Management Statement for the Quarter Ending June 30, 2012 Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs

1. Introduction
2. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results
3. Risks and Uncertainties
4. Significant Changes in Relation to Operations, Personnel and Programs
5. Budget 2012 Implementation
6. Statement of Authorities (unaudited)
7. Departmental budgetary expenditures by Standard Object (unaudited)

1. Introduction

This quarterly financial report has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board (TB), and should be read in conjunction with the Main Estimates as well as Canada’s Economic Action Plan 2012 (Budget 2012). This quarterly report has not been subject to an external audit or review.

1.1 Public Health Agency of Canada’s Program Activities

The primary goals of the Public Health Agency of Canada (PHAC) are to strengthen Canada’s capacity to protect and improve the health of Canadians. This mandate is fulfilled by the promotion of health; prevention and control of chronic diseases and injuries; prevention and control of infectious diseases; preparing and responding to public health emergencies; and strengthening public health capacity in a manner consistent with a shared understanding of the determinants of health and of the common factors that maintain health or lead to disease and injury.

Further details on PHAC’s authority, mandate and program activities may be found in PHAC’s Main Estimates 2012-2013, at the following link: 2012-13 Part I and II - Main Estimates.

1.2 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes PHAC’s spending authorities granted by Parliament and those used by the Agency, consistent with the Main Estimates for the 2011-2012 and 2012-2013 fiscal years. This quarterly report has been prepared using a special-purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before moneys can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

As part of the departmental performance reporting process, PHAC prepares its annual departmental financial statements on a full accrual basis in accordance with the TB accounting policies, which are based on Canadian Generally Accepted Accounting Principles (GAAP) for the public sector. However, the spending authorities voted by Parliament are prepared on an expenditure basis.

2. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

This section highlights the significant items that contributed to the net decrease in resources available for the year and actual expenditures for the quarter ended June 30, 2012.

The following graph provides a comparison of budgetary authorities and expenditures as of June 30, 2011, and June 30, 2012.

Enlarge Figure 1

The above graph outlines the net budgetary authorities available for use in fiscal years 2011-2012 and 2012-2013. As of June 30, 2012 the Agency had a total of $616.5 million in authorities available for spending compared to $622.7 million as of June 30, 2011. The Agency’s total expenditures as of June 30, 2012 were $117.8 million compared to $119.1 million as of June 30, 2011. Both authorities and expenditures will change as the year progresses to reflect additional funding received throughout the year and increased expenditures.

2.1 Significant Changes to Authorities

When compared to the first quarter of the previous fiscal year, the authorities available for spending for the year have decreased by $6.2 million, or 1%, from $622.7 million to $616.5 million. The decrease is primarily attributable to decreases in authorities relating to operating and capital votes, which is partially offset by an increase in the grants and contributions vote.

Operating Expenditures (authorities)

Operating authorities available for use in fiscal year 2012-2013 have decreased $3.3 million, or 1% from $369.2 million in fiscal year 2011-2012 to $366.0 million, and is mainly explained as follows:

Decreases related to:

• Incremental funding decrease for the influenza fill line to support the installation of a new influenza fill line to secure, protect and improve ongoing domestic vaccine capacity in Canada for seasonal and pandemic influenza;
• Sunsetting of Listeriosis funding which aimed to enhance the ability to prevent, detect and respond to outbreaks of food-borne illness; and
• Transfer of authority to Shared Services Canada to streamline and modernize IT services, telecommunications and reduce administration costs.

Partially offsetting these decreases are increases for:

• Short-term replenishment of the National Antiviral Stockpile (NAS) to ensure that antiviral drugs are held domestically and are readily available for timely distribution and use during a pandemic; and
• Funding increase to secure Canada’s pandemic influenza vaccine supply.

Capital Expenditures (authorities)

Capital authorities available for use in fiscal year 2012-2013 have decreased by $5.8 million, or 25%, from $22.9 million in fiscal year 2011-2012 to $17.1 million. This reduction in authorities is related to a decrease in construction activity as the JC Wilt Infectious Diseases Research Centre nears completion.

