ARCHIVED - Future-Oriented Statement of Operations for the Canadian Food Inspection Agency (Unaudited)

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Years ending March 31, 2014 and March 31, 2015

Statement of Management Responsibility (Unaudited)

Agency's management is responsible for this future-oriented statement of operations, including responsibility for the appropriateness of the assumptions on which this statement is prepared. This statement is based on the best information available and assumptions adopted as at December 31, 2013 and reflects the plans described in the Report on Plans and Priorities.

Management maintains a system of financial management and internal control designed to provide reasonable assurance that financial information is reliable, that transactions are in accordance with the Financial Administration Act and are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its statement of operations by careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate division of responsibilities, and by communication programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the Agency.

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 is responsible for providing the President with independent and objective advice on the maintenance of adequate control systems and the quality of financial reporting. The Departmental Audit Committee provides this support through oversight of core areas of the Agency's controls and accountabilities.

The future-oriented statement of operations of the Agency has not been audited.

B.A. (Bruce) Archibald, PhD
President

Daniel Paquette
Interim Chief Financial Officer and
Vice-President, Corporate Management Branch

Ottawa, Canada
January 29, 2014

Future-Oriented Statement of Operations (Unaudited)

Year ended March 31
(In thousands of dollars)
Planned Results
2015
Estimated Results
2014
Expenses
Food Safety Program $ 400,261 $ 410,770
Animal Health and Zoonotics Program 112,402 217,828
Plant Resources Program 91,269 102,184
International Collaboration and Technical Agreements 30,911 36,617
Internal Services 130,681 145,618
Total expenses 765,524 913,017
Revenues
Inspection fees 38,465 38,002
Registrations, permits, certificates 8,062 7,966
Miscellaneous fees and services 5,286 5,926
Establishment license fees 1,669 1,609
Administrative monetary penalties 1,409 1,182
Grading 179 158
Interest 32 32
Revenues earned on behalf of Government (1,441) (1,214)
Total revenues 53,661 53,661
Net cost of operations 711,863 859,356

Segmented information (Note 8)

Information for the year ended March 31, 2014 includes actual amounts from April 1, 2013 to December 31, 2013.

The accompanying notes are an integral part of this future-oriented statement of operations.

B.A. (Bruce) Archibald, PhD
President

Daniel Paquette
Interim Chief Financial Officer and
Vice-President, Corporate Management Branch

Ottawa, Canada
January 29, 2014

Notes to the Future-Oriented Financial Statements (Unaudited)

Years ending March 31, 2014 and March 31, 2015

1. Authority and Purposes

The Canadian Food Inspection Agency (the "Agency") was established, effective April 1, 1997, under the Canadian Food Inspection Agency Act. The Act consolidates all federally mandated food and fish inspection services and federal animal and plant health activities into a single agency.

The Agency is a departmental corporation named in Schedule II to the Financial Administration Act and reports to Parliament through the Minister of Health.

The mandate of the Agency is to enhance the effectiveness and efficiency of federal inspection and related services for food, animals and plants. The objectives of the Agency are to contribute to a safe food supply and accurate product information; to contribute to the continuing health of animals and plants; and to facilitate trade in food, animals, plants, and related products.

In delivering its mandate, the Agency operates under the following 4 program activities, supported by internal services:

(a) Food Safety Program: The Food Safety Program aims to mitigate risks to public health associated with diseases and other health hazards in the food supply system and to manage food safety emergencies and incidents. The program achieves its objectives by promoting food safety awareness through public engagement and verification of compliance by industry with standards and science-based regulations. The program delivers initiatives to verify that consumers receive food safety and nutrition information and to mitigate unfair market practices targeting consumers and industry. Collaboration with other governments and stakeholders further enhances the Agency's ability to track, detect and mitigate risks associated with food and the food supply system, including food-borne illness. This program supports public health and instils confidence in Canada's food system.

