ARCHIVED - Canadian Food Inspection Agency - Quarterly Financial Report (QFR) for the Quarter ended December 31, 2014

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Introduction

This quarterly report has been prepared by management as required by Section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This quarterly report should be read in conjunction with the 2014-15 Main Estimates, the 2014-15 Supplementary Estimates (B), Canada's Economic Action Plan 2014 (Budget 2014), as well as Canada's Economic Action Plan 2012 (Budget 2012).

A summary description of the Canadian Food Inspection Agency's (CFIA) program activities can be found in the CFIA's 2014-15 Report on Plans and Priorities.

The quarterly report has not been subject to an external audit or review.

CFIA Mandate

The Minister of Health is responsible for the CFIA and for the overall direction of the Agency. In addition, the Minister of Agriculture and Agri-Food is responsible for oversight of the CFIA's non-food safety agricultural activities, including economic and trade issues, as well as important animal health and plant protection work.

The CFIA is headed by a President, who has the rank and all the powers of a Deputy Head of a Department. The President is also the Chief Executive Officer. The responsibilities of these roles are outlined in the Canadian Food Inspection Act 1997, c. 6.

The CFIA is responsible for administering and enforcing 13 federal statutes and 38 sets of regulations for regulating the safety and quality of food sold in Canada, and for supporting a sustainable plant and animal resource base. In November 2012, the Safe Food for Canadians Act received Royal Assent. This new legislation, when in force, will also bring into effect new regulations that provide the necessary legal framework for a single, consistent approach to strengthening food inspection in Canada. The CFIA shares many of its core responsibilities with other federal departments and agencies, with provincial, territorial and municipal authorities and with other stakeholders.

The CFIA works with its partners to: implement food safety measures; manage food, animal and plant risks, incidents and emergencies; and promote the development of food safety and disease control systems to maintain the safety of Canada's high-quality agriculture, agri-food, aquaculture and fisheries products. The Agency's activities include: verifying the compliance of imported products; registering and inspecting establishments; testing food, animals, plants and their related products; and approving the use of many agricultural inputs.

Additionally, the CFIA actively participates in international fora for the development of international science-based rules, standards, guidelines and policies. It also engages in the management of sanitary and phytosanitary committees, established under international agreements, and actively promotes the Canadian science-based regulatory system among foreign trading partners. The CFIA negotiates to resolve scientific and technical issues, contributing to market access for Canadian goods. It also provides scientific advice, develops new technologies, provides testing services, and conducts regulatory research.

At the CFIA, decisions are based on high-quality, timely, relevant science. Science informs policy development and program design and delivery through foresight, advice, risk assessment, the influence of international standards, research and development, and testing.

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities (Annex A) includes the Agency's spending authorities granted by Parliament and those used by the Agency, consistent with the Main Estimates and Supplementary Estimates (B) for the 2014-15 fiscal year and authorities received from Treasury Board Central Votes. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before funding can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purpose of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the Consolidated Revenue Fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The Agency uses the full accrual method of accounting to prepare and present its annual Agency financial statements that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

Savings initiatives announced in Budget 2012 are reflected in CFIA's 2013-14 Main Estimates and 2014-15 Main Estimates. Incremental funding announced in Budget 2014, which was not included in the 2014-15 Main Estimates, has been partially received via the 2014-15 Supplementary Estimates (B). The CFIA will seek access to the remainder of the 2014-15 incremental resources via Supplementary Estimates (C), subject to Treasury Board and Parliamentary approval, and CFIA's authorities will be updated accordingly.

For more information on Budget 2012 Implementation and Budget 2014 Announcements, please see the appropriate sections below.

Highlights of Fiscal Quarter and Fiscal Year-To-Date (YTD)

In line with previously reported variances in the Departmental Performance Report and Quarterly Financial Reports, the CFIA determined that variances which are greater than $5.0 million and represent more than a 10 per cent change, in budget or expenditures from one year to the next, are deemed significant. When both of these criteria are met, further analysis is provided.

Significant Changes in the Statement of Authorities (Annex A at end of document)

Authorities

At the end of the third quarter of 2014-15, the CFIA had $679.9 million of funding available for use, as detailed in Table 1. This is a decrease of $88.3 million (11.5 per cent) compared to the end of the same quarter in 2013-14. Below is a breakdown of this decrease by vote.