Grants and Contributions (authorities)

Grants and Contributions authorities available for use in fiscal year 2012-2013 have increased by $4.2 million, or 2%, from $196.3 million in fiscal year 2011-12 to $200.6 million. This increase is primarily explained by an increase in funding to address sport and recreation injuries among Canadian children and youth.

2.2 Significant Changes to Expenditures

When compared to the first quarter of the previous fiscal year, the expenditures decreased by $1.3 million, or 1%, from $119.1 million to $117.8 million. The decrease is primarily attributable to decreases in operating and capital expenditures, which is partially offset by an increase in grants and contributions payments.

Operating Expenditures

Operating expenditures in the first quarter of fiscal year 2012-2013 were $54.6 million, a decrease of $8.2 million, or 13%, from $62.8 million in the same quarter of the previous year. This decrease is primarily due to the reduced expenditures in personnel and professional services. The primary factors contributing to these decreases are the transfer of employees to Shared Services Canada and the Agency’s Business Transformation Agenda which is realigning priorities to ensure a more effective and efficient organization.

Capital Expenditures

Capital expenditures for the first quarter of fiscal year 2012-2013 were $1.6 million, a decrease of $1.2 million, or 42%, from $2.9 million in the same quarter of the previous year. The reduction in expenditures relates to a decrease in construction activity as the JC Wilt Infectious Diseases Research Centre nears completion.

Grants & Contributions

Grants & Contributions expenditures for the first quarter of fiscal year 2012-2013 were $53.3 million, an increase of $8.5 million, or 19%, from $44.9 million over the same quarter in the previous year. This increase in mainly due to a timing issue that occurred in 2011-12 when the Agency was under a Governor General Warrant situation and delayed disbursement of funds until the approval of the Main Estimates.

3. Risks and Uncertainties

The dominant risks faced by PHAC relate to the nature of its mandate and the need to respond to unforeseeable events such as H1N1. Significant surge capacity would need to be activated in these instances.

To manage this risk, PHAC continues to strengthen its preparation and responsiveness to public health emergencies and public health capacity. In an emergency situation, PHAC would first consider internal re-allocation of resources in order to address unforeseeable events. The federal government also has systems and processes in place for departments to access funds, should an emergency arise.

4. Significant Changes in Relation to Operations, Personnel and Programs

Shared Services Canada

Shared Services Canada was created on August 4, 2011, pursuant to section 31.1 of the Financial Administration Act and Order in Council. Shared Services Canada's mandate is to streamline and reduce duplication of information technology services in the federal government in order to reduce costs, improve services, and leverage capacity in the public and private sectors through pooled resources and greater buying power. On November 15, 2011, pursuant to a second Order in Council, a transfer of employees from the Agency to Shared Services Canada occurred.

In addition, see section 5 below.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office.

The Agency will achieve Budget 2012 savings of $67.9 million by fiscal year 2014-15 through efficiency measures and program reductions that align resources to its core mandate, scaling back where there is a need; transforming how it works internally; and by consolidating and streamlining.

In the first year of implementation, the Agency will achieve savings of approximately $13.7 million. Savings will increase to $35.7 million in 2013-14 and will result in ongoing saving of $67.9 million by 2014-15.

A portion of the Budget 2012 savings will be achieved through the following initiatives:

• Shared Services Partnership - Health Portfolio:
  • Health Canada and the Public Health Agency of Canada will combine resources and share common services. It is anticipated that standardization of business processes and efficiencies will be achieved through this arrangement.
• Business Transformation Agenda:
  • The Agency has implemented a Business Transformation Agenda which will result in improved program cohesion and integration, priority alignment within the Agency and a more efficient and effective organization.

In addition to the savings measures outlined above, the Public Health Agency of Canada was also referenced, along with other federal departments, in Budget 2012 to receive funding to continue measures to enhance surveillance and early detection of food safety risks, and improve response capabilities to food-borne illness emergencies.

Approved by: