Departmental Financial Statements 2016-17 - Health Canada
Table of Contents
- Statement of Management Responsibility Including Internal Control Over Financial Reporting
- Statement of Financial Position (Unaudited)
- Statement of Operations and Departmental Net Financial Position (Unaudited)
- Statement of Change in Departmental Net Debt (Unaudited)
- Statement of Cash Flows (Unaudited)
- Notes to the Financial Statements (Unaudited)
- Health Canada's Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting
Statement of Management Responsibility Including Internal Control Over Financial Reporting
Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2017, and all information contained in these statements rests with the management of Health Canada. These financial statements have been prepared by management using the Government's accounting policies, which are based on Canadian public sector accounting standards.
Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Department's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in Health Canada's Departmental Results Report, is consistent with these financial statements.
Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.
Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the Department and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.
The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.
A risk-based assessment of the system of ICFR for the year ended March 31, 2017 was completed in accordance with the Treasury Board Policy on Internal Control, and the results and action plans are summarized in the annex.
The effectiveness and adequacy of the Department's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the Department's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting.
The financial statements of Health Canada have not been audited.
Simon Kennedy
Deputy Minister
Ottawa, Canada
Date: August 23, 2017
Randy Larkin
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: August 23, 2017
Statement of Financial Position (Unaudited)
As at March 31
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Liabilities | ||
Accounts payable and accrued liabilities (note 4) | $ 287,899 | $ 267,134 |
Vacation pay and compensatory leave | 42,057 | 37,535 |
Deferred revenue | 7,976 | 8,905 |
Employee future benefits (note 6) | 40,965 | 52,886 |
Other liabilities (note 7) | 118,519 | 96,373 |
Total gross liabilities | 497,416 | 462,833 |
Liabilities held on behalf of Government | ||
Deferred revenue | (173) | (200) |
Total liabilities held on behalf of Government | (173) | (200) |
Total net liabilities | 497,243 | 462,633 |
Financial assets | ||
Due from Consolidated Revenue Fund | 273,252 | 261,145 |
Accounts receivable and advances (note 8) | 88,080 | 57,357 |
Total gross financial assets | 361,332 | 318,502 |
Financial assets held on behalf of Government | ||
Accounts receivable and advances (note 8) | (56,001) | (35,160) |
Total financial assets held on behalf of Government | (56,001) | (35,160) |
Total net financial assets | 305,331 | 283,342 |
Departmental net debt | 191,912 | 179,291 |
Non-financial assets | ||
Tangible capital assets (note 9) | 141,057 | 135,225 |
Total non-financial assets | 141,057 | 135,225 |
Departmental net financial position | $ (50,855) | $ (44,066) |
Contractual obligations (note 10)
Contingent liabilities (note 11)
The accompanying notes form an integral part of these financial statements.
Simon Kennedy
Deputy Minister
Ottawa, Canada
Date: August 23, 2017
Randy Larkin
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: August 23, 2017
Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31
(in thousands of dollars) | 2017 Planned Results |
2017 | 2016 |
---|---|---|---|
Expenses | |||
A health system responsive to the needs of Canadians | $ 343,595 | $ 359,330 | $ 319,968 |
Health risks and benefits associated with food, products, substances, and environmental factors are appropriately managed and communicated to Canadians | 644,947 | 695,323 | 629,043 |
First Nations and Inuit communities and individuals receive health services and benefits that are responsive to their needs so as to improve their health status | 2,851,373 | 3,102,718 | 2,843,393 |
Internal services | 301,355 | 339,286 | 359,153 |
Expenses incurred on behalf of Government | 2,568 | 323 | (3,802) |
Total expenses | 4,143,838 | 4,496,980 | 4,147,755 |
Revenues | |||
Sales of goods and services | |||
Services of a regulatory nature | 61,223 | 56,183 | 45,611 |
Rights and privileges | 67,202 | 53,113 | 54,736 |
Services of a non-regulatory nature | 223,961 | 204,655 | 204,564 |
Lease and use of public property | 290 | 151 | 265 |
Revenues from fines | 1,998 | 986 | 1,807 |
Interest | 541 | 211 | 334 |
Other | 436 | 2,155 | 1,472 |
Revenues earned on behalf of Government | (14,526) | (16,412) | (16,755) |
Total revenues | 341,125 | 301,042 | 292,034 |
Net cost of operations before government funding and transfers | 3,802,713 | 4,195,938 | 3,855,721 |
Government funding and transfers | |||
Net cash provided by Government of Canada | 4,045,138 | 3,813,726 | |
Change in due from Consolidated Revenue Fund | 12,107 | 3,443 | |
Services provided without charge by other government departments (note 12) | 131,921 | 128,953 | |
Transfer of the transition payments for implementing salary payments in arrears | (17) | (263) | |
Transfer of tangible capital assets from (to) other government departments | - | 155 | |
Net cost of (revenue from) operations after government funding and transfers | 6,789 | (90,293) | |
Departmental net financial position - Beginning of year | (44,066) | (134,359) | |
Departmental net financial position - End of year | $ (50,855) | $ (44,066) |
Segmented information (note 13)
The accompanying notes form an integral part of these financial statements.
