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

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Years ending March 31, 2016 and March 31, 2017

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, 2015 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

Ottawa, Canada
January 22, 2016

Dominique Osterrath, CPA, CA
Acting Vice-President, CMB and Chief Financial Officer

Future-Oriented Statement of Operations (Unaudited)

Year ended March 31
(In thousands of dollars)
Forecast
Results
2015-16
Planned
Results
2016-17
Expenses
Food Safety Program $ 412,177 $ 394,165
Animal Health and Zoonotics Program 149,346 153,188
Plant Resources Program 92,586 97,267
International Collaboration and Technical Agreements 44,573 44,276
Internal Services 130,255 132,695
Total expenses 828,937 821,591
Revenues
Inspection fees 37,347 37,333
Registrations, permits, certificates 8,033 8,031
Miscellaneous fees and services 4,601 4,599
Establishment license fees 1,790 1,790
Administrative monetary penalties 1,341 1,340
Grading 131 131
Interest 31 31
Revenues earned on behalf of Government (645) (645)
Total revenues 52,629 52,610
Net cost of operations before government funding and transfers $ 776,308 $ 768,981

Segmented information (Note 8)

Information for the year ended March 31, 2016 includes actual amounts from April 1, 2015 to December 31, 2015.

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

B.A. (Bruce) Archibald, PhD
President

Ottawa, Canada
January 22, 2016

Dominique Osterrath, CPA, CA
Acting Vice-President, CMB and Chief Financial Officer

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

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 programs, 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 meeting 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 with foreign trading partners and negotiations to resolve scientific and technical issues contribute to market access.
  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 information in the forecast results for fiscal year 2015–16 is based on actual results as at December 31, 2015 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2016-17 fiscal year.

The main assumptions are as follows:

  1. The Agency's activities will remain substantially the same as in the previous year except for new initiatives funded through the capital vote (refer to Note 3(a)) or the renewal of certain Food Safety programs listed in Note 3(d).
  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 2015-16 is used as the opening position for the 2016-17 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 2017. As for fiscal year 2016, the actual compensation payments as of December 31, 2015 (mostly the Avian Influenza compensation payments) are considered in addition to the base authority from the Main Estimates.
  5. All current expired collective agreements are expected to be ratified in fiscal year 2017 in a manner to allow enough time to process all payments before March 31, 2017. The assumptions about the collective agreements renewal do not necessarily reflect any development in the collective bargaining.
  6. The Agency's statutory authority per the Main Estimates for the spending of revenues pursuant to section 30 of the CFIA act 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, 2015.

3. Variations and Changes to the Forecast Financial Information

While every attempt has been made to forecast final results for the remainder of 2015-16 and for 2016-17, 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. Note that the Agency has received new significant capital funding for infrastructure upgrades (Federal Infrastructure Initiative) and for the Electronic Service Delivery Platform for fiscal year 2015-16 and 2016-17. These funds are reflected in Note 5(a) under vote 5.
  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. The funding of some programs within the Food Safety Program (Food Safety Modernization, Listeria, Inspection Verification teams, and Daily Presence) has not yet been reconfirmed for fiscal year 2016-17. In the event that these programs continue past fiscal year 2015-16, the expenses for fiscal year 2016-17 could be higher than planned.
  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)). The variances associated with this factor are fairly common and often significant given the unforeseeable nature of events leading to compensation payments (Plant or animal diseases and outbreaks) and the importance of the amounts involved.
  6. The estimate for employee severance benefits allowance 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 different than the amount established for this statutory item (Refer to note 2 (f)).

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. Variances will be explained in the Departmental Performance Report.

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.

    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 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, legal services and Shared Services Canada expenses 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:

      As part of collective agreement negotiations with the employees, and changes to conditions of employment, the accumulation of severance benefits under the employee severance pay program has ceased commencing in 2012. As of March 31st 2015, all employees had been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. The obligation relating to the benefits earned to be paid on termination is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

    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 Government of Canada'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 available
(In thousands of dollars):
Forecast
Results
2015-16
Planned
Results
2016-17
Vote 1 - Operating expenditures $585,370 $545,943
Vote 5 - Capital expenditures 62,009 102,069
Statutory contributions to employee benefits plans 78,825 77,961
Statutory compensation payments (Refer to note 2d) 13,344 3,500
Statutory authority for spending of revenues pursuant to section 30 of the CFIA ActTable Note 1 66,172 61,261
Less:
Authorities available for future years (8,100) -
Lapsed authority – operating (includes $2.9 million in frozen funds) (14,873) -
Lapsed authority – capital (includes $17.9 million in frozen funds) (25,269) -
Forecast authorities available $757,478 $790,734

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 statutory authority for spending of revenues includes the portion available from prior years (amounts of $13,011,000 and $8,100,000 for fiscal years 2016 and 2017 respectively). Those amounts are in addition to the Main Estimates figure ($53,161,000) for that statutory authority.

