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
• Statement of Financial Position (Unaudited)
• Statement of Operations and Agency Net Financial Position (Unaudited)
• Statement of Change in Agency Net Debt (Unaudited)
• Statement of Cash Flows (Unaudited)
• Notes to the Financial Statements (Unaudited)
• Public Health Agency of Canada's Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 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:

• 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'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

• 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, he 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.

(e) Expenses

• Transfer payments are recorded as an expense in the year the transfer is authorized and all eligibility criteria have been met by the recipient.
• Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
• Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, and legal services are recorded as operating expenses at their carrying value.

(f) Employee future benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan (the "Plan"), a multiemployer pension plan administered by the Government. The 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:

• Organizational accountability structures: as they relate to internal control management to support sound financial management, including the roles and responsibilities for control management;
• 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 on statutory requirements, and policies and procedures for sound financial management and control; and
• Monitoring of, and regular updates on, internal control management, as well as the provision of related assessment results and action plans to the deputy head and senior Agency management and, as applicable, the Departmental Audit Committee.

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

• Public Services and Procurement Canada (PSPC) centrally administers the payment of salaries and the procurement of goods and services in accordance with the Agency's Delegation of Authority and provides real property and accommodation services;
• Shared Services Canada, which provides information technology (IT) infrastructure services to the Agency, such as data centres and network services;
• The Department of Justice Canada, which provides legal services to the Agency; and
• Treasury Board of Canada Secretariat, a central agency, which provides services related to public service insurance plans for federal public service employees and centrally administers payment of the employer's share of contributions toward statutory employee benefit plans (the Public Service Pension Plan, Employment Insurance (EI) Plan, Canada Pension Plan or Quebec Pension Plan (CPP/QPP), and the Supplementary Death Benefit Plan on behalf of departments and agencies).

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

• Agriculture and Agri-Food Canada provides platform access to its human resources management system of record (PeopleSoft);
• Crown-Indigenous Relations and Northern Affairs Canada provides 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 (staffing, compensation and classification), financial management (financial operations) and materiel management (procurement and contracting). Assessment results and action plan on the shared controls of these services are provided through this Annex. Under this agreement, PHAC also provides Health Canada with internal audit services, which encompass audits related to financial management and controls; and
• Health Canada provides PHAC with a financial system platform (SAP) to capture and report all financial transactions.

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:

• entity-level controls;
• financial statements and year-end reporting;
• revenues, receivables and receipts;
• purchasing, payables and payments;
• transfer payments;
• payroll; and
• information technology general controls.

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:

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

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:

• Financial Governance and Oversight; Investment Management and Plans; Financial Information and Disclosures; Delegated Financial and Contracting Authorities.
• Cabinet Submissions, Chief Financial Officer Attestations and Costing; Planning, Budgeting, Resource Management, and Ongoing Forecasting; Assets, Acquired Services and Inventory Management.
• Internal Controls over Financial Management; Efficient Financial Management Practices, Processes and Systems; Contracting and Procurement
• An effective Financial Management Workforce.

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:

• re-evaluate the risk assessments of key control areas, focusing on higher risk processes to determine if the COVID-19 pandemic had an impact on the effectiveness of key controls;
• assess new or amended processes developed in response to the COVID-19 pandemic; and
• report results to the Departmental Audit Committee.

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.