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Health Canada – 2021-22 Departmental Financial Statements

Table of Contents

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, 2022, 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 of Canada'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 Health Canada'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 Health Canada 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, 2022 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the annex.

The effectiveness and adequacy of Health Canada's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of Health Canada's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the Deputy Minister of Health Canada.

The financial statements of Health Canada have not been audited.

 

Stephen Lucas
Deputy Minister
Ottawa, Canada
Date:  September 1, 2022

Serena Francis
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date:  August 30, 2022

Statement of Financial Position (Unaudited)

As at March 31

(in thousands of dollars) 2022 2021
Liabilities
Accounts payable and accrued liabilities (note 4) $ 1,904,869 $ 245,641
Vacation pay and compensatory leave 84,686 84,811
Deferred revenue 16,774 14,330
Employee future benefits (note 5) 27,935 33,433
Other liabilities 26,202 26,143
Total gross liabilities 2,060,466 404,358
Liabilities held on behalf of Government
Deferred revenue (126) (80)
Total liabilities held on behalf of Government (126) (80)
Total net liabilities 2,060,340 404,278
Financial assets
Due from Consolidated Revenue Fund 1,861,797 198,589
Accounts receivable and advances (note 6) 103,100 115,920
Total gross financial assets 1,964,897 314,509
Financial assets held on behalf of Government
Accounts receivable and advances (note 6) (42,418) (40,554)
Total financial assets held on behalf of Government (42,418) (40,554)
Total net financial assets 1,922,479 273,955
Departmental net debt 137,861 130,323
Non-financial assets
Prepaid expenses 72,548 -
Inventory (note 7) 366,000 -
Tangible capital assets (note 8) 142,827 142,591
Total non-financial assets 581,375 142,591
Departmental net financial position $ 443,514 $ 12,268

Contractual obligations (note 9)

Contingent liabilities and contingent assets (note 10)

The accompanying notes form an integral part of these financial statements.

Stephen Lucas
Deputy Minister
Ottawa, Canada
Date:  September 1, 2022

Serena Francis
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date:  August 30, 2022

Statement of Operations and Departmental Net Financial Position (Unaudited)

For the Year Ended March 31

(in thousands of dollars) 2022
Planned Results		 2022 2021
Expenses
Health Care Systems $ 2,453,793 $ 4,311,264 $ 1,984,894
Health Protection and Promotion 1,390,280 1,059,107 938,397
Internal Services 357,849 567,425 527,726
Expenses incurred on behalf of Government (338) (60) (178)
Total expenses 4,201,584 5,937,736 3,450,839
Revenues
Sales of goods and services Services of a regulatory nature 76,752 137,132 120,067
Rights and privileges 120,570 108,444 86,945
Services of a non-regulatory nature 91,293 247,341 167,541
Lease and use of public property 52 54 47
Revenues from fines 996 418 614
Interest 333 438 251
Other 17 5,822 945
Revenues earned on behalf of Government (67,088) (92,495) (70,561)
Total revenues 222,925 407,154 305,849
Net cost of operations before government funding and transfers 3,978,659 5,530,582 3,144,990
Government funding and transfers
Net cash provided by Government of Canada no data 4,153,258 2,940,805
Change in due from Consolidated Revenue Fund no data 1,663,208 42,311
Services provided without charge by other government departments (note 11) no data 136,787 139,019
Transfer of the transition payments for implementing salary payments in arrears no data (2) (4)
Other transfers of assets and liabilities (to) / from other government departments no data 8,577 4,828
Net cost of (revenue from) operations after government funding and transfers no data (431,246) 18,031
Departmental net financial position - Beginning of year no data 12,268 30,299
Departmental net financial position - End of year no data $ 443,514 $ 12,268

Segmented information (note 12)

