Public Health Agency of Canada Financial Statements for the year ended March 31, 2021

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, 2021, 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, 2021 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.

Iain Stewart
President
Ottawa, Canada
Date: September 3, 2021

Martin Krumins
Chief Financial Officer
Ottawa, Canada
Date: August 31, 2021

Statement of Financial Position (Unaudited)

As at March 31

Statement of Financial Position (Unaudited) As at March 31

(in thousands of dollars)

2021

2020
Restated
(note 14)

Liabilities

Accounts payable and accrued liabilities (note 4)

$ 857,635

$ 162,737

Vacation pay and compensatory leave

26,372

16,145

Deferred revenue

1

0

Employee future benefits (note 5)

8,694

9,057

Other liabilities

1,748

3,229

Total net liabilities

894,450

191,168

Financial assets

Due from Consolidated Revenue Fund

273,383

146,034

Accounts receivable and advances (note 6)

601,068

27,907

Total gross financial assets

874,451

173,941

Financial assets held on behalf of Government

Accounts receivable and advances (note 6)

(14,970)

(7,973)

Total financial assets held on behalf of Government

(14,970)

(7,973)

Total net financial assets

859,481

165,968

Agency net debt

34,969

25,200

Non-financial assets

Prepaid expenses (note 7)

1,897,046

210,091

Inventory (note 8)

3,488,542

118,025

Tangible capital assets (note 9)

130,558

87,697

Total non-financial assets

5,516,146

415,813

Agency net financial position

$ 5,481,177

$ 390,613

Contractual obligations (note 10)
Contingent liabilities (note 11)

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

Iain Stewart
President
Ottawa, Canada
Date: September 3, 2021

Martin Krumins
Chief Financial Officer
Ottawa, Canada
Date: August 31, 2021

Statement of Operations and Agency Net Financial Position (Unaudited)

For the Year Ended March 31

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

(in thousands of dollars)

2021
Planned Results

2021

2020
Restated
(note 14)

Expenses

Infectious disease prevention and control

$ 229,452

$ 1,547,960

$ 245,900

Health promotion and chronic disease prevention

286,629

292,672

276,461

Health security

59,519

1,626,945

73,646

Internal services

103,286

220,246

117,667

Expenses incurred on behalf of Government

(70)

5

(94)

Total expenses

678,816

3,687,828

713,580

Revenues

Sales of goods and services

Rights and privileges

242

57

391

Services of a non-regulatory nature

14,203

13,365

13,204

Lease and use of public property

0

23

(8)

Interest

7

4

4

Other

61

9,098

70

Revenues earned on behalf of Government

(389)

(269)

(560)

Total revenues

14,124

22,278

13,101

Net cost of operations before government funding and transfers

664,692

3,665,550

700,479

Government funding and transfers

Net cash provided by Government of Canada

No 2021 Planned Results

8,596,628

804,502

Change in due from Consolidated Revenue Fund

No 2021 Planned Results

127,349

69,579

Services provided without charge by other government departments (note 12)

No 2021 Planned Results

32,821

26,665

Other transfers of assets and liabilities from other government departments

No 2021 Planned Results

(684)

(169)

Net cost of (revenue from) operations after government funding and transfers

No 2021 Planned Results

(5,090,564)

(200,098)

Agency net financial position - Beginning of year

No 2021 Planned Results

390,613

190,515

Agency net financial position - End of year

No 2021 Planned Results

$ 5,481,177

$ 390,613

Segmented information (note 13)

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

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

(in thousands of dollars)

2021

2020
Restated
(note 14)

Net cost of (revenue from) operations after government funding and transfers

$ (5,090,564)

$ (200,098)

Change due to tangible capital assets

Acquisition of tangible capital assets

60,789

7,734

Amortization of tangible capital assets

(17,255)

(15,343)

Proceeds from disposal of tangible capital assets

(3)

(6)

Loss on disposal of tangible capital assets including adjustments

(670)

