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Archived - Canadian Food Inspection Agency (CFIA) - Quarterly Financial Report (QFR) for the Quarter ended September 30, 2017

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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 2017-18 Main Estimates, the 2017-18 Supplementary Estimates (A) and authorities received from Treasury Board Central Votes through which the Canadian Food Inspection Agency (CFIA) received $35.8 million of additional authorities for the renewal of four sunsetting initiatives and an additional $39.2 million of carry forward funds from 2016-17. Main and Supplementary Estimates documents can be found on the Government of Canada's Planned government spending webpage.

A summary description of the program activities of the CFIA can be found in the CFIA's 2017-18 Departmental Plan.

This 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 Agency'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 administers and enforces 14 federal statutes and 34 sets of regulations. These statutes and regulations regulate the safety and quality of food sold in Canada and support a sustainable animal and plant resource base. It 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 Agency actively participates in international fora for the development of international science-based rules, standards, guidelines and policies. It also participates 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 the Supplementary Estimates (A), and authorities received from Treasury Board Central Votes for the 2017-18 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 through annual appropriation acts or legislation which provides statutory spending authority for specific purposes.

When Parliament is dissolved for the purpose of a general election, section 30 of the Financial Administration Actauthorizes 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 Results 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 always provided. Further analysis is also provided when the dollar value is deemed significant.

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

Authorities Available for Use

At the end of the second quarter, September 30, 2017 (Q2), the CFIA had $779.6 million of authorities available for use, as detailed in Table 1. This is a decrease of $24.0 million (3.0 per cent) compared to the end of the same quarter in 2016-17. Below is a breakdown of this variance.

Table 1: Authorities Available for Use for the Year Ending March 31, 2018 and March 31, 2017 (in thousands of dollars)
Authorities 2017-18 2016-17 Variances %
Vote 1 - Operating Expenditures and Contributions 581,185 565,367 15,818 2.8
Vote 5 - Capital Expenditures 64,368 99,050 (34,682) (35.0)
Budgetary Statutory Authorities
Employee benefit plan 77,400 82,554 (5,154) (6.2)
Compensation payments 3,500 3,500 0 0.0
Spending of revenues / Other 53,161 53,161 0 0.0
Total Authorities 779,614 803,632 (24,018) (3.0)

Numbers may not add due to rounding.

The $15.8 million (2.8 per cent) increase in Vote 1 – Operating expenditures and contributions authorities is mainly due to the timing of the receipt of new funding for Improving Food Safety – Budget 2016 and Securing Market Access – Budget 2015, as well as an increase in the operating carry forward in 2017-18 as compared to 2016-17.

The $34.7 million (35.0 per cent) decrease in Vote 5 – Capital expenditures authorities is primarily due to the reduction in temporary funding for the Federal Infrastructure Initiative (FII) – Budget 2015, to maintain and upgrade federal infrastructure assets – Budget 2016, and for the Electronic Service Delivery Platform (ESDP) project. These reductions are partially offset by an increase in capital carry forward in 2017-18 as compared to 2016-17.

Year-to-Date Expenditures

At the end of the 2017-18 second quarter, the CFIA had expenditures of $333.0 million as outlined in Table 2. This represents an overall decrease of $3.0 million (0.9 per cent) compared to the end of the same quarter in 2016-17. Below is a breakdown of the variance.

Table 2: Year-to-Date Expenditures Used as of September 30, 2017 and September 30, 2016 (in thousands of dollars)
Expenditures 2017-18 2016-17 Variances %
Vote 1 – Operating Expenditures and Contributions 262,948 261,435 1,513 0.6
Vote 5 – Capital Expenditures 13,237 11,872 1,365 11.5
Budgetary Statutory Authorities
Employee benefit plan 36,494 38,981 (2,487) (6.4)
Compensation payments 4,023 2,052 1,971 96.0
Spending of revenues/Other 16,305 21,675 (5,370) (24.8)
Total Expenditures 333,007 336,015 (3,008) (0.9)

Numbers may not add due to rounding.

Expenditures incurred against revenues at the end of the second quarter are $5.4 million (24.8 per cent) less than at the same time in 2016-17. This is primarily due to a timing difference in the reimbursement of other government department costs, namely the Department of Justice (DOJ) for legal services and Agriculture and Agri-Food Canada (AAFC) for SAP and PeopleSoft services.

Although Vote 5 – Capital authorities are lower in 2017-18, Q2 Capital year-to-date expenditures are slightly higher than in 2016-17. This situation is mainly due to the initiation of FII projects during Q2 of 2016-17 versus full scale implementation of FII projects during Q2 of 2017-18.

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

Planned Expenditures (Equivalent to Authorities) by Standard Object

When compared to the previous year, the 2017-18 planned expenditures for professional and special services and acquisition of machinery and equipment have decreased by $15.8 million (15.1 per cent), and $7.9 million (29.2 per cent) respectively, primarily due to the decrease in temporary funding received for implementation of FII and ESDP projects.

Expended During the Quarter Ended September 30, 2017 by Standard Object

The expenditure decrease of $6.3 million (31.8 per cent) for the quarter ended September 30, 2017 for professional and special services is largely due to a timing difference in the reimbursement of other government department costs by the CFIA. Expenditures that had been incurred during Q2 in 2016-17 for DOJ legal services and AAFC SAP and PeopleSoft services have yet to be billed for 2017-18. Decreased spending in support of the Electronic Service Delivery Platform (ESDP) project also resulted in decreased expenditures under professional and special services. These items also account for the decrease in year-to-date expenditures for professional and special services.

