and non-communicable disease prevention, and provision of primary health care services through nursing stations and community health centres in remote and/or isolated communities to supplement and support the services that provincial, territorial and regional health authorities provide. Health Canada also supports targeted health promotion programs for Aboriginal people, regardless of residency (e.g. Aboriginal Diabetes Initiative) as well as counselling, addictions and mental wellness services. The Non-Insured Health Benefits coverage of drug, dental care, vision care, medical supplies and equipment, short-term crisis intervention mental health services, and medical transportation is available to all registered Indians and recognized Inuit in Canada, regardless of residency.

Strategic Outcome 5: Internal Services

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

2. Underlying Assumptions

The future-oriented Statement of Operations has been prepared on the basis of government policies, priorities and the external environment as at January 21, 2010. The statement has been prepared according to the requirements of Treasury Board Accounting Policies which are based on Canadian generally accepted accounting principles for the public sector. It has been prepared on the assumption that the resources provided will enable Health Canada to deliver the expected results specified in the Report on Plans and Priorities. The forecasting of future results was compiled on the basis of historical costs and trends.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to accurately forecast final results for the fiscal years 2009-10 and 2010-11, actual results achieved are likely to vary from the forecast information presented and this variation could be material.

Once the Report on Plans and Priorities is presented, Health Canada will not be updating the forecast for any changes to appropriations or forecast financial information made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

4. Significant accounting policies

The future-oriented financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Parliamentary appropriations

The Department of Health is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the department do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 5 provides a high-level reconciliation between the two bases of reporting.

(b) Net Cash Provided by Government

The department operates within the Consolidated Revenue Fund (CRF). The CRF is administered by the Receiver General for Canada. All cash received by the department is deposited to the CRF and all cash disbursements made by the department are paid from the CRF. Net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.

(c) Forecasted Revenues

Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues. Types of revenues collected include medical devices, radiation dosimetry, drug submission evaluation, veterinary drugs, pest management regulation, product safety, hospital revenues resulting from payments for services provided to First Nations and Inuit Health hospitals, which are covered under provincial or territorial plans, and for the sale of drugs and health services for First Nations communities.

Revenues that have been received but not yet earned are disclosed as deferred revenues.

d) Forecasted Expenses

Expenses are recorded on the accrual basis:

  • Grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements;
  • Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement;
  • Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment;
  • Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans, salary and associated expenditures of legal services and the worker's compensation coverage are recorded as operating expenses at their estimated cost.

(e) Accounts receivable

Accounts receivable are stated at amounts expected to be ultimately realized; a provision is made for receivables where recovery is considered uncertain.

(f) Employee future benefits

  1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. The department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the department to make contributions for any actuarial deficiencies of the Plan.
  2. Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially-determined liability for employee severance benefits for the government as a whole.

(g) Contingent liabilities

Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(h)Environmental liabilities

Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally- contaminated sites. Based on management's best estimates, a liability is accrued and an expense recorded when the contamination occurs or when the department becomes aware of the contamination and is obligated or is likely to be obligated to incur such costs. If the likelihood of the department's obligation to incur these costs is not determinable or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements.

(i) Tangible Capital Assets

All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Health Canada does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, immovable assets located on Indian Reserves and museum collections.

Amortization of capital assets is on a straight-line basis over the estimated useful life of the capital asset as follows:

Asset class Sub-asset class Amortization Period
Buildings Buildings 25 years
Works and infrastructure Works and infrastructure 25 years
Leasehold improvements Leasehold improvements Lease term, max. 40 years
Works and infrastructure Works and infrastructure 25 years
Machinery and equipment Machinery and equipment 8-12 years
Computer equipment 3-5 years
Computer software 3 years
Other equipment 5-12 years
Vehicles Motor Vehicles 4-7 years
Other Vehicles 10 years
Assets under construction Buildings in progress of construction Once in service, in accordance with
Engineering works in progress of construction asset type
Work in progress for software
Other construction or work in progress

(j) Prepaid expenses

Prepaid expenses include prepayments of transfer payments. Prepaid transfer payments consist of contributions advanced to recipients as of March 31 for which it is known that the costs will be incurred by the recipient in the subsequent fiscal year and the amount can be readily determined based on available information.

(k) Measurement uncertainty

The preparation of these financial statements in accordance with accounting policies issued by the Treasury Board of Canada which are consistent with Canadian generally accepted accounting principles for the public sector requires management to make estimates and assumptions that affect amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, environmental liabilities, the liability for employee severance benefits and the useful life of tangible capital assets. Actual results could differ from those estimated. Management's estimates are reviewed periodically and as adjustments become necessary, they are recorded in the financial statements in the year that they become known.

5. Parliamentary appropriations

Health Canada receives most of its funding through annual Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, the department has different net cost of operations from an appropriations perspective as opposed to an accrual accounting basis. These differences are reconciled in the following tables.