(120)

Total change due to tangible capital assets

42,861

(7,735)

Change due to prepaid expenses

1,686,955

210,091

Change due to inventory

3,370,517

371

Net increase in Agency net debt

9,769

2,629

Agency net debt - Beginning of year

25,200

22,571

Agency net debt - End of year

$ 34,969

$ 25,200

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

Statement of Cash Flows (Unaudited)

For the Year Ended March 31

Statement of Cash Flows (Unaudited) For the Year Ended March 31

(in thousands of dollars)

2021

2020
Restated
(note 14)

Operating activities

Net cost of operations before government funding and transfers

$ 3,665,550

$ 700,479

Non-cash items:

Amortization of tangible capital assets

(17,255)

(15,343)

Loss on disposal of tangible capital assets including adjustments

(670)

(120)

Services provided without charge by other government departments (note 12)

(32,821)

(26,665)

Variations in Statement of Financial Position:

Decrease (increase) in accounts payable and accrued liabilities

(694,898)

(83,922)

Decrease (increase) in vacation pay and compensatory leave

(10,227)

(2,814)

Decrease (increase) in deferred revenue

(1)

5

Decrease (increase) in employee future benefits

363

221

Decrease (increase) in other liabilities

1,481

(138)

Increase (decrease) in accounts receivable and advances

566,164

14,440

Increase (decrease) in prepaid expenses

1,686,955

210,091

Increase (decrease) in inventory

3,370,517

371

Other transfers of assets and liabilities from other government departments

684

169

Cash used in operating activities

8,535,842

796,774

Capital investing activities

Acquisition of tangible capital assets

60,789

7,734

Proceeds from disposal of tangible capital assets

(3)

(6)

Cash used in capital investing activities

60,786

7,728

Net cash provided by Government of Canada

$ 8,596,628

$ 804,502

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

Notes to the Financial Statements (Unaudited)

For the Year Ended March 31, 2021

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:

The Agency's core responsibilities, as part of the Departmental Results Framework, are described as follows:

Core Responsibility 1: Health Promotion and Chronic Disease Prevention

Promote the health and well-being of Canadians of all ages by conducting surveillance and public health research and supporting community-based projects which address the root causes of health inequalities and the common risk and protective factors that are important to promoting better health and preventing chronic disease.

Core Responsibility 2: Infectious Disease Prevention and Control

Protect Canadians from infectious diseases by predicting, detecting, assessing, and responding to outbreaks and new threats; and contribute to the prevention, control, and reduction of the spread of infectious disease among Canadians.

Core Responsibility 3: Health Security

Prepare for and respond to public health events and emergencies; address health and safety risks associated with the use of pathogens and toxins; and address travel-related public health risks.

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. These 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 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:

(a) 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 a 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 2020-21 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 2020-21 Departmental Plan.

(b) 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.

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

(d) Revenues
(e) Expenses
(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 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.
(g) Accounts receivable

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

(h) Non-financial assets

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

Inventories are valued at cost and are comprised of supplies and equipment held for future program delivery and are not primarily intended for resale. A provision is recorded for inventories that no longer have service potential or have service potential that extends over a period of time beyond one year, and 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 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.

(l) Related party transactions

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

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

  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 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)

2021

2020
Restated
(note 14)

Net cost of operations before government funding and transfers

$ 3,665,550

$ 700,479

Adjustments for items affecting net cost of operations but not affecting authorities:

Amortization of tangible capital assets

(17,255)

(15,343)

Gain (loss) on disposal of tangible capital assets

3

(45)

Services provided without charge by other government departments

(32,821)

(26,665)

Decrease (increase) in vacation pay and compensatory leave

(10,227)

(2,814)

Decrease (increase) in employee future benefits

363

221

Refund/adjustment of prior year's expenditures

10,326

4,482

Bad debt expense

6

(129)

Increase (decrease) in transfer payment accrual

(88)