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Net cost of (revenue from) operations after government funding and transfers | $ 6,789 | $ (90,293) |
Change due to tangible capital assets | ||
Acquisition of tangible capital assets | 29,011 | 30,608 |
Amortization of tangible capital assets | (22,668) | (25,713) |
Proceeds from disposal of tangible capital assets | (500) | (253) |
Gain (loss) on disposal of tangible capital assets including adjustments | (11) | (279) |
Non-cash changes in tangible capital assets | - | (69) |
Transfer of tangible capital assets from (to) other government departments | - | 155 |
Total change due to tangible capital assets | 5,832 | 4,449 |
Net increase (decrease) in departmental net debt | 12,621 | (85,844) |
Departmental net debt - Beginning of year | 179,291 | 265,135 |
Departmental net debt - End of year | $ 191,912 | $ 179,291 |
The accompanying notes form an integral part of these financial statements.
Statement of Cash Flows (Unaudited)
For the Year Ended March 31
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Operating activities | ||
Net cost of operations before government funding and transfers | $ 4,195,938 | $ 3,855,721 |
Non-cash items: | ||
Amortization of tangible capital assets | (22,668) | (25,713) |
Gain (loss) on disposal of tangible capital assets including adjustments | (11) | (279) |
Non-cash changes in tangible capital assets | - | (69) |
Services provided without charge by other government departments (note 12) | (131,921) | (128,953) |
Transition payments for implementing salary payments in arrears | 17 | 263 |
Variations in Statement of Financial Position: | ||
Decrease (increase) in accounts payable and accrued liabilities | (20,765) | (2,927) |
Decrease (increase) in vacation pay and compensatory leave | (4,522) | 1,575 |
Decrease (increase) in deferred revenue | 902 | (1,073) |
Decrease (increase) in employee future benefits | 11,921 | 4,575 |
Decrease (increase) in other liabilities | (22,146) | 81,996 |
Increase (decrease) in accounts receivable and advances | 9,882 | (1,745) |
Cash used in operating activities | 4,016,627 | 3,783,371 |
Capital investing activities |
||
Acquisition of tangible capital assets | 29,011 |
30,608 |
Proceeds from disposal of tangible capital assets | (500) |
(253) |
Cash used in capital investing activities | 28,511 | 30,355 |
Net cash provided by Government of Canada | $ 4,045,138 | $ 3,813,726 |
The accompanying notes form an integral part of these financial statements.
Notes to the Financial Statements (Unaudited)
For the Year Ended March 31, 2017
1. Authority and objectives
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 programs:
Strategic Outcome 1: A health system responsive to the needs of Canadians
Canadians expect their governments to provide a health system that meets their needs and that delivers results effectively and efficiently. In addition to ensuring that it meets specific federal responsibilities, such as health services for federal employees and during international events held in Canada, Health Canada works with provincial and territorial governments as well as health organizations and other stakeholder groups to address the health objectives of Canadians. Research and policy analysis, support and funding to test innovations in health service delivery and monitoring of provincial and territorial application of the Canada Health Act all lead to continuing improvement in Canada's health system.
Programs:
- Canadian Health System Policy
- Specialized Health Services
- Official Language Minority Community Development
Strategic Outcome 2: Health risks and benefits associated with food, products, substances, and environmental factors are appropriately managed and communicated to Canadians
This strategic outcome seeks to ensure that the food that Canadians eat and products they use are as safe as possible and that threats to health are addressed effectively. It helps increase Canadians’ understanding of factors that influence everyone’s health such as environmental conditions and nutrition. It helps to limit the use and abuse of tobacco and illicit drugs.
Programs:
- Health Products
- Food Safety and Nutrition
- Environmental Risks to Health
- Consumer Product and Workplace Hazardous Materials
- Substance Use and Abuse
- Radiation Protection
- Pesticides
Strategic Outcome 3: First Nations and Inuit communities and individuals receive health services and benefits that are responsive to their needs so as to improve their health status
This strategic outcome seeks to ensure that First Nations and Inuit living on reserve or in Inuit communities have access to health services as well as a limited range of medically necessary health-related goods and services not provided through private insurance plans, provincial/territorial health or social programs or other publicly funded programs. It seeks to reduce the gap in health outcomes between First Nations and Inuit and the Canadian population in general.