(b) Animal Health And Zoonotics Program: The Animal Health and Zoonotics Program aims to mitigate risks to Canada's animal resource base, animal feeds and animal products, which are integral to a safe and accessible food supply system as well as to public health. The program achieves its objectives by mitigating risks to Canada's animals (including livestock and aquatic animals) from regulated diseases, managing animal disease emergencies and incidents, mitigating and managing risks to livestock and derived food products associated with feed, promoting animal welfare and guarding against deliberate threats to the animal resource base. The program helps to mitigate risks associated with animal diseases that can be transmitted to humans by controlling diseases within animal populations. This program supports the health of Canada's animal resources and instils confidence in the safety of Canada's animals, animal products and by-products, and production systems.

(c) Plant Resources Program: The Plant Resources Program aims to mitigate risks to Canada's plant resource base, which is integral to a safe and accessible food supply, as well as to public health and environmental sustainability.

The program achieves its objectives by regulating agricultural and forestry products; mitigating risks to the plant resource base (including crops and forests) from regulated pests and diseases; regulating the safety and integrity of seeds, fertilizers and plant products; and managing plant health emergencies and incidents. The program also guards against deliberate threats to the plant resource base, facilitates the introduction of emerging plant technologies and protects the rights of plant breeders. Achieving the objectives of the program instils confidence in Canada's plants, plant production systems and plant products, and contributes to the health of Canada's plant resources.

(d) International Collaboration And Technical Agreements: The CFIA's International Collaboration and Technical Agreements program contributes to a coherent, predictable, and science-based international regulatory framework that facilitates meeting regulatory requirements of importing countries' food, animals and plants, and their products, resulting in the facilitation of multi-billion dollar trade for the Canadian economy. The program achieves its objectives through actively participating in international fora for the development of international science-based rules, standards, guidelines and policies and, the management of sanitary and phytosanitary committees established under international agreements. The CFIA's active promotion of the Canadian science-based regulatory system with foreign trading partners and negotiations to resolve scientific and technical issues contribute to market access.

(e) 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; Communication Services; Legal Services; Human Resources Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Material Management Services; Travel and Other Administrative Services.

The Agency is responsible for the administration and enforcement of the following acts: Agriculture and Agri-Food Administrative Monetary Penalties Act, Canadian Food Inspection Agency Act, Feeds Act, Fertilizers Act, Health of Animals Act, Plant Breeders' Rights Act, Plant Protection Act, Seeds Act, and the Safe Food for Canadians Act, which once enacted, will replace the Canada Agricultural Products Act, Fish Inspection Act, Meat Inspection Act, and Consumer Packaging and Labelling Act (as it relates to food).

In addition, the Agency is responsible for enforcement of the Consumer Packaging and Labelling Act and the Food and Drugs Act as they relate to food, except those provisions that relate to public health, safety, or nutrition.

Operating and capital expenditures are funded by the Government of Canada through parliamentary authorities. Compensation payments under the Health of Animals Act and the Plant Protection Act and employee benefits are authorized by separate statutory authorities. Revenues generated by its operations are deposited to the Consolidated Revenue Fund and are available for use by the Agency.

2. Methodology and Significant Assumptions

The future-oriented statement of operations has been prepared on the basis of the government priorities and the plans of the department as described in the Report on Plans and Priorities.

The main assumptions are as follows:

(a) The Agency's activities will remain substantially the same as for the previous year.

(b) Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue.

(c) Estimated year end information for 2013-14 is used as the opening position for the 2014-15 planned results.

(d) The Agency's statutory authority for compensation payments per Main Estimates is used to estimate the total compensation payments for the fiscal year 2015. As for fiscal year 2014, the actual compensation as of November 2013 as well as expected payments are considered in addition to the base authority from the Main Estimates. Expected payments related to a recent Infectious Salmon Anemia outbreak were estimated at $ 28,700,000. That amount was included for fiscal year 2014 in addition to the payments already posted as of November 30, 2013.

(e) All current expired collective agreements are expected to be ratified in fiscal year 2015 in a manner to allow enough time to process all payments before March 31, 2015. The agreements will include provisions to eliminate accumulation of the severance and offer immediate payouts of the severance already accumulated. 75% of those eligible would opt for an immediate cash-out. The assumptions about the collective agreements renewal and the impact on the severance are in line with Treasury Board Guidance for the future-oriented statement of operations, but do not necessarily reflect any development in the collective bargaining.