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) 2022 2021
Net cost of (revenue from) operations after government funding and transfers $ (431,246) $ 18,031
Change due to tangible capital assets
Acquisition of tangible capital assets 16,754 19,087
Amortization of tangible capital assets (23,960) (21,613)
Proceeds from disposal of tangible capital assets (5,924) (70)
Gain (loss) on disposal of tangible capital assets including adjustments 5,086 35
Transfer of tangible capital assets (to) / from other government departments 8,280 4,540
Total change due to tangible capital assets 236 1,979
Change due to inventory 366,000 -
Change due to prepaid expenses 72,548 -
Net increase (decrease) in departmental net debt 7,538 20,010
Departmental net debt - Beginning of year 130,323 110,313
Departmental net debt - End of year $ 137,861 $ 130,323
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) 2022 2021
Operating activities
Net cost of operations before government funding and transfers $ 5,530,582 $ 3,144,990
Non-cash items: Amortization of tangible capital assets (23,960) (21,613)
Gain (loss) on disposal of tangible capital assets including adjustments 5,086 35
Services provided without charge by other government departments (note 11) (136,787) (139,019)
Variations in Statement of Financial Position: Decrease (increase) in accounts payable and accrued liabilities (1,659,228) (71,369)
Decrease (increase) in vacation pay and compensatory leave 125 (25,929)
Decrease (increase) in deferred revenue (2,398) (3,781)
Decrease (increase) in employee future benefits 5,498 159
Decrease (increase) in other liabilities (59) 482
Increase (decrease) in accounts receivable and advances (14,684) 38,117
Increase (decrease) in prepaid expenses 72,548 -
Increase (decrease) in inventory 366,000 -
Transition payments for implementing salary payments in arrears 2 4
Transfer of financial assets and liabilities (to) / from other government departments (297) (288)
Cash used in operating activities 4,142,428 2,921,788
Capital investing activities
Acquisition of tangible capital assets 16,754 19,087
Proceeds from disposal of tangible capital assets (5,924) (70)
Cash used in capital investing activities 10,830 19,017
Net cash provided by Government of Canada $ 4,153,258 $ 2,940,805
The accompanying notes form an integral part of these financial statements.

Notes to the Financial Statements (Unaudited)

For the Year Ended March 31, 2022

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 core responsibilities and related programs:

Core Responsibility 1 - Health Care Systems

Health Canada provides national leadership to support and encourage sustainable and adaptable health care systems that ensures access for Canadians to appropriate and effective health care services.

Expected Results:

Core Responsibility 2 - Health Protection and Promotion

Health Canada works with domestic and international partners to assess, manage and communicate the health and safety risks and benefits associated with health and consumer products, food, chemicals, pesticides, environmental factors, tobacco and vaping products, cannabis, and controlled substances.

Expected Results:

Internal Services

Internal Services are those groups of related activities and resources that the federal government considers to be services in support of Programs and/or required to meet corporate obligations of an organization. Internal Services refers to the activities and resources of the ten distinct service categories that support Program delivery in the organization, regardless of the Internal Services delivery model in a department. The ten service categories are:  Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Management Services; Materiel Management Services; and Acquisition Management Services.

2. Summary of significant accounting policies

These financial statements are prepared using the department'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 2021-22 Departmental Plan. 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 2021-22 Departmental Plan.

(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

(e) Expenses

(f) Employee future benefits

(g) Accounts receivable

Accounts receivable are initially recorded at cost and where necessary, are discounted to reflect their concessionary terms. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts receivable to amounts that approximate their net recoverable value.

(h) Non-financial assets

Prepaid expenses are disbursements made, pursuant to a contract, before delivery of the goods or rendering of the service.

Inventories are valued at cost and are comprised of spare parts and supplies held for future program delivery and are not primarily intended for resale. Inventories that no longer have service potential are valued at the lower of cost or net realizable value.

The costs of acquiring land, buildings, equipment and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in note 8. All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, works of art, museum collection and Crown land to which no acquisition cost is attributable; and intangible assets.

(i) Contingent liabilities

Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, a provision is accrued and an expense recorded to other expenses. 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.

(j) Contingent assets

Contingent assets are possible assets which may become actual assets when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, the contingent asset is disclosed in the notes to the financial statements.

(k) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government's best estimate of the related amount at the end of the reporting period. The most significant items where estimates are used are contingent 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.

(l) Related party transactions

Related party transactions, other than inter-entity transactions, are recorded at the exchange amount.

Inter-entity transactions are transactions between commonly controlled entities. Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:

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. The differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to current year authorities used

(in thousands of dollars) 2022 2021
Net cost of operations before government funding and transfers $ 5,530,582 $ 3,144,990
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (23,960) (21,613)
Gain (loss) on disposal of tangible capital assets 5,100 70
Services provided without charge by other government departments (136,787) (139,019)
Decrease (increase) in vacation pay and compensatory leave 125 (25,929)
Decrease (increase) in employee future benefits 5,498 159
Refund/adjustment of prior years' expenditures 7,915 9,337
Bad debt expense (145) (510)
Increase (decrease) in transfer payment accrual 106 (174)
Statutory spending authority equivalent to revenues earned 204,413 130,829
Other (6,447) (5,098)
Total items affecting net cost of operations but not affecting authorities 55,818 (51,948)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets 16,754 19,087
Increase (decrease) in inventory 366,012 -
Increase (decrease) in prepaid expenses 72,548 -
Increase in salary overpayments to be recovered 2,940 4,387
Issuance of advances to employees 88 121
Transition payments for implementing salary payments in arrears 2 4
Proceeds from disposal of Crown assets 41 12
Total items not affecting net cost of operations but affecting authorities 458,385 23,611
Current year authorities used $ 6,044,785 $ 3,116,653

(b) Authorities provided and used

(in thousands of dollars) 2022 2021
Authorities provided:
Vote 1 - Operating expenditures $ 4,943,034 $ 1,316,671
Vote 5 - Capital expenditures 21,084 21,307
Vote 10 - Grants and contributions 3,455,290 2,101,445
Public Health Events of National Concern Payments Act - 50,574
Payments for expenses in relation to COVID-19 tests 710,877 -
Other statutory amounts 318,561 245,329
Less:
Authorities available for future years (209) (82)
Lapsed authorities (3,403,852) (618,591)
Current year authorities used $ 6,044,785 $ 3,116,653

4. Accounts payable and accrued liabilities

The following table presents details of the Department's accounts payable and accrued liabilities:

Accounts payable and accrued liabilities
(in thousands of dollars) 2022 2021
Accounts payable - Other government departments and agencies $ 317,595 $ 25,322
Accounts payable - External parties 1,162,919 86,495
Total accounts payable 1,480,514 111,817
Accrued liabilities 424,355 133,824
Total accounts payable and accrued liabilities $ 1,904,869 $ 245,641

5. 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 2021-22 expense amounts to the following:

Pension benefits
(in thousands of dollars) 2022 2021
Expense for the year $ 86,506 $ 83,624

For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2020-21) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2020-21) 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 Consolidated 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, 2022, 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:

Severance benefits
(in thousands of dollars) 2022 2021
Accrued benefit obligation - Beginning of year $ 33,433 $ 33,592
Provision for the year (2,321) 2,313
Benefits paid during the year (3,177) (2,472)
Accrued benefit obligation - End of year $ 27,935 $ 33,433

6. Accounts receivable and advances

The following table presents details of the Department's accounts receivable and advances balances:

Accounts receivable and advances

(in thousands of dollars) 2022 2021
Accounts receivable - Other government departments and agencies $ 48,362 $ 52,262
Accounts receivable - External parties 26,009 37,410
Employee advances 30,437 27,842
Subtotal 104,808 117,514
Allowance for doubtful accounts on receivables from external parties (1,708) (1,594)
Gross accounts receivable and advances 103,100 115,920
Accounts receivable held on behalf of Government (42,418) (40,554)
Net accounts receivable and advances $ 60,682 $ 75,366

7. Inventory

The following table presents details of the Department's inventory:

Inventory

(in thousands of dollars) 2022 2021
Laboratory supplies $ 345,915 $ -
Pharmaceutical and other medicinal products 20,085 -
Total inventory $ 366,000 $ -

The cost of distributed inventory recognized as an expense in the Statement of Operations and Departmental Net Financial Position is $558.2 million in 2021-22 (nil in 2020-21).

8. Tangible capital assets

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

Amortization period by asset class
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 asset class in the year they are put into service and are not amortized until they are put into service.
Engineering works in progress of construction
Work in progress for software
Other construction or work in progress

Tangible capital assets (in thousands of dollars)

Cost Opening balance Acquisitions Disposals and write-offs Transfers and adjustments Closing balance
Land $ 170 $ - $ (77) $ - $ 93
Buildings 153,550 - (9,287) 1,540 145,803
Works and infrastructure 2,355 21 (1,297) - 1,079
Leasehold improvements 26,190 - - (1,450) 24,740
Machinery and equipment 295,754 11,751 (8,270) 359 299,594
Vehicles 5,301 232 (298) 87 5,322
Assets under construction 9,450 4,750 - 5,910 20,110
Total $ 492,770 $ 16,754 $ (19,229) $ 6,446 $ 496,741
Accumulated amortization Opening balance Amortization Disposals and write-offs Transfers and adjustments Closing balance
Buildings $ 106,608 $ 2,910 $ (9,236) $ - $ 100,282
Works and infrastructure 931 90 (640) - 381
Leasehold improvements 25,543 39 - (1,450) 24,132
Machinery and equipment 213,428 20,253 (8,232) (396) 225,053
Vehicles 3,669 668 (297) 26 4,066
Total $ 350,179 $ 23,960 $ (18,405) $ (1,820) $ 353,914
Net book value Net book value 2021 Net change acquisitions and amortization Net change disposals and write-offs Net change transfers and adjustments Net book value 2022
Land $ 170 $ - $ (77) $ - $ 93
Buildings 46,942 (2,910) (51) 1,540 45,521
Works and infrastructure 1,424 (69) (657) - 698
Leasehold improvements 647 (39) - - 608
Machinery and equipment 82,326 (8,502) (38) 755 74,541
Vehicles 1,632 (436) (1) 61 1,256
Assets under construction 9,450 4,750 - 5,910 20,110
Total $ 142,591 $ (7,206) $ (824) $ 8,266 $ 142,827

Adjustments include assets under construction of $2,308 thousand that were transferred to the other categories upon completion of the assets.