97

Increase (decrease) in inventory

1,316,600

371

Statutory spending authority equivalent to revenues earned

12,473

12,366

Other

9,868

8

Total items affecting net cost of operations but not affecting authorities

1,289,248

(27,451)

Adjustments for items not affecting net cost of operations but affecting authorities:

Acquisitions of tangible capital assets

60,789

7,734

Issuance of advance payments

3,740,873

210,091

Proceeds from disposal of Crown Assets

21

46

Increase in salary overpayments to be recovered

1,214

1,621

Issuance of advances to employees

64

78

Other

0

8

Total items not affecting net cost of operations but affecting authorities

3,802,961

219,578

Current year authorities used

$ 8,757,759

$ 892,606

(b) Authorities provided and used

(in thousands of dollars)

2021

2020

Authorities provided:

Vote 1 - Operating expenditures

$ 14,796,625

$ 601,500

Vote 5 - Capital expenditures

140,611

8,157

Vote 10 - Grants and contributions

616,420

252,078

Vote 15 - Introducing a National Dementia Strategy

0

223

Vote 25 - Supporting a Pan-Canadian Suicide Prevention Service

0

138

Public Health Events of National Concern Payments Act

5,443,026

0

Other statutory amounts

49,227

41,501

Subtotal

21,045,909

903,597

Less:

Authorities available for future years

(24)

0

Lapsed authorities

(12,288,126)

(10,991)

Current year authorities used

$ 8,757,759

$ 892,606

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)

2021

2020

Accounts payable - Other government departments and agencies

$ 63,165

$ 14,749

Accounts payable - External parties

482,433

78,092

Total accounts payable

545,598

92,841

Accrued liabilities

312,037

69,896

Total accounts payable and accrued liabilities

$ 857,635

$ 162,737

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 2020-21 expense amounts to the following:

Pension benefits

(in thousands of dollars)

2021

2020

Expense for the year

$ 28,223

$ 21,317

For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2019-20) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2019-20) 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, 2021, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

The changes in the obligations during the year were as follows:

Severance benefits

(in thousands of dollars)

2021

2020

Accrued benefit obligation - Beginning of year

$ 9,057

$ 9,278

Expense for the year

312

645

Benefits paid during the year

(675)

(866)

Accrued benefit obligation - End of year

$8,694

$ 9,057

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)

2021

2020

Accounts receivable - Other government departments and agencies

$ 579,188

$ 19,729

Accounts receivable - External parties

13,983

871

Employee advances

7,940

7,355

Subtotal

601,111

27,955

Allowance for doubtful accounts on receivables from external parties

(43)

(48)

Gross accounts receivable and advances

601,068

27,907

Accounts receivable held on behalf of Government

(14,970)

(7,973)

Net accounts receivable and advances

$ 586,098

$ 19,934

7. Prepaid expenses

The following table presents details of the Agency's prepaid expenses:

Prepaid expenses

(in thousands of dollars)

2021

2020

Pharmaceutical and other medicinal products

$ 1,834,517

$ 0

Personal protective equipment and other medical supplies

14,529

177,494

Diagnostic testing kits

0

32,597

Other fees and services

48,000

0

Total prepaid expenses

$ 1,897,046

$ 210,091

8. Inventory

Inventory

(in thousands of dollars)

2021

2020 Restated
(note 14)

Personal protective equipment

$ 2,062,951

$ 14,595

Pharmaceutical and other medicinal products

203,116

85,323

Laboratory supplies and testing devices

295,191

99

Medical and laboratory equipment

746,606

6,402

Social services supplies

762

894

Other medical supplies

148,389

2,198

Other goods and supplies

31,527

8,514

Total inventory

$ 3,488,542

$ 118,025

The cost of consumed inventory recognized as an expense in the Statement of Operations and Agency Net Financial Position is $1,877.2 million in 2020-21 ($32.2 million in 2019-20).