(f) The Agency's statutory authority for spending of revenues pursuant to section 30 of the CFIA act per Main Estimate is used to estimate the total of revenues for the fiscal year. The portion available from prior years is added to constitute the amount available for spending.

These assumptions are adopted as at December 31, 2013.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2013-14 and for 2014-15, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this future-oriented statement of operations the Canadian Food Inspection Agency has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the future-oriented statement of operations and the historical financial statements include:

(a) The timing and amounts of acquisitions and disposals of property, plant and equipment may affect gains/losses and amortization expense.

(b) Implementation of new collective agreements.

(c) Economic conditions may affect the amount of revenue earned.

(d) Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.

(e) As a result of future events, the Agency's compensation payments could be higher than the amount established for this statutory item (Refer to note 2 (d)).

(f) The amount of employee severance benefit estimated could lead to material differences between the future-oriented statement and actual results.

(g) As a result of future events, the Agency's revenues could be higher than the amount established for this statutory item (Refer to note 2 (f)). A variance could also be the result of the revenue statutory authority not being revised every year by Treasury Board versus increasing collected revenues of the past few years.

(h) The CFIA's planned spending decreases in fiscal year 2015 primarily due to the implementation of saving initiatives as well as the sunsetting of resources. The Agency will assess the level of resources required and seek renewal as needed for these programs/initiatives when they sunset. Such revisions could lead to increase in resources available and therefore create a variance in expenditures compared to the planned results for fiscal year 2015.

Once the Report on Plans and Priorities is presented, the Canadian Food Inspection Agency will not be updating the forecasts for any changes to appropriations or forecast financial information made in ensuing supplementary estimates.

4. Summary of Significant Accounting Policies

The future-oriented statement of operations has 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 mainly 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. Note 5 provides a reconciliation between the bases of reporting.

(b) Net Cash Provided by Government

The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General of 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 of Canada.

(c) Due from the Consolidated Revenue Fund (CRF)

The amount of due from 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 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 for fees, permits and certificates are recognized in the accounts as the services are provided.

Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. Revenue from external parties for specified purposes is recognized in the period in which the related expenses are incurred.

Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenues.

Revenues earned on behalf of Government of Canada (Administrative monetary penalties and Interest) are non-respendable and are not available to discharge the Agency's liabilities. These revenues are presented as a reduction to the Agency's revenues. While the President 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 Government of Canada and are therefore presented as a reduction of the Agency's revenues.

(e) Expenses

Expenses are recorded on an accrual basis:

Transfer payments are recognized in the year in which the recipient has met the eligibility criteria or fulfilled the terms of a contractual transfer agreement.

Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.

Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.

(f) Employee future benefits

(i) Pension benefits:

The Agency's eligible employees participate in the Public Service Pension Plan (the "Plan"), a multi-employer plan administered by the Government of Canada. Both the employees and the Agency contribute to the cost of the Plan. The Agency's contributions are expensed during the year in which the services are rendered and represent the total pension obligation of the Agency. Under present legislation the Agency is not required to make contributions with respect to actuarial deficits of the Plan.

(ii) Severance benefits:

Eligible employees are entitled to severance benefits, as provided for under labor contracts and conditions of employment. The cost of these benefits is 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 at the Agency level using specific rates provided by the Office of the Chief Actuary of Canada.

(iii) Other future benefit plans:

The Government of Canada sponsors a variety of other future benefit plans from which employees and former employees can benefit during or after employment or upon retirement. The Public Service Health Care Plan and the Pensioners' Dental Services Plan represent the two major future benefit plans available to the Agency's employees.

The Agency does not pay for these programs as they fall under the federal government's financial responsibilities, but the Agency records its share of the annual benefits paid under these programs as a service provided without charge by other government departments. No amount is recorded in the Agency's future-oriented statement of operations with regard to either the actuarial liability of these programs at year end or the annual increase of such liabilities.

