Health Canada 2023-24 Departmental financial statements

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, 2024, and all information contained in these financial 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, 2024 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the annex.

The annex also provides information on the status of the risk-based assessment of the controls over common services provided by the Department that have a bearing on a recipient's departmental financial statements.

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.

The financial statements of Health Canada have not been audited.

Original signed by Greg Orencsak
Greg Orencsak
Deputy Minister
Ottawa, Canada
Date: September 10, 2024

Original signed by Serena Francis
Serena Francis
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: September 4, 2024

Statement of financial position (Unaudited)

Original signed by Greg Orencsak
Greg Orencsak
Deputy Minister
Ottawa, Canada
Date: September 10, 2024

Original signed by Serena Francis
Serena Francis
Assistant Deputy Minister and Chief Financial Officer
Ottawa, Canada
Date: September 4, 2024

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)

For the year ended March 31, 2024

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:

• Canadians have modern and sustainable health care systems.
• Canadians have access to appropriate and effective health services.

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:

• Canadians have access to safe, effective and quality health products.
• Canadians are protected from unsafe consumer and commercial products and substances.
• Canadians make healthy choices.

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 10 distinct services that support Program delivery in the organization, regardless of the Internal Services delivery model in a department. The 10 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 2023-24 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 2023-24 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 the 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 and deferred revenues

Revenues are comprised of revenues earned from non-tax sources. They include exchange transactions where goods or services are provided for consideration where a performance obligation exists, and non-exchange transactions where no performance obligations exist to provide a good or service. These transactions can be recurring or non-recurring in nature. Recurring transactions are viewed as ongoing, routine activities that form part of the normal course of operations and can be used to indicate if they can be reasonably expected to be earned again in future years.

Deferred revenue consists of amounts received in advance of the delivery of goods and rendering of services that will be recognized as revenue in a subsequent fiscal year as it is earned. Other revenues are recognized in the period the event giving rise to the revenues occurred.

Revenues that are non-respendable are not available to discharge the Department's liabilities. While the Departmental 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 earned on behalf of the Government of Canada and are therefore presented as a reduction of the entity's gross revenues. Revenues earned on behalf of Government consist of the sale of services and gains on the sale of assets. These are recognized when earned.

(e) Expenses

Transfer payments are recorded as an expense in the year the transfer is authorized, and all eligibility criteria have been met by the recipient.

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 carrying value.

(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: The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(g) Financial instruments

A contract establishing a financial instrument creates, at its inception, rights, and obligations to receive or deliver economic benefits. The financial assets and financial liabilities portray these rights and obligations in the financial statements. The Department recognizes a financial instrument when it becomes a party to a financial instrument contract.

Financial instruments consist of accounts receivable, and accounts payable and accrued liabilities.

All financial assets and liabilities are recorded at cost or amortized cost. Any associated transaction costs are added to the carrying value upon initial recognition. For financial instruments measured at amortized cost, the effective interest method is used to determine interest revenue or expense.

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

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 9. 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) Asset retirement obligations

An asset retirement obligation is recognized when all of the following criteria are satisfied: there is a legal obligation to incur retirement costs in relation to a tangible capital asset, the past event or transaction giving rise to the retirement liability has occurred, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The costs to retire an asset are normally capitalized and amortized over the asset's estimated remaining useful life. An asset retirement obligation may arise in connection with a tangible capital asset that is not recognized or no longer in productive use. In this case, the asset retirement cost would be expensed. The measurement of the liability is the Department's best estimate of the amount required to retire a tangible capital asset.

When the future cash flows required to settle or otherwise extinguish a liability are estimable, predictable, and expected to occur over extended future periods, a present value technique is used. The discount rate used reflects the government's cost of borrowing, associated with the estimated number of years to complete remediation.

The recorded liabilities are adjusted each year, as required, for present value adjustments, inflation, new obligations, changes in management estimates and actual costs incurred.

(l) 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 Department'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, asset retirement obligations, 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.

Asset retirement obligations are subject to measurement uncertainty as discussed in note 5 due to the evolving technologies used in the estimation of the costs for asset retirements, the use of discounted present value of future estimated costs, inflation, interest rates, and the fact that not all sites have had a complete assessment of the extent and nature of asset retirement costs. Changes to underlying assumptions, the timing of the expenditures, the technology employed, or the revisions to environmental standards or changes in regulatory requirements could result in significant changes to the liabilities recorded.

(m) 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:

• Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.
• Certain services received on a without charge basis are recorded for departmental financial statement purposes at the carrying amount.

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:

4. Accounts payable and accrued liabilities

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

5. Asset retirement obligations

The Department has recorded asset retirement obligations for the removal of asbestos and other hazardous materials in buildings, retirement activities linked to machinery and equipment, and other asset retirement obligations.

