Financial Statements For the year ended March 31, 2012

Annex to the Statement of Management Responsibility Including Internal Control Over Financial Reporting

1. Introduction

This document is attached to the Public Health Agency of Canada’s (PHAC) Statement of Management Responsibility Including Internal Control over Financial Reporting (ICFR) for the fiscal year ended March 31, 2012. As required by the Treasury Board Policy on Internal Control (PIC), this document provides summary information on the measures taken by management to maintain an effective system of ICFR. In particular, it provides summary information on the assessments conducted by the Agency as at March 31, 2012, including progress, results and related action plans, including key financial highlights pertinent to understanding the control environment unique to the Agency.  This is the first year of publication of this Annex by the Agency.

1.1  Authority, Mandate and Program Activities

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

1.2  Financial highlights

Below is key financial information for fiscal year 2011-2012. More information can be found in the Agency's Financial Statements (unaudited) and the Notes to Financial Statements.  Information can also be found in the Public Accounts of Canada.

• The Agency had approximately 2,700 employees, with salary costs including Employee Benefit Plans (EBP) representing about 38% of total authorized spending.
• The Agency had $193 million in transfer payments, representing 28% of total authorized spending.
• Net Book Value of tangible capital assets comprises 58% of total assets.
• The Agency had a regional presence of approximately 27% of the Agency’s total employees with the remaining 73% located in the National Capital Region (NCR). 
• There are a number of information systems that are critical to Agency operations and financial reporting such as SAP (Systems, Applications, and Products in data processing) which is the Agency’s financial system of records, a transfer payment management system, an Agency Contract Requisition and Reporting System, Salary Management System and PeopleSoft.

1.3 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:

Common Arrangements

• Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries and the procurement of goods and services, as per the Agency’s Delegation of Authority.
• Treasury Board Secretariat provides the Agency with information that is used to calculate various accruals and allowances, such as the accrued severance liability.
• The Department of Justice provides legal services to the Agency.
• Shared Services Canada (SSC) was created on August 4, 2011 to consolidate, streamline and improve the government’s information technology (IT) infrastructure services, specifically email, data centre and network services for 43 federal departments and agencies. Effective November 15, 2011, the responsibility for email, and for data centre and network services, including associated resources, was transferred from the Agency to SSC. The administration and delivery of these services were shared during the 2011-12 transition period while SSC was being established.

Specific Arrangements

• The Agency, pursuant to a Memorandum of Agreement, relies on Health Canada for a number of its key financial systems, processes and controls.  As part of the Memorandum, Health Canada provides and manages the Agency’s financial system of record (SAP) and its grants and contributions management system. As part of the Memorandum as well, Health Canada provides accounts payable and centralized accounting and reporting functions to the Agency in the NCR and in various Regional Offices of the Agency. In providing its own assurance that the key controls related to these systems are well managed, the Agency relies on the various key controls embedded in these Health Canada provided systems and services, which are documented and assessed in the Health Canada Annex.
• The Agency, pursuant to a Memorandum of Agreement, relies on Agriculture and Agri-Food Canada for its human resources management system of record (PeopleSoft).  This system, launched in November 2011, manages and tracks Classification, Staffing, Compensation, and Security activities as well as Service Leave.  In providing its own assurance that the key controls related to this system are well managed, the Agency relies on the various key controls embedded in this system, which are documented and assessed in the Agriculture and Agri-Food Canada Annex.

1.4 Material changes in fiscal year 2011-2012

Changes impacting the Financial Resources

In 2011-2012, significant changes to the Agency’s authorities were as follows:

• An increase of $7.6 million to enhance the ability to prevent, detect and respond to outbreaks of food‑borne illness;
• A decrease of $20.6 million to reflect the completion of the project to modernize the National Microbiology Laboratory;
• A decrease of $20.0 million in incremental funding to support the installation of a new influenza fill line pending completion of plans;
• A deferral of $7.3 million from 2010-11 to 2011-12 for the Canadian HIV Vaccine Initiative;
• A scheduled decrease of $6.6 million in funding to better prepare for and respond to the threat of avian and pandemic influenza;
• A decrease of $6.3 million related to the 2008 Strategic Review;
• The Agency also received funding during 2011-12 for short-term replenishment of the National Antiviral Stockpile $16 million; $7.8 million for Pandemic readiness and influenza vaccine, and $18.1million operating budget carry forward from 2010-11;
• The Agency changed its operations in response to the creation of Shared Services Canada, including transferring of certain IT functions and associated staff; and financial sources (deemed appropriation of $2.6 million for 2011-12); and
• The Agency renewed its sunsetting programs, of which the major items include: Genomics Research & Development Initiative ($1.9 million for 2011-12). Funding to help Canadians adapt to the impacts of climate change under Canada’s Clean Air Agenda ($1.5 million for 2011-2012).

In 2011-2012, there were no changes in the Deputy Head and the Chief Financial Officer positions.