Public Health Agency of Canada - Financial Statements for the year ended March 31, 2015

Table of Contents

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2015, 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'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 Performance 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, 2015 was completed in accordance with the Treasury Board Policy on Internal Control 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.

The financial statements of the Agency have not been audited.

Krista Outhwaite
President
Ottawa, Canada
Date: September 3, 2015

Carlo Beaudoin
Chief Financial Officer
Ottawa, Canada
Date: August 14, 2015

Statement of Financial Position (Unaudited)

As at March 31

(in thousands of dollars) 2015 2014
Restated
(note 14)
Liabilities
Accounts payable and accrued liabilities (note 4) $ 47,371 $ 59,076
Vacation pay and compensatory leave 10,709 9,941
Deferred revenue 3 2
Employee future benefits (note 5) 13,590 10,138
Other liabilities 7,654 4,646
Total net liabilities 79,327 83,803
Financial assets
Due from Consolidated Revenue Fund 51,551 58,006
Accounts receivable and advances (note 6) 3,900 5,785
Total gross financial assets 55,451 63,791
Financial assets held on behalf of Government
Accounts receivable and advances (note 6) (612) (592)
Total financial assets held on behalf of Government (612) (592)
Total net financial assets 54,839 63,199
Agency net debt 24,488 20,604
Non-financial assets
Tangible capital assets (note 7) 120,902 127,003
Total non-financial assets 120,902 127,003
Agency net financial position $ 96,414 $ 106,399

Contractual obligations (note 8)
Contingent liabilities (note 9)

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

Krista Outhwaite
President
Ottawa, Canada
Date: September 03, 2015

Carlo Beaudoin
Chief Financial Officer
Ottawa, Canada
Date: August 14, 2015

Statement of Operations and Agency Net Financial Position (Unaudited)

For the Year Ended March 31

(in thousands of dollars) 2015
Planned Results
2015 2014
Restated
(note 14)
Expenses
Public health infrastructure $ 137,457 $ 138,406 $ 140,681
Health promotion and disease prevention 364,761 356,217 308,575
Health security 60,399 63,842 73,649
Internal services 100,387 101,608 111,993
Expenses incurred on behalf of government - (225) (219)
Total expenses 663,004 659,848 634,679
Revenues
Sales of goods and services
Rights and privileges 40 3,791 58
Services of a non-regulatory nature 15,265 14,889 15,482
Lease and use of public property 18 7 18
Interest 2 11 3
Other 8 103 61
Revenues earned on behalf of Government (14,759) (3,979) (353)
Total revenues 574 14,822 15,269
Net cost of operations before government funding and transfers 662,430 645,026 619,410
Government funding and transfers
Net cash provided by Government of Canada - 625,152 633,959
Change in due from Consolidated Revenue Fund - (6,455) (32,330)
Services provided without charge by other government departments (note 10) - 22,812 23,481
Transfer of the transition payments for implementing salary payments in arrears (note 11) - (6,468) -
Transfer of tangible capital assets from/to other government departments - - 5
Transfer of assets and liabilities from Health Canada
(note 12)
- - 157
Net cost (revenue) from operations after government funding and transfers - 9,985 (5,862)
Agency net financial position - Beginning of year - 106,399 100,537
Agency net financial position - End of year - $ 96,414 $ 106,399

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) 2015 2014
Restated
(note 14)
Net cost (revenue) from operations after government funding and transfers $ 9,985 $ (5,862)
Change due to tangible capital assets
Acquisition of tangible capital assets 6,909 11,198
Amortization of tangible capital assets (12,946) (12,116)
Proceeds from disposal of tangible capital assets (5) (55)
Gain (loss) on disposal of tangible capital assets including adjustments (59) 18
Transfer of tangible capital assets from/to other government departments - 5
Transfer of assets and liabilities from Health Canada (note 12) - 124
Total change due to tangible capital assets (6,101) (826)
Change due to prepaid expenses - (60)
Net increase (decrease) in Agency net debt 3,884 (6,748)
Agency net debt - Beginning of year 20,604 27,352
Agency net debt - End of year $ 24,488 $ 20,604