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:

Estimated useful life

Asset class

Sub-asset class

Amortization period

Buildings

Buildings

25 years

Works and infrastructure

Works and infrastructure

25 years

Leasehold improvements

Leasehold improvements

Lease term, max. 40 years

Machinery and equipment

Machinery and equipment

8-12 years

Computer equipment

3-5 years

Computer software

3 years

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

$ 0 $ 0 $ 0

$ 604

Buildings

134,160

0

0

0

134,160

Works and infrastructure

1,166

0

0

0

1,166

Leasehold improvements

240

0

0

0

240

Machinery and equipment

123,229

53,351

(485)

679

176,774

Vehicles

3,070

5,368

0

32

8,470

Assets under construction

2,510

2,070

0

(1,420)

3,160

Total

$ 264,979

$ 60,789

$ (485)

$ (709)

$ 324,574

Accumulated amortization

Opening balance

Amortization

Disposals and write-offs

Transfers and adjustments

Closing balance

Buildings

$ 83,094

$ 5,316

$ 0 $ 0

$ 88,410

Works and infrastructure

507

47

0

0

554

Leasehold improvements

10

9

0

0

19

Machinery and equipment

90,817

11,795

(485)

(51)

102,076

Vehicles

2,854

88

0

15

2,957

Total

$ 177,282

$ 17,255

$ (485)

$ (36)

$ 194,016

Net book value for year 2020 and 2021

Net book value

Net book value 2020

Net book value 2021

Land

$ 604

$ 604

Buildings

51,066

45,750

Works and infrastructure

659

612

Leasehold improvements

230

221

Machinery and equipment

32,412

74,698

Vehicles

216

5,513

Assets under construction

2,510

3,160

Total

$ 87,697

$ 130,558

Adjustments include assets under construction of $1,420 thousand that were transferred to other categories upon completion of the assets.

10. 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)

Operating contracts

Transfer payments

Total

2021-22

$ 4,928,957

$ 323,161

$ 5,252,118

2022-23

74,237

153,251

227,488

2023-24

19,750

95,497

115,247

2024-25

19,750

28,684

48,434

2025-26 and thereafter

19,750

15,008

34,758

Total

$ 5,062,444

$ 615,601

$ 5,678,045

11. 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. Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $100 thousand ($ nil in 2019-20) at March 31, 2021.

12. 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 Services 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, legal services 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 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)

2021

2020

Employer's contribution to the health and dental insurance plans

$ 26,233

$ 20,032

Accommodation

6,325

6,375

Legal services

263

258

Total

$ 32,821

$ 26,665

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)

2021

2020

Expenses - Other government departments and agencies

$ 335,556

$ 82,051

Revenues - Other government departments and agencies

12,521

12,426

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

13. Segmented information

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

Segmented information

(in thousands of dollars)

Infectious disease prevention and control

Health promotion and chronic disease prevention

Health security

Internal services

2021 Total

2020 Total
Restated
(note 14)

Expenses

Utilities, materials and supplies

$ 1,141,540

$ 505

$ 754,539

$ 208

$ 1,896,792

$ 43,150

Other

25,343

(2)

437,182

26

462,549

717

Salaries and employee benefits

150,828

66,682

103,895

58,864

380,269

270,924

Professional and special services

65,347

12,317

198,719

79,675

356,058

87,543

Transfer payments

131,335

208,621

1,582

0

341,538

241,717

Information services

3,892

3,088

935

80,349

88,264

28,484

Rentals

3,259

58

72,027

89

75,433

5,673

Transportation and communication

3,590

248

53,418

55

57,311

9,171

Amortization of tangible capital assets

14,459

18

2,770

8

17,255

15,343

Accommodation

3,960

1,133

1,703

970

7,766

7,911

Repair and maintenance

4,407

4

175

8

4,594

2,912

Bad debt

0

0

0

(6)

(6)

129

Expenses incurred on behalf of Government

0

0

0

5

5

(94)

