ARCHIVED - 2009-2010 Statement of Management Responsibility

Table of Contents

• Statement of Financial Position (Unaudited)
• Statement of Operations (Unaudited)
• Statement of Equity (Unaudited)
• Statement of Cash Flow (Unaudited)
• Notes to the Financial Statements (Unaudited)
  1. Authority and objectives
  2. Significant accounting policies
  3. Parliamentary authorities
  4. Accounts receivable and advances
  5. Tangible capital assets
  6. Accounts payable and accrued liabilities
  7. Employee benefits
  8. Other liabilities
  9. Contingent liabilities
  10. Contractual obligations
  11. Related party transactions
  12. Adoption of new accounting policies
  13. Comparative information

Statement of Financial Position (Unaudited)

Contingent Liabilities (Note 9)
Contractual Obligations (Note 10)

The accompanying notes are an integral part of the financial statements

Glenda Yeates
Deputy Minister
Ottawa, Canada

Date: July 27, 2010

Germain Tremblay
Acting Chief Financial Officer
Ottawa, Canada

Date: July 27, 2010

Statement of Operations (Unaudited)

Table: Statement of Operations (Unaudited)

Statement of Equity (Unaudited)

Statement of Cash Flow (Unaudited)

Notes to the Financial Statements (Unaudited)

1. Authority and Objectives

The department of Health was established effective July 12, 1996 under the Department of Health Act to participate in the promotion and preservation of the health of the people of Canada. It is named in Schedule I of the Financial Administration Act and reports through the Minister of Health. Priorities and reporting are aligned under the following strategic outcomes and related program activities:

Strategic Outcome 1: Accessible and Sustainable Health System Responsive to the Health Needs of Canadians

Canadian Health System

This program activity provides strategic policy advice on health care issues such as improved access, quality and integration of health care services to better meet the health needs of Canadians wherever they live or whatever their financial circumstances. The objective is pursued mindful of long-term equity, sustainability and affordability considerations and in close collaboration with provinces and territories, health professionals, administrators, other key stakeholders and citizens.
Improved access, quality and integration of health services administration is achieved through investments in the health system and in health system renewal, for instance by reducing wait times for essential services, by working with provinces and territories to ensure that the principles of the Canada Health Act are respected, by developing health information and health measures for Canadians, by meeting the health and health access needs of specific groups such as women and official language minority communities, and by ensuring the implementation of agreements between federal/provincial/territorial Ministers of Health.

Canadian Assisted Human Reproduction

This program activity implements the Assisted Human Reproduction (AHR) Act, whose objective is to protect and promote human health, safety, dignity and human rights in the use of AHR technologies. It develops policies and regulations in the area of assisted human reproduction. The science of AHR evolves rapidly and, as a result, the program activity engages stakeholders on an ongoing basis to find a balance between the needs of patients who use these technologies to help them build their families, the children born from these technologies and the providers of these services with health and safety as the overriding factors. The goal of the policies and regulations is developing a responsive regulatory regime which is a leader both domestically and in the international AHR community, and reflects the objectives put forward in the AHR Act. The program activity gathers input from stakeholders, including the provinces, to ensure a pan-Canadian approach.

International Health Affairs

Health Canada works internationally through leadership, partnerships and collaboration to fulfill its federal mandate of striving to make Canada's population among the healthiest in the world. International Affairs serves as the department's focal point to initiate, coordinate, and monitor departmental policies, strategies and activities that help promote Canadian priorities and values on the international health agenda. International collaboration on global health issues is important given that the health of Canadians is influenced significantly by public health risks originating from other countries. Global issues such as pandemic influenza preparedness, HIV/AIDS strategies and global health security are critical initiatives that are discussed with key external health partners such as the World Health Organization (WHO) and the Pan American Health Organization (PAHO).
Countries and international organizations want to connect quickly to information about Canada's health care system and initiatives. The international affairs program activity strives to share Canada's best policies and practices with other countries, and assists in the development of bilateral agreements with numerous countries on important health issues. This program activity delivers strategic policy advice on international health issues to the Minister of Health, senior management and the Health Portfolio, including appropriate representation at international fora concerning the health portfolio. It also manages grants to non-profit organizations for projects in the domain of international health that are aligned with Canada's priorities in global health.