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) 2015 2014
Restated
(note 14)
Operating activities
Net cost of operations before government funding and transfers $ 645,026 $ 619,410
Non-cash items:
Amortization of tangible capital assets (12,946) (12,116)
Gain (loss) on disposal of tangible capital assets including adjustments (59) 18
Services provided without charge by other government departments (note 10) (22,812) (23,481)
Transition payments for implementing salary payments in arrears (note 11) 6,468 -
Variations in Statement of Financial Position:
Decrease (increase) in accounts payable and accrued liabilities 11,705 35,869
Decrease (increase) in vacation pay and compensatory leave (768) (427)
Decrease (increase) in deferred revenue (1) (2)
Decrease (increase) in employee future benefits (3,452) 3,665
Decrease (increase) in other liabilities (3,008) (2,172)
Increase (decrease) in accounts receivable and advances (1,905) 2,145
Increase (decrease) in prepaid expenses - (60)
Transfer of assets from Health Canada (note 12) - (84)
Transfer of liabilities from Health Canada (note 12) - 51
Cash used in operating activities 618,248 622,816
Capital investing activities
Acquisitions of tangible capital assets 6,909 11,198
Proceeds from disposal of tangible capital assets (5) (55)
Cash used in capital investing activities 6,904 11,143
Net cash provided by Government of Canada $ 625,152 $ 633,959

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

Notes to the Financial Statements (Unaudited)

For the Year Ended March 31, 2015

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 the quality and quantity of surveillance data 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 has a sole strategic outcome: Protecting Canadians and empowering them to improve their health. The Agency delivers on its strategic outcome through its key programs described below.

Public Health Infrastructure

The Public Health Infrastructure Program strengthens Canada's public health workforce capability, information exchange, federal/provincial/territorial networks, and scientific capacity. These infrastructure elements are necessary to support effective public health practice and decision making in Canada. Working with federal, provincial and territorial stakeholders and within existing collaborative mechanisms, the Program supports planning for and building consensus on strategic and targeted investments in public health infrastructure, including training, tools, best practices, standards, and mechanisms to facilitate information exchange and coordinated action. Public health laboratories provide leadership in research, technical innovation, reference laboratory services; surveillance; outbreak response capacity; and national laboratory coordination. Through these capacity-building mechanisms and scientific expertise, the Government of Canada facilitates effective coordination and timely public health interventions which are essential to having an integrated and evidence-based national public health system. Key stakeholders include local, regional, provincial and national public health organizations, practitioners and policy makers, researchers and academics, professional associations and non-governmental organizations.

Health Promotion and Disease Prevention

The Health Promotion and Disease Prevention Program aims to promote better overall health of the population--with additional focus on those that are most vulnerable--by promoting healthy development among children, adults and seniors, reducing health inequalities, and preventing and controlling chronic and infectious diseases. Working in collaboration with provinces and territories, the Program develops and implements federal aspects of frameworks and strategies (e.g., Curbing Childhood Obesity: A Federal, Provincial and Territorial Framework for Action to Promote Healthy Weights, national approaches to addressing immunization, HIV/AIDS) geared toward promoting health and preventing disease. The Program carries out primary public health functions of health promotion, surveillance, science and research on diseases and associated risk and protective factors to inform evidenced-based frameworks, strategies, and interventions. It also undertakes health promotion and prevention initiatives working with stakeholders to prevent and mitigate chronic disease and injury, and to help prevent and control infectious disease.

Health Security

The Health Security Program takes an all-hazards approach to the health security of Canada's population, which provides the Government of Canada with the ability to prepare for and respond to public health issues and events. This Program seeks to bolster the resiliency of the population and communities, thereby enhancing the ability to cope and respond. To accomplish this, its main methods of intervention include actions taken through partnerships with key jurisdictions and international partners. These actions are carried out through the implementation and maintenance of International Health Regulations and through the administration and enforcement of legislation, including the Emergency Management Act, the Quarantine Act, the Human Pathogens and Toxins Act and the Human Pathogens Importation Regulations.