Return to table note 1 referrer

(b) Reconciliation of net cost of operations to authorities available:
(In thousands of dollars)
Forecast
Results
2015-16
Planned
Results
2016-17
Net cost of operations before government funding and transfers $776,308 $768,981
Adjustments for items affecting net cost of operations but not affecting authorities:
Add (less):
Services provided without charge by other government departments (84,109) (83,522)
Amortization of tangible capital assets (43,553) (47,909)
Revenues pursuant to Section 30 of the CFIA act 52,629 52,610
Change in allowance for employee severance benefits 21,981 (3,655)
Change in allowance for expired collective agreements (2,924) 3,717
Other net changes in future funding requirements 909 (994)
Post-capitalization of tangible capital assets 59 75
  (55,008) (79,678)
Adjustments for items not affecting net cost of operations but affecting authorities:
Add (less):
   
Acquisition of tangible capital assets 36,740 102,069
Proceeds from disposal of tangible capital assets (562) (638)
  36,178 101,431
Forecast authorities available $757,478 $790,734

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. As part of collective agreement negotiations with the employees, and changes to conditions of employment, the accumulation of severance benefits under the employee severance pay program has ceased commencing in 2012. Employees have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service.

Information about the severance benefits, measured for March 31, is as follows:
(In thousands of dollars)
Forecast
Results
2015-16
Planned
Results
2016-17
Accrued benefit obligation, beginning of year $57,166 $35,184
Expense (recovery) for the year (5,382) 5,655
Benefits paid during the year (16,600) (2,000)
Accrued benefit obligation, end of year $35,184 $38,839

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)
Forecast
Results
2015-16
Planned
Results
2016-17
Employer's contribution to the health and dental insurance plans $40,813 $40,528
Accommodation 30,711 30,497
Legal services 971 964
Shared Services Canada 11,614 11,533
Total $84,109 $83,522

8. Segmented information

Presentation by segment is based on the Agency's program alignment 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)
2016 2017
Total Food Safety Program Animal Health and Zoonotics Program Plant Resources Program International Collaboration and Technical Agreements Internal Services Total
Revenues
Inspection fees $37,347 $21,292 $2,330 $5,233 $8,478 $- $37,333
Registrations, permits, certificates 8,033 4,580 501 1,126 1,824 - 8,031
Miscellaneous fees and services 4,601 1,792 287 645 1,044 831 4,599
Establishment license fees 1,790 1,021 112 251 406 - 1,790
Administrative monetary penalties 1,341 713 84 188 304 51 1,340
Grading 131 75 8 18 30 - 131
Interest 31 18 2 4 7 - 31
Revenues earned on behalf of Government (645) - - - - (645) (645)
Total revenues 52,629 29,491 3,324 7,465 12,093 237 52,610
Operating Expenses
Salaries and employee benefits 600,444 302,732 110,980 74,864 35,324 82,547 606,447
Professional and special services 70,338 22,381 12,277 4,950 576 26,901 67,085
Accommodation 37,849 17,908 6,789 4,396 1,977 6,029 37,099
Amortization 43,553 23,126 8,767 5,677 2,554 7,785 47,909
Travel and relocation 17,309 7,969 3,021 1,956 880 2,683 16,509
Utilities, materials and supplies 18,218 8,387 3,180 2,059 926 2,824 17,376
Communications 11,386 5,000 1,896 1,228 552 1,683 10,359
Repairs 5,625 2,589 982 636 286 872 5,365
Furniture and equipment 5,495 2,288 868 562 253 770 4,741
Equipment rentals 2,386 1,098 417 270 121 370 2,276
Information 1,009 464 176 114 51 156 961
Miscellaneous 484 223 85 55 25 75 463
Total operating expenses 814,096 394,165 149,438 96,767 43,525 132,695 816,590
Transfer Payments
Compensation payments 13,344 - 3,000 500 - - 3,500
Other 1,497 - 750 751 - 1,501
Total transfer payments 14,841 - 3,750 500 751 - 5,001
Total expenses 828,937 394,165 153,188 97,267 44,276 132,695 821,591
Net cost of operations $776,308 $364,674 $149,864 $89,802 $32,183 $132,458 $768,981
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