Public Health Agency of Canada – 2021-2022 Financial Statements
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)
- 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, 2022, 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, 2022 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plan are summarized in the annex.
The effectiveness and adequacy of the Agency's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the Agency's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the President of the Agency.
The financial statements of the Agency have not been audited.
Dr. Harpreet S. Kochhar
President
Ottawa, Canada
Date: September 1, 2022
Martin Krumins
Chief Financial Officer
Ottawa, Canada
Date: August 29, 2022
Statement of Financial Position (Unaudited)
As at March 31
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Liabilities | ||
| Accounts payable and accrued liabilities (note 4) | $ 1,081,168 | $ 857,635 |
| Vacation pay and compensatory leave | 30,798 | 26,372 |
| Deferred revenue | 1 | 1 |
| Employee future benefits (note 5) | 8,646 | 8,694 |
| Other liabilities | 1,929 | 1,748 |
| Total net liabilities | 1,122,542 | 894,450 |
| Financial assets | ||
| Due from Consolidated Revenue Fund | 1,022,850 | 273,383 |
| Accounts receivable and advances (note 6) | 75,901 | 601,068 |
| Total gross financial assets | 1,098,751 | 874,451 |
| Financial assets held on behalf of Government | ||
| Accounts receivable and advances (note 6) | (15,672) | (14,970) |
| Total financial assets held on behalf of Government | (15,672) | (14,970) |
| Total net financial assets | 1,083,079 | 859,481 |
| Agency net debt | 39,463 | 34,969 |
| Non-financial assets | ||
| Prepaid expenses (note 7) | 866,230 | 1,897,046 |
| Inventory (note 8) | 2,711,289 | 3,488,542 |
| Tangible capital assets (note 9) | 127,974 | 130,558 |
| Total non-financial assets | 3,705,493 | 5,516,146 |
| Agency net financial position | $ 3,666,030 | $ 5,481,177 |
Contractual obligations (note 10)
Contingent liabilities (note 11)
The accompanying notes form an integral part of these financial statements.
Dr. Harpreet S. Kochhar
President
Ottawa, Canada
Date: September 1, 2022
Martin Krumins
Chief Financial Officer
Ottawa, Canada
Date: August 29, 2022
Statement of Operations and Agency Net Financial Position (Unaudited)
For the Year Ended March 31
| (in thousands of dollars) | 2022 Planned Results |
2022 | 2021 |
|---|---|---|---|
| Expenses | |||
| Infectious disease prevention and control | $ 6,834,828 | $ 7,274,880 | $ 1,547,960 |
| Health promotion and chronic disease prevention | 346,901 | 289,206 | 292,672 |
| Health security | 3,116,057 | 2,589,484 | 1,626,945 |
| Internal services | 252,955 | 212,733 | 220,246 |
| Expenses incurred on behalf of Government | (82) | (4) | 5 |
| Total expenses | 10,550,659 | 10,366,299 | 3,687,828 |
| Revenues | |||
| Sales of goods and services | |||
| Rights and privileges | 285 | 338 | 57 |
| Services of a non-regulatory nature | 14,217 | 14,030 | 13,365 |
| Lease and use of public property | - | 23 | 23 |
| Interest | 4 | 3 | 4 |
| Other | 64 | 7,555 | 9,098 |
| Revenues earned on behalf of Government | (448) | (6,772) | (269) |
| Total revenues | 14,122 | 15,177 | 22,278 |
| Net cost of operations before government funding and transfers | 10,536,537 | 10,351,122 | 3,665,550 |
| Government funding and transfers | |||
| Net cash provided by Government of Canada | N/A | 7,958,550 | 8,596,628 |
| Change in due from Consolidated Revenue Fund | N/A | 749,467 | 127,349 |
| Services provided without charge by other government departments (note 12) | N/A | 45,618 | 32,821 |
| Other transfers of assets and liabilities (to) / from other government departments | N/A | (217,660) | (684) |
| Net cost of (revenue from) operations after government funding and transfers | N/A | 1,815,147 | (5,090,564) |
| Agency net financial position - Beginning of year | N/A | 5,481,177 | 390,613 |
| Agency net financial position - End of year | N/A | $ 3,666,030 | $ 5,481,177 |
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
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Net cost of (revenue from) operations after government funding and transfers | $ 1,815,147 | $ (5,090,564) |
| Change due to tangible capital assets | ||
| Acquisition of tangible capital assets | 17,401 | 60,789 |
| Amortization of tangible capital assets | (19,759) | (17,255) |
| Proceeds from disposal of tangible capital assets | (32) | (3) |
| Loss on disposal of tangible capital assets including adjustments | (75) | (11) |
| Transfer of tangible capital assets (to) / from other government departments | (119) | (659) |
| Total change due to tangible capital assets | (2,584) | 42,861 |
| Change due to prepaid expenses | (1,030,816) | 1,686,955 |
| Change due to inventory | (777,253) | 3,370,517 |
| Net increase in Agency net debt | 4,494 | 9,769 |
| Agency net debt - Beginning of year | 34,969 | 25,200 |
| Agency net debt - End of year | $ 39,463 | $ 34,969 |
The accompanying notes form an integral part of these financial statements.
