Management Statement for the Quarter Ending September 30, 2011 Outlining Results, Risks and Significant Changes in Operations, Personnel and Programs

1. Introduction
2. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results
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 (TB). This report will not be subject to an external audit or review.

1.1 Public Health Agency of Canada’s Program Activities

The primary goals of the Public Health Agency of Canada (PHAC) are to strengthen Canada’s capacity to promote and protect the health of Canadians. 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, at the following link: 2011-12 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, Supplementary Estimates A and Treasury Board allotment transfers for the FY 2010-2011 second quarter end, and the Main Estimates and Treasury Board allotment transfers for second 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 federal 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. Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

This section highlights the significant items that contributed to the net increase or decrease in resources available for the year and actual expenditures for the quarter ended September 30, 2011.

Text equivalent of Highlights of Fiscal Quarter and Fiscal Year to Date (YTD) Results

2.1 Significant Variances by Vote:

Vote 40 - Operating Expenditures

The operating authorities available for use in FY 2011-2012 are $387.3M, representing a decrease of 10.3% from $431.9M in FY 2010-2011. The most significant decreases in authorities for FY 2011-2012 include the influenza fill line of $20M, the sunsetting of $11.2M of deferred funding for vaccine readiness and clinical trials, strategic review savings of $6.3M identified in Budget 2009, and a decrease of $7.9M related to the JC Wilt Infectious Diseases Research Centre in Winnipeg. The variance was partially offset by an increase in funding of $7.6M for listeriosis.

Operating expenditures in the second quarter of FY 2011-2012 were $92.3M, an increase of $10.5M or 13% from $81.8M in the same quarter of the previous year. This increase is primarily attributed to $8.8M in severance payout due to revisions to specified collective agreements. As a result, YTD operating expenditures of $155.1M in FY 2011-2012 represent an increase from $145.4M in the prior year.

Vote 45 - Capital Expenditures

Total capital authorities available for use in FY 2011-2012 have decreased by 28.6%, from $36.8M in the FY 2010-2011, to $26.3M. This decrease is primarily due to the completion of the Modernization of Federal Laboratories (MFL) project in the amount of $19.9M and funding changes in the amount of $3M related to the Avian Pandemic and Human Pathogens programs. These were offset in part by an increase of $9M resulting from the realignment of resources from operating to capital related to the JC Wilt Infectious Diseases Research Centre, and the Capital Budget Carry Forward of $3.4M.

Capital expenditures for the second quarter of FY 2011-2012 were $6.2M, an increase of $1.1M over expenses in the same quarter of FY 2010-2011. The net increase primarily relates to the payment of $4.2M in engineering consulting contracts for the JC Wilt Infectious Diseases Research Centre construction in FY 2011-12, and is offset by a payment in the amount of $2.7M for the Modernization of Federal Laboratories (MFL) in FY 2010-2011. YTD expenditures have also increased from $5.2M in FY 2010-2011 to $9.0M in FY 2011-12.

Vote 50 - Grants and Contributions

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

G&C expenditures for the second quarter of FY 2011-2012 were $48.4M, an increase of $5.7M over the same quarter of the previous year. This increase is due to a combination of several new projects related to the Innovation Strategy, and the end of the Governor General Warrants and the commencement of issuance of semi-annual payment to low-risk recipients.

2.2 Significant Variances by Standard Object:

The only variances are to:

Personnel
In the second quarter of FY 2011-2012, PHAC incurred $74.7M in personnel expenditures as compared to $62.4M in FY 2010-2011 in the same period. This increase of $12.3M or 20% is mainly due to the severance payout resulting from revisions to specified collective agreements.

Professional and Special Services
In the second quarter of FY 2011-2012, PHAC incurred $19M in professional services expenditures as compared to $14.1M in FY 2010-2011 in the same period. This increase of $4.9M or 35% is mainly due to the engineering consulting contract in the amount of $4.0M for the JC Wilt Infectious Diseases Research Centre.

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 activated in these instances.

Budget 2010 announced that the operating budgets of departments would be frozen at their FY 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 - Leading the Way on Jobs and Growth .

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 federal 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

James Libbey
Chief Financial Officer