(a) Reconciliation of net cost of operations to current year appropriations:

Forecast Forecast
(in thousands of dollars) 2011 2010
Net cost of operations 3,414,023 3,725,648
Adjustments for items affecting net cost of operations but not affecting appropriations:
Add (Less):
Services provided without charge by other government departments (121,251) (120,092)
Amortization (22,338) (26,165)
Employee severance benefits (15,498) (27,203)
Refund/adjustment of previous year's expenditures 41,999 32,304
Revenue not available for spending 11,730 11,534
Bad debts (1,083) 99
Vacation pay and compensatory leave (2,042) (1,941)
Other changes in liabilities 76,117 1,080
3,381,658 3,595,265
Adjustments for items not affecting net cost of operations but affecting appropriations:
Add (Less):
Acquisitions of tangible capital assets 37,718 53,242
Net change to accountable advances 0 11
Appropriations available for use 3,419,376 3,648,518

(b) Appropriations available for use:

Forecast Forecast
(in thousands of dollars) 2011 2010
Operating expenditures - Vote 1 1,876,074 1,944,130
Capital expenditures - Vote 5 37,718 53,242
Grants and Contributions - Vote 10 1,382,680 1,523,012
Statutory Amounts 122,904 128,134
Appropriations available for use 3,419,376 3,648,518

6. Tangible capital assets

Capital assets Opening Balance Acquisitions Disposals/ write-downs/ adjustments Closing Balance
(in thousands of dollars)
Land 1,180 0 0 1,180
Buildings 136,483 5,546 (131) 141,898
Works and infrastructure 503 0 1 504
Leasehold improvements 19,907 0 (74) 19,832
Machinery and equipment 216,067 22,921 (88) 237,480
Vehicles 23,399 2,544 1,355 24,619
Assets under construction 34,494 6,707 0 41,201
Total 432,033 37,718 1,063 466,714
Accumulated amortization Opening Balance Current year amortization Disposals/ write-downs/ adjustments Closing Balance
(in thousands of dollars)
Buildings 95,978 4,998 0 100,976
Works and infrastructure 5 5 0 10
Leasehold improvements 19,126 43 0 19,169
Machinery and equipment 136,676 16,867 (333) 153,210
Vehicles 15,221 425 (25) 15,621
Asset under construction 34,494 0 (34,494) 0
Total 267,006 22,338 (358) 288,986
Tangible capital assets net book value Opening Balance Closing Balance
(in thousands of dollars)
Land 1,180 1,180
Buildings 40,505 40,922
Works and infrastructure 498 494
Leasehold improvements 781 663
Machinery and equipment 79,391 84,270
Vehicles 8,178 8,998
Asset under construction 0 41,201
Total 130,533 177,728

7. Employee benefits

(a) Pension benefits

The department's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation.

Both the employees and the department contribute to the cost of the Plan. The current and previous year expenses amount to:

(in thousands of dollars) 2011 2010
Expense for the year 88,680 92,456

The department's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

The department provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows:

(in thousands of dollars) 2011 2010
Accrued benefit obligation, beginning of year 210,865 183,662
Expense for the year 22,867 35,115
Benefits paid during the year (7,369) (7,912)
Accrued benefit obligation, end of year 226,363 210,865

8. Other liabilities

Other liabilities include an allowance reflecting the balance of a statutory grant in the amount of $98M as a result of Budget 2007 (Bill C-52 for Canada Health Infoway Inc.).

9. Contingent liabilities

(a) Contaminated sites

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the department is obligated or likely to be obligated to incur such costs. Health Canada has identified sites where such action is possible and for which a liability has been recorded.

2011 2010
Approximate number of sites for which a liability has been recorded 11 12
(in thousands of dollars)
Liability recorded for contaminated sites 711 1,035

Health Canada's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued in the year in which they become known.

(b) Claims and litigation

In the normal course of its operations, Health Canada becomes involved in various legal actions. There are a number of claims for which a reasonable estimate of the potential liability cannot presently be determined. Some of these potential liabilities may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded on the department's financial statements.

10. Contractual obligations

The nature of Health Canada's activity results in multi-year contracts and obligations whereby the department will be committed to make some future payments. Significant contractual obligations that can be reasonably estimated are as follows:

(in thousands of dollars) Transfer payments Non-Insured Health Benefits Total
2011-12 212,000 21,000 233,000
2012-13 53,000 19,000 72,000
2013-14 85,000 22,000 107,000
2014-15 85,000 22,000 107,000
2015-16 and thereafter 85,000 22,000 107,000
Total 520,000 106,000 626,000

11. Related party transactions

The department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The department enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the department received services which were obtained without charge from other government departments as presented in part (a).

(a) Services provided without charge by other government departments:

During the year the department received without charge from other departments, accommodation, legal fees, worker's compensation and the employer's contribution to the health and dental insurance plans. These services without charge have been recognized in the department's Statement of Operations as follows:

Forecast Spending Forecast Spending
(in thousands of dollars) 2011 2010
Accommodation 53,013 52,014
Employer's contribution to the health and dental insurance plans 62,384 63,131
Worker's compensation costs 589 554
Legal services 5,265 4,393
121,251 120,092

The government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge. The costs of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included as an expense in the department's Statement of Operations.

(b) Payables outstanding at year-end with related parties:

(in thousands of dollars) 2011 2010
Accounts payable to other government departments and agencies 35,006 31,635
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