2021-22 Departmental Financial Statements

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 the Patented Medicine Prices Review Board (PMPRB). 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 the PMPRB's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the PMPRB'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 PMPRB 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.

The PMPRB is subject to periodic Core Control Audits performed by the Office of the Comptroller General and uses the results of such audits to comply with the Treasury Board Policy on Financial Management.

A Core Control Audit was performed in 2011-12 by the Office of the Comptroller General of Canada (OCG). The Audit Report and related Management Action Plan are posted on the PMPRB's web site.

The financial statements of the PMPRB have not been audited.

Mélanie Bourassa Forcier
Acting Chairperson
Ottawa, Canada
Date:  August 9, 2022

Devon Menard
Chief Financial Officer
Ottawa, Canada
Date:  August 9, 2022

Statement of Financial Position (Unaudited)

As at March 31

(in dollars)	2022	2021
Liabilities
Accounts payable and accrued liabilities (note 4)	$ 952,912	$ 1,759,657
Vacation pay and compensatory leave	652,115	690,603
Employee future benefits (note 5)	262,598	335,788
Total net liabilities	1,867,625	2,786,048
Financial assets
Due from Consolidated Revenue Fund	777,737	1,515,428
Accounts receivable and advances (note 6)	382,111	466,731
Total gross financial assets	1,159,848	1,982,159
Financial assets held on behalf of Government
Accounts receivable and advances (note 6)	(206,935)	(222,501)
Total financial assets held on behalf of Government	(206,935)	(222,501)
Total net financial assets	952,913	1,759,658
Departmental net debt	914,712	1,026,390
Non-financial assets
Tangible capital assets (note 7)	45,968	93,060
Total non-financial assets	45,968	93,060
Departmental net financial position	$ (868,744)	$ (933,330)

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

Mélanie Bourassa Forcier
Acting Chairperson
Ottawa, Canada
Date:  August 9, 2022

Devon Menard
Chief Financial Officer
Ottawa, Canada
Date:  August 9, 2022

Statement of Operations and Departmental Net Financial Position (Unaudited)

For the Year Ended March 31

(in dollars)	2022 Planned Results	2022	2021
Expenses
Regulate Patented Medicine Prices	$  17,097,166	$ 10,085,645	$ 12,205,915
Internal Services	3,485,989	3,798,883	4,900,457
Total expenses	20,583,155	13,884,528	17,106,372
Revenues
Voluntary compliance undertakings	-	38,309	304,355
Other	-	527	3,689
Revenues earned on behalf of Government	-	(38,309)	(304,355)
Total revenues	-	527	3,689
Net cost of operations before government funding and transfers	20,583,155	13,884,001	17,102,683
Government funding and transfers
Net cash provided by Government of Canada	-	13,056,958	15,149,807
Change in due from Consolidated Revenue Fund	-	(737,691)	90,226
Services provided without charge by other government departments (note 8)	-	1,638,198	1,559,774
Transfer of assets and liabilities from / (to) other government departments	-	(8,878)	(13,801)
Net cost of (revenue from) operations after government funding and transfers	-	(64,586)	316,677
Departmental net financial position - Beginning of year	-	(933,330)	(616,653)
Departmental net financial position - End of year	-	$ (868,744)	$ (933,330)

Segmented information (note 9)

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 dollars)	2022	2021
Net cost of (revenue from) operations after government funding and transfers	$ (64,586)	$ 316,677
Change due to tangible capital assets
Amortization of tangible capital assets	(47,092)	(51,325)
Total change due to tangible capital assets	(47,092)	(51,325)
Net increase (decrease) in departmental net debt	(111,678)	265,352
Departmental net debt - Beginning of year	1,026,390	761,038
Departmental net debt - End of year	$ 914,712	$ 1,026,390

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

Statement of Cash Flows (Unaudited)