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 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. Summary of significant accounting policies

These financial statements have been prepared using the Government'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 Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2014-15 Report on Plans and Priorities. Planned results are not presented in the "Government funding and transfers" section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2014-15 Report on Plans and Priorities.

(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. 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 Agency 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.
  • 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 or she 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 in reduction of the entity's gross revenues.
(e) Expenses

Expenses are recorded on an accrual basis:

  • Transfer payments are recorded as expenses when authorization for the payment exists and the recipient has met the eligibility criteria or the entitlements established for the transfer payment program. In situations where payments do not form part of an existing program, transfer payments are recorded as expenses 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. Transfer payments that become repayable as a result of conditions specified in the contribution agreement that have come into being are recorded as a reduction to transfer payment expense and as a receivable.
  • 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, legal services and workers' compensation 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 (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's obligation to the Plan. The Agency's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.
  2. Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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 accounts receivable where recovery is considered uncertain.

(h) Contingent liabilities

Contingent liabilities are potential liabilities that 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 if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(i) 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. The Agency does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

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

Amortization by asset class
Asset class Sub-asset class Amortization period
Buildings Buildings 25 years
Works and infrastructure Works and infrastructure 25 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 capital asset class in the year that they become available for use and are not amortized until they become available for use.
(j) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported 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, the liability for employee future benefits, allowance for doubtful accounts 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.

3. Parliamentary authorities

The Agency receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Financial Position and the Statement of Operations and Agency Net Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the Agency has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to current year authorities used:
(in thousands of dollars) 2015 2014
Restated
(note 14)
Net cost of operations before government funding and transfers $ 645,026 $ 619,410
Adjustments for items affecting net cost of operations but not affecting authorities:
Amortization of tangible capital assets (12,946) (12,116)
Gain (loss) on disposal of tangible capital assets (59) 18
Services provided without charge by other government departments (22,812) (23,481)
Decrease (increase) in vacation pay and compensatory leave (768) (427)
Decrease (increase) in employee future benefits (3,452) 3,687
Refund/adjustment of previous year's expenditures 4,230 5,135
Bad debt expense (237) (241)
Decrease in Workforce adjustment measures 262 3,426
Statutory spending authority equivalent to revenues earned 14,060 14,764
Other 223 160
Total items affecting net cost of operations but not affecting authorities (21,499) (9,075)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets 6,909 11,198
Increase (decrease) in prepaid expenses - (60)
Proceeds from disposal of Crown assets 64 25
Transition payments for implementing salary payments in arrears (note 11) 6,468 -
Total items not affecting net cost of operations but affecting authorities 13,441 11,163
Current year authorities used $ 636,968 $ 621,498
(b) Authorities provided and used:
(in thousands of dollars) 2015 2014
Authorities provided:
Vote 1 - Operating expenditures $ 365,834 $ -
Vote 5 - Capital expenditures 8,760 -
Vote 10 - Grants and contributions 251,102 -
Vote 45 - Operating expenditures - 375,400
Vote 50 - Capital expenditures - 13,849
Vote 55 - Grants and contributions - 208,048
Statutory amounts 41,727 43,830
Less:
Authorities available for future years (8) (6)
Lapsed authorities (30,447) (19,623)
Current year authorities used $ 636,968 $ 621,498

4. Accounts payable and accrued liabilities

The following table presents details of the Agency's accounts payable and accrued liabilities:

(in thousands of dollars) 2015 2014
Accounts payable - External parties $ 19,341 $ 32,999
Accounts payable - Other government departments and agencies 2,797 6,564
Total accounts payable 22,138 39,563
Accrued liabilities 25,233 19,513
Total accounts payable and accrued liabilities $ 47,371 $ 59,076

In Canada's Economic Action Plan 2012, the Government announced savings measures to be implemented by departments over the next three fiscal years starting in 2012-13. As a result, the Agency has recorded at March 31, 2015, an obligation for termination benefits for an amount of $210 thousand ($472 thousand in 2013-14) as part of accrued liabilities to reflect the estimated workforce adjustment costs.

