Archived - Canadian Food Inspection Agency User Fee Proposal: Overtime Fees

Consultation Document

Preamble

This paper is intended to act as a basis for discussion with stakeholders and for eventual tabling in Parliament as a user fee proposal pursuant to the Canadian Food Inspection Agency Act and the User Fees Act. The goals of the consultation are:

• to propose revised service standards and an accompanying user fee schedule; and
• to obtain an enhanced understanding of the impact of proposed user fees and consider stakeholder perspectives, concerns and suggestions prior to finalizing user fee recommendations
• Invitation to Comment

Table of Contents

• Executive Summary
• 1.0 Introduction
• 2.0 Legislative and Policy Framework
• 3.0 Current Service Standards and User Fees
• 4.0 Proposed Service Standards and User Fees
  • 4.1 Service standards, performance measurement and tracking
  • 4.2 Cost Analysis
  • 4.3 Public vs. Private Benefit
  • 4.4 User Fee
  • 4.5 Benchmarking
    • 4.5.1 Australia
    • 4.5.2 New Zealand
    • 4.5.3 The United Kingdom
    • 4.5.4 The United States
    • 4.5.5 Other Canadian Government Departments and Agencies
    • 4.5.6 Comparison with CFIA Proposal
• 5.0 Complaints and Comments During Consultations

Executive Summary

The CFIA was created in 1997 as a Special Operating Agency and retained the cost recovery approaches of its parent organizations. At the same time, the Minister of Agriculture and Agri-Food made a commitment to introduce no new user fees or increases to existing fees before the year 2000. In 2002, the government extended indefinitely a commitment to introduce no new user fees or increases to existing fees, contributing to an inability to keep existing fees in line with the costs of delivering services and further complicating the current Canadian Food Inspection Agency Fees Notice. As of June 2009, this commitment is no longer in effect. The CFIA is now reviewing its service standards and user fees in an effort to align fees with the cost to deliver services where private benefits are derived, to adjust to technological advances, to recognize industry improvements in quality control and risk management, and to provide fair and equitable treatment across all industry sectors.

The CFIA delivers services for numerous programs. These services may be subject to user fees where there is a private benefit component and are typically delivered during the CFIA offices' regular working hours^Footnote 1, or in some cases, expanded service windows^Footnote 2. The CFIA may receive requests from service recipients to deliver these services outside of the CFIA's regular working hours. In these instances, these services may also be subject to the incremental costs incurred by the CFIA to accommodate the request which are charged as overtime fees.

The proposed overtime fees will continue to apply to all services delivered by the CFIA that:

1. are provided at the request of a service recipient; and
2. are requested to be provided outside of the regular working hours or, where applicable, the expanded service window.

The following additional criterion is now being proposed to apply to overtime fees in relation to all services delivered by the CFIA: that the services in question have an associated user fee.

The CFIA will continue to charge service recipients the applicable user fees, as set out in the Canadian Food Inspection Agency Fees Notice, plus the applicable overtime fees. The overtime costs incurred by the CFIA to deliver services outside of regular working hours will be fully cost recovered as the service recipient is the sole beneficiary.

Service standards are established for service delivery that takes place during regular working hours. Those service standards will continue to apply to those services that may be delivered outside of regular working hours.

* an annual inflationary factor of 1.9% has been applied to fix fees for five years – refer to paragraph 44 for more information.

1.0 Introduction

1. The Canadian Food Inspection Agency (CFIA) is dedicated to safeguarding food, animals and plants, and contributing to a safe and accessible food supply and plant and animal resource base, thereby enhancing the health and well-being of Canada's people, environment and economy. The CFIA's activities are aimed at protecting Canadian food consumers, Canadian agricultural production (including forestry), and our environment. In addition to Canadians, more specifically these activities benefit Canadian farmers, fishers, foresters, processors and distributors (including importers and exporters).

2. The CFIA was created in 1997 as a Special Operating Agency and retained the cost recovery approaches of its parent organizations, Agriculture Canada and Fisheries and Oceans Canada, in the agri-food and seafood sectors, respectively. The programs that migrated from Health Canada or the former Consumer and Corporate Affairs had no cost recovery component associated with their program activities.

3. The original intent of Parliament was for the CFIA to be partially dependant on revenue generated by user fees for its operations. However, the Minister made a commitment to introduce no new user fees or increases to existing fees before the year 2000. The intent was to reassure Parliament that the proposed CFIA would achieve efficiencies through cost reduction and cost avoidance rather than through the imposition of additional fees. In 2002, the moratorium on new or increased user fees was extended but was lifted in June 2009.

