ARCHIVED - Canadian Food Inspection Agency (CFIA) - Quarterly Financial Report (QFR) for the Quarter ended December 31, 2015

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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 2015-16 Main Estimates, as well as the 2015-16 Supplementary Estimates (A).

A summary description of the Canadian Food Inspection Agency's (CFIA) program activities can be found in the CFIA's 2015-16 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 fully in force, will bring into effect new regulations that provide the necessary legal framework for a more consistent approach to strengthening food inspection in Canada. This Act consolidates and will replace the Fish Inspection Act, the Canadian Agricultural Products Act, the Meat Inspection Act, and the food provisions of the Consumer Packaging and Labelling Act.

The Agricultural Growth Act received Royal Assent on February 25, 2015, and has come into force. This Act modernized and strengthened federal agriculture legislation, supporting innovation in the Canadian agriculture industry and enhancing global market opportunities for Canadians. This Act updated the following suite of Acts which are used to regulate Canada's agriculture sector: Plant Breeders' Rights Act; Feeds Act; Fertilizers Act; Seeds Act; Health of Animals Act; Plant Protection Act; and the Agriculture and Agri-Food Administrative Monetary Penalties Act.

The CFIA shares many of its core responsibilities with other federal departments and agencies, with provincial, territorial and municipal authorities, with private industry, 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 fishery 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, Supplementary Estimates (A) for the 2015-16 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.

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 Available for Use

At the end of the third quarter, December 31, 2015 (Q3), the CFIA had $751.3 million of authorities available for use, as detailed in Table 1. This is an increase of $71.4 million (10.5 per cent) compared to the end of the same quarter in 2014-15. Below is a breakdown of this increase by vote.

Table 1: Authorities Available for Use for the Year Ending March 31, 2016 and March 31, 2015 (in thousands of dollars)
Authorities 2015-16 2014-15 Variances %
Vote 1 - Operating Expenditures and Contributions 554,048 523,875 30,173 5.8%
Vote 5 - Capital Expenditures 61,747 27,959 33,788 120.8%
Budgetary Statutory Authorities
Employee benefit plan 78,825 71,387 7,438 10.4%
Compensation payments 3,500 3,500 0 0.0%
Spending of revenues 53,161 53,161 0 0.0%
Total Authorities 751,281 679,882 71,399 10.5%

Numbers may not add due to rounding.

The primary reasons for the $30.2 million (5.8 per cent) increase in Vote 1 – Operating Expenditures and Contributions authorities in 2015-16 Q3 include:

  • Incremental funding to strengthen Canada's food safety oversight system, to establish a Food Safety Information Network (FSIN), and related to collective bargaining settlements; and,
  • Timing differences in the receipt of authorities for the renewal of Bovine Spongiform Encephalopathy (BSE) Program.

These increases in authorities are partially offset by:

  • A smaller Operating Budget Carry Forward into 2015-16 as compared to 2014-15; and,
  • The transfer of resources and responsibilities to other government departments and agencies (such as the consolidation of pay services in Public Works and Government Services Canada, and the centralization of the support of the Canada Agricultural Review Tribunal with the Administrative Tribunals Support Service of Canada).

The $33.8 million (120.8 per cent) increase in Vote 5 – Capital Expenditures authorities is mainly due to:

  • New funding to implement the Federal Infrastructure Initiative;
  • Incremental funding for the implementation of the Food Safety Modernization –Electronic Service Delivery Platform (ESDP); and,
  • A larger Capital Budget Carry Forward into 2015-16 as compared to 2014-15.

The primary reasons for the $7.4 million (10.4 per cent) increase in Statutory Employee Benefit Plan (EBP) authorities are related to the salary impacts of new, renewed and incremental program funding.

Year-to-Date Expenditures

At the end of the 2015-16 third quarter, the CFIA had expenditures of $526.9 million as outlined in Table 2. This represents an overall decrease of $28.3 million (5.1 per cent) compared to the end of the same quarter in 2014-15. Below is a breakdown of the variances of expenditures by vote.

Table 2: Year-to-Date Expenditures Used as of December 31, 2015 and December 31, 2014 (in thousands of dollars)
Expenditures 2015-16 2014-15 Variances %
Vote 1 - Operating Expenditures and Contributions 407,367 437,667 (30,300) (6.9%)
Vote 5 - Capital Expenditures 18,492 9,059 9,433 104.1%
Budgetary Statutory Authorities
Employee benefit plan 58,469 51,279 7,190 14.0%
Compensation payments 14,028 3,171 10,857 342.4%
Spending of revenues/Other 28,546 54,027 (25,481) (47.2%)
Total Expenditures 526,902 555,203 (28,301) (5.1%)

Numbers may not add due to rounding.

The expenditure decrease of $30.3 million (6.9 per cent) in the 2015-16 Vote 1 – Operating Expenditures is primarily due to the 2014-15 one-time transition payment to implement salary payment in arrears by the Government of Canada, and the in-year salary impacts of collective agreement settlements that occurred in 2014-15.