For the Year Ended March 31

(in dollars)	2022	2021
Operating activities
Net cost of operations before government funding and transfers	$ 13,884,001	$ 17,102,683
Non-cash items:
Amortization of tangible capital assets	(47,092)	(51,325)
Services provided without charge by other government departments (note 8)	(1,638,198)	(1,559,774)
Transfer of assets and liabilities from / (to) other government departments	8,878	13,801
Variations in Statement of Financial Position:
Decrease (increase) in accounts payable and accrued liabilities	806,745	118,622
Decrease (increase) in vacation pay and compensatory leave	38,488	(272,519)
Decrease (increase) in employee future benefits	73,190	7,166
Increase (decrease) in accounts receivable and advances	(69,054)	(208,847)
Cash used in operating activities	13,056,958	15,149,807
Net cash provided by Government of Canada	$ 13,056,958	$ 15,149,807

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 Patented Medicine Prices Review Board (PMPRB) is an independent quasi-judicial body established by Parliament in 1987 under the Patent Act.

Although the PMPRB is part of the Health Portfolio, it carries out its mandate at arm's length from the Minister of Health. It also operates independently of other bodies such as Health Canada, which approves drugs for safety and efficacy, and public drug plans, which approve the listing of drugs on their respective formularies for reimbursement purposes.

Core responsibility:  Regulate Patented Medicine Prices
The PMPRB regulates the prices of patented medicines by setting non-excessive price ceilings and taking enforcement action before the Board in the event of non-compliance.

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 service categories that support Program delivery in the organization, regardless of the Internal Services delivery model in a department. The services 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 have been prepared using the PMPRB'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 PMPRB is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the PMPRB 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 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 PMPRB operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the PMPRB is deposited to the CRF, and all cash disbursements made by the PMPRB 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 PMPRB 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.
• Other revenues are recognized in the period the event giving rise to the revenue occurred.
• Revenues that are non-respendable are not available to discharge the PMPRB's liabilities. While the Acting Chairperson is expected to maintain accounting control, she 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

• 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, and employer contributions to the health and dental insurance plans are recorded as operating expenses at their carrying value.

(f) Employee future benefits

1. Pension benefits:  Eligible employees participate in the Public Service Pension Plan (the "Plan"), a multiemployer pension plan administered by the Government. The PMPRB's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The PMPRB'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.
2. 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) 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
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 7. 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 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 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.

(i) 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:

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

3. Parliamentary authorities

The PMPRB 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 PMPRB 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 dollars)	2022	2021
Net cost of operations before government funding and transfers	$ 13,884,001	$ 17,102,683
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets	(47,092)	(51,325)
Services provided without charge by other government departments	(1,638,198)	(1,559,774)
Decrease (increase) in vacation pay and compensatory leave	38,488	(272,519)
Decrease (increase) in employee future benefits	73,190	7,166
Refund/adjustment of prior years' expenditures	23,145	17,491
Other	(11,200)	-
Total items affecting net cost of operations but not affecting authorities	(1,561,667)	(1,858,961)
Adjustments for items not affecting net cost of operations but affecting authorities:
Proceeds from disposal of Crown assets	-	295
Increase in salary overpayments to be recovered	17,075	12,773
Issuance of advances to employees	-	2,293
Total items not affecting net cost of operations but affecting authorities	17,075	15,361
Current year authorities used	$ 12,339,409	$ 15,259,083

(b) Authorities provided and used

(in dollars)	2022	2021
Authorities provided:
Vote 1 - Program expenditures	$ 18,141,046	$ 17,170,104
Statutory amounts	1,159,593	1,220,825
Less:
Authorities available for future years	-	(233)
Lapsed authorities	(6,961,230)	(3,131,613)
Current year authorities used	$ 12,339,409	$ 15,259,083

4. Accounts payable and accrued liabilities

The following table presents details of the PMPRB’s accounts payable and accrued liabilities:

Accounts payable and accrued liabilities

(in dollars)	2022	2021
Accounts payable - Other government departments and agencies	$ 55,726	$ 15,011
Accounts payable - External parties	257,854	1,220,173
Total accounts payable	313,580	1,235,184
Accrued liabilities	639,332	524,473
Total accounts payable and accrued liabilities	$ 952,912	$ 1,759,657

5. Employee future benefits

(a) Pension benefits
The PMPRB'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 Plans benefits and they are indexed to inflation.

