ARCHIVED - Canadian Food Inspection Agency - Quarterly Financial Report (QFR) for the Quarter ended June 30, 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 will modernize and strengthen federal agriculture legislation, support innovation in the Canadian agriculture industry and enhance global market opportunities for Canadians. This Act updates the following suite of Acts CFIA uses 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 and Supplementary Estimates (A) for the 2015-16 fiscal year. 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 first quarter of 2015-16 (Q1), the CFIA had $737.5 million of authorities available for use, as detailed in Table 1. This is an increase of $118.2 million (19.1 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)
Authorities2015-162014-15Variances%
Vote 1 - Operating Expenditures and Contributions 545,149 470,030 75,119 16.0%
Vote 5 - Capital Expenditures 56,900 24,264 32,636 134.5%
Budgetary Statutory Authorities
Employee benefit plan 78,825 68,373 10,452 15.3%
Compensation payments 3,500 3,500 0 0.0%
Spending of revenues 53,161 53,161 0 0.0%
Total Authorities 737,535 619,328 118,207 19.1%

Numbers may not add due to rounding.

The primary reasons for the $75.1 million (16.0 per cent) increase in Vote 1 – Operating Expenditures and Contributions authorities in 2015-16 Q1 include:

  • Incremental funding to strengthen Canada's food safety oversight system, to establish a Food Safety Information Network (FSIN), to support the Genomics Research and Development Initiative, and related to collective bargaining settlements;
  • Timing differences in the receipt of authorities for the renewal of Bovine Spongiform Encephalopathy (BSE) Program, the renewal of resources to support the increased frequency of food inspections in meat processing establishments, and the transfer of resources for Market Access and Growing Forward II initiatives; and,
  • A partial offset due to decreases in funding for certain initiatives, (such as the Single Window Initiative, and Trusted Traders and Trusted Travellers program) 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, the centralization of the support of the Canada Agricultural Review Tribunal with the Administrative Tribunals Support Service of Canada).

The $32.6 million (134.5 per cent) increase in Vote 5 – Capital Expenditures authorities is mainly due to:

  • New funding to implement the Federal Infrastructure Initiative (as announced in November 2014 Government of Canada Action Plan); and,
  • Incremental funding for the Food Safety Modernization program for the implementation of Electronic Service Delivery Platform (ESDP) and to strengthen Canada's food safety oversight system.

The primary reasons for the $10.5 million (15.3 per cent) increase in Statutory Employee Benefit Plan authorities are related to the impacts of new, renewed and incremental funding partially offset by funding decreases, as outlined above for Vote 1 and Vote 5.

Year-to-Date Expenditures

At the end of the 2015-16 first quarter, the CFIA had expenditures of $184.3 million as outlined in Table 2. This represents an overall increase of $18.4 million (11.1 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 June 30, 2015 and June 30, 2014
(in thousands of dollars)
Expenditures2015-162014-15Variances%
Vote 1 - Operating Expenditures and Contributions 147,489 142,469 5,020 3.5%
Vote 5 - Capital Expenditures 4,475 1,237 3,238 261.9%
Budgetary Statutory Authorities
Employee benefit plan 19,490 17,093 2,398 14.0%
Compensation payments 8,860 905 7,955 879.4%
Spending of revenues/Other 4,027 4,231 (204) (4.8%)
Total Authorities 184,341 165,934 18,407 11.1%

Numbers may not add due to rounding.

The expenditure increase of $3.2 million (261.8 per cent) in the 2015-16 Vote 5 – Capital Expenditures is mainly due to expenditures related to the implementation of the Federal Infrastructure Initiative, the strengthening Canada's food safety oversight system, and ESDP, as noted in the authorities variances.

The primary reason for the $8.0 million (879.0 per cent) expenditure increase in Budgetary Statutory Authorities – Compensation Payments is due to an increase in payments made under the Health of Animals Act. In the first quarter of 2015-16 the Agency issued $8.4 million in compensation payments due to the Avian Influenza outbreak in southern Ontario in April 2015.