Programs:
- First Nations and Inuit Primary Health Care
- Supplementary Health Benefits for First Nations and Inuit
- Health Infrastructure Support for First Nations and Inuit
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. Internal services include only those activities and resources that apply across an organization, and not those provided to a specific program. The groups of activities 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; and Acquisition Services.
2. Summary of significant accounting policies
These financial statements have been prepared using the Government's accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.
Significant accounting policies are as follows:
(a) Parliamentary authorities
The Department is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Financial Position and in the Statement of Operations and Departmental Net Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the “Expenses” and “Revenues” sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-Oriented Statement of Operations included in the 2016-17 Report on Plans and Priorities. Planned results are not presented in the “Government funding and transfers” section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2016-17 Report on Plans and Priorities.
(b) Net cash provided by Government
The Department operates within the Consolidated Revenue Fund (CRF), which 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. The net cash provided by Government is the difference between all cash receipts and all cash disbursements, including transactions between departments of the Government.
(c) Amounts due from the Consolidated Revenue Fund
Amounts due from the CRF are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Department is entitled to draw from the CRF without further authorities to discharge its liabilities.
(d) Revenues
- Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
- Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred.
- Funds that have been received are recorded as deferred revenue, provided the Department has an obligation to other parties for the provision of goods, services or the use of assets in the future.
- Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.
- Revenues that are non-respendable are not available to discharge the Department's liabilities. While the Deputy Head is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the entity's gross revenues.
(e) Expenses
Expenses are recorded on the accrual basis:
- Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses 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. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.
- Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
- Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers' compensation are recorded as operating expenses at their estimated cost.
(f) Employee future benefits
- Pension benefits: Eligible employees participate in the Public Service Pension Plan (the "Plan"), a multiemployer pension plan administered by the Government. The Department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. 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.
- Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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) Accounts receivable
Accounts receivable are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts receivable where recovery is considered uncertain.
(h) Contingent liabilities
Contingent liabilities are potential liabilities that 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 if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.
(i) Environmental liabilities
Environmental liabilities consist of estimated costs related to the remediation of contaminated sites.
A liability for remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the department is directly responsible or accepts responsibility, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The liability reflects the Department’s best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the cash flows required to settle or otherwise extinguish a liability are expected to occur over extended future periods, a present value technique is used. The discount rate applied is taken from the government’s consolidated revenue fund monthly lending rates for periods of one year and over which is based on the Government's cost of borrowing. The discount rates used are based on the term rate associated with the estimated number of years to complete remediation. For remediation costs with estimated future cash flows spanning more than 25 years, the Government of Canada's 25-year Consolidated Revenue Fund lending rate is used as the discount rate.
The recorded environmental liabilities are adjusted each year, as required, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred.
If the likelihood of the Department’s responsibility is not determinable, a contingent liability is disclosed in the notes to the financial statements. If measurement uncertainty exists, it is also disclosed in the notes to the financial statements.
(j) 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. The Department does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.
Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the 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 |
Machinery and equipment | Machinery and equipment | 8-12 years |
Computer equipment | 3-5 years | |
Computer software | 3 years | |
In-house developed software | 5 years | |
Other equipment | 5-12 years | |
Vehicles | Motor vehicles | 4-7 years |
Other vehicles | 10 years | |
Assets under construction | Buildings in progress of construction | Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use. |
Engineering works in progress of construction | ||
Work in progress for software | ||
Other construction or work in progress |
(k) Measurement uncertainty
The preparation of these financial statements requires management to make estimates and assumptions that affect the reported 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 future benefits, allowance for doubtful accounts and the useful life of tangible capital assets. Actual results could significantly 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 they become known.