(g) Accounts receivable and advances

Accounts receivable and advances are stated at amounts expected to be ultimately realized; a provision is made for receivable 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 future-oriented statement of operations.

(i) Inventory

Inventory consists of laboratory materials, supplies, and livestock held for future program delivery and not intended for re-sale. It is valued at cost. If it no longer has service potential, it is valued at the lower of cost or net realizable value.

(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. Amortization of tangible capital assets is recorded on a straight-line basis over the estimated useful life of the asset as follows:
Asset class Amortization Period
Buildings 20-30 years
Machinery and equipment 5-20 years
Computer equipment and software 3-10 years
Vehicles 7-10 years
Leasehold improvements Lesser of the remaining term of the lease or useful life of the improvement
Assets under construction Once in service, in accordance with asset class

(k) Measurement uncertainty

The preparation of this future-oriented statement of operations requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in the future-oriented statement of operations. 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 severance benefits and the useful life of tangible capital assets. Actual results could significantly differ from those estimated.

5. Parliamentary Authorities

The Agency receives most of its funding through annual Parliamentary authorities. Items recognized in the Future-Oriented Statement of Operations 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) Authorities requested:
(in thousands of dollars)
Planned Results
2015
Estimated Results
2014
Operating expenditures and contributions vote $ 520,497 $ 600,286
Supplementary Operating expenditures voteTable Note 1 94,790 -
Capital expenditures vote 29,479 26,076
Statutory contributions to employee benefits plans 68,373 83,068
Statutory compensation payments (Refer to note 2d) 3,500 58,326
Statutory authority for spending of revenues pursuant to section 30 of the CFIA ActTable Note 2 69,714 83,283
Less:
Authorities available for future years - (16,553)
Lapsed authority – operating - (12,119)
Lapsed authority – capital - (5,215)
Forecast authorities available $ 786,353 $ 817,152

Table Notes

Table Note 1

The supplementary operating expenditures vote comes from an estimate in 2015 made for employee severance benefit for all expired collective agreements that includes provisions to eliminate accumulation of severance with an assumption that 75% of those eligible opted for an immediate cash-out. It also includes an amount of $ 8,700,000 for retroactive payments expected to be funded by Treasury Board. This supplementary vote is not reflected in the Report on Plans and Priorities.

Return to table note 1 referrer

Table Note 2

The statutory authority for spending of revenues includes the portion available from prior years (amounts of $ 30,122,000 and $ 16,553,000 for fiscal years 2014 and 2015 respectively). Those amounts are in addition to the Main Estimates yearly figure of $ 53,161,000 for that statutory authority.

Return to table note 2 referrer

(b) Reconciliation of net cost of operations to requested authorities:
(in thousands of dollars)
Planned Results
2015
Estimated Results
2014
Net cost of operations $ 711,863 $ 859,356
Adjustments for items affecting net cost of operations but not affecting authorities:
Add (less):
Services provided without charge by other government departments (86,277) (84,988)
Amortization of tangible capital assets (32,033) (30,611)
Revenues pursuant to Section 30 of the CFIA act 53,161 53,161
Refunds of prior year expenditures 1,895 2,075
Bad debt (157) (117)
Change in allowance for employee severance benefits 84,231 926
Change in allowance for expired collective agreements 25,868 (11,794)
Change in allowance for workforce adjustment - 6,463
Other net changes in future funding requirements (703) 2,462
Loss on disposal of tangible capital assets (778) (685)
Post-capitalization of tangible capital assets 100 300
45,306 (62,809)
Adjustments for items not affecting net cost of operations but affecting authorities:
Add (less):
Acquisition of tangible capital 29,479 20,861
Proceeds from disposal of tangible capital assets (296) (256)
29,183 20,605
Requested authorities $ 786,353 $ 817,152

6. Employee Benefits

(a) Pension benefits

The Agency's employees participate in the Public Service Pension Plan (the "Plan"), a multi-employer 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/Quebec Pension Plans benefits and are indexed to inflation. Both the employees and the Agency contribute to the cost of 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.