Table 1: Authorities Available for Use for the Year Ending March 31, 2015 and March 31, 2014
(In thousands of dollars)
Authorities 2014-15 2013-14 Variances %
Vote 1 - Operating Expenditures and Contributions 523,875 599,853 (75,978) (12.7%)
Vote 5 - Capital Expenditures 27,959 28,553 (594) (2.1%)
Budgetary Statutory Authorities
Employee benefit plans 71,387 83,067 (11,680) (14.1%)
Compensation payments 3,500 3,500 - 0.0%
Spending of revenues 53,161 53,161 - 0.0%
Total Authorities 679,882 768,134 (88,252) (11.5%)

Numbers may not add due to rounding.

The primary reasons for the $76.0 million (12.7 per cent) decrease in Vote 1 – Operating Expenditures and Contributions authorities include:

  • Reductions resulting from the implementation of Budget 2012 savings initiatives. All savings related to Budget 2012 impact CFIA's Vote 1 – Operating Expenditures and Contributions authorities, as well as the associated Statutory Employee Benefit Plan authorities; and
  • The sunset of Bovine Spongiform Encephalopathy (BSE) Program funding in 2013-14. This funding was renewed in Budget 2014; however, it is not included in CFIA's 2014-15 Main Estimates or Supplementary Estimates (B). The Agency continues to deliver the BSE Program and will seek renewal of BSE funding via 2014-15 Supplementary Estimates (C).

The primary reasons for the $11.7 million (14.1 per cent) decrease in Statutory Employee Benefit Plan authorities are:

  • Reductions resulting from the implementation of Budget 2012 savings initiatives; and
  • Reductions related to sunsetting initiatives in 2013-14 for BSE. The Agency continues to deliver the BSE Program and will seek renewal of BSE funding via 2014-15 Supplementary Estimates (C).

Year-to-Date Expenditures

At the end of the 2014-15 third quarter, the CFIA had expenditures of $555.2 million as detailed in Table 2. This represents an overall increase of $12.4 million (2.3 per cent) compared to the end of the same quarter in 2013-14. Below is a breakdown of the variances of expenditures by vote.

Table 2: Year-to-Date Expenditures Used as of December 31, 2014 and December 31, 2013
(In thousands of dollars)
Expenditures 2014-15 2013-14 Variances %
Vote 1 - Operating Expenditures and Contributions 437,667 412,302 25,365 6.2%
Vote 5 - Capital Expenditures 9,059 7,093 1,966 27.7%
Budgetary Statutory Authorities
Employee benefit plans 51,279 59,269 (7,990) (13.5%)
Compensation payments 3,171 34,407 (31,236) (90.8%)
Spending of revenues/Other 54,027 29,731 24,296 81.7%
Total Expenditures 555,203 542,802 12,401 2.3%

Numbers may not add due to rounding.

The expenditure increase of $25.4 million (6.2 per cent) in Vote 1 – Operating Expenditures and Contributions is mainly due to in year salary impacts of collective agreement settlements and a one-time transition payment to implement salary payments in arrears, partially offset by Budget 2012 savings initiatives.

The expenditure decrease of $8.0 million (13.5 per cent) in Budgetary Statutory Authorities – Employee Benefit Plans is mainly due to the implementation of Budget 2012 savings initiatives. In addition, there is a timing difference between the adjustments of authorities and recording of expenditures for Employee Benefit Plans as they pertain to the settlement of collective agreements. As per Treasury Board Secretariat practice, Employee Benefit Plan authorities and expenditures will be updated to include the associated increase at year end.

The primary reason for the $31.2 million (90.8 per cent) expenditure decrease in Budgetary Statutory Authorities – Compensation Payments is the significant reduction in payments made under the Health of Animals Act and the Plant Protection Act. In 2013-14, the Agency made $58.3 million in compensation payments as a result of the Infectious Salmon Anemia (ISA) outbreak. No payments have yet been necessary for ISA in 2014-15.

