Future-oriented Statement of Operations For the year ended March 31, 2010
Notes to the Financial Statement (unaudited)
1. Authority and Objectives
The Public Health Agency of Canada (Agency) was created by Orders In Council on September 24, 2004 in response to growing concerns about the capacity of Canada's public health system to anticipate and respond effectively to public health threats. Its creation was the result of wide consultation with the provinces, territories, stakeholders and Canadians. It also followed recommendations from reports from a number of expert studies, including the National Advisory Committee on SARS and Public Health (Dr. David Naylor) and the Senate Committee on Social Affairs, Science and Technology (Senator Michael Kirby), as well as advice from intergovernmental bodies. The Public Health Agency of Canada Act, assented to December 12, 2006, provides a statutory foundation for the Agency.
The Agency is mandated to work in collaboration with its partners, to lead federal efforts and to mobilize pan-Canadian action in preventing disease and injury, and to promote and protect national and international public health through the following:
- Anticipating, preparing for, responding to and recovering from threats to public health;
- Carrying out surveillance of, monitoring, researching, investigating and reporting on diseases, injuries, other preventable health risks and their determinants, and the general state of public health in Canada and internationally;
- Using the best available evidence and tools to advise and support public health stakeholders nationally and internationally as they work to enhance the health of their communities;
- Providing public health information, advice and leadership to Canadians and stakeholders; and
- Building and sustaining a public health network with stakeholders.
2. Underlying Assumptions
This Future-oriented Statement of Operations has been prepared based on:
(a) Planned Spending:
The Agency assumes funding for increased planned spending will be appropriated by Parliament during 2009-2010.
(b) Tangible Capital Assets:
All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. There are no known intangible assets.
(c) Amortization:
Tangible capital assets acquired during 2009-2010 are amortized assuming an acquisition date of October 1st, 2009.
(d) Salaries:
Salaries reflect recent collective bargaining settlements of approximately 2% per annum.
(e) Severance Benefits:
Severance benefits have been calculated as 1/52 of total salaries.
(f) Environmental and Contingent Liabilities:
At the time of the preparation of this Future-oriented Statement of Operations, the Agency is not aware of any environmental or contingent liabilities.
(g) Revenues:
The Agency's revenues include: proceeds from the sale of first aid kits and other miscellaneous goods and services, interest; and credit card rebate. The projected revenues are based on historical trends over the past three years.
3. Variations and Changes to the Forecast Financial Information
While every attempt has been made to accurately forecast final results for 2009-2010, actual results achieved are likely to vary from the forecast information presented, and this variation could be material.
Once the Report on Plans and Priorities is presented, the Agency will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing Supplementary Estimates. Variances will be explained in the Departmental Performance Report.
4. Summary of Significant Accounting Policies
The Future-oriented Statement of Operations has been prepared by management in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.
Significant accounting policies are as follows:
(a) Parliamentary Appropriations
The Agency is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the Agency do not parallel financial reporting according to Canadian generally accepted accounting principles since appropriations are based on a modified cash basis. Consequently, items recognized in the Future-oriented Statement of Operations are not necessarily the same as those provided through appropriations from Parliament. Note 5 provides a high-level reconciliation between the two bases of reporting.
(b) Forecasted Revenues
Revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.
(c) Forecasted Expenses
Expenses are recorded on an accrual basis:
- Grants are recognized in the year in which the recipient has met the eligibility criteria and the conditions for payment;
- Contributions are recognized in the year in which the recipient has met the conditions and fulfilled the terms of the contractual agreement;
- Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment; and
- Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans, and legal services are recorded as operating expenses at their estimated cost.
(d) Employee Future Benefits
Pension Benefits: Eligible employees participate in the Public Service Pension Plan administered by the Government of Canada. The Agency's contributions to the Plan are expensed in the year incurred and represent the total obligation to the Plan by the Agency. Current legislation does not require the Agency to make contributions for any actuarial deficiencies of the Plan.
Severance Benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. The obligation for these benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.
(e) 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 | Amortization Period |
|---|---|
| Buildings | 25 years |
| Works and Infrastructure | 25 years |
| Machinery and Equipment | 8-12 years |
| Computer Equipment | 3-5 years |
| Computer Software | 3 years |
| Other Equipment | 10-12 years |
| Motor Vehicles | 4-7 years |
| Other Vehicles | 10 years |
(f) Antivirals
The Agency purchases antivirals and other related medical supplies in anticipation of a pandemic emergency. The antivirals have a short shelf life and they, as well as the other related medical supplies, are not anticipated to be consumed except in the event of a pandemic. As a result, these purchases are written off in the year in which they are purchased.