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% 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 Canada's 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 2014-15 expense amounts to the following:

(in thousands of dollars) 2015 2014
Expense for the year $ 19,913 $ 21,551

For Group 1 members, the expense represents approximately 1.41 times (1.60 times in 2013-14) the employee contributions and, for Group 2 members, approximately 1.39 times (1.50 times in 2013-14) 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 financial statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

The Agency provides severance benefits to its employees based on eligibility, years of service and salary at termination of employment. These severance benefits are not pre-funded. Benefits will be paid from future authorities.

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Information about the severance benefits, measured as at March 31, is as follows:

(in thousands of dollars) 2015 2014
Accrued benefit obligation - Beginning of year $ 10,138 $ 13,803
Transferred from Health Canada (note 12) - 22
Subtotal 10,138 13,825
Provision for the year 5,416 3,654
Benefits paid during the year (1,964) (7,341)
Accrued benefit obligation - End of year $ 13,590 $ 10,138

6. Accounts receivable and advances

The following table presents details of the Agency's accounts receivables and advances balances:

(in thousands of dollars) 2015 2014
Restated
(note 14)
Accounts receivable - External parties $ 2,552 $ 2,049
Accounts receivable - Other government departments and agencies 2,931 5,088
Employee advances 11 10
Subtotal 5,494 7,147
Allowance for doubtful accounts on receivables from external parties (1,594) (1,362)
Gross accounts receivable and advances 3,900 5,785
Accounts receivable held on behalf of Government (612) (592)
Net accounts receivable and advances $ 3,288 $ 5,193

7. Tangible capital assets

Capital assets Opening Balance Acquisitions Disposals/write-downs Transfers and adjustments Closing Balance
(in thousands of dollars)
Land $ 604 $ - $ - $ - $ 604
Buildings 131,927 528 - 118 132,573
Works and infrastructure 965 - - - 965
Machinery and equipment 88,218 3,434 (445) 301 91,508
Vehicles 2,914 71 - (32) 2,953
Assets under construction 12,452 2,876 - (450) 14,878
Total $ 237,080 $ 6,909 $ (445) $ (63) $ 243,481
Accumulated amortization Opening Balance Amortization Disposals/write-downs Transfers and adjustments Closing Balance
(in thousands of dollars)
Buildings $ 51,405 $ 5,285 $ - $ - $ 56,690
Works and infrastructure 252 39 - - 291
Machinery and equipment 56,720 7,334 (382) (31) 63,641
Vehicles 1,700 288 - (31) 1,957
Total $ 110,077 $ 12,946 $ (382) $ (62) $ 122,579
Tangible capital assets net book value Net Book Value
2014
Net Book Value
2015
(in thousands of dollars)
Land $ 604 $ 604
Buildings 80,522 75,883
Works and infrastructure 713 674
Machinery and equipment 31,498 27,867
Vehicles 1,214 996
Assets under construction 12,452 14,878
Total $ 127,003 $ 120,902

Transfers from assets under construction represent assets that were put into use in the year and have been transferred to the other capital asset classes as applicable.

8. Contractual obligations

The nature of the Agency's activities can 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) Transfer payments Operating contracts Total
2015-16 $ 158,995 $ 9,200 $ 168,195
2016-17 155,308 9,800 165,108
2017-18 2,834 9,800 12,634
2018-19 702 9,800 10,502
2019-20 and thereafter - 19,600 19,600
Total $ 317,839 $ 58,200 $ 376,039

9. 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 other 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.

10. Related party transactions

The Agency is related as a result of common ownership to all government departments, agencies, and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Agency received common services which were obtained without charge from other government departments as disclosed below.

(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 in the Agency's Statement of Operations and Agency Net Financial Position as follows:

(in thousands of dollars) 2015 2014
Employer's contribution to the health and dental insurance plans $ 15,478 $ 15,972
Accommodation 7,291 7,508
Legal services 43 1
Total $ 22,812 $ 23,481

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 Works and Government Services 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) 2015 2014
Accounts payable - Other government departments and agencies $ 2,797 $ 6,564
Accounts receivable - Other government departments and agencies 2,931 5,088
Expenses - Other government departments and agencies 74,331 82,178
Revenues - Other government departments and agencies 14,194 14,804

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

11. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-15. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the Agency. However, it did result in the use of additional spending authorities by the Agency. Prior to year end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Works and Government Services Canada, who is responsible for the administration of the Government pay system.

