Canadian Food Inspection Agency - Quarterly Financial Report for the quarter ended December 31, 2012

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 2012-13 Main Estimates, the 2012-13 Supplementary Estimates (A) and (B), as well as Canada's Economic Action Plan 2012 (Budget 2012).

A summary description of the CFIA's program activities can be found in Part II of the Main Estimates at the following website: http://www.tbs-sct.gc.ca/est-pre/20112012/p2-eng.asp

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

CFIA Mandate

The Minister of Agriculture and Agri-Food Canada is responsible for the CFIA and for the overall direction of the Agency. 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. http://laws-lois.justice.gc.ca/eng/acts/C-16.5/

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. The CFIA shares many of its core responsibilities with other federal departments and agencies, with provincial, territorial and municipal authorities and with other stakeholders.

In a complex operating environment, the CFIA works with its partners to implement food safety measures; manage food, animal and plant risks 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. The Agency also provides scientific advice, and conducts regulatory research.

At the CFIA, informed decision making is 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 includes the Agency's spending authorities granted by Parliament and those used by the Agency, consistent with the Main Estimates and Supplementary Estimates (A) and (B) for the 2012-13 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 moneys 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 departmental financial statements that are part of the departmental performance reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year. Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012. As a result, the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-13, a frozen allotment has been established by Treasury Board authority in the Agency's Vote 20 - Operating Expenditures and Contributions equal to the savings measures in Budget 2012. This frozen allotment will be offset against new funding. In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled by parliament.

For further information on the Budget 2012 Implementation, please see the Budget 2012 Implementation section below.

Highlights of fiscal quarter and fiscal year to date (YTD)

In line with previously reported variances in the Departmental Performance Report, the CFIA determined that the greater of $5.0 million and 10% change in budget and expenditures from one year to the next are deemed to be significant. In these situations, further analysis is provided.

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

At the end of the third quarter of 2012-13, the CFIA had funding available for use of $770.1 million as detailed in Table 1. This is an increase of $14.2 million as compared to the end of the same quarter in 2011-12. Below is the breakdown of this increase.

Table 1: Authorities Available for Use for the Year Ending March 31, 2013 and March 31, 2012 (In thousands of dollars)

Authorities	2012-13	2011-12	Variances	%
Vote 20 - Operating Expenditures and Contributions	594,159	597,183	(3,024)	-0.5%
Vote 25 - Capital expenditures	41,859	23,952	17,907	74.8%
Budgetary Statutory Authorities
Employee benefit plans	79,424	81,143	(1,719)	-2.1%
Compensation payments	1,500	1,500	-	-
Spending of revenues	53,161	52,158	1,003	1,9%
Total Authorities	770,103	755,936	14,167	1.9%

Numbers may not add due to rounding.

The primary reasons for the overall decrease in Vote 20 - Operating Expenditures and Contributions include:

Decreases:

• Sunsetting of resources for Listeriosis and to support increased frequency of food inspection in meat processing plants. Funding for these two items was extended as part of Budget 2012 and will be added to the Agency's budget later in the year, subject to Parliamentary approval, through Supplementary Estimates;
• Transfer to Shared Services Canada.

Increases:

• Incremental resources for the Food Safety Action Plan;
• Resources for the Food Safety Modernization initiative;
• Resources for the Plum Pox Monitoring and Management Program;
• Increase in 2011-12 carry forward as compared to the 2010-11 carry forward.

The primary reasons for the increase in Vote 25 - Capital Expenditures include:

• Transfer from Agriculture and Agri-Food Canada for the development of a Traceability National Information Portal;
• Resources for the Food Safety Modernization initiative;
• Increase in 2011-12 carry forward as compared to the 2010-11 carry forward.

At the end of the third quarter of 2012-13, the CFIA had expenditures of $532.0 million as detailed in Table 2. This is an increase of $14.2 million as compared to the end of the same quarter in 2011-12. Below is the breakdown of this increase.

Table 2: Year-to-Date Expenditures used as of December 31, 2012 and December 31, 2011 (In thousands of dollars)

Expenditures	2012-13	2011-12	Variances	%
Vote 20 - Operating Expenditures and Contributions	413,111	420,598	(7,487)	-1.8%
Vote 25 - Capital expenditures	9,778	5,246	4,532	86.4%
Budgetary Statutory Authorities
Employee benefit plans	59,568	60,966	(1,398)	-2.3%
Compensation payments	24,601	1,071	23,530	2297.0%
Spending of revenues	24,902	29,844	(4,942)	19.8%
Total Expenditures	531,960	517,725	14,235	2.7%

Numbers may not add due to rounding.

The primary reason for the increase in statutory compensation payments is the increase in compensation payments made to owners of salmon that were ordered destroyed under the Health of Animals Act due to Infectious Salmon Anaemia. Statutory payments do not require parliamentary approval as they are not funded from the Agency's voted appropriations. They are funded directly from the consolidated revenue fund, in accordance with the applicable legislation (in this case the Health of Animals Act). The Agency's authorities will be adjusted at the end of the fiscal year to reflect these draws against the consolidated revenue fund.

