Public Health Agency of Canada - Financial Statements for the year ended March 31, 2018

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, 2018, and all information contained in these statements rests with the management of the Public Health Agency of Canada (the Agency). 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 Agency's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Agency'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 Agency 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, 2018 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plan are summarized in the annex.

The effectiveness and adequacy of the Agency's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the Agency'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 President of the Agency.

The financial statements of the Agency have not been audited.

Dr. Siddika Mithani
President
Ottawa, Canada
Date:

Carlo Beaudoin
Chief Financial Officer
Ottawa, Canada
Date:

Statement of Financial Position (Unaudited) As at March 31 (in thousands of dollars)

  2018 2017
Liabilities
Accounts payable and accrued liabilities (note 4) $ 85,908  $ 69,935
Vacation pay and compensatory leave 11,937 11,089
Deferred revenue 3 4
Employee future benefits (note 5) 9,877 9,882
Other liabilities 4,773 4,877
Total net liabilities 112,498 95,787
Financial assets
Due from Consolidated Revenue Fund 77,962 68,519
Accounts receivable and advances (note 6) 18,187 11,630
Total gross financial assets 96,149 80,149
Financial assets held on behalf of Government
Accounts receivable and advances (note 6) (5,407) (5,243)
Total financial assets held on behalf of Government (5,407) (5,243)
Total net financial assets 90,742 74,906
Agency net debt 21,756 20,881
Non-financial assets
Tangible capital assets (note 7) 101,967 106,108
Total non-financial assets 101,967 106,108
Agency net financial position $ 80,211 $ 85,227

Contractual obligations (note 8)
Contingent liabilities (note 9)

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

Dr. Siddika Mithani
President
Ottawa, Canada
Date:

Carlo Beaudoin
Chief Financial Officer
Ottawa, Canada
Date:

Statement of Operations and Agency Net Financial Position (Unaudited)
For the Year Ended March 31 (in thousands of dollars)

  2018
Planned Results
2018 2017
Expenses
Public health infrastructure $ 122,459 $ 125,786 $ 125,331
Health promotion and disease prevention 316,787 332,110 293,013
Health security 67,271 76,031 71,073
Internal services 94,620 100,213 93,698
Expenses incurred on behalf of government - (68) (47)
Total expenses 601,137 634,072 583,068
Revenues
Sales of goods and services
     Rights and privileges 48 121 23
     Services of a non-regulatory nature 14,051 14,927 14,323
     Lease and use of public property 29 7 58
Interest 9 (11) 12
Other 41 73 78
Revenues earned on behalf of Government (201) (235) (242)
Total revenues 13,977 14,882 14,252
Net cost of operations before government funding and transfers 587,160 619,190 568,816
Government funding and transfers
Net cash provided by Government of Canada   579,468 526,730
Change in due from Consolidated Revenue Fund   9,443 11,526
Services provided without charge by other government departments (note 10)   25,255 24,073
Other transfers of assets and liabilities from other government departments   8 -
Net cost from operations after government funding and transfers   5,016 6,487
Agency net financial position – Beginning of year   85,227 91,714
Agency net financial position – End of year   $ 80,211 $ 85,227

Segmented information (note 11)

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

Statement of Change in Agency Net Debt (Unaudited)
For the Year Ended March 31 (in thousands of dollars)

  2018 2017
Net cost from operations after government funding and transfers $ 5,016 $ 6,487
Change due to tangible capital assets
Acquisition of tangible capital assets 10,012 5,956
Amortization of tangible capital assets (14,136) (14,836)
Proceeds from disposal of tangible capital assets (2) (22)
Loss on disposal of tangible capital assets including adjustments (15) (386)
Total change due to tangible capital assets (4,141) (9,288)
Net decrease in Agency net debt 875 (2,801)
Agency net debt - Beginning of year 20,881 23,682
Agency net debt - End of year $ 21,756 $ 20,881

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)