The changes in asset retirement obligations during the year are as follows:

Accretion expense is the increase in the carrying amount of an asset retirement obligation due to the passage of time.

The undiscounted future expenditures, adjusted for inflation, for the planned projects comprising the liability are $4,440 thousand ($2,569 thousand as at March 31, 2023).

Key assumptions used in determining the provision are as follows:

The Department's ongoing efforts to assess asset retirement obligations may result in additional asset retirement obligations.

6. Revenues

The Department has the following major types of revenues: services of a regulatory nature, services of a non-regulatory nature, rights and privileges, miscellaneous revenues, and revenues earned on behalf of the Government. Services of a regulatory nature, services of a non-regulatory nature, and rights and privileges are recorded when they are earned. Miscellaneous revenues include the lease and use of public property, revenues from fines, interest, and other fees and charges. These are recorded when performance obligations are satisfied.

7. 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.

For Group 1 members, the expense represents approximately 1.02 times (1.02 times in 2022-23) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2022-23) 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, 2024, 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:

8. Accounts receivable and advances

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

The following table provides an aging analysis of accounts receivable from external parties and the associated valuation allowances used to reflect their net recoverable value.

9. 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:

Adjustments include assets under construction of $3,796 thousand that were transferred to the other categories upon completion of the assets.

10. Contractual obligations

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

11. Contingent liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown.

Claims and litigations:

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 $39.2 million at March 31, 2024 ($454.2 million in 2022-23).

12. 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, the Public Health Agency of Canada, the Canada Revenue Agency and Employment and Social Development 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 the employer's contribution to the health and dental insurance plans, accommodation, legal services, 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:

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.

(b) Other transactions with other government departments and agencies

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

13. Transfers to other government departments

Effective February 19, 2024, the Department transferred the responsibility, care, and custody of COVID-19 rapid testing devices to the Public Health Agency of Canada in accordance with a memorandum of understanding, including the stewardship responsibility for the related assets and liabilities. Accordingly, the Department transferred the following assets and liabilities related to COVID-19 rapid testing devices to the Public Health Agency of Canada on February 19, 2024:

In addition, the 2023 comparative figures have been reclassified on the Statement of operations and departmental net financial position to present the revenues and expenses of the transferred operations. Note 15 provides a reconciliation of the reclassified results.

14. 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:

15. Adjustments to prior year's results

During 2023-24, the Department identified an administrative error in the calculation of the inventory value reported at March 31, 2023. The year end inventory balance was overstated and the cost of inventory consumed during 2022-23 was understated. The correction has been applied retroactively and comparative information for 2022-23 has been restated.

In addition, comparative information for 2022-23 has been restated for the reporting of transferred operations as described in note 13.

A reconciliation of the restatements for the significant financial statement line items follows:

16. Comparative information

Certain comparative figures have been reclassified to conform to the current year's presentation.

Health Canada's Annex to the statement of management responsibility including internal control over financial reporting

2023-24 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), as well as 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 2024-25 fiscal year and the Departmental Results Report for the 2023-24 fiscal year.

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 overall system of internal control. A departmental internal control over financial management framework is in place and comprises:

• organizational accountability structures as they relate to internal control management to support sound financial management, including the roles and responsibilities of senior departmental managers for control management in their areas of responsibility;
• 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, and linking them to integrated risk management;
• ongoing communication and training on legislative and policy requirements for sound financial management and control; and
• monitoring and regular updates on internal control management, as well as the provision of related assessment results and action plans to the deputy head and senior departmental management and, as applicable, the Departmental Audit Committee.

The Departmental Audit Committee is an independent advisory committee to the deputy head. It is responsible to provide 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

• Public Services and Procurement Canada administers the payment of salaries, the procurement of goods and services, and provides accommodation services;
• Shared Services Canada provides information technology infrastructure services;
• Department of Justice Canada provides legal services; and
• Treasury Board of Canada Secretariat provides information on public service insurance and centrally administers payment of the employer's share of contributions toward statutory employee benefit plans.