The $24.3 million (81.7 per cent) increase in Budgetary Statutory Authorities – Spending of revenue/other expenditures is due to payments of retroactive wage and salary expenditures related to prior years following the settlement of collective agreements in 2014-15.

Significant Changes in the Departmental budgetary expenditures by Standard Object (Annex B at end of document)

Authorities

Under "Planned expenditures for the year ending March 31, 2015", the CFIA's authorities for "Personnel" decreased by $61.3 million (10.8 per cent) when compared to the previous year. As previously indicated for Vote 1 – Operating Expenditures and Contributions, the primary reasons for decreased personnel authorities are reductions resulting from the implementation of Budget 2012 savings initiatives and sunsetting initiatives such as BSE, for which renewal was announced in Budget 2014 and for which funding is being sought through the 2014-15 Supplementary Estimates (C). As the Agency continues to deliver the BSE Program, expenditures are being incurred creating a timing difference until the authorities are reflected.

Planned and Year-to-Date Expenditures

In addition, under "Planned expenditures for the year ending March 31, 2015", the CFIA's authorities for "Transportation and communications" have decreased by $12.3 million (27.8 per cent). In line with the government priorities, the Agency has made concerted efforts to reduce transportation and communications expenditures by focusing on key priorities and by using communication technologies whenever possible.

The expenditure decrease of $31.7 million (90.0 per cent) under "Year-to-date used at quarter-end" "Transfer payments" is primarily due to the significant reduction in statutory compensation payments made under the Health of Animals Act and the Plant Protection Act related to Infectious Salmon Anemia.

Under "Year-to-date used at quarter-end", the expenditure increase of $17.3 million under "Other Subsidies and Payments" is primarily due to a one-time transition payment of $17.2 million for implementing salary payment in arrears by the Government of Canada.

Risks and Uncertainties

This Quarterly Financial Report reflects the results of the current fiscal period in relation to Main Estimates, and Supplementary Estimates (B) for which full supply was released on December 18, 2014, and authorities received from Treasury Board Central Votes. The Agency anticipates receiving further incremental 2014-15 funding via Supplementary Estimates (C), as well as additional authorities provided from Treasury Board Central Votes.

In addition to delivering all of the Agency's programs based on anticipated spending authorities, the Agency faces other financial risks and uncertainties. Budget 2010 announced that the operating budgets of departments would be frozen at their 2010-11 levels for the fiscal years 2011-12 and 2012-13. The area most impacted by this freeze has been personnel costs, as they amount to nearly 80 per cent of planned expenditures annually. The negotiated collective agreements have been signed; therefore the retroactive wage increases for 2011-12 and 2012-13, as well as the ongoing costs, are being absorbed within existing budgets.

In addition, the 2013 Speech from the Throne and Fall Update announced the reinstatement of an operating budget freeze for fiscal years 2014-15 and 2015-16. Wage and salary increases resulting from collective agreements that take place during this two year freeze period will also have to be absorbed within existing budgets. The exact amount of these salary increases is not yet known. The Agency has taken appropriate action to mitigate the risks associated with these operating budget freezes for 2014-15 and future years.

The CFIA strives to fulfill its mandate and responsibilities by balancing both risks and opportunities when designing its policies, programs and services.

The Agency has adopted an integrated approach to corporate risk management called the Integrated Risk Management (IRM). This is a continuous proactive and systematic process for assessing, managing and communicating risk from an organization-wide perspective. The Corporate Risk Profile (CRP) lies at the foundation of the Agency's corporate risk management process. The research, consultations and collaborative processes leading to its development serve to:

  • Foster a risk-smart culture; and
  • Provide key support to the Agency's planning, priority-setting, resource allocation, monitoring and reporting processes.

The results of the CRP directly inform the priorities presented in the Agency's Report on Plans and Priorities and are the basis for the key strategic initiatives pursued by the Agency for upcoming years. As a practice - and a culture - Integrated Risk Management is practiced throughout the Agency.

Through exercises such as the maintenance of the CRP, cyclical assessments of business line risks and the development of the Agency's risk-based oversight processes to guide inspection activities, the CFIA is continually refining and improving how it views risk and applies risk knowledge in its decision making at both at the corporate and operational levels. This, in turn, supports the achievement of the CFIA's strategic outcome – a safe and accessible food and plant and animal resource base.