  2018 2017
Operating activities
Net cost of operations before government funding and transfers $ 619,190 $ 568,816
Non-cash items:
Amortization of tangible capital assets (14,136) (14,836)
Loss on disposal of tangible capital assets including adjustments (15) (386)
Services provided without charge by other government departments (note 10) (25,255) (24,073)
Variations in Statement of Financial Position:
Decrease (increase) in accounts payable and accrued liabilities (15,973) (13,396)
Decrease (increase) in vacation pay and compensatory leave (848) (460)
Decrease (increase) in deferred revenue 1 (2)
Decrease (increase) in employee future benefits 5 2,929
Decrease (increase) in other liabilities 104 163
Increase (decrease) in accounts receivable and advances 6,393 2,041
Other transfers of assets and liabilities from other government departments (8) -
Cash used in operating activities 569,458 520,796
Capital investing activities
Acquisition of tangible capital assets 10,012 5,956
Proceeds from disposal of tangible capital assets (2) (22)
Cash used in capital investing activities 10,010 5,934
Net cash provided by Government of Canada $ 579,468 $ 526,730

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

Notes to the Financial Statements (Unaudited) For the Year Ended March 31, 2018

1. Authority and objectives

The Public Health Agency of Canada (the Agency) was created by Orders In Council on September 24, 2004. The Public Health Agency of Canada Act, assented to December 12, 2006, provides a statutory foundation for the Agency.

The Agency has the responsibility to:

  • Contribute to the prevention of disease and injury, and to the promotion of health;
  • Enhance surveillance information and expand the knowledge of disease and injury in Canada;
  • Provide federal leadership and accountability in managing national public health events;
  • Strengthen intergovernmental collaboration on public health and facilitate national approaches to public health policy and planning; and
  • Serve as a central point for sharing Canada's public health expertise with international partners, and to translate international knowledge and approaches to inform and support Canada's public health priorities and programs—for example, by participating in international working groups to develop new public health tools to protect, mitigate and respond to emerging public health threats.

The Agency has a sole strategic outcome: Protecting Canadians and empowering them to improve their health. The Agency delivers on its strategic outcome through its key programs described below.

The Public Health Infrastructure Program strengthens Canada's public health, workforce capability, information exchange, and federal, provincial and territorial networks, and scientific capacity. These infrastructure elements are necessary for effective public health practice and decision-making in Canada. The program works with federal, provincial and territorial stakeholders in planning for and building strategic and targeted investments in public health infrastructure, including public health research, training, tools, best practices, standards, and mechanisms to facilitate information exchange and coordinated action. Public health laboratories provide leadership in research, technical innovation, reference laboratory services, surveillance, outbreak response capacity and national laboratory coordination to inform public health policy and practice. Through these capacity-building mechanisms and scientific expertise, the Government of Canada facilitates effective coordination and timely public health interventions which are essential to having an integrated and evidence-based national public health system based on excellence in science. Key stakeholders include local, regional, provincial, national and international, public health organizations, practitioners and policy makers, researchers and academics, professional associations and non-governmental organizations.

The Health Promotion and Disease Prevention Program aims to improve the overall health of the population--with additional focus on those that are most vulnerable--by promoting healthy development among children, adults and seniors, reducing health inequalities, and preventing and mitigating the impact of chronic disease and injury, as well as infectious diseases. Working in collaboration with provinces, territories, and stakeholders, the Program develops and implements federal aspects of frameworks and strategies (e.g., Curbing Childhood Obesity: A Federal, Provincial and Territorial Framework for Action to Promote Healthy Weights, national approaches to addressing immunization) geared toward promoting health and preventing disease. The Program carries out primary public health functions of health promotion, surveillance, science and research on diseases and associated risk and protective factors to inform evidenced-based frameworks, strategies, and interventions.

The Health Security Program takes an all hazards approach to the health security of Canada's population, which provides the Government of Canada with the ability to prevent, prepare for, and respond to public health events/emergencies. This program seeks to bolster the resiliency of the populations and communities, thereby enhancing the ability to cope and respond. To accomplish this, its main methods of intervention include actions taken through collaborations with key jurisdictions and international collaborators. These actions are carried out by fulfilling Canada's obligations under the International Health Regulations and through the administration and enforcement of pertinent legislation and regulations.

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 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 Services; Materiel Services; and Acquisition Services.