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

Planned Expenditures (Equivalent to Authorities) by Standard Object

Under "Planned expenditures for the year ending March 31, 2016", the CFIA's "Personnel" authorities increased by $64.4 million (13.4 per cent) when compared to the previous year. This increase is primarily due to: new resources received to establish FSIN; timing differences in the receipt of authorities for the renewal of BSE and the increased frequency of food inspections in meat processing establishments; incremental authorities for ESDP and to strengthen Canada's food safety oversight; as well as, additional authorities related to collective bargaining settlements.

The CFIA's authorities for "Transportation and communications" increased by $9.6 million (49.8 per cent) mainly due to: incremental resources received to strengthen Canada's food safety oversight; and, timing differences in the receipt of authorities for the renewal of BSE and the increased frequency of food inspections in meat processing establishments resources.

Authorities for "Professional and special services" increased by $29.0 million (52.8 per cent) when compared to the previous year. This increase is primarily due to new funding received for the Federal Infrastructure Initiative and incremental resources received for ESDP. A smaller portion of the increase can be attributed to the timing difference in the transfer resources for Market Access and Growing Forward II initiatives.

"Utilities, materials and supplies" authorities increased by $7.0 million (50.9 per cent) mainly due to new funding for the Federal Infrastructure Initiative and the timing difference in the renewal of BSE resources.

Year-to-Date Expenditures by Standard Object

The expenditure increase of $23.9 million (17.7 per cent) under "Year-to-date used at quarter-end" for "Personnel" is primarily due to: salary impacts of collective agreement settlements including the cash out of accumulated severance; incremental funding to strengthen Canada's food safety oversight and ESDP; and, increased employee benefit plan payments related to new, renewed and incremental funding received by the Agency.

The $8.2 million (907.5 per cent) expenditure increase in "Transfer payments" is mainly due to the increase in statutory compensation payments issued under the Health of Animals Act and the Plant Protection Act related to the Avian Influenza outbreak in Ontario.

"Other Subsidies and Payments" expenditures decreased by $16.3 million (97.9 per cent) expenditure 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, and Supplementary Estimates (A) for which authorities have been received from Treasury Board. The Agency anticipates receiving further incremental 2015-16 funding from Treasury Board Central Votes and upcoming Supplementary Estimates 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.

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 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 latest two year freeze period will also have to be absorbed within existing budgets, as was the case for the Budget 2010 operating freeze. The exact amount of these salary increases is not yet known, however, the Agency has taken appropriate action to plan and mitigate the risks associated with these costs to be absorbed in 2015-16 and future years.

In November 2014 the Federal Government Action Plan announced the Federal Infrastructure Initiative (FII). As part of this initiative, $65.7 million over two years (2015-16 and 2016-17) will be allocated for the CFIA to accelerate its renewal and upgrades of various critical infrastructure. Due to the number of total government wide projects expected to be delivered in a tight timeframe, there is a risk that increased demand will affect the availability of experienced and qualified project managers, tradespeople, equipment and supplies, which could potentially lead to delays and/or increased costs associated with completing the work.

To minimize and mitigate this risk, the CFIA began as much preliminary work as possible, such as Requests for Proposal and Statements of Work, as soon as the required Treasury Board approvals were obtained. In addition, 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 includes innovation and integrated risk management.

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 Outbreaks

In early December 2014, there was an Avian Influenza outbreak in British Columbia. Four months later, in April 2015, the presence of Avian Influenza (AI) was also confirmed in Ontario.

The strain of the virus in Ontario was nearly identical to the strain identified in British Columbia at the end of 2014, and also closely matched a strain isolated in Washington State, US. Avian Influenza circulates in migratory wild birds and waterfowl, which poses a risk for spreading the disease. On April 18, 2015, AI was confirmed at a second site in Ontario.

Since the onset of the outbreaks, the CFIA and its provincial and industry partners have been working together to rapidly mobilize all necessary resources to contain the outbreak and re-establish disease-free status for market access. In accordance with internationally accepted practices, the Agency established AI Control Zones to control the movement of animals, products and equipment to minimize disease spread.