Total expenses

1,547,960

292,672

1,626,945

220,251

3,687,828

713,580

Revenues

Sales of goods and services

Rights and privileges

57

0

0

0

57

391

Services of a non-regulatory nature

55

0

2,772

10,538

13,365

13,204

Lease and use of public property

0

0

23

0

23

(8)

Interest

0

0

0

4

4

4

Other

2,744

0

6,354

0

9,098

70

Revenues earned on behalf of Government

(112)

0

(153)

(4)

(269)

(560)

Total revenues

2,744

0

8,996

10,538

22,278

13,101

Net cost of operations before government funding and transfers

$ 1,545,216

$ 292,672

$ 1,617,949

$ 209,713

$ 3,665,550

$ 700,479

14. Adjustment to prior year's results

In 2020-21, the Agency adopted a change in accounting policy for recording inventory. This change has been applied retroactively and comparative information for 2019-20 has been restated. The effect of this adjustment is presented in the table below:

Adjustment to prior year's results

(in thousands of dollars)

2020 As previously
stated

Effect of change

2020
Restated

Statement of Financial Position

Inventory

$ 0

$ 118,025

$ 118,025

Total non-financial assets

297,788

118,025

415,813

Agency net financial position

272,588

118,025

390,613

Statement of Operations and Agency Net Financial Position

Expenses - Infectious disease prevention and control

$ 241,172

$ 4,728

$ 245,900

Expenses - Health security

78,745

(5,099)

73,646

Total Expenses

713,951

(371)

713,580

Net cost of operations before government funding and transfers

700,850

(371)

700,479

Net cost (revenue) from operations after government funding and transfers

(199,727)

(371)

(200,098)

Agency net financial position - Beginning of year

72,861

117,654

190,515

Agency net financial position - End of year

272,588

118,025

390,613

Statement of Change in Agency Net Debt

Net cost (revenue) from operations after government funding and transfers

$ (199,727)

$ (371)

$ (200,098)

Change due to inventory

0

371

371

Statement of Cash Flows

Net cost of operations before government funding and transfers

$ 700,850

$ (371)

$ 700,479

Increase (decrease) in inventory

0

371

371

Note 3 (a)

Net cost of operations before government funding and transfers

$ 700,850

$ (371)

$ 700,479

Increase (decrease) in inventory

0

371

371

Total items affecting net cost of operations but not affecting authorities

(27,822)

371

(27,451)

Note 8 - Inventory

Personal protective equipment

$ 0

$ 14,595

$ 14,595

Pharmaceutical and other medicinal products

0

85,323

85,323

Laboratory supplies and testing devices

0

99

99

Medical and laboratory equipment

0

6,402

6,402

Social services supplies

0

894

894

Other medical supplies

0

2,198

2,198

Other goods and supplies

0

8,514

8,514

Total inventory

0

118,025

118,025

Note 13 - Segmented information

Utilities, materials and supplies

$ 43,521

$ (371)

$ 43,150

Total expenses

713,951

(371)

713,580

Net cost of operations before government funding and transfers

700,850

(371)

700,479

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, 2021

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 core responsibilities can be found in the Agency's Departmental Plan for the 2020-21 fiscal year and Departmental Results Report for the 2020-21 fiscal year.

2. PHAC's 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. An Agency Internal Control over Financial Management Framework, approved by the President and the Chief Financial Officer, is in place and comprises:

The Departmental Audit Committee is an independent advisory committee to the deputy head. It is responsible to provide advice to the deputy head on the adequacy and functioning of the Agency's risk management, control and governance frameworks and processes.

2.2 Service arrangements relevant to financial statements

The Agency relies on other organizations for processing certain transactions that are recorded in its financial statements, as follows.

2.2.1 Common service arrangements

Readers of this annex may refer to the annexes of the above-noted departments for a greater understanding of the systems of ICFR related to these specific services.