2. Summary of significant accounting policies

These financial statements have been prepared using the Agency'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:

  1. Parliamentary authorities

    The Agency is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Agency 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 Agency Net Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides reconciliation between the bases of reporting. The planned results amounts in the "Expenses" and "Revenues" sections of the Statement of Operations and Agency Net Financial Position are the amounts reported in the Future-Oriented Statement of Operations included in the 2017-18 Departmental Plan . Planned results are not presented in the "Government funding and transfers" section of the Statement of Operations and Agency Net Financial Position and in the Statement of Change in Agency Net Debt because these amounts were not included in the 2017-18 Departmental Plan.

  2. Net cash provided by Government

    The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF, and all cash disbursements made by the Agency 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.

  3. 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 Agency is entitled to draw from the CRF without further authorities to discharge its liabilities.

  4. Revenues
    • Revenues from regulatory fees are recognized in the accounts based on the services provided in the year.
    • Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. Revenues are then recognized in the period in which the related expenses are incurred.
    • 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 Agency's liabilities. While the Deputy Head 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 as a reduction of the entity's gross revenues.

  5. 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, and workers' compensation are recorded as operating expenses at their carrying value.

  6. 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 Agency's contributions to the Plan are charged to expenses in the year incurred and represent the total agency obligation to the Plan. The Agency'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.

  7. 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.

  8. 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.

  9. 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.

  10. 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.

  11. 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.

  12. 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 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 Agency receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Financial Position and the Statement of Operations and Agency Net Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Agency 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)
2018 2017
Net cost of operations before government funding and transfers $ 619,190 $ 568,816
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (14,136) (14,836)
Gain (loss) on disposal of tangible capital assets 2 (386)
Services provided without charge by other government departments (25,255) (24,073)
Decrease (increase) in vacation pay and compensatory leave (848) (460)
Decrease (increase) in employee future benefits 5 2,929
Refund/adjustment of prior year's expenditures 2,202 4,038
Bad debt expense (74) (61)
Statutory spending authority equivalent to revenues earned 14,160 13,596
Other 62 1,146
Total items affecting net cost of operations but not affecting authorities (23,882) (18,107)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets 10,012 5,956
Proceeds from disposal of Crown Assets 54 41
Salary overpayments 1,672 2,398
Issuance of accountable advances 57 113
Total items not affecting net cost of operations but affecting authorities 11,795 8,508
Current year authorities used $ 607,103 $ 559,217
     
(b) Authorities provided and used (in thousands of dollars)
  2018 2017
Authorities provided:
Vote 1 - Operating expenditures $ 350,780 $ 353,128
Vote 5 - Capital expenditures 10,340 6,504
Vote 10 - Grants and contributions 225,739 195,199
Statutory amounts 39,928 38,210
  626,787 593,041
Less:
Authorities available for future years (43) (41)
Lapsed authorities (19,641) (33,783)
Current year authorities used $ 607,103 $ 559,217

4. Accounts payable and accrued liabilities

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

Accounts payable and accrued liabilities (in thousands of dollars)
  2018 2017
Accounts payable - Other government departments and agencies 5,805 2,891
Accounts payable - External parties 25,023 22,212
Total accounts payable 30,828 25,103
Accrued liabilities 55,080 44,832
Total accounts payable and accrued liabilities $ 85,908  $ 69,935

5. Employee future benefits

(a) Pension benefits

The Agency'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 Agency 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 contributions 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 2017-18 expense amounts to the following:

Pension benefits (in thousands of dollars)
2018 2017
Expense for the year $ 18,773 $ 18,733

For Group 1 members, the expense represents approximately 1.01 times (1.12 times in 2016-17) the employee contributions and, for Group 2 members, approximately 1.00 times (1.08 times in 2016-17) the employee contributions.