(g) Measurement Uncertainty
The preparation of the Future-oriented Statement of Operations requires management to make estimates and assumptions that affect the reported amounts of all assets, liabilities, revenues and expenses. Assumptions are based upon information available and known to management at the time of development, reflect current business and economic conditions, and assume a continuation of current governmental priorities and consistency in Agency mandate and strategic objectives. At the time of preparation of this statement, management believes the estimates and assumptions to be fair and reasonable. Nonetheless, as with all such estimates and assumptions, there is a measure of uncertainty. This uncertainty increases as the forecast horizon extends.
5. Parliamentary Appropriations
The Agency receives most of its funding through annual Parliamentary appropriations. Items recognized in the Future-oriented Statement of Operations in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, the Agency has different net cost of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:
| Forecast 2009-2010 |
(in thousands of dollars) |
|---|---|
| Net Cost of Operations | 689,941 |
| Adjustments for Items Affecting Net Cost of Operations but Not Affecting Appropriations: Add (Less): |
|
| Amortization of tangible capital assets | (8,140) |
| Services provided without charge by other government departments | (22,656) |
| Revenues not available for spending | 490 |
| Decrease (Increase) in severance benefits | (3,641) |
| (33,947) | |
| Current Year Appropriations Provided | 653,542 |
| Forecast 2009-2010 |
(in thousands of dollars) |
|---|---|
| Operating expenditures | 357,838 |
| Capital expenditures | 9,646 |
| Grants and contributions | 255,381 |
| Contributions to employee benefit plans | 30,677 |
| Current Year Appropriations Provided | 653,542 |
| Less: | |
| Lapsed Appropriations: | 0 |
| Current Year Appropriations Used | 653,542 |
6. Tangible Capital Assets (in thousands of dollars)
| Capital Asset Class |
Cost | Accumulated Amortization | Net Book Value |
||||||
|---|---|---|---|---|---|---|---|---|---|
| Opening Balance |
Acquisitions | Disposals and Write-offs |
Closing Balance |
Opening Balance |
Amortization | Disposals and Write-offs |
Closing Balance |
||
| Land | 604 | 0 | 0 | 604 | 0 | 0 | 0 | 0 | 604 |
| Buildings | 71,741 | 0 | 0 | 71,741 | 34,399 | 2,869 | 0 | 37,268 | 34,473 |
| Works and Infrastructure | 3,596 | 5,000 | 0 | 8,596 | 78 | 244 | 0 | 322 | 8,274 |
| Machinery and Equipment | 49,070 | 5,612 | 0 | 54,682 | 30,151 | 4,193 | 0 | 34,344 | 20,338 |
| Computer Equipment | 4,341 | 580 | 0 | 4,921 | 2,926 | 413 | 0 | 3,339 | 1,582 |
| Computer Software | 1,086 | 187 | 0 | 1,273 | 1,016 | 87 | 0 | 1,103 | 170 |
| Other Equipment | 2,573 | 1,000 | 0 | 3,573 | 1,015 | 310 | 0 | 1,325 | 2,248 |
| Motor Vehicles | 205 | 0 | 0 | 205 | 104 | 22 | 0 | 126 | 79 |
| Other Vehicles | 115 | 0 | 0 | 115 | 87 | 3 | 0 | 90 | 25 |
| Total | 133,331 | 12,379 | 0 | 145,710 | 69,776 | 8,141 | 0 | 77,917 | 67,793 |
Forecasted amortization expense for the year ending March 31, 2010 is $8,141.
7. Employee Benefits
(a) Pension Benefits:
The Agency's employees participate in the Public Service Pension Plan which is sponsored and administered by the Government of Canada. Pension benefits accrue at a rate of 2 percent per year of pensionable service to a maximum of 35 years.
Both employees and the Agency contribute to the Public Service Pension Plan. Pension benefits for 2009-2010 are estimated based on previous year trend, amounting to approximately 12.3% of salaries.
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.
(b) Severance Benefits:
Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information concerning the estimated severance benefits is as follows:
| Forecast 2009-2010 |
(in thousands of dollars) |
|---|---|
| Accrued benefit obligation, beginning of year | 34,028 |
| Expense for the year | 3,641 |
| Benefits to be paid during the year | (1,160) |
| Accrued Benefit Obligation, End of Year | 36,509 |
8. Related Party Transactions
The Agency is related as a result of common ownership to all Government of Canada Departments, Agencies, and Crown Corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the Agency receives services which are obtained without charge from other Government Departments. These services without charge have been recognized in the Agency's Future-oriented Statement of Operations as follows:
| Forecast 2009-2010 |
(in thousands of dollars) |
|---|---|
| Accommodation | 6,287 |
| Employer's contribution to the health and dental insurance plans | 16,093 |
| Legal services | 276 |
| Total, Related Party Transactions | 22,656 |
The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge. The costs of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included as an expense in the Agency's Future-oriented Statement of Operations.
The Agency pays approximately $13 million annually to Health Canada for the provision of corporate services including financial, human resources, asset management, evaluation, information management, communications, and regional services, and for the administration of Agency's grants and contributions programs in the Territories.
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