ARCHIVED - Future-Oriented Financial Statements for the Canadian Food Inspection Agency (Unaudited)

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Years ending March 31, 2015 and March 31, 2016

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, 2014 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 G. Paquette, CPA, CA
Vice-President, CMB and Chief Financial Officer

Ottawa, Canada
January 30, 2015

Future-Oriented Statement of Operations (Unaudited)

Year ended March 31
(In thousands of dollars)
Planned Results 2016 Estimated Results 2015
Expenses
Food Safety Program $ 424,502 $ 421,571
Animal Health and Zoonotics Program 136,953 144,222
Plant Resources Program 90,555 91,077
International Collaboration and Technical Agreements 41,523 42,916
Internal Services 134,562 133,494
Total expenses 828,095 833,280
Revenues
Inspection fees 37,854 38,172
Registrations, permits, certificates 7,713 7,777
Miscellaneous fees and services 6,020 6,070
Establishment license fees 1,707 1,721
Administrative monetary penalties 1,211 1,221
Grading 160 161
Interest 32 32
Revenues earned on behalf of Government (399) (399)
Total revenues 54,298 54,755
Net cost of operations 773,797 778,525

Segmented information (Note 8)

Information for the year ended March 31, 2015 includes actual amounts from April 1, 2014 to December 31, 2014.

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

B.A. (Bruce) Archibald, PhD
President

Daniel G. Paquette, CPA, CA
Vice-President, CMB and Chief Financial Officer

Ottawa, Canada
January 30, 2015

Notes to the Future-Oriented Statement of Operations (Unaudited)

Years ending March 31, 2015 and March 31, 2016

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:

  1. 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 instills confidence in Canada's food system.
  2. 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 instills confidence in the safety of Canada's animals, animal products and by-products, and production systems.
  3. 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 instills confidence in Canada's plants, plant production systems and plant products, and contributes to the health of Canada's plant resources.
  4. International Collaboration and Technical Agreements: The Canadian Food Inspection Agency's International Collaboration and Technical Agreements program contributes to a coherent, predictable, and science-based international regulatory framework that facilitates compliance with the regulatory requirements of importing countries' food, animals, plants, and their products, resulting in the facilitation of multi-billion dollar trade for the Canadian economy. The program achieves its objectives through active participation 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 among foreign trading partners and its negotiations to resolve scientific and technical issues contribute to market access. This program uses funding from the following transfer payment: Federal Assistance Program.
  5. 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. Internal services include only those activities and resources that apply across an organization, and not those provided to a specific program. The groups of activities 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; and Acquisition 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:

  1. The Agency's activities will remain substantially the same as for the previous year.
  2. Expenses, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue.
  3. Estimated year end information for 2014-15 is used as the opening position for the 2015-16 planned results.
  4. The Agency's statutory authority for compensation payments (transfer payments) per Main Estimates is used to estimate the total compensation payments for the fiscal year 2016. As for fiscal year 2015, the actual compensation payments as of December 2014 as well as expected payments are considered in addition to the base authority from the Main Estimates. An estimation of expected payments related to the recent Avian Influenza outbreak in British Colombia is included in the total amount of the Animal Health Program only when the animals have been destroyed or if an order of destruction has been created as of December 31st, 2014.
  5. The larger employee collective agreements have been ratified in fiscal year 2015 and all retroactive payments will be done before March 31, 2015. The agreements included 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 assumption about the impact on the severance is in line with Treasury Board Guidance for the future-oriented statement of operations.
  6. 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 of revenue available from prior years is also added to the current year authorities to constitute the amount available for spending.

These assumptions are adopted as at December 31, 2014.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2014-15 and for 2015-16, 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:

  1. The timing and amounts of acquisitions and disposals of property, plant and equipment may affect gains/losses and amortization expense. There is a possibility that the Agency could receive new capital funding for infrastructure upgrades and for the Electronic Service Delivery Platform in fiscal year 2015-16. That funding has not been approved as of December 31st 2014.
  2. Implementation of new collective agreements.
  3. Economic conditions may affect the amount of revenue earned.
  4. Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.
  5. 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)).
  6. The amount of employee severance benefits (including the cash-out) estimated could lead to material differences between the future-oriented statement and actual results.
  7. 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.

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 for the Future-Oriented Statement of Operations are as follows:

  1. 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.

  2. Revenues

    Revenues for fees, permits and certificates are recognized in the accounts as the services are provided.

    Revenues earned on behalf of Government of Canada 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.

  3. 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.

  4. Employee future benefits
    1. 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.

    2. 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.

    3. 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.

  5. 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.

  6. 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, the compensation payments, 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 2016 Estimated Results 2015
Operating expenditures vote $ 565,149 $ 569,339
Supplementary Operating expenditures vote Table Note 1 - 108,384
Capital expenditures vote 27,959 27,959
Statutory contributions to employee benefits plans 77,958 78,237
Statutory compensation payments (Refer to note 2d) 3,500 6,810
Statutory authority for spending of revenues pursuant to section 30 of the CFIA Act Table Note 2 58,382 89,009
Less:
Authorities available for future years - (4,000)
Lapsed authority – operating (includes $6 million in frozen funds) - (10,000)
Lapsed authority – capital - (2,000)
Forecast authorities available $ 732,948 $ 863,738

Authorities presented reflect current forecasts of statutory items, approved initiatives included and expected to be included in Estimates documents and, when reasonable estimates can be made, estimates of amounts to be allocated from Treasury Board central votes.