The Agency'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 Agency'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, 2018, 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

Severance benefits (in thousands of dollars)
2018 2017
Accrued benefit obligation - Beginning of year $ 9,882 $ 12,811
Expense for the year 503 (2,373)
Benefits paid during the year (508) (556)
Accrued benefit obligation - End of year $ 9,877 $ 9,882

6. Accounts receivable and advances

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

Accounts receivable and advances (in thousands of dollars)
  2018 2017
Accounts receivable - Other government departments and agencies $ 12,651 $ 6,197
Accounts receivable - External parties 576 1,632
Employee advances 4,963 3,821
Subtotal 18,190 11,650
Allowance for doubtful accounts on receivables from external parties (3) (20)
Gross accounts receivable and advances 18,187 11,630
Accounts receivable held on behalf of Government (5,407) (5,243)
Net accounts receivable and advances $ 12,780 $ 6,387

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:

Asset class Sub-asset class Amortization period
Buildings Buildings 25 years
Works and infrastructure Works and infrastructure 25 years
Machinery and equipment Machinery and equipment 8-12 years
Computer equipment 3-5 years
Computer software 3 years
Other equipment 5-12 years
Vehicles Motor vehicles 4-7 years
Other vehicles 10 years
Assets under construction Other construction or work in progress 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.
Tangible capital assets (in thousands of dollars)
Cost Opening balance Acquisitions Disposals and write-offs Transfers and adjustments Closing balance
Land $ 604        $ - $ - $ - $ 604
Buildings 133,211 - - (17) 133,194
Works and infrastructure 1,166 -     - - 1,166
Machinery and equipment 110,150 8,341 (31) 2,097 120,557
Vehicles 3,091 81     -                    - 3,172
Assets under construction 2,709 1,590     - (2,097) 2,202
Total $ 250,931 $ 10,012 $ (31) $ (17) $ 260,895
Accumulated amortization (in thousands of dollars)
Buildings $ 67,310 $ 5,328 $ - $ - $ 72,638
Works and infrastructure 368 47     - - 415
Machinery and equipment 74,747 8,492 (31) - 83,208
Vehicles 2,398 269   - - 2,667
Total $ 144,823 $ 14,136 $ (31) $ - $ 158,928
Net book value (in thousands of dollars)
  2017       2018
Land  $ 604       $ 604
Buildings 65,901       60,556
Works and infrastructure 798       751
Machinery and equipment 35,403       37,349
Vehicles 693       505
Assets under construction 2,709       2,202
Total $ 106,108       $ 101,967

Adjustments include assets under construction of $2,097 thousand that were transferred to other categories upon completion of the assets.

8. Contractual obligations

The nature of the Agency's activities may result in some multi-year contracts and obligations whereby the Agency 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)
Year Transfer payments Operating contracts Total
2018-19 $ 167,458 $ 9,800 $ 177,258
2019-20 157,465 9,800 167,265
2020-21 31,019 9,800 40,819
2021-22 24,680                    -   24,680
Total $ 380,622 $ 29,400 $ 410,022

9. 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 Agency in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Agency 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.

 10. Related party transactions

The Agency 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 Agency enters into transactions with these entities in the normal course of business and on normal trade terms. In addition, the Agency has agreements with Agriculture and Agri-Food Canada, Health Canada and Indigenous and Northern Affairs 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 Agency received services without charge from certain common service organizations, related to accommodation, 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 Agency's Statement of Operations and Agency Net Financial Position as follows:

Common services provided without charge by other government departments
(in thousands of dollars)
  2018 2017
Employer's contribution to the health and dental insurance plans $ 18,233 $ 16,967
Accommodation 6,940 7,106
Worker's compensation  82  
Total $ 25,255 $ 24,073

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 Agency's Statement of Operations and Agency 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 Agency's Statement of Operations and Agency Net Financial Position.