4. The government's commitment to introduce no new user fees or increases to existing fees prevented the CFIA from reducing the complexity and inconsistency of the Canadian Food Inspection Agency Fees Notice. A 2008 report by the Office of the Auditor General (OAG)^Footnote 3 found that many fees charged by the government have not kept pace with increasing costs. The CFIA is now reviewing its service standards and user fees in an effort to keep pace with technological advances, to recognize industry improvements in quality control and risk management, and to provide fair and equitable treatment across all industry sectors.

5. The CFIA delivers services for numerous programs. These services may be subject to user fees where there is a private benefit component and are typically delivered during the CFIA offices' regular working hours^Footnote 4, or in some cases, expanded service window^Footnote 5. The CFIA may receive requests from service recipients to deliver services outside of the CFIA's regular working hours, or expanded service windows. In these instances, these services may also be subject to the incremental costs incurred by the CFIA to accommodate the request and are charged as overtime fees.

2.0 Legislative and Policy Framework

6. Subsection 24(1) and section 25 of the Canadian Food Inspection Agency Act provide the authority for the Minister of Agriculture and Agri-Food to fix the fees for a service or the use of a facility, or to fix fees in respect of products, rights and privileges provided by the CFIA, respectively.

7. The CFIA's policy regarding user fees, as set out in its Cost Recovery Policy and Framework, states:

“The Canadian Food Inspection Agency will charge a user fee for services that provide service recipients direct benefits beyond those received by the general public.”

8. The User Fees Act (UFA), which came into effect on March 31, 2004, applies to user fees fixed by a regulating authority. Most federal departments and agencies are subject to the UFA. The primary objective of the UFA is to give Parliament a role in overseeing the implementation of certain fees charged by the federal government for various goods and services.

9. The UFA circumscribes what kind of user fees are subject to the Act and sets out preconditions to be met before a regulating authority fixes, increases, or expands the application of or increases the duration of a user fee, including requirements to:

• consult stakeholders;
• establish standards comparable to those established by other countries with which a comparison is relevant; and
• establish an independent advisory panel, where applicable, to make recommendations for resolving complaints about the proposed fees.

10. In November 2004, Treasury Board introduced a Policy on Service Standards for External Fees. This policy represents the government's commitment to those who use its services. Service standards represent an important management tool for measuring, assessing, communicating and improving service performance.

11. In March 2008, Treasury Board updated its Guide to Costing. The guide is based on generally accepted management accounting principles and presents a logical seven-step approach to be used for all costing exercises, including the development of cost-recovery proposals.

12. Treasury Board guidance^Footnote 6 states that cost-based user fees and cost-based regulatory charges serve to recover an amount up to the full cost of the associated activity from users or direct-benefit recipients.

3.0 Current Service Standards and User Fees

13. The CFIA's current overtime fees are based on the rates of pay and other benefits described in the respective collective agreements as they existed in 1995. The overtime fees listed in the Canadian Food Inspection Agency Fees Notice are a simplification of the actual rates of pay contained in the collective agreements.

14. Currently, the CFIA sets out overtime fees in the Canadian Food Inspection Agency Fees Notice for three classifications of employees: Engineering and Scientific Support Group (EG), Program Administration Group (PM), and Veterinary Medicine Group (VM). There are three distinct situations for which overtime fees are applied: contiguous (same day); call-back (subject to a minimum charge); and standby (henceforth, collectively referred to as ‘overtime').

15. Current Overtime Fees for Services Provided Outside Regular Working Hours^Footnote 7

16. The fees for overtime services are equivalent to the full incremental costs (salary plus premiums and administration costs) of providing overtime services to service recipients. These rates are based on the maximum rate of pay for the lowest employee group and level (VM/EG/PM) qualified to perform the service. If the CFIA chooses to provide overtime service by using a more highly paid employee then it does so with no expectation of recovering the additional cost.

17. All regular user fees are in effect in overtime as they were designed to recover a portion of the CFIA's regular operating expenses. The CFIA's overhead and indirect costs are fixed and are recovered through regular time inspection fees. There are no additional indirect or overhead program costs associated with overtime and therefore none are added to the overtime fee charged to service recipients.