The expenditure increase of $9.4 million (104.1 per cent) in the 2015-16 Vote 5 – Capital Expenditures is mainly due to expenditures related to the redevelopment of the St. Hyacinthe Laboratory, an increase in fleet acquisitions and the implementation of the Federal Infrastructure Initiative.

The $7.2 million (14.0 per cent) expenditure increase in Budgetary Statutory Authorities – Employee Benefit Plans (EBP) is mainly due to an increase in the level of personnel authorities in the 2015-16 Main Estimates as compared to the 2014-15 Main Estimates. Main Estimates authorities are the basis of EBP expenditures throughout a fiscal year. As per Treasury Board Secretariat practice EBP expenditures are updated at year-end for actual requirements.

The primary reason for the $10.9 million (342.4 per cent) expenditure increase in Budgetary Statutory Authorities – Compensation Payments is due to an increase in payments made under the Health of Animals Act. As at 2015-16 Q3, the Agency has issued $11.7 million in compensation payments due to the Avian Influenza outbreak in southern Ontario in April 2015.

The decrease in expenditures of $25.5 million (47.2 per cent) for the spending of revenues is primarily due to collective bargaining for prior fiscal years' retroactive payments that were processed in 2014-15.

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

Planned Expenditures (Equivalent to Authorities) by Standard Object

Authorities for Professional and special services increased by $15.3 million (21.5 per cent) when compared to the previous year. This increase is primarily due to new temporary funding received for the Federal Infrastructure Initiative (2015-16 and 2016-17) and incremental resources received for ESDP.

Authorities for Utilities, materials and supplies increased by $5.0 million (31.8 per cent) when compared to the previous year. This increase is also due to funding received for the Federal Infrastructure Initiative as well as the timing of funds received for Bovine Spongiform Encephalopathy.

Expended During the Quarter Ended December 31, 2015 by Standard Object

The expenditure decrease of $35.0 million (19.9 per cent) during the quarter ended December 31, 2015 for Personnel is primarily due to significant one-time disbursements of in-year retroactive salary settlements and the cash out of accumulated severance that occurred in the third quarter of 2014-15.

Year-to-Date Expenditures by Standard Object

The $11.2 million (318.3 per cent) expenditure increase in Transfer payments is mainly due to the increase in statutory compensation payments issued under the Health of Animals Act related to the Avian Influenza outbreak in Ontario.

Other Subsidies and Payments expenditures decreased by $15.7 million (79.7 per cent) primarily due to the 2014-15 one-time transition payment to implement 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, Supplementary Estimates (A) and authorities received from Treasury Board Central Votes. The Agency anticipates receiving further incremental 2015-16 funding from Treasury Board Central Votes and the upcoming Supplementary Estimates (C) for 2015-16. In addition to delivering all of the Agency's programs based on anticipated spending authorities, the Agency faces other financial risks and uncertainties.

Retroactive and ongoing wage and salary increases resulting from upcoming collective agreement settlements for 2014-15 and 2015-16 will have to be absorbed by the Agency. The exact cost is not yet known, however, the Agency has taken appropriate action to plan and mitigate the risks associated with these incremental Agency costs in 2015-16 and future years.

As part of the Federal Infrastructure Initiative (FII), $65.7 million over two years (2015-16 and 2016-17) was approved for the CFIA to accelerate its renewal and upgrades of various critical infrastructures.

The CFIA infrastructure projects require invasive work to the building structures and systems. There is always a risk of discovering unanticipated hazardous materials and /or related problems arising from the condition of the building structures and systems which can lead to increased project costs above the initial estimates. To provide the Agency flexibility to respond to these unforeseen risks, a measure of flexibility was built into the initial costing estimates. Since the inception of the initiative it has become apparent that much of the 2015-16 financial flexibility, included for the upfront design and development phases, is more likely to be required in year two, the construction phase.

The Agency therefore reprofiled $4.4 million in FII funding from 2015-16 to 2016-17 in order to increase its ability to manage unknown risks and to provide sufficient flexibility during the construction phase of the infrastructure projects.

The Agency has and will continue to engage experienced project managers to serve on-site to oversee project progress in a hands-on manner, thereby observing, monitoring and mitigating potential delays and overruns before they affect efficient project completion.

The CFIA strives to fulfill its mandate and responsibilities by balancing both risks and opportunities when designing its policies, programs and services. The Agency is implementing an ambitious transformation agenda to better meet the needs of stakeholders such as consumers, industry and international trading partners, that include innovation and integrated risk management.

The Agency has adopted an integrated approach to corporate risk management called Integrated Risk Management (IRM), which is a continuous proactive and systematic process for assessing, managing and communicating risk from an organization-wide perspective. The CFIA is continually refining and improving how it views risk and applies risk knowledge in its decision making at both 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

Changes in Senior Management Personnel

In December 2015, Daniel G. Paquette, Chief Financial Officer, announced his departure from the CFIA effective December 31, 2015. At that time an interim replacement was identified.

Early in the new calendar year Alfred Tsang will be assuming the role of Chief Financial Officer for the CFIA on an interim basis until a permanent replacement is selected.

