Management Statement for the Quarter Ending June 30, 2011 outlining results, risks and significant changes in operations, personnel and programs

1. Introduction
2. Statement of Authorities
3. Risks and Uncertainties
4. Significant Changes in Relation to Operations, Personnel and Programs

1. Introduction

This quarterly report should be read in conjunction with the Main Estimates and Supplementary Estimates A. It has been prepared as required by section 65.1 of the Financial Administration Act, and in the form and manner prescribed by the Treasury Board. This report will not be subject to an external audit or review.

1.1 PHAC’s program activities

The primary goals of the Public Health Agency of Canada (PHAC) are to strengthen Canada’s capacity to protect and improve the health of Canadians, and to help reduce pressures on the health-care system. This mandate is fulfilled by the promotion of health; prevention and control of chronic diseases and injuries; prevention and control of infectious diseases; preparing and responding to public health emergencies; and strengthening public health capacity in a manner consistent with a shared understanding of the determinants of health and of the common factors that maintain health or lead to disease and injury.

Further details on PHAC’s authority, mandate and program activities may be found in PHAC’s Main Estimates 2011-2012, available on the following link: 2011-2012 Part I and II - Main Estimates

1.2 Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes PHAC’s spending authorities granted by Parliament and those used by the department, consistent with the Main Estimates and Supplementary Estimates A for the 2010-2011 first quarter end, and the Main Estimates for first quarter end for the current FY 2011-2012. This quarterly report has been prepared using a special-purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before moneys can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation of statutory spending authority for specific purposes.

As part of the departmental performance reporting process, PHAC prepares its annual departmental financial statements on a full accrual basis in accordance with the Treasury Board accounting policies, which are based on Canadian Generally Accepted Accounting Principles (GAAP) for the public sector. However, the spending authorities voted by Parliament are prepared on an expenditure basis.

2. Statement of Authorities

2.1 Highlights of Fiscal Quarter and Fiscal Year to Date Results

Text Equivalent

2.2 Significant Variances by Vote:

Vote 40 Operating expenditures

The Operating authorities available for use in FY 2010-2011 are $414.3M, representing 10.9% more than $369.2M in FY 2011-2012. The most significant decreases in authorities for 2011-2012 include the influenza fill line of ($20M), sunset of deferred funding for vaccine readiness and clinical trials ($11.2M), strategic review savings identified in Budget 2009 ($6.3M), and a decrease related to the JC Wilt Infectious Diseases Research Centre in Winnipeg ($7.9M). The variance was partially offset by an increase in funding for listeriosis of $7.6M.

No significant variances exist in Actual Operating expenditures on a Q1 Year over Year basis.

Vote 45 Capital expenditures

The total capital available for use in FY 2011-2012 is $22.9M, and in FY 2010-2011 it was $36.8M. This represents a 37.8% decrease in budget, primarily due to the sunsetting of funds for the Modernization of Federal Laboratories (MFL) of ($19.9M), other changes relating to the Avian Pandemic and Human Pathogens programs of ($3M). These were mitigated in part by an increase of $9M due to the realignment of resources from operating to capital relating to the JC Wilt Infectious Diseases Research Centre.

Capital expenditures for Q1 2011-2012 were $2.9M versus Q1 2010-2011 actual capital expenditures of $148K. This variance is primarily attributed to $2.5M in engineering consulting contracts paid during Q1 of 2011-2012 relating to the JC Wilt Infectious Diseases Research Centre construction.

Vote 50 Grants and Contributions

Grants and Contributions (G&C) available to use in FY 2011-2012 are $196.3M and in FY 2010-2011 were $206M, for a net decrease of ($9.7M). The most significant decreases consist of the transfer out for Breast Cancer Research to CIHR of ($3M) and deferment of funding to subsequent fiscal years and transfer to HC for the Canadian HIV Vaccine Initiative ($7.2M). The decrease is partially offset by the increase in the Aboriginal Head Start program of $3M.

2.3 Significant Variances by Standard Object:

Departmental budgetary expenditures by Standard Object (unaudited)

	Fiscal year 2011-2012			Fiscal year 2010-2011
(in thousands of dollars)	Planned expenditures for the year ending March 31, 2012 *	Expended during the quarter ended June 30, 2011	Year to date used at quarter-end	Planned expenditures for the year ended March 31, 2011 *	Expended during the quarter ended June 30, 2010	Year to date used at quarter-end
* Includes only authorities available for use and granted by Parliament at quarter end.
Expenditures:
Personnel	225,177	57,507	57,507	222,623	54,574	54,574
Transportation and communications	25,790	2,306	2,306	25,840	3,025	3,025
Information	9,409	111	111	5,516	346	346
Professional and special services	76,299	7,492	7,492	126,685	6,389	6,389
Rentals	11,292	869	869	8,357	914	914
Repair and maintenance	8,556	742	742	9,111	910	910
Utilities, materials and supplies	32,297	1,528	1,528	35,144	2,021	2,021
Acquisition of lands, buildings and works	15,015	44	44	30,244	2	2
Acquisition of machinery and equipment	7,100	597	597	7,665	481	481
Transfer payments	196,321	44,864	44,864	206,020	44,341	44,341
Other subsidies and payments	15,476	3,025	3,025	11,736	2,947	2,947
Total gross budgetary expenditures	622,732	119,085	119,085	688,941	115,947	115,947
Less revenues netted against expenditures:
Services Non-Regulatory	50	1	1	50	1	1
Total Revenues netted against expenditures	50	1	1	50	1	1
Total net budgetary expenditures	622,682	119,084	119,084	688,891	115,946	115,946

No significant variances exist by Standard Object other than in:

Professional and Special Services

In Q1 2010-2011, PHAC incurred $6.4M in professional services expenditures as compared to $7.5M in FY 2011-2012 Q1. This increase of $1.1M or 17% is due to the engineering consulting contract for JC Wilt Infectious Diseases Research Centre in the amount of $2.5M in FY 2011-2012. Furthermore, professional service contracts were reduced during the election period as Governor General special warrants were required to authorize expenditures.

3. Risks and Uncertainties

The dominant risks faced by PHAC relate to financial constraints associated with the need to respond to unforeseeable events such as H1N1. Significant surge capacity would need to be stood up in these instances.

This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to the Main Estimates for which full supply was released on June 27, 2011.

Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-2011 levels for the fiscal years 2011-2012 and 2012-2013. Management is reviewing various options to adjust to this constraint in funding. For further details on the 2010 Budget, please visit Budget 2010 - Canada's Economic Action Plan: Year 2 .

Mitigation Strategies

As a means of managing this risk, PHAC continues to strengthen its preparation and responsiveness to public health emergencies and public health capacity. In an emergency situation, PHAC would first consider internal re-allocation of resources in order to address unforeseeable events. The Government also has systems and processes in place for Departments to access funds, should an emergency arise.

4. Significant Changes in Relation to Operations, Personnel and Programs

There have been no significant changes in relation to operations, personnel and programs over the last year.

Approved by,

Dr. David Butler-Jones
Deputy Head

Mr. Jim Libbey
Chief Financial Officer