Canada notified the World Organisation for Animal Health (OIE) that as of June 3, 2015, British Colombia is considered 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. The CFIA is on track for the same successful closure to the Ontario situation.

Federal Infrastructure Initiative

As part of the incremental funding provided for the Federal Infrastructure Initiative (announced in November 2014 Government of Canada Action Plan), 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 (SR). The new SR Group will amalgamate the Biological Sciences (BI), Chemistry (CH) and Agriculture (AG) 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 SR group will be cost neutral to the Agency.

Agricultural Growth Act

In February 2015, Canada's Agricultural Growth Act received Royal Assent. This Act amended nine different statutes – seven that the CFIA uses to regulate Canada's agricultural sector and two administered by Agriculture and Agri-Food Canada (AAFC).

The Agricultural Growth Act brings aged acts, some of which date back to the 1950s, into the modern age and will affect the way Agency staff conduct business. As a result, the Agency is developing procedures to integrate the new authorities into existing procedures; first identifying changes that can be actioned immediately; and, then those which require policy and program updates; as well as supporting operational guidance to operationalize.

Original signed by:

Carolina Giliberti
Acting President

Ottawa, Ontario
Date: August 13, 2015

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

Ottawa, Ontario
Date: August 11, 2015

Annex A
Statement of Authorities (unaudited)
For the quarter ended June 30, 2015
(in thousands of dollars)
Fiscal year 2015-16Fiscal year 2014-15
Total available for use for the year ending March 31, 2016 Table Note 1Expended during the quarter ended June 30, 2015Year to date used at quarter-endTotal available for use for the year ending March 31, 2015 Table Note 1Used during the quarter ended June 30, 2014Year to date used at quarter-end
Vote 1 - Operating expenditures and contributions 545,149 147,489 147,489 470,030 142,469 142,469
Vote 5 - Capital expenditures 56,900 4,475 4,475 24,264 1,237 1,237
Budgetary statutory authorities
Employee benefit plans 78,825 19,490 19,490 68,373 17,093 17,093
Compensation payments 3,500 8,860 8,860 3,500 905 905
Spending of revenues 53,161 4,002 4,002 53,161 4,229 4,229
Refunds of previous years revenue 0 25 25 0 2 2
Collection agency fees 0 0 0 0 0 0
Spending of proceeds from the disposal of surplus Crown assets 0 0 0 0 0 0
Total budgetary authorities 737,535 184,341 184,341 619,328 165,934 165,934

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

Annex B
Departmental budgetary expenditures by Standard Object (unaudited)
For the quarter ended June 30, 2015
(in thousands of dollars)
Fiscal year 2015-16Fiscal year 2014-15
Planned expenditures for the year ending March 31, 2016 Table Note 2Expended during the quarter ended June 30, 2015Year to date used at quarter-endPlanned expenditures for the year ending March 31, 2015 Table Note 2Expended during the quarter ended June 30, 2014Year to date used at quarter-end
Expenditures
Personnel 547,197 158,797 158,797 482,752 134,919 134,919
Transportation and communications 28,951 2,767 2,767 19,326 2,301 2,301
Information 2,612 40 40 1,274 36 36
Professional and special services 83,974 6,830 6,830 54,976 7,120 7,120
Rentals 8,092 310 310 6,842 228 228
Repair and maintenance 20,096 1,544 1,544 15,345 613 613
Utilities, materials and supplies 20,777 2,353 2,353 13,765 2,094 2,094
Acquisition of land, buildings and works 0 0 0 0 0 0
Acquisition of machinery and equipment 18,088 2,235 2,235 18,168 1,023 1,023
Transfer payments 4,319 9,113 9,113 4,319 905 905
Other subsidies and payments 3,429 352 352 2,561 16,696 16,696
Total gross budgetary expenditures 737,535 184,341 184,341 619,328 165,934 165,934

Numbers may not add due to rounding.

Table Notes

Table note 2

Includes only authorities granted by Parliament at quarter-end.

Return to table note 2  referrer

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