18. Overtime fees are currently applicable when a service recipient specifically requests the CFIA to provide a service outside regular service windows or, where applicable, expanded service windows, and are charged regardless of whether or not the service was of a health and safety, quality assurance, compulsory or non-compulsory nature. Within the regular working hours service recipients are not charged overtime fees even if overtime is incurred by CFIA employees.

19. Service standards in relation to services delivered outside regular service windows do not currently exist.

4.0 Proposed Service Standards and User Fees

20. The proposed overtime fees will continue to apply to all services delivered by the CFIA that:

1. are provided at the request of a service recipient; and
2. are requested to be provided outside of the regular working hours or, where applicable, the expanded service window.

The following additional criterion is being proposed to apply to overtime fees: that the service(s) in question have an associated user fee.

21. The CFIA will continue to charge service recipients the applicable user fees, as set out in the Canadian Food Inspection Agency Fees Notice, plus the applicable overtime charge.

4.1 Service standards, performance measurement and tracking

22. Service standards tell service recipients what to expect in terms of, for example, the time frame for service delivery, how services will be delivered, and what service recipients can do when they are not satisfied with the standard of service they receive.

23. Service standards are established for service delivery that takes place during regular working hours, or expanded service windows. Those service standards will continue to apply to those services that may be delivered outside of regular working hours. The ability of the program to meet the service standard will continue to be tracked and measured even when the service is delivered outside regular working hours.

4.2 Cost Analysis

24. Full cost is defined as all resources consumed, including program support and internal services, to deliver a service.

25. All user fees for services delivered during regular working hours will continue to apply to services delivered outside of those time periods. These existing user fees already account for overhead and indirect costs associated with the service. The proposed overtime fees include only the additional salary and benefits paid to CFIA employees.

26. The overtime fee will continue to be set in accordance with the relevant employee collective agreement. The overtime fees have not been adjusted since they were put in place when the CFIA was created. As a result, the overtime fees will increase in order to be consistent with the cost to deliver the service.

27. CFIA employees who deliver services to service recipients are principally within the Engineering and Scientific Support Group (EG), which includes inspectors; or the Veterinary Medicine Group (VM) employee classifications.

28. The overtime fee is based on the average salary of the respective employee classification delivering the service. There are three types of overtime fees. The first is the contiguous (same day) hourly rate which is the average salary per hour, including Employee Benefit Plans^Footnote 8 (EBP), applied at a rate of time and a half. The second is the call-back, day of rest & designated paid holiday which is the average salary per hour applied at a rate of time and a half, subject to a minimum 3 hour charge. The third is the user-requested standby fee per 4 hours which is the average salary per hour applied at a rate of one-half hour for each four hour period or portion thereof.

29. Overtime fees will be calculated to the nearest 15 minute increment, except in the case of the minimum charge for a call-back or the standby fee. Where an employee on standby is called in to deliver a service, the service recipient will be billed for the applicable standby fee and call-back fees.

30. Travel time incurred to deliver a service outside regular working hours will continue to be subject to overtime fees.

31. Where charges for cancelled service requests exist, they will continue to apply as per regular time cancellation requests. Where the cancellation request pertains to a request for service outside of the regular service window, overtime fees are also applicable.

32. In order to account for the time difference of fixing fees for FY2013-14 based on costs incurred in FY2010-11, an inflationary factor is applied to adjust the costs. Refer to paragraph 44 for more details around the inflationary factor.

33. Based on the most recent collective agreement for the Veterinary Medicine classification (VM-01 and VM-02), which expired on September 30, 2011, the overtime costs incurred by the CFIA are as follows:

34. The average VM hourly cost of $52.38 is arrived at by summing the total salary dollars paid by the CFIA for VM-01 and VM-02 employees who deliver services, multiplied by 1.2537 to include EBP, and divided by the total annual paid hours of 1,958^Footnote 9. This figure is then adjusted for inflation to bring the costs forward 3 years, to arrive at a cost of $55.42/hr. This figure then becomes the base for deriving the respective overtime fees for the VM classification.

35. Based on the most recent collective agreement for the Engineering and Scientific Support classification^Footnote 10 (EG-02 to EG-04), which expired on June 21, 2011, the overtime costs incurred by the CFIA are as follows:

36. The average EG hourly cost of $37.60 is arrived at by summing the total salary dollars paid by the CFIA for EG-02, EG-03, and EG-04 employees who deliver services, multiplied by 1.2537 to include EBP, and divided by the total annual paid hours of 1,958. This figure is then adjusted for inflation to bring the costs forward 3 years, to arrive at a cost of $39.78/hr. This figure then becomes the base for deriving the respective overtime fees for the EG classification.