9. Contractual obligations

The nature of the Department's activities may result in some 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:

Contractual obligations
(in thousands of dollars) Transfer payments Operating contracts Total
2022-23 $ 592,161 $ 3,286 $ 595,447
2023-24 238,845 3,287 242,132
2024-25 187,089 3,287 190,376
2025-26 100,855 3,287 104,142
2026-27 and subsequent 47,500 - 47,500
Total $ 1,166,450 $ 13,147 $ 1,179,597

10. Contingent liabilities and contingent assets

(a) 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 $1,015.9 million ($1,015.0 million in 2020-21) at March 31, 2022.

(b) Contingent assets

Contingent assets arise in the normal course of operations and their ultimate disposition is unknown. The Department has made claims against external parties for which recovery or gain is likely to materialize, however a reasonable estimate cannot be made. Contingent assets are not recognized in the financial statements.

11. Related party transactions

The Department is related as a result of common ownership to all government departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family member of that individual.

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 Services Canada, Crown-Indigenous Relations 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.

(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 at the carrying value in the Department's Statement of Operations and Departmental Net Financial Position as follows:

Common services provided without charge by other government departments
(in thousands of dollars) 2022 2021
Employer's contribution to the health and dental insurance plans $ 86,389 $ 74,555
Accommodation 47,536 61,423
Legal services 2,489 2,470
Worker's compensation 373 571
Total $ 136,787 $ 139,019

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

Other transactions with related parties
(in thousands of dollars) 2022 2021
Expenses - Other government departments and agencies $ 533,173 $ 101,095
Revenues - Other government departments and agencies 238,786 159,414

Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).

12. Segmented information

Presentation by segment is based on the Department's departmental results framework. 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:

Segmented information
(in thousands of dollars) Health Care Systems Health Protection and Promotion Internal Services 2022 Total 2021 Total
Expenses
Transfer payments $ 3,150,430 $ 98,459 $ - $ 3,248,889 $ 1,883,382
Salaries and employee benefits 55,602 802,917 288,332 1,146,851 1,082,158
Utilities, materials and supplies 838,026 10,585 24,280 872,891 41,995
Professional and special services 83,457 73,544 112,384 269,385 233,688
Transportation and communications 175,680 2,393 5,464 183,537 4,856
Information services 4,293 12,644 65,950 82,887 84,975
Accommodation 2,380 33,331 29,833 65,544 70,082
Repair and maintenance - 3,955 22,323 26,278 14,508
Amortization of tangible capital assets - 15,158 8,802 23,960 21,613
Rentals 163 4,712 10,410 15,285 13,165
Travel and relocation 192 1,299 124 1,615 654
Other 1,041 110 (622) 529 (569)
Bad debts - - 145 145 510
Expenses incurred on behalf of Government - - (60) (60) (178)
Total expenses 4,311,264 1,059,107 567,365 5,937,736 3,450,839
Revenues
Sales of goods and services Services of a regulatory nature - 126,226 10,906 137,132 120,067
Rights and privileges - 104,839 3,605 108,444 86,945
Services of a non-regulatory nature - 37,582 209,759 247,341 167,541
Lease and use of public property - - 54 54 47
Revenues from fines - 418 - 418 614
Interest - - 438 438 251
Other - 780 5,042 5,822 945
Revenues earned on behalf of Government - (86,693) (5,802) (92,495) (70,561)
Total revenues - 183,152 224,002 407,154 305,849
Net cost from continuing operations $ 4,311,264 $ 875,955 $ 343,363 $ 5,530,582 $ 3,144,990

Health Canada's Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting

2021-22 Fiscal Year

A.1 Introduction

This document provides summary information on the measures taken by Health Canada 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 the department's authority, mandate and core responsibilities can be found in the departmental plan for the 2021-22 fiscal year and the departmental results report for the 2021-22 fiscal year Health Canada's corporate management reporting.