Statement of Cash Flows (Unaudited)
For the Year Ended March 31
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Operating activities | ||
| Net cost of operations before government funding and transfers | $ 10,351,122 | $ 3,665,550 |
| Non-cash items: | ||
| Amortization of tangible capital assets | (19,759) | (17,255) |
| Loss on disposal of tangible capital assets including adjustments | (75) | (11) |
| Services provided without charge by other government departments (note 12) | (45,618) | (32,821) |
| Variations in Statement of Financial Position: | ||
| Decrease (increase) in accounts payable and accrued liabilities | (223,533) | (694,898) |
| Decrease (increase) in vacation pay and compensatory leave | (4,426) | (10,227) |
| Decrease (increase) in deferred revenue | - | (1) |
| Decrease (increase) in employee future benefits | 48 | 363 |
| Decrease (increase) in other liabilities | (181) | 1,481 |
| Increase (decrease) in accounts receivable and advances | (525,869) | 566,164 |
| Increase (decrease) in prepaid expenses | (1,030,816) | 1,686,955 |
| Increase (decrease) in inventory | (777,253) | 3,370,517 |
| Other transfers of assets and liabilities (to) / from other government departments | 217,541 | 25 |
| Cash used in operating activities | 7,941,181 | 8,535,842 |
| Capital investing activities | ||
| Acquisition of tangible capital assets | 17,401 | 60,789 |
| Proceeds from disposal of tangible capital assets | (32) | (3) |
| Cash used in capital investing activities | 17,369 | 60,786 |
| Net cash provided by Government of Canada | $ 7,958,550 | $ 8,596,628 |
The accompanying notes form an integral part of these financial statements.
Notes to the Financial Statements (Unaudited)
For the Year Ended March 31, 2022
1. Authority and objectives
The 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 inequities 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 (e.g., floods, forest fires, and outbreaks such as COVID-19); 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 are 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 2021-22 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 2021-22 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
- 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.
- 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:
- Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.
- Certain services received on a without charge basis are recorded for departmental financial statement purposes at the carrying amount.
3. Parliamentary authorities
The Agency receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Financial Position and the Statement of Operations and Agency Net Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Agency has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Net cost of operations before government funding and transfers | $10,351,122 | $ 3,665,550 |
| Adjustments for items affecting net cost of operations but not affecting authorities: | ||
| Amortization of tangible capital assets | (19,759) | (17,255) |
| Gain (loss) on disposal of tangible capital assets | 31 | 3 |
| Services provided without charge by other government departments | (45,618) | (32,821) |
| Decrease (increase) in vacation pay and compensatory leave | (4,426) | (10,227) |
| Decrease (increase) in employee future benefits | 48 | 363 |
| Refund/adjustment of prior year's expenditures | 18,170 | 10,326 |
| Bad debt expense | (7) | 6 |
| Increase (decrease) in transfer payment accrual | 14 | (88) |
| Statutory spending authority equivalent to revenues earned | 13,039 | 12,473 |
| Other | (29,614) | 9,868 |
| Total items affecting net cost of operations but not affecting authorities | (68,122) | (27,352) |
| Adjustments for items not affecting net cost of operations but affecting authorities: | ||
| Acquisitions of tangible capital assets | 17,401 | 60,789 |
| Increase (decrease) in inventory | (565,790) | 3,370,518 |
| Increase (decrease) in prepaid expenses | (1,030,816) | 1,686,955 |
| Proceeds from disposal of Crown assets | 82 | 21 |