4.3 Public vs. Private Benefit

37. The CFIA proposes to continue to recover the full incremental costs incurred to deliver services outside of regular working hours.

38. Specifically requesting service delivery outside of regular working hours is indicative of a time sensitive business process from which direct benefits accrue solely to the service recipient.

39. Service recipients will continue to benefit from the public versus private benefit ratio that is applied to arrive at the user fee for the service when delivered during regular working hours through the application of the existing user fee for the service.

40. Therefore, service recipients will be charged the user fee that applies to the service when delivered during regular working hours in addition to the full incremental costs of providing the service outside of these time periods.

4.4 User Fee

41. The CFIA is proposing to fix overtime fees at the following rates for the next five years.

* an annual inflationary factor of 1.9% has been applied to fix fees for five years – refer to paragraph 44 for more information.

42. Projected Overtime Costs and Revenues*:

* assuming constant demand, an annual inflationary factor of 1.9% is applied to project costs and revenues for three years – refer to paragraph 44 for more information.

43. The average demand for overtime services over three fiscal years (FY2008-09 to FY2010-11) has been used to forecast costs and revenues. Demand is assumed to be constant for the purposes of this projection. For VM service, average demand for contiguous (same day) overtime service is 28,955.34 hours; average demand for call back at the hourly rate is 2,297.32 hours; average demand for call-back overtime service subject to the minimum fee is 315.25 times; and average demand for standby overtime service is 44.67 times. For EG service, average demand for contiguous (same day) overtime service is 97,015.11 hours; average demand for call back at the hourly rate is 6,882.78 hours; average demand for call-back overtime service subject to the minimum fee is 5,123.97 times; and average demand for standby overtime service is 12.17 times.

44. The annual inflation adjustment factor is the average of the percentage change in the consumer price index (CPI) over the previous five years^Footnote 11 as reported by Statistics Canada^Footnote 12. This adjustment factor will be subject to annual review based on the CPI produced by Statistics Canada.

4.5 Benchmarking

45. The CFIA examined four foreign jurisdictions for benchmarking purposes: Australia, New Zealand, the United Kingdom, and the United States. Departments and agencies in each of these jurisdictions deliver services similar to those delivered by the CFIA and generally base overtime fees on their respective collective agreements for employees and pass these charges on to service recipients.

46. Domestically, overtime fees administered by the Canadian Grain Commission were also considered.

47. This section will provide an overview of the approach to overtime fees for each jurisdiction, as well as the Canadian Grain Commission, and compare them to the CFIA's proposal.

4.5.1 Australia

48. In Australia, the Department of Agriculture, Food, and Forestry (DAFF) develops and implements policies and programs that allow Australia's agricultural, fisheries, food, and forestry industries to remain competitive, profitable and sustainable. The Australian Quarantine and Inspection Service (AQIS) is part of DAFF and is responsible for managing the quarantine controls at the border and providing import and export inspection and certification.

49. At the request of a service recipient, AQIS will provide services outside of normal working hours, subject to overtime charges and shift penalties. These charges and shift penalties are triggered when they are payable to employees, including veterinarians and inspectors, by AQIS and are charged for every ¼ hour beyond normal working hours.

50. The overtime rates for a veterinary officer are AUS$67 (CAD$70) for time and a half or AUS$111 (CAD$116) for double time and a half. The overtime rates for a meat inspector are AUS$45 (CAD$47) for time and a half or AUS$60 (CAD$63) for double time. The overtime rates for the fish, dairy, and egg export program are AUS$48 (CAD$50) for time and a half or AUS$80 (CAD$84) for double time.

4.5.2 New Zealand

51. In New Zealand, the New Zealand Food Safety Authority (NAFSA) and the Ministry of Agriculture (MAF) Biosecurity & Animal Welfare, were amalgamated in July 2010 and focus on the integrity and performance of New Zealand's animal, plant, food and related sectors.

52. Work completed outside the defined ordinary hours, rostered working hours or the standard number of hours for the day or week is paid to veterinarians and non-veterinary verifiers as overtime, provided the work has been properly authorized and supervised. These charges are chargeable to service recipients and are consistent with the terms of the collective agreements for these classifications of employees.

53. The overtime rate for a veterinary officer ranges from NZ$82.61 (CAD$68.82) to NZ$110.15 (CAD$91.77). The overtime rate for a supervising veterinary officer ranges from NZ$89.18 (CAD$74.30) to NZ$118.91 (CAD$99.07).