(b) Other transactions with related parties

Other transactions with related parties (in thousands of dollars)
  2018 2017
Expenses - Other government departments and agencies $ 65,836 $ 63,699
Revenues - Other government departments and agencies 14,224 13,666

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

11. Segmented information

Presentation by segment is based on the Agency's program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main programs, by major object of expense and by major type of revenue. The segment results for the period are as follows:

Segmented information (in thousands of dollars)
Public health infrastructure Health promotion and disease prevention Health security Internal services 2018 Total 2017 Total
Expenses
 Salaries and employee benefits $ 76,325 $ 94,922 $ 37,714 $ 35,917 $ 244,878 $ 222,303
 Transfer payments 7,448 208,579 -   -   216,027 186,994
 Professional and special services 4,080 16,819 11,903 49,672 82,474 83,697
 Utilities, materials and supplies 15,589 788 19,107 222 35,706 35,215
 Information services 569 5,559 1,641 12,476 20,245 18,568
 Amortization of tangible capital assets 11,235 35 2,847 19 14,136 14,836
 Accommodation 3,918 2,687 1,061 846 8,512 9,378
 Travel and relocation 1,930 2,072 902 906 5,810 6,430
 Repair and maintenance 2,818 10 154 3 2,985 2,218
 Rentals 1,468 490 267 136 2,361 1,741
 Communications 353 141 432 46 972 1,237
 Bad debt - - - 74 74 61
 Other 53 8 3 (104) (40) 437
 Expenses incurred on behalf of Government - - - (68) (68) (47)
Total expenses $ 125,786 $ 332,110 $ 76,031 $ 100,145 $ 634,072 $ 583,068
Revenues 
Sales of goods and services            
     Rights and privileges 121 - - - 121  23
     Services of a non-regulatory nature 17 - 2,698 12,212 14,927 14,323
     Lease and use of public property 11 (12)  9 (1) 7  58
     Interest - - - (11) (11)  12
Other 7  1  63  2 73  78
Revenues earned on behalf of Government (150)  12 (108)  11 (235) (242)
Total revenues 6  1 2,662 12,213 14,882 14,252
Net cost of operations before government funding and transfers $ 125,780 $332,109 $73,369 $87,932 $619,190 $568,816

Public Health Agency of Canada's Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting Assessment of Internal Controls Over Financial Reporting and Action Plan for The Fiscal Year Ended March 31, 2018

1. Introduction

This document provides summary information on the measures taken by the Public Health Agency of Canada (PHAC) 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 PHAC's authority, mandate, and program activities can be found in the 2017-18 Departmental Results Report [HYPERLINK] and the 2017-18 Departmental Plan.

2. Departmental system of internal control over financial reporting

2.1 Internal control management

PHAC has a well-established governance and accountability structure to support departmental assessment efforts and oversight of its system of internal control. A departmental internal control over financial reporting framework is in place and includes:

  • Organizational Accountability Structures: Establish the means by which the leading authorities at PHAC, i.e. President, Chief Financial Officer, Chief Audit Executive, the Departmental Audit Committee (DAC), Vice Presidents and Governance Committees, ensure proper accountability, stewardship, and transparency in the conduct of financial management, risk management, internal control, and stewardship over resources.
  • Values and Ethics: PHAC adheres to the Values and Ethics Code for the Public Service and has implemented its internal Code of Conduct, which provides mechanisms for listening to employee concerns, ensuring broad training on values and ethics issues, and linking values and ethics to integrated risk management.
  • Ongoing Communication and Training: Ensure that all Agency employees are informed and trained on statutory requirements, policies and procedures for sound financial management and controls.
  • Monitoring, Regular Updates and Assessments: Ensure that internal controls are monitored through ongoing assessments and updated as required. Results of such assessments are reported to the President, Departmental Senior Management, and the DAC with action plans to remediate any deficiencies.  DAC meets four times annually and provides advice to the President on the adequacy and functioning of the Agency's risk management, control and governance frameworks and processes. In addition, key financial controls may be subjected to audit by the Office of Audit and Evaluation who conducts audits in accordance with the risk-based audit plan.
  • Departmental Audit Committee: The DAC endorses the efforts of the Agency in maintaining an effective ICFR.

2.2  Service arrangements relevant to financial statements

PHAC relies on other organizations for the processing of certain transactions that are recorded in its financial statements as follows:/p>

Common Arrangements

  • Public Services and Procurement Canada centrally administers the payments of salaries and the procurement of goods and services in accordance with the PHAC Delegation of Authority, and provides accommodation services.
  • The Treasury Board of Canada Secretariat provides PHAC with information used to calculate various accruals and allowances, such as the accrued severance liability.
  • The Department of Justice provides legal services to PHAC.
  • Shared Services Canada provides information technology (IT) infrastructure services to PHAC in the areas of data centre and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and PHAC.