| Increase in salary overpayments to be recovered | 1,503 | 1,214 |
| Issuance of advances to employees | 52 | 64 |
| Total items not affecting net cost of operations but affecting authorities | (1,577,568) | 5,119,561 |
| Current year authorities used | $ 8,705,432 | $ 8,757,759 |
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Authorities provided: | ||
| Vote 1 - Operating expenditures | $ 15,379,583 | $ 14,796,625 |
| Vote 5 - Capital expenditures | 117,965 | 140,611 |
| Vote 10 - Grants and contributions | 881,670 | 616,420 |
| Public Health Events of National Concern Payment Act | - | 5,443,026 |
| Other statutory amounts | 65,880 | 49,227 |
| Subtotal | 16,445,098 | 21,045,909 |
| Less: | ||
| Authorities available for future years | (112) | (24) |
| Lapsed authorities | (7,739,554) | (12,288,126) |
| Current year authorities used | $ 8,705,432 | $ 8,757,759 |
4. Accounts payable and accrued liabilities
The following table presents details of the Agency's accounts payable and accrued liabilities:
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Accounts payable - Other government departments and agencies | $ 38,300 | $ 63,165 |
| Accounts payable - External parties | 542,870 | 482,433 |
| Total accounts payable | 581,170 | 545,598 |
| Accrued liabilities | 499,998 | 312,037 |
| Total accounts payable and accrued liabilities | $ 1,081,168 | $ 857,635 |
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 2021-22 expense amounts to the following:
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
Expense for the year |
$ 37,575 |
$28,223 |
For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2020-21) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2020-21) the employee contributions.
The 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, 2022, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.
The changes in the obligations during the year were as follows:
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Accrued benefit obligation - Beginning of year | $ 8,694 | $ 9,057 |
| Expense for the year | 444 | 312 |
| Benefits paid during the year | (492) | (675) |
| Accrued benefit obligation - End of year | $ 8,646 | $ 8,694 |
6. Accounts receivable and advances
The following table presents details of the Agency's accounts receivable and advances balances:
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Accounts receivable - Other government departments and agencies | $ 52,157 | $ 579,188 |
| Accounts receivable - External parties | 14,702 | 13,983 |
| Employee advances | 9,092 | 7,940 |
| Subtotal | 75,951 | 601,111 |
| Allowance for doubtful accounts on receivables from external parties | (50) | (43) |
| Gross accounts receivable and advances | 75,901 | 601,068 |
| Accounts receivable held on behalf of Government | (15,672) | (14,970) |
| Net accounts receivable and advances | $ 60,229 | $ 586,098 |
7. Prepaid expenses
The following table presents details of the Agency's prepaid expenses:
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Pharmaceutical and other medicinal products | $759,463 | $ 1,834,517 |
| Personal protective equipment and other medical supplies | - | 14,529 |
| Diagnostic testing kits | 58,767 | - |
| Other fees and services | 48,000 | 48,000 |
| Total prepaid expenses | $ 866,230 | $ 1,897,046 |
8. Inventory
The following table presents details of the Agency's inventory:
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Personal protective equipment | $1,093,857 | $2,062,951 |
| Pharmaceutical and other medicinal products | 592,037 | 203,116 |
| Laboratory supplies and testing devices | 376,438 | 295,191 |
| Medical and laboratory equipment | 467,146 | 746,606 |
| Social services supplies | 3,377 | 762 |
| Other medical supplies | 120,990 | 148,389 |
| Other goods and supplies | 57,444 | 31,527 |
| Total inventory | $ 2,711,289 | $ 3,488,542 |
The cost of distributed inventory recognized as an expense in the Statement of Operations and Agency Net Financial Position is $6,160.7 million in 2021-22 ($1,877.2 million in 2020-21).