3. Parliamentary authorities
The Department receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Financial Position and the Statement of Operations and Departmental Net Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Department has different net results of operations for the year on a government funding basis than on an accrual accounting basis. These differences are reconciled in the following tables:
(a) Reconciliation of net cost of operations to current year authorities used:
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Net cost of operations before government funding and transfers | $ 4,195,938 | $ 3,855,721 |
Adjustments for items affecting net cost of operations but not affecting authorities: | ||
Amortization of tangible capital assets | (22,668) | (25,713) |
Gain (loss) on disposal of tangible capital assets | (11) | (279) |
Services provided without charge by other government departments | (131,921) | (128,953) |
Decrease (increase) in vacation pay and compensatory leave | (4,522) | 1,575 |
Decrease (increase) in employee future benefits | 11,921 | 4,575 |
Refund/adjustment of prior years' expenditures | 20,779 | 15,882 |
Bad debt expense | 715 | (4,340) |
Increase (decrease) in transfer payment accrual | 2,926 | (7,953) |
Decrease (increase) in workforce adjustment measures | 112 | 578 |
Statutory spending authority equivalent to revenues earned | 55,026 | 55,536 |
Other | (52,725) | 899 |
Total items affecting net cost of operations but not affecting authorities | (120,368) | (88,193) |
Adjustments for items not affecting net cost of operations but affecting authorities: | ||
Disbursement to Canada Health Infoway Inc. | 37,878 | 82,700 |
Acquisitions of tangible capital assets | 29,011 | 30,608 |
Salary overpayments | 9,785 | - |
Issuance of accountable advances | 785 | - |
Transition payments for implementing salary payments in arrears | 17 | 263 |
Proceeds from disposal of Crown assets | 171 | 33 |
Total items not affecting net cost of operations but affecting authorities | 77,647 | 113,604 |
Current year authorities used | $ 4,153,217 | $ 3,881,132 |
(b) Authorities provided and used:
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Authorities provided: | ||
Vote 1 - Operating expenditures | $ 1,987,121 | $ 1,832,092 |
Vote 5 - Capital expenditures | 36,587 | 34,939 |
Vote 10 - Grants and contributions | 2,039,369 | 1,810,890 |
Statutory amounts | 205,334 | 253,657 |
Less: | ||
Authorities available for future years | (49) | - |
Lapsed authorities | (115,145) | (50,446) |
Current year authorities used | $ 4,153,217 | $ 3,881,132 |
4. Accounts payable and accrued liabilities
The following table presents details of the Department's accounts payable and accrued liabilities:
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Accounts payable - Other government departments and agencies | $ 7,347 | $ 7,054 |
Accounts payable - External parties | 102,275 | 99,730 |
Total accounts payable | 109,622 | 106,784 |
Accrued liabilities | 178,277 | 160,350 |
Total accounts payable and accrued liabilities | $ 287,899 | $ 267,134 |
In Canada's Economic Action Plan 2012, the Government announced savings measures to be implemented by departments starting in 2012-13 and extending over the three subsequent fiscal years. To this effect, the Department has recorded an obligation for termination benefits as part of accrued liabilities to reflect the estimated workforce adjustment costs. The remaining balance of these measures as of March 31, 2017 is $16,000 ($128,000 as of March 31, 2016).
5. Environmental liabilities
Remediation of contaminated sites
The government has developed a “Federal Approach to Contaminated Sites”, which incorporates a risk-based approach to the management of contaminated sites. Under this approach the Government has inventoried the contaminated sites on federal lands that have been identified, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aids in the identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to the environment and human health.
The Department has identified 1 site (1 site in 2015-16) where action is possible and for which a liability of $101,000 ($173,000 in 2015-16) has been recorded. This liability represents management’s best estimate of the costs required to remediate the site to the current minimum standard for its use prior to contamination, based on information available at the financial statement date. A net present value technique has been used since the cash flows are expected to occur over extended future periods.
The liability estimate is based on a future cash requirement, adjusted for inflation using a forecast Consumer Price Index (CPI) rate of 2%. Inflation is included in the undiscounted amount. The Government of Canada lending rate applicable to loans with similar terms to maturity has been used to discount the estimated future expenditures. The March 2017 rates range from 0.89% for 2 year term to 2.55% for a 25 or greater year term.
The nature and source of the liability is contamination primarily associated with fuel storage and handling, e.g., accidental spills related to fuel storage tanks or former fuel handling practices, e.g. petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX. The estimated total undiscounted expenditures are $101,000 ($174,000 in 2015-16).
6. Employee future benefits
(a) Pension benefits
The Department's employees participate in the Public Service Pension Plan (the "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 Plan benefits and they are indexed to inflation.
Both the employees and the Department contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into two groups – Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.
The 2016-17 expense amounts to the following:
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Expense for the year | $ 80,056 | $ 81,556 |
For Group 1 members, the expense represents approximately 1.12 times (1.25 times in 2015-16) the employee contributions and, for Group 2 members, approximately 1.08 times (1.24 times in 2015-16) the employee contributions.
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
Severance benefits provided to the Department’s employees were previously based on an employee’s eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2017, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.
The changes in the obligations during the year were as follows:
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Accrued benefit obligation - Beginning of year | $ 52,886 | $ 57,461 |
Provision for the year | (9,115) | 229 |
Benefits paid during the year | (2,806) | (4,804) |
Accrued benefit obligation - End of year | $ 40,965 | $ 52,886 |
7. Other liabilities
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Canada Health Infoway Inc. | $ 50,477 | $ 88,479 |
Other | 68,042 | 7,894 |
Total other liabilities | $ 118,519 | $ 96,373 |
Budget 2007 announced an allocation of $400.0 million to Canada Health Infoway Inc. Of this authority $392.2 million has been disbursed to date, $9.4 million in 2016-17 ($12.8 million in 2015-16). Budget 2009 announced an additional allocation of $500.0 million to Canada Health Infoway Inc. Of this 2009 authority $457.3 million has been disbursed to date, $28.6 million in 2016-17 ($69.9 million in 2015-16). The disbursed amounts include interest deemed to have been paid to Canada Health Infoway Inc.
The remaining other liabilities include amounts for contingent liabilities of $60.9 million ($0.4 million in 2015-16) and Specified Purpose Accounts: Collaborative research projects $3.1 million ($3.1 million in 2015-16); Miscellaneous federal/provincial projects $1.7 million ($1.6 million in 2015-16); and World Health Organization $0.1 million ($0.1 million in 2015-16).
8. Accounts receivable and advances
The following table presents details of the Department's accounts receivable and advances balances:
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Accounts receivable - Other government departments and agencies | $ 19,808 | $ 11,183 |
Accounts receivable - External parties | 63,304 | 61,233 |
Employee advances | 17,967 | 55 |
Subtotal | 101,079 | 72,471 |
Allowance for doubtful accounts on receivables from external parties | (12,999) | (15,114) |
Gross accounts receivable and advances | 88,080 | 57,357 |
Accounts receivable held on behalf of Government | (56,001) | (35,160) |
Net accounts receivable and advances | $ 32,079 | $ 22,197 |
9. Tangible capital assets
Cost | Opening balance | Acquisitions | Disposals/write-downs | Transfers and adjustments | Closing balance |
---|---|---|---|---|---|
Land | $ 1,175 | $ - | $ - | $ - | $ 1,175 |
Buildings | 135,369 | - | - | 26,046 | 161,415 |
Works and infrastructure | 2,067 | - | - | - | 2,067 |
Leasehold improvements | 26,475 | - | - | - | 26,475 |
Machinery and equipment | 233,411 | 15,101 | (4,048) | 2,907 | 247,371 |
Vehicles | 14,157 | 1,766 | (1,915) | 20 | 14,028 |
Assets under construction | 36,662 | 12,144 | - | (29,153) | 19,653 |
Total | $ 449,316 | $ 29,011 | $ (5,963) | $ (180) | $ 472,184 |
Accumulated amortization | Opening balance | Amortization | Disposals/write-downs | Transfers and adjustments | Closing balance |
Buildings | $ 118,402 | $ 1,884 | $ - | $ - | $ 120,286 |
Works and infrastructure | 501 | 83 | - | - | 584 |
Leasehold improvements | 23,094 | 692 | - | - | 23,786 |
Machinery and equipment | 162,420 | 18,703 | (3,566) | (200) | 177,357 |
Vehicles | 9,674 | 1,306 | (1,886) | 20 | 9,114 |
Total | $ 314,091 | $ 22,668 | $ (5,452) | $ (180) | $ 331,127 |
Net book value |
Net book value 2016 |
Net change acquisitions and amortization | Net change disposals/write-downs | Net change transfers and adjustments | Net book value 2017 |
Land | $ 1,175 | $ - | $ - | $ - | $ 1,175 |
Buildings | 16,967 | (1,884) | - | 26,046 | 41,129 |
Works and infrastructure | 1,566 | (83) | - | - | 1,483 |
Leasehold improvements | 3,381 | (692) | - | - | 2,689 |
Machinery and equipment | 70,991 | (3,602) | (482) | 3,107 | 70,014 |
Vehicles | 4,483 | 460 | (29) | - | 4,914 |
Assets under construction | 36,662 | 12,144 | - | (29,153) | 19,653 |
Total | $ 135,225 | $ 6,343 | $ (511) | $ - | $ 141,057 |
Transfers from assets under construction represent assets that were put into use in the year and have been transferred to the other capital asset classes as applicable.