(b) Severance benefits

The Agency provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded and thus have no assets, resulting in a plan deficit equal to the accrued benefit obligation. Benefits will be paid from future authorities. Information about the severance benefits, measured for March 31, is as follows:

(In thousands of dollars)
Planned Results
2015
Estimated Results
2014
Accrued benefit obligation, beginning of year $ 121,766 $ 122,692
Expense (recovery) for the year 4,851 12,645
Benefits paid during the year (Include Cash-out in 2015) (89,082) (13,571)
Accrued benefit obligation, end of year $ 37,535 $ 121,766

7. Related Party Transactions

The Agency is related as a result of common ownership to all Government of Canada departments, agencies, and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms.

Services provided without charge by other government departments:

During the year, the Agency received the employer's contribution to the health and dental insurance plans, accommodation, Shared Services Canada, and legal services, without charge from other government departments. These amounts have been recognized in the Agency's Future-Oriented Statement of Operations and Agency Net Financial Position as follows:

(In thousands of dollars)
Planned Results
2015
Estimated Results
2014
Employer's contribution to the health and dental insurance plans $ 43,123 $ 43,268
Accommodation 31,831 31,466
Legal services 1,535 1,542
Shared Services Canada 9,788 8,713
Total $ 86,277 $ 84,988

8. Segmented information

Presentation by segment is based on the Agency's program activities architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 4. The following table presents the expenses incurred and revenues generated for the main program activities, by major object of expenses and by major type of revenues. The segmented results for the period are as follows

(in thousands of dollars)
2015 2014
Food Safety Program Animal Health and Zoonotics Program Plant Resources Program International Collaboration and Technical Agreements Internal Services Total Total
Revenues
Inspection fees $ 22,276 $ 2,044 $ 4,626 $ 9,519 $ - $ 38,465 $ 38,002
Registrations, permits, certificates 4,669 428 970 1,995 - 8,062 7,966
Miscellaneous fees and services 3,061 281 636 1,308 - 5,286 5,926
Establishment license fees 966 89 201 413 - 1,669 1,609
Administrative monetary penalties - - - - 1,409 1,409 1,182
Grading 103 10 22 44 - 179 158
Interest - - - - 32 32 32
Revenues earned on behalf of Government - - - - (1,441) (1,441) (1,214)
Total revenues 31,075 2,852 6,455 13,279 0 53,661 53,661
Operating Expenses
Salaries and employee benefits 297,882 80,635 67,064 22,371 97,139 565,091 633,863
Professional and special services 33,124 9,251 7,508 2,504 10,875 63,262 73,102
Amortization 16,773 4,684 3,802 1,268 5,506 32,033 30,611
Accommodation 16,557 4,624 3,753 1,252 5,436 31,622 36,540
Travel and relocation 9,499 2,653 2,153 718 3,118 18,141 20,963
Utilities, materials and supplies 9,320 2,603 2,112 705 3,060 17,800 20,569
Repairs 5,472 1,528 1,240 414 1,796 10,450 12,075
Communications 5,029 1,404 1,140 380 1,651 9,604 11,098
Furniture and equipment 4,224 1,180 957 319 1,387 8,067 9,323
Equipment rentals 966 270 219 73 317 1,845 2,132
Information 806 225 183 61 265 1,540 1,778
Loss on disposal of assets 407 114 92 31 134 778 685
Miscellaneous 202 56 46 15 66 385 446
Expenses incurred on behalf of Government - - - - (69) (69) (18)
Total operating expenses 400,261 109,227 90,269 30,111 130,681 760,549 853,167
Transfer Payments
Compensation payments - 2,500 1,000 - - 3,500 58,326
Other - 675 - 800 - 1,475 1,524
Total transfer payments 0 3,175 1,000 800 0 4,975 59,850
Total expenses 400,261 112,402 91,269 30,911 130,681 765,524 913,017
Net cost from continuing operations $ 369,186 $ 109,550 $ 84,814 $ 17,632 $ 130,681 $ 711,863 $ 859,356
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