Strategic Outcome 2: Access to Safe and Effective Health Products and Food and Information for Healthy Choices

Health Products

The Health Products program activity is responsible for a broad range of health protection and promotion activities that affect the everyday lives of Canadians. As the federal authority responsible for the regulation of health products, the program activity evaluates and monitors the safety, quality and effectiveness of drugs (human and animal), biologics, medical devices, and natural health products, under the authority of the Food and Drugs Act and Regulations, as well as the Department of Health Act. The program activity also provides timely, evidence-based and authoritative information to key stakeholders (including but not limited to: health care professionals such as physicians, pharmacists and practitioners such as herbalists, naturopathic doctors, Traditional Chinese Medicine (TCM) practitioners) and members of the public to enable them to make informed decisions and healthy choices.

Food and Nutrition

The Food and Nutrition program activity establishes policies, regulations and standards related to the safety and nutritional quality of food. Food safety standards-quality are enforced by the Canadian Food Inspection Agency (CFIA). The legislative framework for food is found in the Food and Drugs Act and Regulations, the Canadian Food Inspection Agency Act and the Department of Health Act. The program activity also promotes the nutritional health and well-being of Canadians by collaboratively defining, promoting and implementing evidence-based nutrition policies and standards. As the focal point and authoritative source for nutrition and healthy eating policy and promotion, the program activity disseminates timely, evidence-based and authoritative information to Canadians and stakeholders to enable them to make informed decisions and healthy choices.

Strategic Outcome 3: Reduced Health and Environmental Risks from Products and Substances, and Healthy, Sustainable Living and Working Environments

Sustainable Environmental Health

The environment continues to be a key determinant of health for all Canadians. This program activity promotes and protects the health of Canadians by identifying, assessing and managing health risks posed by environmental factors in living, working and recreational environments. The scope of activities includes: research on drinking water quality, air quality, contaminated sites, toxicology and climate change; clean air programming and regulatory activities; risk assessment and management of: chemical substances, environmental noise, environmental electromagnetic frequencies, products of biotechnology and products of other new and emerging technologies (including nanotechnology); solar ultraviolet radiation; preparedness for nuclear and environmental disasters as well as working with the passenger conveyance industry to protect the travelling public.
Under the Chemical Management Plan, Health Canada assesses and regulates chemicals used in industrial and consumer products. Other activities include: implementing a national bio-monitoring system; developing risk management performance agreements with industry sectors; and, strengthening the assessment and management of risks to human health posed by pharmaceuticals, personal care and consumer products, cosmetics and food. Finally, enhanced communications and outreach activities allow Canadians to make better informed decisions about limiting their exposure to potential environmental hazards. Relevant Act includes the Canadian Environmental Protection Act.

Consumer Products

Health Canada identifies, assesses, manages and communicates to Canadians the health and safety risks associated with consumer products (including domestic, industrial and clinical use products), cosmetics and radiation emitting devices. This is achieved through research, risk assessments and the development of risk management strategies to minimize the exposure of Canadians to potentially hazardous products. Also included are regulatory monitoring and compliance activities as well as information, education and guidance aimed at both industry and the public. Relevant acts include: consumer products (Hazardous Products Act), cosmetics (Food and Drugs Act) and radiation emitting devices (Radiation Emitting Devices Act).

Workplace Health

This program activity provides services to protect the health and safety of the federal public sector, visiting dignitaries, and others. Specific programs include: the provision of occupational health services to federal employees; delivery of the Employee Assistance Program; emergency health services to Internationally Protected Persons; dosimetry services (the measurement of personal, occupational exposure to radiation through the reading of “dosimeters” or plaques enclosed in special holders worn by the user for specified periods); and, Workplace Hazardous Materials Information System (WHMIS) a national hazard communication standard, including worker education, inspector training, and standards for cautionary labels.