10. Contractual obligations
The nature of the Department's activities can result in multi-year contracts and obligations whereby the Department will be obligated to make future payments in order to carry out its transfer payment programs or when the services/goods are received. Significant contractual obligations that can be reasonably estimated are summarized as follows:
(in thousands of dollars) | Transfer payments | Operating contracts | Total |
---|---|---|---|
2017-18 | $ 1,647,300 | $ 25,802 | $ 1,673,102 |
2018-19 | 1,180,668 | - | 1,180,668 |
2019-20 | 1,010,557 | - | 1,010,557 |
2020-21 | 794,612 | - | 794,612 |
2021-22 and thereafter | 1,281,905 | - | 1,281,905 |
Total | $ 5,915,042 | $ 25,802 | $ 5,940,844 |
11. Contingent liabilities
Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown.
Claims and litigation
Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and other items for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Department has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $1,523.3 million in 2016-17 ($1,040.3 million in 2015-16).
12. Related party transactions
The Department is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Department enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, the Department has agreements with Agriculture and Agri-Food Canada, the Canadian Northern Economic Development Agency, Indigenous and Northern Affairs Canada, the Patented Medicine Prices Review Board and the Public Health Agency of Canada related to the provision of various finance and administrative services. During the year, the Department received common services which were obtained without charge from other government departments as disclosed below.
a) Common services provided without charge by other government departments:
During the year, the Department received services without charge from certain common service organizations, related to accommodation, legal services, the employer's contribution to the health and dental insurance plans and workers' compensation coverage. These services provided without charge have been recorded in the Department's Statement of Operations and Departmental Net Financial Position as follows:
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Employer's contribution to the health and dental insurance plans | $ 71,661 | $ 66,904 |
Accommodation | 56,069 | 58,554 |
Legal services | 3,733 | 2,986 |
Worker's compensation | 458 | 509 |
Total | $ 131,921 | $ 128,953 |
The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Services and Procurement Canada and audit services provided by the Office of the Auditor General are not included in the Department’s Statement of Operations and Departmental Net Financial Position. The costs of information technology infrastructure services provided by Shared Services Canada, following the transfer of responsibilities in November 2011 and April 2013, are also not included in the Department’s Statement of Operations and Departmental Net Financial Position.
b) Other transactions with related parties:
(in thousands of dollars) | 2017 | 2016 |
---|---|---|
Accounts payable - Other government departments and agencies | $ 7,347 | $ 7,054 |
Accounts receivable - Other government departments and agencies | 19,808 | 11,183 |
Expenses - Other government departments and agencies | 97,751 | 102,511 |
Revenues - Other government departments and agencies | 70,766 | 71,144 |
Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).
13. Segmented information
Presentation by segment is based on the Department's program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main programs, by major object of expense and by major type of revenue. The segment results for the period are as follows:
(in thousands of dollars) | A health system responsive to the needs of Canadians | Health risks and benefits associated with food, products, substances, and environmental factors are appropriately managed and communicated to Canadians | First Nations and Inuit communities and individuals receive health services and benefits that are responsive to their needs so as to improve their health status | Internal services | 2017 Total | 2016 Total |
---|---|---|---|---|---|---|
Expenses | ||||||
Transfer payments | $ 303,683 | $ 30,469 | $ 1,639,755 | $ - | $ 1,973,907 | $ 1,788,767 |
Salaries and employee benefits | 36,417 | 480,386 | 220,025 | 204,536 | 941,364 | 947,928 |
Utilities, materials and supplies | 1,299 | 20,370 | 569,405 | 5,438 | 596,512 | 554,358 |
Professional and special services | 12,583 | 40,553 | 379,882 | 75,203 | 508,221 | 478,763 |
Travel non-insured health patients | - | - | 246,957 | - | 246,957 | 212,609 |
Accommodation | 2,174 | 28,676 | 13,134 | 21,555 | 65,539 | 68,458 |
Other | 1,807 | 60,847 | 274 | (501) | 62,427 | 1,893 |
Travel and relocation | 622 | 6,152 | 24,904 | 1,181 | 32,859 | 28,267 |
Amortization of tangible capital assets | 140 | 9,148 | 1,945 | 11,435 | 22,668 | 25,713 |
Repair and maintenance | 53 | 5,548 | 2,137 | 9,360 | 17,098 | 17,619 |
Information services | 286 | 9,473 | 328 | 3,022 | 13,109 | 10,081 |
Rentals | 195 | 2,190 | 976 | 6,868 | 10,229 | 7,440 |
Communications | 71 | 1,511 | 2,996 | 1,904 | 6,482 | 5,321 |
Bad debts | - | - | - | (715) | (715) | 4,340 |
Expenses incurred on behalf of Government | - | - | - | 323 | 323 | (3,802) |
Total expenses | 359,330 | 695,323 | 3,102,718 | 339,609 | 4,496,980 | 4,147,755 |
Revenues | ||||||
Sales of goods and services | ||||||
Services of a regulatory nature |