The decrease in statutory spending of revenue is related to the timing of payments to Other Government Departments for such things as occupancy costs.

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

Under "Planned expenditures for the year ending March 31, 2013", the CFIA's authorities for Acquisition of Machinery and Equipment increased by $19.9 million, when compared to the previous year. The primary reasons for this increase include:

• Transfer from Agriculture and Agri-Food Canada for the development of a Traceability National Information Portal;
• Resources for Food Safety Modernization
• Increase in 2011-12 carry forward as compared to the 2010-11 carry forward.

Under Year-to-date used at quarter-end, there are two significant variances as follows:

• Decrease of $6.0 million under Transportation and Communication is partially as a result of expenditures made to PWGSC in 2011-12 related to telecommunications. In 2012-13, these expenditures are the responsibility of Shared Services Canada (SSC). These expenditures took place before November 15, 2011 and as such occurred before SSC took responsibility for these types of expenditures. Please see section below on Shared Services Canada for further information on deemed appropriations and expenditures. In addition to this item, the Agency also had a decrease in relocation costs in 2012-13, as compared to the previous year;
• Increase in Transfer Payments, as indicated previously, is primarily as a result of compensation payments made to owners of salmon that were ordered destroyed under the Health of Animals Act due to Infectious Salmon Anaemia

Risks and Uncertainties

This Departmental Quarterly Financial Report (QFR) reflects the results of the current fiscal period in relation to Main Estimates and Supplementary Estimates A and B for which full supply was released on December 14, 2012.

The Agency has adopted an integrated approach to corporate risk management. Integrated Risk Management (IRM) is a continuous, proactive and systematic process for assessing, managing and communicating risk from an organization-wide perspective. The CFIA Corporate Risk Profile (CRP), resulting from the IRM approach, supports strategic decision-making by ensuring that risk information is integrated within existing business processes such as planning and priority-setting. This, in turn, supports the achievement of the CFIA's strategic outcome - a safe and accessible food and plant and animal resource base.

Cost Containment Measures:

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. Again this year, the Agency is carefully monitoring expenditures and is currently on track to meet its budgetary target. As well, the Agency is working to identify opportunities to reduce duplication, standardize management and oversight, streamline and realign business processes, and develop better strategies for the acquisition of goods and services.

Significant Changes in relation to Operations, Personnel and Programs

Shared Services Canada:

As a result of the creation of Shared Services Canada (SSC) on August 4, 2011 and the subsequent passing of the Order-in-Council (OIC) on November 15, 2011, certain responsibilities across 43 departments and agencies, including the CFIA, were transferred to SSC. All unexpended authorities relating to responsibilities transferred to SSC were deemed to have been appropriated as of the OIC date resulting in reductions to transferring out organizations' authorities available for use in 2011-12.

For the Q1 and Q2 Quarterly Financial Reports, deemed appropriations and expenditures related to Shared Services Canada were included in both the Statement of Authorities and the Departmental Budgetary Expenditures by Standard Object tables in the 2011-12 comparative information. However, the transfer of resources to Shared Services Canada has already been removed from the 2012-13 budget via the 2012-13 Annual Reference Level Update.

For the Q3 Quarterly Financial Report, deemed appropriations and expenditures related to Shared Services Canada were excluded from both the Statement of Authorities and the Departmental Budgetary Expenditures by Standard Object tables in the 2011-12 comparative information.

Changes to Senior Management Personnel:

There were no changes to Senior Management Personnel during this third quarter.

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and businesses to deal with their government; and, modernize and reduce the back office.

To support the Government's efforts on spending reductions, the CFIA's budget will be reduced by $2.1 million in 2012-13, $10.0 million in 2013-14 and $55.8 million in 2014-15 and ongoing. Savings in 2012-13 are focused on internal administrative activities and as of December 31st, Budget 2012's impacts on the CFIA' financial situation were minimal. These administrative activities are performed in various parts of the Agency rather than in one particular program.

The changes the Agency is making as a result of the Budget will reflect its goal of focusing 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 2012 also renewed funding for key food safety initiatives. Funding for two of the Agency's sunsetting programs, one for Listeriosis and the other to support increased frequency of food inspections at meat processing plants was extended as part of Budget 2012 and will be added to the Agency's budget later in the year, subject to Treasury Board and Parliamentary approval, through the Supplementary Estimates process.

Food Safety will not be adversely affected by Budget 2012. None of the measures identified in this Budget affect front-line food inspection staff.

