ARCHIVED - Canadian Food Inspection Agency - Quarterly Financial Report for the Quarter ended September 30, 2014 - Revised

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Erratum

Date: December 12, 2014
Location: Annex A - Statement of Authorities (unaudited), Fiscal Year 2014-15, Year to date used at quarter-end, Spending of proceeds from the disposal of surplus Crown Assets.
Revision: "Spending of proceeds from the disposal of surplus Crown Assets $0 thousands" replaces "Spending of proceeds from the disposal of surplus Crown Assets $100 thousands".
Rationale for the revision: Original amount reported was not correct.

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, 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 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. However, incremental funding announced in Budget 2014 was not included in the 2014-15 Main Estimates and is therefore not included in CFIA's authorities as at the end of September 2014. The CFIA will seek access to these incremental resources via the 2014-15 Supplementary Estimates, 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. In these situations, further analysis is provided.

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

At the end of the second quarter of 2014-15, the CFIA had $641.2 million of funding available for use, as detailed in Table 1. This is a decrease of $46.2 million 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 489,464 534,046 (44,582) (8.3%)
Vote 5 - Capital Expenditures 26,751 17,816 8,935 50.2%
Budgetary Statutory Authorities
Employee benefit plan
68,373 78,960 (10,587) (13.4%)
Compensation payments
3,500 3,500 - 0.0%
Spending of revenues
53,161 53,161 - 0.0%
Total Authorities 641,249 687,483 (46,234) (6.7%)

Numbers may not add due to rounding.

The primary reasons for the $44.6 million 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. The Agency continues to deliver the BSE Program and will seek renewal of BSE funding via 2014-15 Supplementary Estimates.

These decreases in authorities are partially offset by:

  • Funding increases for the renewal of the prevention of outbreaks for foodborne illness (Listeriosis), and the establishment of Inspection Verification Teams (IVT) to oversee the performance of the food safety system. In 2013-14, the Agency accessed funding for these initiatives via the Supplementary Estimates (B), and as a result, could not include these authorities until the Q3 Quarterly Financial Report. However, in 2014-15 funding for these initiatives was included in the Main Estimates and is therefore included in the authorities of the 2014-15 second Quarterly report; and
  • A funding increase related to the allocation of the carry-forward authorities. In 2014-15 operating carry-forward authorities were allocated to CFIA before the end of the second quarter. In 2013-14 however, these allocations were completed in the third quarter.
  • These partial offsets are due to timing differences, which will be resolved in third quarter reporting.

The primary reasons for the $8.9 million increase in Vote 5 – Capital Expenditures authorities include:

  • Incremental funding received in support of the Food Safety Modernization initiative, including incremental resources for the Agency's Electronic Service Delivery Platform (ESDP);
  • A transfer approved by Parliament for 2014-15 from Vote 1 – Operating Expenditures and Contributions to Vote 5 – Capital Expenditures related to the Single Window Initiative; and
  • Timing differences in the allocation of carry-forward authorities. In 2014-15 capital carry-forward authorities were allocated to CFIA before the end of the second quarter. However in 2013-14, these allocations were completed in the third quarter. This timing difference is expected to be resolved in 2014-15 third quarter reporting.

The primary reasons for the $10.6 million decrease in Statutory Employee Benefit Plan authorities are:

  • 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;
  • Reduction related to sunsetting initiatives such as Bovine Spongiform Encephalopathy (BSE), which were renewed as part of Budget 2014 and for which funding is being sought through the 2014-15 Supplementary Estimates.
  • These decreases are partially offset by funding increases for the renewal of the prevention of outbreaks for foodborne illness (Listeriosis), and the establishment of IVT to oversee the performance of the food safety system.

At the end of the second quarter of 2014-15, the CFIA had expenditures of $344.2 million as detailed in Table 2. This represents a decrease of $8.7 million compared to the end of the same quarter in 2013-14. Below is a breakdown of this decrease in expenditures by vote.

Table 2: Year-to-Date Expenditures used as of September 30, 2014 and September 30, 2013
(In thousands of dollars)
Expenditures 2014-15 2013-14 Variances %
Vote 1 - Operating Expenditures and Contributions 278,905 268,981 9,924 3.7%
Vote 5 - Capital Expenditures 5,126 3,495 1,631 46.7%
Budgetary Statutory Authorities
Employee benefit plan
34,186 39,513 (5,327) (13.5%)
Compensation payments
1,119 25,962 (24,843) (95.7%)
Spending of revenues / Other
24,854 14,921 9,933 66.6%
Total Expenditures 344,190 352,872 (8,682) (2.5%)

Numbers may not add due to rounding.

The primary reason for the $5.3 million expenditure decrease in Budgetary Statutory Authorities – Employee benefit plan is reductions stemming from the implementation of Budget 2012 savings initiatives. All savings related to Budget 2012 impact expenditures in CFIA's Vote 1 – Operating Expenditures and Contributions, as well as the associated Statutory Employee Benefit Plan expenditures.

This decrease is partially offset by:

  • Expenditures related to new funding received for the establishment of Inspection Verification Teams (IVT) to oversee the performance of the food safety system; and,
  • Incremental expenditures related to the settlement of collective agreements and the resulting pay out of accumulated severance.

The primary reason for the $24.8 million expenditure decrease in Budgetary Statutory Authorities – Compensation Payments is a significant reduction in payments made under the Health of Animals Act and the Plant Protection Act.

The $9.9 million increase in Budgetary Statutory Authorities – Spending of revenue/other expenditures is due to payment of retroactive wage and salary expenditures resulting from the settlement of collective agreements.