- | 52,584 | - | 3,599 | 56,183 | 45,611 |
Rights and privileges |
8 | 49,556 | - | 3,549 | 53,113 | 54,736 |
Services of a non-regulatory nature |
14,737 | 7,547 | 124,701 | 57,670 | 204,655 | 204,564 |
Lease and use of public property |
- | - | 65 | 86 | 151 | 265 |
Revenues from fines | - | 986 | - | - | 986 | 1,807 |
Interest | - | - | - | 211 | 211 | 334 |
Other | 149 | 437 | 419 | 1,150 | 2,155 | 1,472 |
Revenues earned on behalf of Government | (132) | (14,699) | (281) | (1,300) | (16,412) | (16,755) |
Total revenues | 14,762 | 96,411 | 124,904 | 64,965 | 301,042 | 292,034 |
Net cost of operations before government funding and transfers | $ 344,568 | $ 598,912 | $ 2,977,814 | $ 274,644 | $ 4,195,938 | $ 3,855,721 |
Health Canada's Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting
Assessment of Internal Controls Over Financial Reporting and Action Plan for The Fiscal Year Ended March 31, 2017
1. Introduction
This document provides summary information on the measures taken by Health Canada (HC) to maintain an effective system of internal control over financial reporting (ICFR) including information on internal control management, assessment results and related action plans.
Detailed information on Health Canada’s authority, mandate and program activities can be found in the 2016-17 Departmental Results Report and the 2016-17 Report on Plans and Priorities.
2. Departmental system of internal control over financial reporting
2.1 Internal control management
Health Canada has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal control over financial reporting framework, approved by the Deputy Minister and the Chief Financial Officer, is in place and includes:
- Organizational Accountability Structures: Establish the means by which the leading authorities at Health Canada, i.e. Deputy Minister, Chief Financial Officer, Chief Audit Executive, the Departmental Audit Committee (DAC), Assistant Deputy Ministers and Governance Committees, ensure proper accountability, stewardship and transparency in the conduct of financial management, risk management and internal control, and stewardship over resources.
- Values and Ethics: Health Canada adheres to the Values and Ethics Code for the Public Sector and has implemented its internal Code of Conduct, which provides mechanisms for listening to employee concerns, ensuring broad training on values and ethics issues, and linking values and ethics to integrated risk management.
- Ongoing Communication and Training: Ensure that all Departmental employees are informed and trained on statutory requirements, policies and procedures for sound financial management and controls.
- Monitoring, Regular Updates and Assessments: Ensure that internal controls are monitored through ongoing assessments and updated as required. Results of such assessments are reported to the Deputy Minister, Departmental Senior Management, and the DAC with action plans to remediate any deficiencies. DAC meets three times annually and provides advice to the Deputy Minister on the adequacy and functioning of the Department's risk management, control and governance frameworks and processes. In addition, key financial controls may be subjected to audit by the Office of Audit and Evaluation who conducts audits in accordance with the risk-based audit plan. The most recent audit of key financial controls was completed for 2015-16.
- Departmental Audit Committee: The DAC endorses the efforts of the department in maintaining an effective ICFR.
2.2 Service arrangements relevant to financial statements
Health Canada relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:
Common Arrangements
- Public Services and Procurement Canada (PSPC) centrally administers the payments of salaries and the procurement of goods and services in accordance with the Health Canada Delegation of Authority, and provides accommodation services.
- The Treasury Board of Canada Secretariat provides Health Canada with information used to calculate various accruals and allowances, such as the accrued severance liability.
- The Department of Justice provides legal services to Health Canada.
- Shared Services Canada provides information technology (IT) infrastructure services to Health Canada in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and Health Canada.
Specific Arrangements
- Agriculture and Agri-Food Canada provides platform access to its human resources management system of record (PeopleSoft).
- Indigenous and Northern Affairs Canada (INAC) provides host services to Health Canada for the Grants and Contributions Information Management System (GCIMS).
- Pursuant to a contract with the Government of Canada, Express Scripts Canada (ESC), an external service provider, administers the Health Information and Claims Processing System for pharmacy, dental care, medical supplies and equipment benefits on behalf of the First Nations and Inuit Health Branch program. The external service provider has the authority and responsibility to ensure that claims paid on behalf of Health Canada for services provided to First Nations and Inuit clients are made in accordance with the terms and conditions set out by the First Nations and Inuit Health Branch program. Pursuant to the contract requirements, an independent annual assurance report on the operating effectiveness of controls is provided by the external service provider’s independent auditors at the end of each reporting period in accordance with Canadian auditing standards.