12. Transfers from/to other government departments

Effective April 1, 2013, responsibility for the control and supervision of the Travelling Public Program Unit was transferred from Health Canada to the Agency in accordance with Order in Council P.C. 2013-0341, including the stewardship responsibility for the assets and liabilities related to the program.

(in thousands of dollars)
Assets
Account receivable $ 84
Tangible capital assets (net book value) 124
Total assets transferred 208
Liabilities
Accounts payable and accrued liabilities 29
Employee future benefits 22
Total liabilities transferred 51
Adjustment to the Agency net financial position $ 157

13. Segmented information

Presentation by segment is based on the Agency's program alignment architecture. 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) Public health infrastructure Health promotion and disease prevention Health security Internal Services 2015
Total
2014 Total
Restated
(note 14)
Expenses
Transfer payments $ 23,749 $ 223,459 $ - $ - $ 247,208 $ 202,484
Salaries and employee benefits 72,433 97,283 31,935 31,929 233,580 228,459
Professional and special services 7,468 25,348 20,882 57,052 110,750 126,685
Utilities, material and supplies 11,561 964 6,971 137 19,633 30,137
Information services 1,435 2,706 228 10,480 14,849 13,223
Amortization of tangible capital assets 12,222 37 648 39 12,946 12,115
Accommodation 3,089 3,047 1,011 977 8,124 10,001
Travel and relocation 2,409 2,333 1,533 686 6,961 6,497
Repair and maintenance 2,719 36 196 12 2,963 2,915
Rentals 531 649 229 166 1,575 1,235
Communication 618 127 172 14 931 857
Other 172 228 37 (121) 316 49
Bad debts - - - 237 237 241
Expenses incurred on behalf of government - - - (225) (225) (219)
Total expenses 138,406 356,217 63,842 101,383 659,848 634,679
Revenues
Sales of goods and services
Rights and privileges 3,791 - - - 3,791 58
Services of a non-regulatory nature - - 3,001 11,888 14,889 15,482
Lease and use of public property 7 - - - 7 18
Interest - - - 11 11 3
Other 40 8 43 12 103 61
Revenues earned on behalf of Government (3,838) (8) (97) (36) (3,979) (353)
Total revenues - - 2,947 11,875 14,822 15,269
Net cost of operations before government funding and transfers $ 138,406 $ 356,217 $ 60,895 $ 89,508 $ 645,026 $ 619,410

14. Adjustment to prior year's results

During the preparation of the current year's financial statements there was a reinterpretation of the application of Treasury Board Accounting Standards as they relate to the calculation of Financial assets held on behalf of Government. Consequently, the comparative financial statements presented for the year ended March 31, 2014 have been restated. The effect of the adjustment is presented in the table below.

(in thousands of dollars) 2014
As previously stated
Effect of change 2014
Restated
Statement of Financial Position
Total financial assets held on behalf of Government $ (5,570) $ 4,978 $ (592)
Total net financial assets 58,221 4,978 63,199
Agency net debt 25,582 (4,978) 20,604
Agency net financial position 101,421 4,978 106,399
Statement of Operations and Agency Net Financial Position
Expenses incurred on behalf of Government $ (234) $ 15 $ (219)
Net cost of operations before government funding and transfers 619,395 15 619,410
Net cash provided by Government 632,014 1,945 633,959
Net cost (revenue) from operations after government funding and transfers (3,932) (1,930) (5,862)
Agency net financial position - Beginning of year 97,489 3,048 100,537
Agency net financial position - End of year 101,421 4,978 106,399
Statement of Change in Agency Net Debt
Net cost (revenue) from operations after government funding and transfers $ (3,932) $ (1,930) $ (5,862)
Net increase (decrease) in Agency net debt (4,818) (1,930) (6,748)
Agency net debt - Beginning of year 30,400 (3,048) 27,352
Agency net debt - End of year 25,582 (4,978) 20,604
Statement of Cash Flows
Net cost of operations before government funding and transfers $ 619,395 $ 15 $ 619,410
Increase (decrease) in accounts receivable and advances 215 1,930 2,145
Cash used in operating activities 620,871 1,945 622,816
Net cash provided by Government of Canada 632,014 1,945 633,959
Note 3 (a)
Net cost of operations before government funding and transfers $ 619,395 $ 15 $ 619,410
Other 175 (15) 160
Note 6 - Accounts receivable and advances
Accounts receivable held on behalf of Government $ (5,570) $ 4,978 $ (592)
Net accounts receivable and advances 215 4,978 5,193
Note 13
Expenses incurred on behalf of Government $ (234) $ 15 $ (219)
Net cost of operations before government funding and transfers 619,395 15 619,410

Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting - Assessment of Internal Controls Over Financial Reporting and Action Plan for The Fiscal Year Ended March 31, 2015

1. Introduction

This document provides summary information on the measures taken by the Public Health Agency of Canada (or the "Agency") to maintain an effective system of internal control over financial reporting (ICFR) including information on internal control management, assessment results and related action plans.

Detailed information on the Agency's authority, mandate and program activities can be found in the 2014 15 Departmental Performance Report and the 2014-15 Report on Plans and Priorities.

2. The 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. A departmental internal control over financial reporting framework, approved by the Deputy Minister and the Chief Financial Officer, is in place and includes:

  • Organizational Accountability Structures: Establish the means by which the leading authorities at the Agency, i.e. Deputy Minister, Chief Financial Officer, Chief Audit Executive, the external Departmental Audit Committee, Assistant Deputy Ministers and Governance Committees,  ensure proper accountability, stewardship and transparency in the conduct of financial management, risk and internal control, and stewardship over resources.
  • Values and Ethics: The Agency adheres to the Values and Ethics Code for the Public Sector and has implemented its internal Code of Conduct, which provides mechanisms for listening to employee concerns, ensuring broad training on values and ethics issues, and linking values and ethics to integrated risk management.
  • Ongoing Communication and Training: Ensure that all Agency employees are informed and trained on statutory requirements, policies and procedures for sound financial management and controls.
  • Monitoring, Regular Updates and Assessments:  Ensure that internal controls are monitored through ongoing assessments and updated as required.  Results of such assessments are reported to the Deputy Minister, the Agency's Senior Management, and the Departmental Audit Committee (DAC) with action plans to remediate any deficiencies.  The DAC meets four times annually and provides advice to the Deputy Minister 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 of certain transactions that are recorded in its financial statements as follows:

Common Arrangements

  • Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries and the procurement of goods and services, in accordance with the Agency's Delegation of Authority, and provides accommodation services.
  • The Treasury Board of Canada Secretariat provides the Agency with information used to calculate various accruals and allowances, such as the accrued severance liability.
  • The Department of Justice provides legal services to the Agency.

Specific Arrangements

  • Through a Shared Services Partnership Agreement, Health Canada provides the Public Health Agency of Canada (PHAC) services including the following related to ICFR: human resources (pay and benefits), financial management (financial operations) and materiel management (procurement and contracting).  Assurance on the shared controls of these services is provided by Health Canada to the Agency through this Annex. Under this agreement, the Agency also provides HC with internal audit services which encompass audits related to financial management and controls.
  • Shared Services Canada provides information technology (IT) infrastructure services in the areas of data centre and network services to Health Canada. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and Health Canada. These services are also provided to the Agency and addressed in an arrangement between Health Canada and the Agency.
  • Health Canada provides the Agency with a financial system platform (SAP) to capture and report all financial transactions. Health Canada also provides the Agency with results of the assessment of key controls in the SAP system and whether they are properly managed in accordance with the associated Treasury Board policies including the Policy on Internal Control, the Policy on the Stewardship of Financial Management Systems and the Policy on Financial Resource Management, Information and Reporting.
  • Agriculture and Agri-Food Canada provides platform access to its human resources management system of record (PeopleSoft) to Health Canada. These services are also provided to the Agency and addressed in an arrangement between Health Canada and the Agency.
  • Aboriginal Affairs and Northern Development Canada (AANDC) provides host services to Health Canada on their Grant and Contribution Information Management System (GCIMS). These services are also provided to the Agency and addressed in an arrangement between Health Canada and the Agency.