Significant Changes in Relation to Operations, Personnel and Programs

Avian Influenza outbreak in British Columbia (BC)

In early December, the CFIA's National Emergency Operations Centre (NEOC) and a Joint Emergency Operations Centre (JEOC) were activated in response to the Avian Influenza outbreak in BC. Since the onset of the outbreak, the CFIA and its provincial and industry partners have been working together to rapidly mobilize required resources in order to contain the outbreak, and re-establish disease-free status for market access. For the CFIA, this entailed deployment of staff from BC's regions together with employees from across the Agency and incurring additional costs to manage the outbreak. This support of CFIA staff from across the country and its many work units will continue as long as the NEOC and the JEOC remain activated for the response.

Regulations Amending the Maple Products

On December 16, 2014, the Federal Government announced that the Maple Products Regulations have been amended in order to facilitate the trade of maple syrup with the United States and to respond to consumer needs with regard to grade names and colour classes. The amendments standardize different grades and colour classes of maple syrup and take steps to create a harmonized definition and grading system among the United States and Canada. These regulatory changes will help Canadian maple producers market and sell maple syrup in North America and around the world.

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that are being implemented in order to refocus government and programs making it easier for Canadians and business to deal with their government and to modernize and reduce the back office.

The Agency has not reduced staff or cut programs that would in any way impact food safety or place the health and safety of Canadians at risk.

Like all federal departments and agencies, the CFIA was asked to review its activities and processes to see where savings could be achieved and to contribute to the government's overall Economic Action Plan. The CFIA's savings for 2014-15 totaled $55.8 million. This is an ongoing reduction.

The CFIA's budget savings focused on five general categories. Below are a few examples of savings measures that have been implemented:

  • Administrative Efficiencies
    • Reduction of internal administrative activities across all programs;
    • Consolidation of CFIA office space and divestiture of Quarantine Inspection Stations; and
    • Consolidation of St. John's, NL Laboratory Operations.
  • Shared services between CFIA and Agriculture and Agri-Food Canada (AAFC)
    • Consolidation of support services, such as accommodations management, with AAFC.
  • Program changes to improve services, facilitate trade and enhance consumer choice
    • Canadian Food Inspection Agency focus shift to fertilizer safety;
    • Consolidation of the Biocontainment Programs of the Canadian Food Inspection Agency and the Public Health Agency of Canada;
    • Establishment of a Centre of Administration; and
    • Streamlining Pre-clearance Review of US Meat Inspection Certificates.
  • Implementation of agreed upon changes with Provinces
    • Return of provincial meat inspection activities to the Provinces of British Columbia, Manitoba and Saskatchewan.
  • More Effective Response to Animal Diseases and Plant Pests
    • Anaplasmosis program adjustments;
    • Anthrax Program Adjustments; and
    • Other animal health program adjustments.

There are no financial risks or uncertainties related to any of the Budget 2012 savings measures.

Additional information about the CFIA's Budget 2012 decisions can be found at the following link: Budget 2012 and the CFIA.

All reductions related to Budget 2012 savings initiatives affect the authorities and expenditures of CFIA's Vote 1 - Operating Expenditures and Contributions, as well as the associated Statutory Employee Benefit Plans. As previously indicated, the 2013-14 to 2014-15 $76.0 million (12.7 per cent) decrease in Vote 1 authorities is largely due to the Budget 2012 savings initiatives.

The changes the CFIA is making as a result of Budget 2012 reflect its goal to focus on activities that deliver on its core mandate of food safety and consumer protection, while building on recent investments made in Canada's food safety program.

Budget 2014 Announcements

The CFIA continues to strengthen Canada's food safety system and protect Canadian families. As such, Budget 2014 announced $390.0 million over 5 years to strengthen Canada's food safety system, including:

  • The renewal of funding for the Bovine Spongiform Encephalopathy (BSE) program, totaling $205.5 million over 5 years for CFIA and Health Canada, to maintain the comprehensive BSE program;
  • $153.6 million over 5 years for CFIA and Health Canada to enhance food inspection and strengthen the CFIA's preventive food safety oversight programs for foods such as fresh produce, multi-ingredient food, and fish and seafood; and
  • $30.7 million over 5 years for CFIA, Health Canada and Public Health Agency of Canada to modernize the food safety information system by establishing a Food Safety Information Network among federal, provincial and territorial food safety authorities and food testing laboratories.