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:
| 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. |
| Cost | Opening balance | Acquisitions | Disposals and write-offs | Transfers and adjustments | Closing balance |
|---|---|---|---|---|---|
| Land | $ 604 | $ - | $ - | $ - | $ 604 |
| Buildings | 134,160 | - | - | - | 134,160 |
| Works and infrastructure | 1,166 | - | - | - | 1,166 |
| Leasehold improvements | 240 | - | - | - | 240 |
| Machinery and equipment | 176,774 | 15,415 | (594) | 200 | 191,795 |
| Vehicles | 8,470 | 378 | (124) | - | 8,724 |
| Assets under construction | 3,160 | 1,608 | - | (499) | 4,269 |
| Total | $ 324,574 | $ 17,401 | $ (718) | $ (299) | $ 340,958 |
| Accumulated amortization | Opening balance | Amortization | Disposals and write-offs | Transfers and adjustments | Closing balance |
| Buildings | $ 88,410 | $ 5,215 | $ - | $ - | $ 93,625 |
| Works and infrastructure | 554 | 46 | - | - | 600 |
| Leasehold improvements | 19 | 10 | - | - | 29 |
| Machinery and equipment | 102,076 | 13,860 | (593) | (74) | 115,269 |
| Vehicles | 2,957 | 628 | (124) | - | 3,461 |
| Total | $ 194,016 | $ 19,759 | $ (717) | $ (74) | $ 212,984 |
| Net book value | Net book value 2021 | Net book value 2022 |
|---|---|---|
| Land | $ 604 | $ 604 |
| Buildings | 45,750 | 40,535 |
| Works and infrastructure | 612 | 566 |
| Leasehold improvements | 221 | 211 |
| Machinery and equipment | 74,698 | 76,526 |
| Vehicles | 5,513 | 5,263 |
| Assets under construction | 3,160 | 4,269 |
| Total | $ 130,558 | $ 127,974 |
Adjustments include assets under construction of $499 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:
| (in thousands of dollars) | Operating contracts | Transfer payments | Total |
|---|---|---|---|
| 2022-23 | $ 6,521,491 | $ 312,314 | $ 6,833,805 |
| 2023-24 | 869,511 | 128,078 | 997,589 |
| 2024-25 | - | 44,176 | 44,176 |
| 2025-26 | - | 19,934 | 19,934 |
| 2026-27 and thereafter | - | 8,730 | 8,730 |
| Total | $ 7,391,002 | $ 513,232 | $ 7,904,234 |
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 $5.3 million ($ 100 thousand in 2020-21) at March 31, 2022.
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:
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Employer's contribution to the health and dental insurance plans | $ 38,916 | $ 26,233 |
| Accommodation | 6,436 | 6,325 |
| Legal services | 266 | 263 |
| Total | $ 45,618 | $ 32,821 |
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
| (in thousands of dollars) | 2022 | 2021 |
|---|---|---|
| Expenses - Other government departments and agencies | $ 302,318 | $ 335,556 |
| Revenues - Other government departments and agencies | 13,094 | 12,521 |
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:
| (in thousands of dollars) | Infectious disease prevention and control | Health promotion and chronic disease prevention | Health security | Internal services | 2022 Total | 2021 Total |
|---|---|---|---|---|---|---|
| Expenses | ||||||
| Utilities, materials and supplies | $ 5,643,956 | $ 285 | $ 530,198 | $ 549 | $ 6,174,988 | $ 2,236,786 |
| Inventory adjustments for valuation and write-offs | 200,476 | - | 1,481,065 | - | 1,681,541 | 9,727 |
| Professional and special services | 788,299 | 14,904 | 266,108 | 89,911 | 1,159,222 | 356,058 |
| Salaries and employee benefits | 207,394 | 65,555 | 165,829 | 84,482 | 523,260 | 380,269 |
| Transfer payments | 314,737 | 202,749 | 1,894 | - | 519,380 | 341,538 |
| Information services | 63,498 | 4,713 | 2,585 | 36,173 | 106,969 | 88,264 |
| Transportation and communication | 22,918 | 70 | 60,453 | 505 | 83,946 | 57,311 |
| Rentals | 3,982 | 87 | 75,358 | 80 | 79,507 | 75,433 |
| Amortization of tangible capital assets | 19,059 | 18 | 681 | 1 | 19,759 | 17,255 |
| Accommodation | 4,344 | 827 | 2,053 | 1,013 | 8,237 | 7,766 |
| Repair and maintenance | 4,350 | - | 771 | 2 | 5,123 | 4,594 |
| Other | 1,867 | (2) | 2,489 | 10 | 4,364 | 112,828 |
| Bad debt | - | - | - | 7 | 7 | (6) |
| Expenses incurred on behalf of Government | - | - | - | (4) | (4) | 5 |
| Total expenses | 7,274,880 | 289,206 | 2,589,484 | 212,729 | 10,366,299 | 3,687,828 |
| Revenues | ||||||
| Sales of goods and services | ||||||
| Rights and privileges | 338 | - | - | - | 338 | 57 |
| Services of a non-regulatory nature | 63 | - | 2,863 | 11,104 | 14,030 | 13,365 |
| Lease and use of public property | - | - | 23 | - | 23 | 23 |
| Interest | - | - | - | 3 | 3 | 4 |
| Other | 461 | - | 7,094 | - | 7,555 | 9,098 |
| Revenues earned on behalf of Government | (402) | - | (6,367) | (3) | (6,772) | (269) |
| Total revenues | 460 | - | 3,613 | 11,104 | 15,177 | 22,278 |
| Net cost of operations before government funding and transfers | $ 7,274,420 | $ 289,206 | $ 2,585,871 | $ 201,625 | $ 10,351,122 | $ 3,665,550 |
14. Comparative information
Certain comparative figures have been reclassified to conform to the current year's presentation.
Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting
Fiscal Year 2021-22
1. Introduction
This document provides summary information on the measures taken by the Public Health Agency of Canada (the Agency) to maintain an effective system of internal control over financial reporting, including information on internal control management, assessment results, and related action plans.
Detailed information on the Agency's authority, mandate, and core responsibilities can be found in the Agency's Departmental Plan and Departmental Results Report.
2. Agency's system of internal control over financial reporting
2.1 Internal control management
The Agency 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 (CFO), is in place and includes:
- Organizational accountability structures, as they relate to internal control management to support sound financial management, including the roles, responsibilities, accountabilities and authorities;
- Agency adherence to the Values and Ethics Code for the public service, and implementation of its internal Code of Conduct, which includes mechanisms such as agency wide training on values and ethics, including linkages to integrated risk management;
- Ongoing communication and training on statutory requirements, and policies and procedures for sound financial management and control;
- A new financial accountability framework was developed with the objective of ensuring that a robust financial and investment management accountability structure exists that clearly articulates policy requirements, governance structures, and processes;
- A dedicated Internal Control team within the Chief Financial Officer Corporate Management Branch, who are responsible for conducting risk-based assessments of the system of internal controls over financial management, including internal controls over financial reporting; 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 Agency's Departmental Audit Committee.
The Departmental Audit Committee provides independent and objective advice to the President (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 the processing certain transactions that are recorded in its financial statements, as follows:
2.2.1 Common service arrangements
- Public Services and Procurement Canada centrally administers the payment of salaries and the procurement of goods and services in accordance with the Agency's Delegation of Spending and Financial Authority and provides real property and accommodation services;
- Shared Services Canada, which provides information technology 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 Plan, Canada Pension Plan or Quebec Pension Plan, 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 internal controls over financial reporting related to these specific services.
The Agency 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 the Agency for the Grants and Contributions Information Management System;
- Through a Shared Services Partnership Agreement, Health Canada provides the Agency with services including the following related to internal controls over financial reporting: 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, the Agency also provides Health Canada with internal audit services, which encompass audits related to financial management and controls; and,
- Health Canada provides the Agency with a financial system platform (SAP) to capture and report all financial transactions.
3. Agency assessment results for the 2021-22 fiscal year
The following table summarizes the status of the ongoing monitoring activities according to the 2021-22 fiscal year's rotational plan.
| Previous fiscal year's rotational ongoing monitoring plan for fiscal year 2021-22 | StatusNote de bas de page * |
|---|---|
| Internal controls over financial management | |
| Budgeting and forecasting | Planned activity completed. Remedial actions underway. |
| Investment Planning | Planned activity completed. |
| Costing | Planned activity completed. |
| CFO attestation | Planned activity completed. |
| Project Management | Planned activity completed. Remedial actions underway. |
| Internal controls over financial reporting | |
| Financial statements and year-end reporting | Planned activity completed. |
| Revenues, receivables and receipts | Planned activity completed. Remedial actions underway. |
| Purchasing, payables and payments | Planned activity completed. Remedial actions underway. |
| Grants and contributions | Planned activity completed. |
| Inventory Management | Planned activity completed. |
| Payroll | Planned activity completed. Remedial actions underway. |
| Travel, hospitality, conference and events, and relocation | Planned activity completed. Remedial actions underway. |
| Information technology general controls | Planned activity completed. Remedial actions underway. |
|
|
The Agency and Health Canada also maintain compensatory controls within their business processes to further mitigate any potential impacts of control deficiencies on the financial statements.