Substance Use and Abuse

Through regulatory, programming and educational activities, Health Canada seeks to improve health outcomes by reducing and preventing tobacco consumption and combating alcohol and drug abuse. Through the Tobacco Act and its regulations, Health Canada regulates aspects of the manufacture and sale of tobacco. It also leads the Federal Tobacco Control Strategy – the goals of which are to: further reduce the prevalence of smoking; decrease the number of cigarettes sold; increase compliance with sales-to-youth laws; reduce exposure to second hand smoke; and, continue to explore ways to regulate the product.
Health Canada administers the Controlled Drugs and Substances Act (CDSA) and its regulations. Through four regional labs, Health Canada provides expert scientific advice and drug analysis services to law enforcement agencies. The Marihuana Medical Access Regulations and related programs control the authorization for use and cultivation of marihuana by those suffering from grave and debilitating illnesses. Health Canada is a partner in the government's anti-drug strategy which includes: prevention programming aimed at youth; facilitating access to treatment programs; compliance and enforcement activities related to controlled substances and precursor chemicals; and, increased resources to Drug Analysis Services commensurate with the increase in law enforcement resources.

Pesticide Regulation

To help prevent unacceptable risks to people and the environment, and facilitate access to sustainable pest management tools, Health Canada, through the Pest Management Regulatory Agency, regulates the importation, sale and use of pesticides under the federal authority of the Pest Control Products Act (PCPA) and Regulations.

Strategic Outcome 4: Better Health Outcomes and Reduction of Health Inequalities Between First Nations and Inuit and Other Canadians

First Nations and Inuit Health Programming and Services

The provision of health programs and services by Health Canada to First Nations and Inuit is rooted in the Federal Indian Health Policy. The department provides health programs and services to First Nations and Inuit as a matter of policy, using the Annual Appropriations Act to obtain Parliamentary approval. Together with First Nations and Inuit and other health partners, the First Nations and Inuit Health Branch through its regional offices, delivers public health and community health programs on-reserve. These include environmental health and communicable and non-communicable disease prevention, and provision of primary health care services through nursing stations and community health centres in remote and/or isolated communities to supplement and support the services that provincial, territorial and regional health authorities provide. Health Canada also supports targeted health promotion programs for Aboriginal people, regardless of residency (e.g. Aboriginal Diabetes Initiative) as well as counselling, addictions and mental wellness services. The Non-Insured Health Benefits coverage of drug, dental care, vision care, medical supplies and equipment, short-term crisis intervention mental health services, and medical transportation is available to all registered Indians and recognized Inuit in Canada, regardless of residency.

Strategic Outcome 5: Internal Services

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are: Management and Oversight Services; Communications Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Services; Acquisition Services; and Travel and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

2. Significant accounting policies

These financial statements have been prepared in accordance with the Treasury Board accounting policies stated below, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

(a) Parliamentary authorities

The Department of Health is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the department 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 Operations and the Statement of 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 Statement of Operations are the amounts reported in the future-oriented financial statements included in the 2009-10 Report on Plans and Priorities.

(b) Net Cash Provided by Government

The department operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the department is deposited to the CRF and all cash disbursements made by the department 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 results 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 department is entitled to draw from the CRF without further appropriations 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. These revenues are recognized in the period in which the related expenses are incurred.
• Funds that have been received are recorded as deferred revenue, provided the department has an obligation to other parties for the provision of goods, services, or the use of assets in the future.
• Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place.

(e) Expenses:

• Grants are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized when the government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements;
• Contributions are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement, provided that the transfer is authorized and a reasonable estimate can be made.
• 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’s contribution to health and dental insurance plans, legal services and worker's compensation coverage are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. The department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. Current legislation does not require the department to make contributions for any actuarial deficiencies of the Plan.
2. 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.