4.5.3 The United Kingdom

54. In the United Kingdom, the Food Standards Agency (FSA) provides advice and information to the public and government on food safety from farm to fork. It also protects consumers through effective food enforcement and monitoring, including delivering official controls in approved meat premises to protect public health, and animal health and welfare.

55. The FSA administers two types of overtime charges. Contractual overtime is overtime that is pre-arranged to ensure that the obligation can be met; once in place, this type of overtime payment is guaranteed to the employee so long as it meets the arrangement set out in the contract such as operating hours and the availability of the employee. Costs associated with this type of arrangement are passed on to service recipients. For all other overtime situations, overtime rates are consistent with collective agreements and are passed on to the service recipient as part of the total time cost.

56. The overtime rate for an official veterinarian is £56.40 (approximately CAD$90) and for an inspection is £43.80 (approximately CAD$70).

4.5.4 The United States

57. In the United States, the Animal and Plant Health Inspection Service (APHIS) and the Food Safety and Inspection Service (FSIS) of the United States Department of Agriculture (USDA) are responsible for food safety and animal and plant inspections.

58. APHIS is a multi-faceted Agency with a broad mission that includes protecting and promoting U.S. agricultural health, regulating genetically engineered organisms, administering the Animal Welfare Act and carrying out wildlife damage management activities. FSIS is the public health agency responsible for verifying that the nation's commercial supply of meat, poultry, and egg products is safe, wholesome, and correctly labelled and packaged.

59. The USDA-APHIS charges a user fee to recover the costs of providing agricultural quarantine and inspection services, export certification of plant and plant products, veterinary services for imports and exports of live animals and products, and veterinary diagnostic goods and services. An additional overtime fee is applied to recover the costs associated with overtime.

60. In general, the USDA-FSIS charges service recipients for overtime inspection services when two conditions are met: (i) the establishment decides to work outside of its approved operating schedule, and (ii) FSIS inspection program personnel need to work outside of their regular 8 hour working day, or 40 hours per week, and are entitled to premium pay to provide overtime inspection services.

61. The premium hour rate that USDA-APHIS will charge after October 2012 to service recipients for import and export services is in the range of USD$156.00 (CAD$153) to USD$176.00 (CAD$172) on Sundays. Reimbursable overtime fees, established in October 2005, for work at laboratories and ports of entry range from USD$51.00 (CAD$50) to USD$67.00 (CAD$66).

4.5.5 Other Canadian Government Departments and Agencies

62. The Canadian Grain Commission (CGC) is the regulator of Canada's grain handling industry. The CGC certifies the quality, safety, and weight of Canadian grain that is delivered to domestic and export markets.

63. The CGC applies overtime fees, consistent with the conditions in the employee collective agreements, for time worked outside of standard hours of operation (standard hours: 6:30am to 6:30pm, Monday to Friday) or if an inspector works more than 8 hours at one service recipient's premises. There may be some exceptions by special arrangement.

64. Overtime user fees range from CAD$14.20 to CAD$107.20 and are applied in addition to regular time charges.

4.5.6 Comparison with CFIA Proposal

65. In general, the approach to overtime in each jurisdiction is comparable to the approach proposed by the CFIA, in that it is based on the commitments of the governmental authority to its employees via collective agreements and the full charge is passed on to service recipients. The approach to overtime user fees set out in this proposal is also consistent with that of the CGC.

5.0 Complaints and Comments During Consultations

66. According to the User Fees Act (UFA), the CFIA is required to notify stakeholders of a proposed user fee. An on-line consultation on this proposal began on October 25, 2012 and will end on January 11, 2013. Those wishing to participate in the consultation can do so by visiting the CFIA's website at: www.inspection.gc.ca.

67. Section 4.1 of the UFA outlines the complaints process. Complaints or comments about the proposal can be submitted until January 11, 2013. If a complaint is received, the CFIA will try to resolve the complaint and provide notice in writing of any proposed measures to resolve the complaint.

68. If a complaint is not resolved to a complainant's satisfaction within 30 days after January 11, 2013, the complainant may request in writing that the complaint be referred to an independent advisory panel. This written request must be received within 10 days following the 30 day period.

69. If appropriate, the independent advisory panel will prepare a report for the Minister with its findings and recommendations for resolving the dispute. The CFIA will consider the panel's recommendations and include the panel's report in the tabling package.