3.The Agency's assessment results during fiscal year 2014-15

The Agency implemented an ongoing risk-based monitoring program over several key control areas in conjunction with Health Canada through the Shared Services Partnership Agreement, and initiated design effectiveness testing over the Agency's remaining key control areas.

3.1. Design effectiveness testing of key controls

In 2014-15, the Agency initiated the design effectiveness testing of the following processes: Entity Level Controls; Budget; Revenue, Receivables and Receipts; and Inventory. Remediation of key control deficiencies was also initiated in some of these control areas.

3.2. Ongoing monitoring of key controls

In 2014-15, ongoing monitoring was completed as planned for the following processes relevant to the Agency: Capital Assets; and Financial Statements, Year End and Reporting. Monitoring was also conducted on some Information Technology General Controls related to access and program change.

Key controls tested as part of the ongoing risk-based monitoring plan in 2014-15 were found to be operating effectively with no significant deficiencies identified.  Opportunities for improvement in the area of periodic review of system user access were identified and are being addressed:

  • The employee departure application needs to be used consistently; and
  • The periodic review of system user access could be enhanced.

As part of its ongoing risk-based monitoring plan, the Agency reassesses key controls affected by new or significantly amended processes. A new system for the management and reporting of transfer payments was implemented in 2014-2015.  The Grants and Contribution Information Management System (GCIMS) is hosted by Aboriginal Affairs and Northern Development Canada (AANDC).  Working collaboratively with AANDC, the Agency has updated the design and will monitor the operating effectiveness of key controls being amended in the Grants and Contributions process of the Agency.

4. The Agency's action plan

4.1. Progress during fiscal year 2014-15

During 2014-15, the Agency continued to make significant progress in assessing and improving its key controls. The following table summarizes the Agency's progress based on the plans identified in the previous fiscal year's annex.

Progress During Fiscal Year 2014-15
Element in previous year's action plan Status
Completion of the Agency's Risk Assessment and Scoping Analysis
  • Completed as planned
Initiate Design Effectiveness Testing of Several Control Areas (Entity Level Controls; Budget; Revenue, Receivables and Receipts; and Inventory)
  • Completed as planned
Financial Statements, Year End and Reporting: Ongoing monitoring
  • Completed as planned
Capital Assets: Ongoing monitoring
  • Completed as planned
Grants and Contributions: Ongoing monitoring
  • Significantly amended key controls in the existing process in 2014-15 which required a reassessment; design effectiveness testing is in progress.

In addition to the ongoing monitoring work that was planned in the rotational ongoing risk-based monitoring plan for 2014-15, some ongoing risk-based monitoring testing of Information Technology General Controls was also conducted in the areas of access and change management.

4.2. Status and action plan for the next fiscal year and subsequent years

Building on progress to date, the Agency is positioned to complete the full assessment of its system of internal control over financial reporting in 2016-17. At that time, the Agency will be applying its rotational ongoing monitoring plan to reassess control performance on a risk basis across all control areas. The status and action plan for the completion of the identified control areas for the next fiscal year and for subsequent years are shown in the following table.

Status and Action Plan for the Next Fiscal Year and Subsequent Years
Key Control Areas Design effectiveness testing and remediation Operational effectiveness testing and remediation Ongoing monitoring rotation (*)
Entity Level Controls 2015-16 2015-16 2016-17
Budget 2015-16 2015-16 2016-17
Financial Statements, Year End and Reporting Complete Complete Rotation in Effect
(2015-16)
Revenue, Receivables and Receipts 2015-16 2015-16 2016-17
Purchasing, Payables and Payments Complete Complete Rotation in Effect
(2015-16)
Grants and Contributions 2015-16 2015-16 2016-17
Payroll Complete Complete Rotation in Effect
(2015-16)
Capital Assets Complete Complete Rotation in Effect
(2016-17)
Inventory 2015-16 2016-17 2017-18
Information Technology General Controls Complete Complete Rotation in Effect
(2015-16)
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