- Through a Shared Services Partnership Agreement, Health Canada provides the Public Health Agency of Canada (PHAC) with services including the following related to ICFR: human resources (pay and benefits), financial management (financial operations) and materiel management (procurement and contracting). Assurance on the shared controls of these services is provided through this Annex. Under this agreement, the PHAC also provides Health Canada with internal audit services which encompass audits related to financial management and controls.
- Health Canada provides PHAC, the Patented Medicine Prices Review Board, INAC, and the Canadian Northern Economic Development Agency with a financial system platform (SAP) to capture and report all financial transactions.
3. Departmental assessment results during fiscal year 2016-17
Health Canada’s ongoing risk-based monitoring program has been in place for the last four years. This ensures that internal controls over financial reporting are maintained, monitored and reviewed, with timely corrective measures taken when issues are identified. The key findings from the current year's assessment activities are summarized below.
New or significantly amended key controls: Health Canada re-assesses key controls affected by new or significantly amended processes identified in its ongoing risk-based monitoring plan.
In 2014-15, Health Canada initiated the phased-in implementation of GCIMS, hosted by INAC, for the management and reporting of transfer payments. More functionalities and modules were implemented throughout 2015-16 and 2016-17. For 2017-18, system enhancements are expected to continue with the adoption of new modules. Working collaboratively with INAC, Health Canada has updated the design and continues to monitor operating effectiveness of its key controls to support the progress of business process standardization.
Health Canada continues to work with Public Services and Procurement Canada and the Treasury Board Secretariat to identify and implement strengthened controls in payroll processing (post Phoenix). Since the implementation of the Phoenix pay system, Public Services and Procurement Canada has encountered challenges in processing pay transactions. Health Canada has enhanced its existing controls to ensure reliability of financial reporting. To ensure effectiveness of these enhanced controls, additional tests will be conducted in the next fiscal year.
Ongoing risk-based monitoring plan: Health Canada completed its assessment of the following processes in line with its 2016-17 ongoing risk-based monitoring plan: Financial Statements and Year End and Reporting; Revenue, Receivables and Receipts; Grants and Contributions; Payroll; Capital Assets; Non-Insured Health Benefits provided to First Nations and Inuit communities and individuals outside ESC Contract; and Information Technology General Controls.
Key controls tested as part of Health Canada's ongoing risk-based monitoring plan in 2016-17 were found to be operating effectively with no significant deficiencies identified. However, opportunities for improvement in the following areas were identified and are being addressed:
- Continued enhancements to the online employee departure application;
- Improvements to the regional Non-Insured Health Benefits systems;
- Consistency in follow up on delinquent accounts receivable;
- Payroll controls need strengthening in the area of FAA Section 34 authorization; and
- Disaster Recovery Plans for critical systems have not been tested.
4. Departmental action plan
4.1 Progress during fiscal year 2016-17
Health Canada continued to conduct its ongoing risk-based monitoring according to the previous fiscal year’s rotational plan as shown in the following table.
Key Control Areas | Status Completed as Planned |
---|---|
Financial Statements, Year End and Reporting | Yes |
Revenue, Receivables and Receipts | Yes |
Grants and Contributions | Yes |
Payroll | Yes |
Capital Assets | Yes |
Non-Insured Health Benefits— Operations and Maintenance (O&M) non-ESC | Yes |
Information Technology General Controls (ITGC) | Yes |
4.2 Action plan for the next fiscal year and subsequent years
Health Canada’s rotational ongoing risk-based monitoring plan over the next three years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.
Key Control Areas | Fiscal year 2017-18 | Fiscal year 2018-19 | Fiscal year 2019-20 |
---|---|---|---|
Entity Level Controls | Yes | No | No |
Budget | Yes | No | No |
Financial Statements, Year End and Reporting | Yes | Yes | Yes |
Revenue, Receivables and Receipts | Yes | Yes | Yes |
Purchasing, Payables and Payments | Yes | No | Yes |
Grants and Contributions | Yes | Yes | Yes |
Payroll | Yes | Yes | Yes |
Capital Assets | No | Yes | No |
Non-Insured Health Benefits – Contract for Operations and Maintenance (O&M) under Express Scripts Canada (ESC) | Yes | No | Yes |
Non-Insured Health Benefits – O&M controls outside ESC Contract | Yes | Yes | Yes |
Information Technology General Controls (ITGC) | Yes | Yes | Yes |
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