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
During fiscal year 2021-22, amid the COVID-19 response, the Agency made advancements with its system of internal controls over financial management. New business processes were mapped out for the first time to ensure alignment to the current and evolved practices and business processes. In addition, business processes that had underwent significant change during the pandemic due to operational requirement of change in policy were updated.
The evolved business processes and associated controls are as follows:
- Inventory Management: Control documentation was developed, identifying new key controls related to core sub-activities. Documentation is scheduled to be completed in fiscal year 2022-23.
- Investment Planning: New key controls were documented in order to align with the Agency's new Investment Management Planning Framework.
- CFO Attestation: Control documentation was developed, identifying new key controls related to management and senior management review and approval of the CFO assertions.
- Costing: Control documentation was developed, identifying new key controls related to management and senior management review and approval of program costing.
- Project Management: The Project Management Office updated its framework for project management in fiscal year 2019-20. As a result, a completed re-alignment of control documentation was conducted and new controls were identified pertaining to data accessibility, identification of new projects, oversight of gating approvals, and monitoring and tracking expenditures.
- Grants and Contributions: Control documentation was updated to align with current Grants and Contributions management practices.
As it relates to the controls associated with the services procured through the shared partnership agreement mentioned in 2.2.2, Health Canada updated the following processes and controls:
- 7. Purchasing, payables, and payments: New controls pertaining to acquisition cards, specimen signature cards and interdepartmental settlements have been implemented.
- 8. Revenues, receivables and receipts: New controls under revenues, receivables and receipts related to deposits of money and risk-based monitoring of invoice adjustments have been implemented.
- 9. Information Technology General Controls: New controls to assist with validation of changes made to their information systems by other departments have been implemented.
3.2 Ongoing monitoring program
As part of its rotational ongoing monitoring plan, the Agency completed its reassessment of entity-level controls and financial controls within the following processes:
- Grants and contributions;
- Budgeting and forecasting;
- Project management;
- Financial statements and year-end reporting;
- Revenues, receivables and receipts;
- Purchasing, payables and payments;
- Payroll;
- Travel, hospitality, conference and events, and relocation; and,
- Information technology general controls.
Key controls that were tested performed as intended and, where required, management action plans addressing remediation requirements were developed by business process owners.
As part of advancing its ongoing rotational monitoring plan, the Agency completed its first design effectiveness assessment of the CFO attestation and costing business processes.
In addition, the Agency initiated its documentation of the investment planning and inventory management business processes. Both processes are scheduled to meet ongoing monitoring status by fiscal year 2023-24.
The Agency and Health Canada continue to assess the impact of the COVID-19 pandemic on its internal controls over financial reporting. Health Canada has not identified deficiencies in the design and operation of internal controls over financial reporting as a result of the COVID-19 pandemic that could have a material impact on the consolidated financial statements.
4. Agency's action plan for the next fiscal year and subsequent fiscal years
Given the expansion of the Agency's mandate and the substantial changes to its operating environment and organizational structure, a full risk assessment of internal controls over financial management will be conducted during fiscal year 2022-23. The results of the assessment will inform the 2022-23 Ongoing Monitoring Plan.
The Agency's rotational ongoing monitoring plan over the next three fiscal years is shown in the following table and is based on:
- an annual validation of high-risk processes and controls; and,
- related adjustments to the ongoing monitoring plan as required.
| Key control areas | 2022-23 | 2023-24 | 2024-25 |
|---|---|---|---|
| Internal controls over financial management | |||
| Entity-level controls | Yes | No | Yes |
| Budgeting and forecasting | No | Yes | No |
| Investment planning | Yes | Yes | Yes |
| Project management | Yes | Yes | Yes |
| Costing | Yes | Yes | Yes |
| CFO attestation | Yes | No | Yes |
| Internal controls over financial reporting | |||
| Financial statement and year-end reporting | Yes | Yes | Yes |
| Revenues, receivables and receipts | Yes | Yes | Yes |
| Purchasing, payables and payments | Yes | No | Yes |
| Grants and contributions | No | Yes | No |
| Payroll | Yes | Yes | Yes |
| Capital assets | No | Yes | No |
| Inventory Management | Yes | Yes | Yes |
| Travel, hospitality, conferences and event, and relocation | No | Yes | No |
| Information technology general controls | Yes | Yes | Yes |
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