Table Notes

Table Note 1

The supplementary operating expenditures vote comes from three elements: First, an estimate of $79,300,000 in 2015 for employee severance benefits for all recently ratified collective agreements that include a provision to eliminate accumulation of severance. Second, supplementary funding of $12,038,229 received for a portion of the salary retroactive payments of those ratified collective agreements. Lastly, an amount of $17,045,772 received for the payment in arrears implementation is also included.

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 $34,627,000 and $4,000,000 for fiscal years 2015 and 2016 respectively). Those amounts are in addition to the Main Estimates figure 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 2016 Estimated Results 2015
Net cost of operations $ 773,797 $ 778,525
Adjustments for items affecting net cost of operations but not affecting authorities:
Add (less):
Services provided without charge by other government departments (83,931) (83,639)
Amortization of tangible capital assets (35,814) (34,108)
Revenues pursuant to Section 30 of the CFIA act 54,382 54,382
Change in allowance for employee severance benefits (164) 77,023
Change in allowance for expired collective agreements (3,113) 27,989
Change in allowance for workforce adjustment - 850
Other net changes in future funding requirements 605 503
Loss on disposal of tangible capital assets (333) (375)
Post-capitalization of tangible capital assets 50 30
(68,318) 42,655
Adjustments for items not affecting net cost of operations but affecting authorities:
Add (less):
Acquisition of tangible capital assets 27,959 25,959
Proceeds from disposal of tangible capital assets (490) (447)
Payment in arrears Table Note 3 17,046
27,469 42,558
Requested authorities $ 732,948 $ 863,738

Table Notes

Table Note 3

The payment in arrears implementation by the Government of Canada resulted in the Agency's appropriation being impacted by $17,045,772. The accounting advance for this transaction has been transferred out using the equity account. The Agency's expenses were not affected, explaining the inclusion of this adjustment in the reconciliation above.

Return to table note 3 referrer

6. Employee Benefits

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:

Severance benefits
(In thousands of dollars)
Planned Results 2016 Estimated Results 2015
Accrued benefit obligation, beginning of year $ 32,849 $ 109,873
Expense (recovery) for the year 1,165 3,276
Benefits paid during the year other than Cash-out (1,000) (1,000)
Cash-out (79,300)
Accrued benefit obligation, end of year $ 33,014 $ 32,849

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:

Related Party Transactions
(In thousands of dollars)
Planned Results 2016 Estimated Results 2015
Employer's contribution to the health and dental insurance plans $ 41,150 $ 41,000
Accommodation 30,431 30,400
Legal services 800 739
Shared Services Canada 11,550 11,500
Total $ 83,931 $ 83,639

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:

Segmented information
(In thousands of dollars)
2016 2015
Food Safety Program Animal Health and Zoonotics Program Plant Resources Program International Collaboration and Technical Agreements Internal Services Total Total
Revenues
Inspection fees $ 22,091 $ 2,268 $ 5,512 $ 7,983 $ 0 $ 37,854 $ 38,172
Registrations, permits, certificates 4,501 462 1,123 1,627 0 7,713 7,777
Miscellaneous fees and services 3,389 361 877 1,270 123 6,020 6,070
Establishment license fees 996 102 249 360 0 1,707 1,721
Administrative monetary penalties 431 73 176 255 276 1,211 1,221
Grading 93 10 23 34 0 160 161
Interest 18 2 5 7 0 32 32
Revenues earned on behalf of Government (399) (399) (399)
Total revenues 31,519 3,278 7,965 11,536 0 54,298 54,755
Operating Expenses
Salaries and employee benefits 321,058 95,105 65,834 34,384 87,919 604,300 607,387
Professional and special services 28,984 14,941 8,013 -1,423 23,040 73,555 73,930
Accomodation 19,045 5,987 4,018 1,793 6,037 36,880 37,069
Amortization 18,495 5,814 3,902 1,741 5,862 35,814 34,108
Travel and relocation 10,166 3,196 2,145 957 3,222 19,686 19,786
Utilities, materials and supplies 9,996 3,142 2,109 941 3,168 19,356 19,454
Communications 5,605 1,762 1,182 528 1,777 10,854 10,910
Repairs 5,148 1,618 1,086 485 1,632 9,969 10,020
Furniture and equipment 3,840 1,208 810 362 1,218 7,438 7,476
Equipment rentals 1,037 326 219 98 329 2,009 2,019
Information 737 231 155 69 233 1,425 1,432
Miscellaneous 219 69 46 21 70 425 427
Loss on disposal of assets 172 54 36 16 55 333 375
Total operating expenses 424,502 133,453 89,555 39,972 134,562 822,044 824,393
Transfer Payments
Compensation payments 2,500 1,000 3,500 6,810
Other 1,000 1,551 2,551 2,077
Total transfer payments 0 3,500 1,000 1,551 0 6,051 8,887
Total expenses 424,502 136,953 90,555 41,523 134,562 828,095 833,280
Net cost of operations $ 392,983 $ 133,675 $ 82,590 $ 29,987 $ 134,562 $ 773,797 $ 778,525
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