As previously indicated, the CFIA is seeking access to these incremental resources through the 2014-15 Supplementary Estimates, subject to Treasury Board and Parliamentary approval.

Original signed by:

B.A. (Bruce) Archibald, PhD
President

Ottawa, Ontario
February 12, 2015

Daniel G. Paquette, CPA, CA
Vice-President,
Corporate Management Branch and Chief Financial Officer

Ottawa, Ontario
February 12, 2015

Annex A

Statement of Authorities (unaudited)
For the quarter ended December 31, 2014
(in thousands of dollars)
Fiscal year 2014-15 Fiscal year 2013-14
Total available for use for the year ending March 31, 2015 Table Note 1 Table Note 2 Used during the quarter ended December 31, 2014 Year to date used at quarter-end Total available for use for the year ending March 31, 2014 Table Note 1 Table Note 2 Used during the quarter ended December 31, 2013 Year to date used at quarter-end
Vote 1 - Operating expenditures and contributions 523,875 158,762 437,667 599,853 143,321 412,302
Vote 5 - Capital expenditures 27,959 3,933 9,059 28,553 3,598 7,093
Budgetary statutory authorities
Employee benefit plans 71,387 17,093 51,279 83,067 19,756 59,269
Compensation payments 3,500 2,052 3,171 3,500 8,445 34,407
Spending of revenues 53,161 28,663 53,453 53,161 14,802 29,623
Refunds of previous years revenue - 4 68 - 1 1
Collection agency fees - 1 1 - 1 2
Spending of proceeds from the disposal of surplus Crown assets - 505 505 - 5 105
Total budgetary authorities 679,882 211,013 555,203 768,134 189,930 542,802

Numbers may not add due to rounding.

Table Notes

Table Note 1

Includes only authorities granted by Parliament at quarter-end.

Return to table note 1 referrer

Table Note 2

Reflects savings initiatives announced in Budget 2012 as the changes to departmental authorities were reflected in the 2013-14 Main Estimates and 2014-15 Main Estimates.

Return to table note 2 referrer

Annex B

Departmental budgetary expenditures by Standard Object (unaudited)
For the quarter ended December 31, 2014
(in thousands of dollars)
Fiscal year 2014-15 Fiscal year 2013-14
Planned expenditures for the year ending March 31, 2015 Table Note 3  Table Note 4 Expended during the quarter ended December 31, 2014 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2014 Table Note 3  Table Note 4 Expended during the quarter ended December 31, 2013 Year to date used at quarter-end
Expenditures
Personnel 506,139 175,449 460,771 567,466 142,058 423,170
Transportation and communications 31,898 3,657 9,320 44,153 5,436 13,042
Information 2,347 80 193 2,275 212 416
Professional and special services 71,072 19,594 40,843 78,186 17,830 42,131
Rentals 6,873 305 3,372 6,531 3,884 6,755
Repair and maintenance 16,633 1,327 4,050 20,277 1,850 3,670
Utilities, materials and supplies 15,769 4,097 9,562 18,712 4,116 10,287
Acquisition of land, buildings and works - 42 42 3,378 - -
Acquisition of machinery and equipment 22,240 1,651 3,910 22,837 3,554 5,867
Transfer payments 4,350 2,201 3,504 4,319 8,895 35,155
Other subsidies and payments 2,561 2,610 19,636 - 2,095 2,309
Total gross budgetary expenditures 679,882 211,013 555,203 768,134 189,930 542,802

Numbers may not add due to rounding.

Table Notes

Table Note 3

Includes only authorities granted by Parliament at quarter-end.

Return to table note 3 referrer

Table Note 4

Reflects savings initiatives announced in Budget 2012 as the changes to departmental spending authorities were reflected in the 2013-14 Main Estimates and 2014-15 Main Estimates.

Return to table note 4 referrer

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