Both the employees and the PMPRB 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 expense

(in dollars)	2022	2021
Expense for the year	$ 783,263	$ 832,889

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 PMPRB'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 PMPRB'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:

Accrued benefit obligation

(in dollars)	2022	2021
Accrued benefit obligation - Beginning of year	$ 335,788	$ 342,954
Expense for the year	5,003	(4,651)
Benefits paid during the year	(78,193)	(2,515)
Accrued benefit obligation - End of year	$ 262,598	$ 335,788

6. Accounts receivable and advances

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

Accounts receivable and advances

(in dollars)	2022	2021
Accounts receivable - Other government departments and agencies	$ 174,676	$ 243,730
Employee advances	207,435	223,001
Gross accounts receivable and advances	382,111	466,731
Accounts receivable held on behalf of Government	(206,935)	(222,501)
Net accounts receivable and advances	$ 175,176	$ 244,230

7. 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
Machinery and equipment	Computer equipment	3-5 years
	Computer software	3 years

Tangible capital assets (in dollars)

Cost	Opening Balance	Acquisitions	Disposals/Write-offs	Closing Balance
Machinery and equipment	$ 443,626	$ -	$ -	$ 443,626
Total	$ 443,626	$ -	$ -	$ 443,626
Accumulated Amortization	Opening Balance	Amortization	Disposals/Write-offs	Closing Balance
Machinery and equipment	$ 350,566	$ 47,092	$ -	$ 397,658
Total	$ 350,566	$ 47,092	$ -	$ 397,658
Net Book Value	Net Book Value 2021	-	-	Net Book Value 2022
Machinery and equipment	$ 93,060	-	-	$ 45,968
Total	$ 93,060	-	-	$ 45,968

8. Related party transactions

The PMPRB 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 PMPRB enters into transactions with these entities in the normal course of business and on normal trade terms.

(a) Common services provided without charge by other government departments
During the year, the PMPRB received services without charge from certain common service organizations, related to accommodation and the employer's contribution to the health and dental insurance plans. These services provided without charge have been recorded at the carrying value in the PMPRB's Statement of Operations and Departmental Net Financial Position as follows:

Common services provided without charge by other government departments

(in dollars)	2022	2021
Accommodation	$ 858,311	$ 835,006
Employer's contribution to the health and dental insurance plans	779,887	724,768
Total	$ 1,638,198	$ 1,559,774

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 PMPRB's Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with related parties

(in dollars)	2022	2021
Expenses - Other government departments and agencies	$ 588,942	$ 2,013,046

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

9. Segmented information

Presentation by segment is based on the PMPRB'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 dollars)	Regulate Patented Medicine Prices	Internal Services	2022 Total	2021 Total
Expenses
Salaries and employee benefits	$ 7,496,987	$ 2,862,803	$ 10,359,790	$ 10,685,950
Professional and special services	1,241,802	225,119	1,466,921	3,269,638
Accommodation	624,162	234,149	858,311	835,006
Information services	712,182	25,369	737,551	625,726
Utilities, materials and supplies	-	187,289	187,289	234,041
Rentals	-	135,378	135,378	197,669
Communications	-	78,826	78,826	68,156
Amortization of tangible capital assets	-	47,092	47,092	51,325
Other	6,328	(506)	5,822	162
Travel and relocation	4,184	-	4,184	4,719
Repair and maintenance	-	3,364	3,364	1,133,980
Total expenses	10,085,645	3,798,883	13,884,528	17,106,372
Revenues
Voluntary compliance undertakings	-	38,309	38,309	304,355
Other	488	39	527	3,689
Revenues earned on behalf of Government	-	(38,309)	(38,309)	(304,355)
Total revenues	488	39	527	3,689
Net cost of operations before government funding and transfers	$ 10,085,157	$ 3,798,844	$ 13,884,001	$ 17,102,683