Significant Changes in the Departmental budgetary expenditures by Standard Object (Annex B)

Under "Planned expenditures for the year ending March 31, 2015", the CFIA's authorities for "Personnel" decreased by $50 million when compared to the previous year. As previously indicated, the primary reasons for decreased plans are authority 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, as well as Statutory Employee Benefit Plan expenditures), 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.

The expenditure decrease of $25 million under "Year-to-date used at quarter-end" "Transfer payments" is primarily due to a significant reduction in statutory compensation payments made under the Health of Animals Act and the Plant Protection Act.

Under "Year-to-date used at quarter-end", the expenditure increase of $16.8 million under "Other Subsidies and Payments" is primarily due to a one-time transition payment of $16.7 million for implementing salary payment in arrears by the Government of Canada.

Risks and Uncertainties

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 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.

This QFR reflects the results of the current fiscal period in relation to Main Estimates, for which full supply was released on June 20, 2014, and authorities received from Treasury Board Central Votes.

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. The negotiated collective agreements have been signed and/or ratified; therefore the retroactive wage increases for 2011-12 and 2012-13, as well as the ongoing costs, will be absorbed within existing budgets.

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 Agency has taken appropriate action to mitigate the risks associated with these operating budget freezes in 2014-15 and future years.

Significant Changes in relation to Operations, Personnel and Programs

Introduction of monetary penalties for non-compliance with meat safety requirements

On July 16, 2014, the Government of Canada further strengthened Canada's food safety system by allowing the CFIA to issue monetary penalties to businesses that do not meet Canada's meat safety requirements. This regulatory amendment will allow CFIA inspectors to issue a monetary penalty for non-compliance with the provisions of the Meat Inspection Act and the Meat Inspection Regulations. These penalties offer the Agency an additional tool to manage non-compliance situations and work to prevent food safety risks and protect Canadians when unsafe products enter the marketplace.

Changes in Senior Management Personnel

On June 20, 2014, Prime Minister Stephen Harper announced changes in the senior ranks of the Public Service. This included Carolina Giliberti's appointment as Executive Vice-President of the CFIA, effective August 5, 2014.

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:

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 $44.6 million decrease in Vote 1 authorities is mainly 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 will seek 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
Date: November 14, 2014

Daniel G. Paquette, CPA, CA
Vice President,
Corporate Management Branch and Chief Financial Officer
Ottawa, Ontario
Date: November 14, 2014

Annex A

Statement of Authorities (unaudited)

For the quarter ended September 30, 2014
(in thousands of dollars)

Fiscal year 2014-15
Total available for use for the year ending March 31, 2015 Table Note 1 Table Note 2 Used during the quarter ended September 30, 2014 Year to date used at quarter-end
Vote 1 - Operating Expenditures and Contributions 489,464 136,435 278,905
Vote 5 - Capital Expenditures 26,751 3,889 5,126
Budgetary Statutory Authorities
Employee benefit plan
68,373 17,093 34,186
Compensation payments
3,500 214 1,119
Spending of revenues
53,161 20,561 24,790
Refunds of previous years revenue
- 62 64
Collection Agency fees
- - -
Spending of proceeds from the disposal of surplus Crown assets
- - -
Total budgetary authorities 641,249 178,254 344,190
Fiscal year 2013-14
Total available for use for the year ending March 31, 2014 Table Note 1 Table Note 2 Used during the quarter ended September 30, 2013 Year to date used at quarter-end
Vote 1 - Operating Expenditures and Contributions 534,046 141,259 268,981
Vote 5 - Capital Expenditures 17,816 2,449 3,495
Budgetary Statutory Authorities
Employee benefit plan
78,960 19,756 39,513
Compensation payments
3,500 25,250 25,962
Spending of revenues
53,161 11,578 14,820
Refunds of previous years revenue
- - -
Collection Agency fees
- - 1
Spending of proceeds from the disposal of surplus Crown assets
- - 100
Total budgetary authorities 687,483 200,293 352,872

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 September 30, 2014
(in thousands of dollars)

Fiscal year 2014-15
Planned expenditures for the year ending March 31, 2015 Table Note 3 Table Note 4 Expended during the quarter ended September 30, 2014 Year to date used at quarter-end
Expenditures
Personnel 482,752 150,402 285,322
Transportation and communications 26,326 3,363 5,663
Information 1,624 77 113
Professional and special services 58,476 14,129 21,249
Rentals 7,842 2,839 3,067
Repair and maintenance 19,845 2,110 2,723
Utilities, materials and supplies 16,849 3,372 5,466
Acquisition of land, buildings and works - - -
Acquisition of machinery and equipment 20,655 1,236 2,258
Transfer payments 4,319 399 1,304
Other subsidies and payments 2,561 329 17,025
Total gross budgetary expenditures 641,249 178,256 344,190
Fiscal year 2013-14
Planned expenditures for the year ending March 31, 2014 Table Note 3 Table Note 4 Expended during the quarter ended September 30, 2013 Year to date used at quarter-end
Expenditures
Personnel 532,805 143,005 281,111
Transportation and communications 25,486 4,459

7,606

Information 1,518 98 204
Professional and special services 57,927 18,028 24,301
Rentals 7,701 2,593 2,872
Repair and maintenance 19,939 1,221 1,820
Utilities, materials and supplies 16,594 3,701 6,171
Acquisition of land, buildings and works 3,378 - -
Acquisition of machinery and equipment 17,816 1,564 2,313
Transfer payments 4,319 25,548 26,260
Other subsidies and payments - 75 215
Total gross budgetary expenditures 687,483 200,293 352,872

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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