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

• Agriculture and Agri-Food Canada administers PeopleSoft, the Human Resources management system, on behalf of Health Canada.
• Indigenous Services Canada provides host services to Health Canada for the Grants and Contributions Information Management System (GCIMS).
• The Canada Revenue Agency administers the interim Canada Dental Benefit on behalf of Health Canada.
• Through Service Canada, the Department of Employment and Social Development (ESDC) administers application intake and processing, and service delivery activities, as well as communicates eligibility of the Canadian Dental Care Plan on behalf of Health Canada.
• Through a Shared Services Partnership Agreement, Health Canada provides the Public Health Agency of Canada with services including the following related to ICFR: human resources (staffing, compensation, and classification), materiel management (procurement and contracting) and financial management (financial operations including assessments of HC ICFR key controls that apply to PHAC transactions. PHAC is responsible for assessing their specific ICFR/ICFM and report on their overall financial processes accordingly). Under this agreement, the Public Health Agency of Canada also provides Health Canada with internal audit services, which encompass audits related to financial management and controls.
• Health Canada provides the Public Health Agency of Canada, the Patented Medicine Prices Review Board, Indigenous Services Canada, Crown-Indigenous Relations and Northern Affairs and the Canadian Northern Economic Development Agency with a financial system platform (SAP) to capture and report all financial transactions.

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.

Internal controls at the ongoing monitoring stage

A.3 Departmental assessment results for the 2023-24 fiscal year

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

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

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

In the current fiscal year, there were no significantly amended key controls in existing processes that required a reassessment. Some measures were implemented to strengthen Health Canada's system of internal controls. Notably, Information technology general controls under departmental management were enhanced around: granting, reviewing/monitoring and correcting SAP access rights; restrictions and limitations for high privilege SAP accounts; policies and procedures regarding program change, access to programs and data, and computer operations; priority designation of SAP incident management; and, access controls for GCIMS and Peoplesoft. Additionally, clarity on costing responsibilities of direct and indirect costs as part of the Budget 2024 implementation cycle was provided to reinforce the cost estimating process. Furthermore, the reconciliation of SAP payment budget with cash authorities provided by the Treasury Board of Canada Secretariat was augmented to fortify the budget forecasting process. Finally, the scope of the risk-based quarterly quality assurance statistical sampling on Journal Vouchers was enhanced to strengthen the financial statements, year-end and reporting process.

Moreover, as part of the Government of Canada's actions to enforce and uphold the highest standards of procurement to ensure sound stewardship of public funds, Health Canada is enhancing related ICFM to notably improve training, oversight, and compliance with the strengthened departmental delegated spending and financial authorities.

To continue to bolster the organization's fraud awareness, the Department implemented the Health Canada Standard on Fraud Risk Management to clarify roles and responsibilities for overseeing and monitoring fraud risk within the Department. Health Canada's branches follow a standardized approach to ensure that fraud risk assessments are regularly conducted, updated, and monitored, with corresponding mitigation strategies established. Furthermore, Health Canada continued to collaborate with subject matter experts to offer targeted training to mitigate risks related to potential fraud scenarios.

By adopting these thorough measures, Health Canada continues to demonstrate its commitment to upholding strong internal control practices and maintaining the integrity of its financial reporting processes.

A.3.2 Ongoing monitoring program

As part of its rotational ongoing monitoring plan, the Department completed its assessment of the following business processes in-line with the 2023-24 departmental ongoing risk-based monitoring plan: Entity-level controls, Capital assets, Pay administration, 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. For example, in Capital assets enhanced communications on internal disposal procedures, monitoring of access to create surplus requests, as well as a review of the record of surplus process are being implemented to strengthen financial controls regarding disposal activities. The assessment of Pay administration is leading to strengthening assurance of commitment authority, salary forecasts, and the validity and accuracy of processed pay actions. Finally, for Information technology general controls under departmental management, Health Canada initiated efforts to enhance system controls in the areas of governance, access and change management.

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:

• an annual validation of high-risk processes and controls; and
• related adjustments to the ongoing monitoring plan, as required.

To better support responsible government spending and in alignment with subsections A.3.1 and A.3.2, the Purchasing, payables and payments process and the Travel, hospitality, conference, events, and relocation process will now be assessed in fiscal year 2024-25. As such, the budgeting and forecasting assessment and the cost estimating assessment are deferred to fiscal year 2025-26.

A.5 Common service provider's annual assessment results for the 2023 to 2024 fiscal year

Health Canada administers a shared instance of SAP, the financial and material management system, on behalf of the organizations indicated in the subsection A.2.2.2 Specific arrangements above and has completed a risk-based assessment of related Information technology general controls for these services. The results of this assessment are described below.

For the most part, the key controls that were tested performed as intended. Health Canada demonstrated that most change management controls under departmental management were effective. These controls play a critical role ensuring that changes are adequately planned, tested, approved, and documented to minimize the risk of errors or system disruptions that could impact financial processes and increase overall quality of services provided by Health Canada.

Several areas for improvement were identified related to governance, system access, and change management controls. Action plans are being implemented notably as indicated in subsection A.3.1 and A.3.2 to improve monitoring, strengthen communication related to access responsibilities, and ensure adequate accountability and contingency planning for internal support services between departments. Some of the corrective measures are already implemented and periodical follow-ups are conducted to ensure action plans are being completed as planned.