PHAC relies on other departments for the processing of certain information or transactions that are recorded in its financial statements, as follows:

2.2.2 Specific arrangements

3. Agency's assessment results for the 2020-21 fiscal year

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

Progress during the 2020-21 fiscal year

Previous fiscal year's rotational ongoing monitoring plan for current fiscal year

Status

Entity-level controls

Completed as planned. Remedial actions to start in 2021-22

Budgeting and forecasting

In progress - to be completed in 2021-22

Financial statements and year-end reporting

Completed as planned. Remedial actions to start in 2021-22

Receivables and receipts

Completed as planned. Remedial actions to start in 2021-22

Purchasing, payables and payments

Completed as planned. Remedial actions to start in 2021-22

Grants and contributions

Completed as planned. Remedial actions to start in 2021-22

Payroll

Completed as planned. Remedial actions to start in 2021-22

Capital assets

Completed as planned. Remedial actions to start in 2021-22

Information technology general controls

Completed as planned. Remedial actions to start in 2021-22

The key findings and significant adjustments required from the current fiscal year's assessment activities are summarized in the following sub-sections.

3.1 New or significantly amended key controls

In the current fiscal year, PHAC implemented new controls in purchasing, payables and payments related to the Agency's response to the COVID-19 pandemic. Both design and operating effectiveness testing were performed on purchasing, payables and payments new controls.

3.2 Ongoing monitoring program

As part of its rotational ongoing monitoring plan, PHAC completed its reassessment of entity level controls and financial controls within the following business processes consistent with the 2020-21 departmental ongoing risk-based monitoring plan:

Key controls that were tested performed as intended, and management action plans addressing remediation requirements were developed by process owners, as required.

PHAC has assessed the impact of the COVID-19 pandemic on the Agency's internal controls over financial reporting, and internal controls over financial management. Key controls were evaluated to address the potential impact on the Agency's financial statements. PHAC has not identified deficiencies in the design and operating effectiveness of the Agency's internal controls over financial reporting as a result of the COVID-19 pandemic that could have a material impact on the Agency's financial statements.

4. Agency's action plan for the next fiscal year and subsequent fiscal years

PHAC's rotational ongoing monitoring plan over the next 3 fiscal years is shown in the following table. The ongoing monitoring plan is based on:

Rotational ongoing monitoring plan

The current PHAC Financial Accountability Framework reflects the renewed Government of Canada Financial Accountability Framework, as envisaged in the Treasury Board Policy on Financial Management.

The PHAC Financial Accountability Framework articulates strengthened financial and investment management across multiple disciplines:

Rotational ongoing monitoring plan

Key Control Areas

2021-22
fiscal year

2022-23
fiscal year

2023-24
fiscal year

Entity-level controls

Yes

Yes

Yes

Information technology general controls

Yes

Yes

Yes

Budgeting and forecasting

Yes

No

Yes

Project management

Yes

No

No

Financial statement and year-end reporting

Yes

Yes

Yes

Receivables and receipts

Yes

Yes

Yes

Purchasing, payables and payments

Yes

Yes

Yes

Grants and contributions

Yes

Yes

Yes

Payroll

Yes

Yes

Yes

Capital assets

No

Yes

No

Inventory

Yes

Yes

Yes

Travel

Yes

No

Yes

As part of its rotational ongoing monitoring plan, the Agency will be reassessing high-risk areas on an annual basis. It is anticipated that the risks will remain high until the Agency stabilizes its response to pandemic and returns to a steady post-pandemic state. The Agency will then engage with its Business Process Owners to revisit its rotational ongoing monitoring plan annually.

In light of the Agency's role in responding to the COVID-19 pandemic, PHAC will continue to monitor the impact of the COVID-19 pandemic on its system of internal control over financial reporting, and complete the following:

For 2021-22, the Agency will be assessing for the first time the following financial management processes: Investment Planning, Costing and Chief Financial Officer Attestations.

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