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

Specific Arrangements

  • Agriculture and Agri-Food Canada provides platform access to its human resources management system of record (PeopleSoft).
  • Crown-Indigenous Relations and Northern Affairs Canada provide host services to PHAC for the Grants and Contributions Information Management System (GCIMS).
  • Through a Shared Services Partnership Agreement, Health Canada provides PHAC with services including the following related to ICFR: human resources (pay and benefits), financial management (financial operations) and materiel management (procurement and contracting). Assurance on the shared controls of these services is provided through this Annex.  Under this agreement, the PHAC also provides Health Canada with internal audit services which encompass audits related to financial management and controls.
  • Health Canada provides PHAC with a financial system platform (SAP) to capture and report all financial transactions.

3. Departmental assessment results during fiscal year 2017-18

PHAC has an ongoing risk-based monitoring program that ensures that internal controls over financial reporting are maintained, monitored and reviewed, with timely corrective measures taken when issues are identified. The key findings from the current year's assessment activities are summarized below.

New or significantly amended key controls: PHAC re-assesses key controls affected by new or significantly amended processes identified in its ongoing risk-based monitoring plan.

PHAC continues to work with Health Canada, Public Services and Procurement Canada and the Treasury Board Secretariat to identify and strengthen controls in pay administration. Since the implementation of the Phoenix pay system, Public Services and Procurement Canada has encountered challenges in processing pay transactions. PHAC has enhanced its existing controls to ensure reliability of financial reporting. To ensure effectiveness of these enhanced controls, additional tests have been conducted.

Ongoing risk-based monitoring plan: PHAC completed its assessment of the following processes in line with its 2017-18 ongoing risk-based monitoring plan: Financial Statements and Year End Reporting; Revenue, Receivables and Receipts; Purchasing, Payables and Payments; Grants and Contributions; Payroll; Inventory and Information Technology General Controls.

Key controls tested as part of PHAC's ongoing risk-based monitoring plan in 2017-18 were found to be operating effectively with no significant deficiencies identified. However, opportunities for improvement in the following areas were identified and are being addressed:

  • Enhancing the monitoring of the online employee departure application;
  • Improving the review of periodic user access;
  • Strengthening the monitoring of pay transactions;
  • Improving the management of receivables;
  • Improving the Grants and Contributions process;
  • Improving the inventory process.

4. Departmental action plan

4.1   Progress during fiscal year 2017-18

PHAC continued to conduct its ongoing risk-based monitoring according to the previous fiscal year's rotational plan as shown in the following table.

Progress of Ongoing Risk-Based Monitoring Testing for 2017-18
Key Control Areas Status Completed as Planned
Financial Statements, Year End and Reporting Yes
Revenue, Receivables and Receipts Yes
Purchasing, Payables and Payments Yes
Grants and Contributions Yes
Payroll Yes
Inventory Yes
Information Technology General Controls (ITGC) Yes

4.2   Action plan for the next fiscal year and subsequent years

PHAC's rotational ongoing risk-based monitoring plan over the next three years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.

Rotational Ongoing Risk-Based Monitoring Plan
Key Control Areas - Process Fiscal Year  2018-19 Fiscal Year 2019-20 Fiscal Year 2020-21
Entity Level Controls (ELC)      
  Entity Level Controls Test   Test
Financial Management Processes      
     Planning, Budgeting and Forecasting Test    
     Investment Planning and Project Management Test    
     Cabinet Document submissions Test    
     Costing and External Charging   Test  
     Financial Management Governance/Performance Test    
Financial Reporting Processes      
     Financial Statement, Year-End and Reporting Test Test Test
     Revenue/Receivables/Receipts Test Test Test
     Purchasing/Payables/Payments   Test  
     Grants and Contributions Test Test Test
     Payroll Test Test Test
     Capital Assets Test   Test
     Travel/Hospitality/Conference/Events/Relocation   Test  
Inventory   Test  
Information Technology General Controls (ITGC)      
     ITGC Test Test Test
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