(g) Accounts receivable

Accounts receivable are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

(h) Contingent liabilities

Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(i) Environmental liabilities

Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management’s best estimates, a liability is accrued and an expense recorded when the contamination occurs or when the department becomes aware of the contamination and is obligated, or is likely to be obligated to incur such costs. If the likelihood of the department’s obligation to incur these costs is not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements.

(j) 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. Health Canada does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, immovable assets located on Indian Reserves and museum collections.

Amortization of capital assets is on a straight-line basis over the estimated useful life of the capital asset as follows:

(k) Prepaid expenses

Prepaid expenses include prepayments of transfer payments. Prepaid transfer payments consist of contributions advanced to recipients as of March 31 for which it is known that the costs will be incurred by the recipient in the subsequent fiscal year and the amount can be readily determined based on available information.

(l) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, environmental liabilities, the liability for employee severance benefits, the allowance for doubtful accounts and the useful life of tangible capital assets. Actual results could 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 that they become known.

3. Parliamentary authorities

Health Canada receives most of its funding through annual Parliamentary authorities. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, the department has different net results of operations for the year on a government funding basis than on an accrual accounting basis. These differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to current year authorities used:

(b) Authorities provided and used

4. Accounts receivable and advances

Health Canada records receivables from three main sources. As of March 31, amounts due under each of these categories are as follows:

5. Tangible capital assets

Amortization expense for the year ended March 31, 2010 is $25,620 (2009 - $23,728).

6. Accounts Payable and Accrued Liabilities

The following table presents details of Health Canada's accounts payable and accrued liabilities:

7. Employee Benefits

(a) Pension benefits

The department's employees participate in the Public Service Pension 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 Plans benefits and they are indexed to inflation.

Both the employees and the department contribute to the cost of the Plan. The current and previous year expenses, which represent approximately 1.9 times (2 in 2008-09) the contributions by employees, amount to:

The department'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

The department provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future appropriations. Information about the severance benefits, measured as at March 31, is as follows:

8. Other Liabilities

Budget 2007 announced an allocation of $400.0 million to Canada Health Infoway Inc. Of this authority $229 .0 million was disbursed, $67.2 million of which took place in 2009-10. When the resulting $171 .0 million is added to the $500 .0 million Budget 2009 allocation, the remaining liability becomes $671 .0 million.

9. Contingent Liabilities

Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into two categories as follows:

(a) Contaminated sites

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the department is obligated or likely to be obligated to incur such costs. Health Canada has identified sites where such action is possible and for which a liability has been recorded.

Health Canada’s ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued in the year in which they become known.

(b) Claims and litigation

In the normal course of its operations, Health Canada becomes involved in various legal actions. There are a number of claims for which a reasonable estimate of the potential liability cannot presently be determined. Some of these potential liabilities may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded on the department's financial statements.

10. Contractual obligations

The nature of Health Canada's activity results in multi-year contracts and obligations whereby the department will be committed to make some future payments. Significant contractual obligations that can be reasonably estimated are as follows:

11. Related party transactions

The department is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The department enters into transactions with these entities in the normal course of business and on normal trade terms. Also, during the year, the department received services which were obtained without charge from other government departments as presented in part (a).

(a) Common Services provided without charge by other government departments:

During the year the department received without charge from other departments, accommodation, legal fees, worker's compensation and the employer's contribution to the health and dental insurance plans. These services without charge have been recognized in the department's Statement of Operations as follows:

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, which include payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included in the department's Statement of Operations.

(b) Other transactions with related parties:

12. Adoption of new accounting policies

During the year, Health Canada adopted the revised Treasury Board accounting policy TBAS 1.2: Departmental and Agency Financial Statements which is effective for the department for the 2010-11 fiscal year. The major change in the accounting policies of the department required by the adoption of the revised TBAS 1.2 is the recording of amounts due from the Consolidated Revenue Fund as an asset on the Statement of Financial Position.

The adoption of the new Treasury Board accounting policies have been accounted for retroactively with the following impact on comparatives for 2009-10:

13. Comparative information

Comparative figures have been reclassified to conform to the current year’s presentation.