A.2 Departmental system of internal control over financial reporting

A.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 management framework, approved by the Deputy Minister and the Chief Financial Officer, is in place and comprises:

The Departmental Audit Committee provides advice to the Deputy Minister on the adequacy and functioning of the department's risk management, control and governance frameworks and processes.

A.2.2 Service arrangements relevant to financial statements

Health Canada relies on other departments and agencies for the processing of certain transactions that are recorded in its financial statements as follows:

A.2.2.1 Common service arrangements

Readers of this annex may refer to the annexes of the above-noted departments and agencies for a greater understanding of the systems of internal control over financial reporting related to these specific services.

Health Canada relies on, and is relied upon by, other departments and agencies for the processing of certain information or transactions that are recorded in its financial statements, as follows:

A.2.2.2 Specific Arrangements

A.3 Departmental assessment results for the 2021-22 fiscal year

Health Canada has a mature ongoing risk-based monitoring program that has been in place since 2013-14 that ensures internal controls over financial reporting are maintained, monitored and reviewed, with timely corrective measures taken when issues are identified.

The following table summarizes the status of the ongoing monitoring activities according to the previous fiscal year's rotational plan.

Progress during the 2021-22 fiscal year

Previous fiscal year's rotational ongoing monitoring plan for the current fiscal year Status
Chief Financial Officer (CFO) attestations including Cabinet submissions Completed as planned;
no remedial actions required.
Financial statements, year-end and reporting Completed as planned;
no remedial actions required.
Revenues, receivables and receipts Completed as planned;
remedial actions started.
Purchasing, payables and payments Completed as planned;
remedial actions started.
Travel management Completed as planned;
remedial actions started.
Payroll Completed as planned;
remedial actions started.
Information technology general controls under departmental management Completed as planned;
remedial actions started.

In addition to ongoing monitoring during the 2021-22 fiscal year, the department made progress in the design and operating effectiveness assessments of the investment planning, project management and cost estimating processes.

The key findings from the current fiscal year's assessment activities are summarized in subsections A.3.1 and A.3.2.

A.3.1 New or significantly amended key controls

This year, Health Canada made enhancements by adding seventeen key controls as follows:

In addition, thirty-one key controls were documented for the investment planning, project management and cost estimating processes, of which twenty-five key controls were assessed for design effectiveness and ten key controls were assessed for operating effectiveness.

A.3.2 Ongoing monitoring program

As part of its rotational ongoing monitoring plan, the department completed its reassessment of the following business processes in-line with the 2021-22 departmental ongoing risk-based monitoring plan:  CFO attestations including Cabinet submissions; financial statements, year-end and reporting; revenues, receivables and receipts; purchasing, payables and payments; travel management; payroll; and information technology general controls under departmental management. For the most part, the key controls that were tested performed as intended. Action plans are being implemented to address instances where remediation is required, such as:

Information technology general controls under departmental management:

Purchasing, payables and payments:

Health Canada continues to assess the impact of the COVID-19 pandemic on the department's internal controls over financial reporting. The department has not identified deficiencies in the design and operation of the department's internal controls over financial reporting as a result of the COVID-19 pandemic that could have a material impact on the department's consolidated financial statements.

A.4 Departmental action plan for the next fiscal year and subsequent fiscal years

Health Canada's rotational ongoing monitoring plan over the next five fiscal years is shown in the following table. The ongoing monitoring plan is based on:

Rotational ongoing monitoring plan
Key Control Areas 2022 to 2023
fiscal year		 2023 to 2024
fiscal year		 2024 to 2025
fiscal year		 2025 to 2026
fiscal year		 2026 to 2027
fiscal year
Entity-level controls No Yes No No Yes
Budgeting and forecasting Yes No Yes No Yes
Chief Financial Officer attestations included in Cabinet Submissions No No Yes No No
Financial statements, year-end and reporting Yes Yes Yes Yes Yes
Revenues, receivables and receipts Yes Yes Yes Yes Yes
Purchasing, payables and payments Yes No Yes No Yes
Transfer payments No Yes No Yes No
Pay administration Yes Yes Yes Yes Yes
Capital assets No Yes No Yes No
Travel, hospitality, conference and events, and relocation No Yes No Yes No
Information technology general controls under departmental management Yes Yes Yes Yes Yes

Work will continue in the investment planning, project management and cost estimating business processes to identify key control activities, document processes, and complete design effectiveness and operating effectiveness testing in order to reach the ongoing monitoring stage by the end of the 2023-24 fiscal year.

The assessments of transfer payments and capital assets are deferred from the 2022-23 fiscal year to the 2023-24 fiscal year based on the re-evaluation of the department's risks and consultation with process owners.

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