Avian Influenza Outbreaks

In April 2015, the presence of Avian Influenza (AI) was confirmed in Ontario. The CFIA and its provincial and industry partners successfully worked together to rapidly mobilize all necessary resources to contain the outbreaks and re-establish disease-free status for market access.

Canada notified the World Organisation for Animal Health (OIE) that as of October 7, 2015, Ontario has been free of notifiable Avian Influenza. The declaration was based on the successful completion of a three-month surveillance period following the eradication of notifiable AI in domestic poultry in the province.

Federal Infrastructure Initiative

As part of the incremental funding provided for the Federal Infrastructure Initiative the Agency will be able to accelerate required infrastructure renewals and upgrades at eight of its fourteen scientific laboratories over the next two fiscal years. The initiative includes multiple projects such as roof replacements, and heating, ventilating and air conditioning upgrades, etc.

The CFIA recognizes that sound management of its assets demands a disciplined approach. Therefore, a dedicated governance structure has been set up to oversee all projects undertaken as part of this initiative. In addition, the CFIA has established appropriate management, reporting, and financial controls to ensure that the Agency meets all project management and reporting requirements associated with the investments in the Agency's critical infrastructure.

New "Regulatory Science" Classification Group

To modernize how scientific work at the CFIA is described and to provide employees with greater career mobility and development opportunities, the Agency has approved a new classification group called Regulatory Science. The new Regulatory Science group will amalgamate the Biological Sciences, Chemistry and Agriculture classification groups that are currently in use at the Agency.

The CFIA and the Scientific and Analytical Executive of the Professional Institute of Public Services Canada worked collaboratively on the project, updating decades old classification standards. Both parties have agreed to implementation through a phased approach, targeting completion by the end of the 2015-16 fiscal year. This conversion to the new Regulatory Science group will be cost neutral to the Agency.

Original signed by:

B.A. (Bruce) Archibald, PhD
President

Dominique Osterrath
Acting Vice President,
Corporate Management Branch and
Chief Financial Officer

Ottawa, Ontario
Date: February 11, 2016

Ottawa, Ontario
Date: February 1, 2016

Annex A
Statement of Authorities (unaudited)
For the quarter ended December 31, 2015
(in thousands of dollars)
Fiscal year 2015-16 Fiscal year 2014-15
Total available for use for the year ending March 31, 2016 Table Note 1 Expended during the quarter ended December 31, 2015 Year to date used at quarter-end Total available for use for the year ending March 31, 2015 Table Note 1 Used during the quarter ended December 31, 2014 Year to date used at quarter-end
Vote 1 - Operating expenditures and contributions 554,048 135,490 407,367 523,875 158,762 437,667
Vote 5 - Capital expenditures 61,747 5,957 18,492 27,959 3,933 9,059
Budgetary statutory authorities
Employee benefit plans 78,825 19,490 58,469 71,387 17,093 51,279
Compensation payments 3,500 1,533 14,028 3,500 2,052 3,171
Spending of revenues 53,161 13,980 28,507 53,161 28,663 53,453
Refunds of previous years revenue 0 0 30 0 4 68
Collection agency fees 0 0 1 0 1 1
Spending of proceeds from the disposal of surplus Crown assets 0 8 8 0 505 505
Total budgetary authorities 751,281 176,458 526,902 679,882 211,013 555,203

Numbers may not add due to rounding.

Table Note

Table note 1

Includes only authorities granted by Parliament at quarter-end.

Return to table note 1 referrer

Annex B
Departmental budgetary expenditures by Standard Object (unaudited)
For the quarter ended December 31, 2015
(in thousands of dollars)
Fiscal year 2015-16 Fiscal year 2014-15
Planned expenditures for the year ending March 31, 2016 Table Note 2 Expended during the quarter ended December 31, 201 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2015 Table Note 2 Expended during the quarter ended December 31, 2014 Year to date used at quarter-end
Expenditures:
Personnel 547,240 140,478 428,770 506,139 175,449 460,771
Transportation and communications 29,951 3,801 9,769 31,898 3,657 9,320
Information 4,112 1,014 1,101 2,347 80 193
Professional and special services 86,331 15,762 38,377 71,072 19,594 40,843
Rentals 11,092 3,422 6,771 6,873 305 3,372
Repair and maintenance 21,096 2,284 7,028 16,633 1,327 4,050
Utilities, materials and supplies 20,777 3,837 9,806 15,769 4,097 9,562
Acquisition of land, buildings and works 0 0 0 0 42 42
Acquisition of machinery and equipment 22,934 1,095 6,646 22,240 1,651 3,910
Transfer payments 4,319 1,688 14,656 4,350 2,201 3,504
Other subsidies and payments 3,429 3,077 3,978 2,561 2,610 19,636
Total gross budgetary expenditures 751,281 176,458 526,902 679,882 211,013 555,203

Numbers may not add due to rounding.

Table Note

Table note 2

Includes only authorities granted by Parliament at quarter-end.

Return to table note 2 referrer

Planned expenditures for the year ending March 31, 2016 were adjusted between Q2 and Q3 to reflect minor changes in expenditure categorization.

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