Approved by:

Annex A

Statement of Authorities (unaudited)

For the quarter ended December 31, 2012

Fiscal year 2012-13

(In thousands of dollars)	Total available for use for the year ending March 31, 2013	Used during the quarter ended December 31, 2012	Year to date used at quarter-end
Vote 20 - Operating Expenditures and Contributions	594,159	142,036	413,111
Vote 25 - Capital expenditures	41,859	4,095	9,778
Budgetary Statutory Authorities
Employee benefit plans	79,424	19,856	59,568
Compensation payments	1,500	8,451	24,601
Spending of revenues	53,161	14,369	24,864
Other	-	7	38
Total Budgetary Authorities	770,103	188,813	531,961
Total Authorities	770,103	188,813	531,961

Numbers may not add due to rounding.

Fiscal year 2011-12

(In thousands of dollars)	Total available for use for the year ending March 31, 2012	Used during the quarter ended December 31, 2011	Year to date used at quarter-end
Vote 20 - Operating Expenditures and Contributions	597,183	142,501	420,598
Vote 25 - Capital expenditures	23,952	3,076	5,246
Budgetary Statutory Authorities
Employee benefit plans	81,143	20,268	60,966
Compensation payments	1,500	350	1,071
Spending of revenues	52,158	14,147	29,841
Other	-	-	3
Total Budgetary Authorities	755,936	180,342	517,725
Total Authorities	755,936	180,342	517,725

Numbers may not add due to rounding.

(1) Includes only authorities available for use and granted by Parliament at quarter-end.

(2) Pursuant to section 31.1 for the Financial Administration Act and Order-in Council P.C. 2011-1297 effective November 15, 2011, $7,087 thousand is deemed to have been appropriated to Shared Services Canada Vote 17 Operating Expenditures and Vote 19 Capital Expenditures, which results in a reduction for the same amount in the Canadian Food Inspection Agency Vote 20 Operating Expenditures and Contributions and Vote 25 Capital Expenditures, Appropriation Act No. 1, 2011-12.

(3) Excludes an amount of $1,031 thousand incurred on behalf of Shared Services Canada from the date of transfer of November 15 to December 31, 2011.

(4) Does not reflect measures announced in Budget 2012.

(5) Increase in Compensation Payments is primarily as a result of payments made to owners of salmon ordered destroyed under the Health of Animals Act, due to Infectious Salmon Anemia. Authorities will be adjusted at year-end for this item.

Annex B

Departmental budgetary expenditures by Standard Object (unaudited)

For the quarter ended December 31, 2012

Fiscal year 2012-13

(In thousands of dollars)	Total available for use for the year ending March 31, 2013	Used during the quarter ended December 31, 2012	Year to date used at quarter-end
Expenditures :
Personnel	594,159	142,078	426,293
Transportation and communications	45,717	4,810	11,951
Information	1,948	202	418
Professional and special services	81,766	17,094	37,232
Rentals	4,753	731	5,170
Repair and maintenance	20,471	6,060	8,152
Utilities, materials and supplies	20,563	4,051	9,932
Acquisition of machinery and equipment	41,859	2,117	4,607
Transfer payments	1,744	8,838	25,369
Other subsidies and payments	2,151	2,831	2,837
Total gross budgetary expenditures	770,103	188,813	531,961
Total net budgetary expenditures	770,103	188,813	531,961

Numbers may not add due to rounding.

Fiscal year 2011-12

(In thousands of dollars)	Total available for use for the year ending March 31, 2012	Used during the quarter ended December 31, 2011	Year to date used at quarter-end
Expenditures :
Personnel	543,287	143,365	430,993
Transportation and communications	47,149	7,027	17,993
Information	4,435	291	704
Professional and special services	84,642	14,642	33,275
Rentals	6,615	2,361	3,135
Repair and maintenance	16,643	2,700	11,646
Utilities, materials and supplies	24,224	3,852	10,335
Acquisition of machinery and equipment	21,999	2,472	4,578
Transfer payments	1,744	469	1,766
Other subsidies and payments	5,198	3,161	3,300
Total gross budgetary expenditures	755,936	180,342	517,725
Total net budgetary expenditures	755,936	180,342	517,725

Numbers may not add due to rounding.

(1) Includes only authorities available for use and granted by Parliament at quarter-end.

(2) Pursuant to section 31.1 for the Financial Administration Act and Order-in Council P.C. 2011-1297 effective November 15, 2011, $7,087 thousand is deemed to have been appropriated to Shared Services Canada Vote 17 Operating Expenditures and Vote 19 Capital Expenditures, which results in a reduction for the same amount in the Canadian Food Inspection Agency Vote 20 Operating Expenditures and Contributions and Vote 25 Capital Expenditures, Appropriation Act No. 1, 2011-12.

(3) Excludes an amount of $1,031 thousand incurred on behalf of Shared Services Canada from the date of transfer of November 15 to December 31, 2011.

(4) Does not reflect measures announced in Budget 2012.

(5) Increase in Transfer Payments is primarily as a result of payments made to owners of salmon ordered destroyed under the Health of Animals Act, due to Infectious Salmon Anemia. Authorities will be adjusted at year-end for this item.