Risks and Uncertainties

This quarterly financial report reflects the results of the current fiscal period in relation to the Main Estimates, Supplementary Estimates (A) and Treasury Board Central Votes. The Agency anticipates receiving further 2017-18 funding from the Supplementary Estimates and Treasury Board Central Votes. In addition to managing the delivery of Agency programs based on anticipated total spending authorities, the Agency faces other financial and non-financial risks and uncertainties.

Emergencies

The CFIA operates in an uncertain environment and must be prepared to respond on an urgent basis to food safety emergencies and unplanned events related to animal and plant health (e.g. 2016 bovine tuberculosis and 2014 avian influenza outbreaks). As the lead authority for safeguarding the food supply in Canada and for monitoring, controlling and eradicating animal and plant diseases, the Agency must respond with prompt action above and beyond normal business activities when these temporary situations arise in order to safeguard Canadians and maintain access to export markets.

The Agency has established a dedicated emergency reserve, to manage the incremental response costs associated with emergencies, which is reviewed every year as part of the Agency's planning process and is subject to ongoing monitoring. While the CFIA is confident that its emergency reserve is generally sufficient to cover the incremental costs related to emergency management on a yearly basis, it is recognized that, in some years, anomalies could drive costs above the funding set aside.

Collective Bargaining

The majority of the CFIA's collective agreements have expired and require renegotiation. In accordance with 2013 Speech from the Throne and Fall Update, as collective agreement settlements are negotiated, retroactive and ongoing salary increases applicable to the 2014-15 and 2015-16 fiscal years will have to be absorbed by the Agency. The exact cost is not yet known; however, based on recent federal government collective bargaining negotiations the Agency is working to mitigate the estimated financial risks for the current year, as well as future years.

Sunsetting Resources

Funding for several of the Agency's established programs will sunset; Improving food safety for Canadians and Securing Market Access in 2017-18; and, Bovine Spongiform Encephalopathy and, daily shift inspection presence in federally registered meat processing establishments in 2018-19. The Agency will assess the level of resources required for these sunsetting programs and will seek renewal as required in order to maintain and continuously improve Canada's strong food safety system, safe and accessible food supply and animal and plant resource base.

Federal Infrastructure Initiative (FII)

As part of the Budget 2015 for FII, the Agency received a total of $65.7 million over two years (2015-16 and 2016-17) in capital funds to accelerate the renewal and upgrade of critical infrastructure at CFIA laboratories. To date, 7 of the 21 FII projects have been completed and one project was cancelled. The remaining 13 projects extended into 2017-18, 2 of which have construction completion scheduled for 2018-19.

The extension into 2017-18 and beyond is due to the overall complexity of these projects. Custom fabrication, delivery of equipment, seasonal constraints and on-site coordination of multiple projects are difficult to estimate and can result in schedule slippage and cost variances from initial plans. The Agency reprofiled $16.0 million of the total $54.9 million 2016-17 FII funding into 2017-18. In addition, the CFIA plans to pursue a reprofile of required funds into 2018-19 in order to complete the 2 remaining projects.

Electronic Service Delivery Platform (ESDP)

ESDP is the digital tool that will make it possible for the CFIA to offer more electronic services to its industry stakeholders. Through ESDP, the Agency will be providing stakeholders with access to more efficient, online business services, while Agency staff will be equipped with modern technology. In the long term, ESDP will give industry access to improved services, CFIA staff access to better information, and the Agency a better understanding of the risk environment. It will also enable sharing of information more effectively with trading partners.

The CFIA recognizes that the ESDP project is a significant implementation in scale, complexity, and impact, since it will significantly change the way CFIA employees and industry clients operate. The management of the ESDP project and related risks follows an established Enterprise Project Management Framework (ePMF) with a dedicated governance structure, which is aligned with industry and government best practices to successfully manage projects.

The phased implementation is designed to incrementally introduce system features allowing for delivery of less complex functionality earlier in the project. The ESDP project began its roll-out in the winter of 2016 and additional phases will continue in 2017, with completion of the roll-out anticipated in December 2017.

As the Agency launches the full release of the on-line service tool, it will also keep open the traditional paper-based service delivery channel for an appropriate time period while the digital tool is adequately tested and phased-in. The delivery of these parallel systems will create flexibility and mitigate projects risks as industry and stakeholders adapt to the digital system. However, it will also create a time-limited financial pressure until the full transition is achieved. The Agency is taking this into consideration in its financial planning for these implementation years.

Program Risk

The CFIA is responsible for identifying and managing risks to the food supply and the animal and plant resource base which contribute to and are crucial for a safe food and a prosperous economy. Across the Agency, integrated risk management is an integral part of policy, program design, priority setting, planning, delivery, review and reporting activities.

Integrated risk management is at the core of the CFIA's modernization initiatives. The Agency operates in a dynamic and complex risk environment that continues to change rapidly. The sectors that the CFIA regulates are constantly changing their business models and technologies; industry is always developing new and innovative products, and new pathways for risk are emerging.

The CFIA has explored improving its capabilities to manage risk and use resources more effectively by experimenting with new risk intelligence tools. The Agency integrates risk information in its planning and operations in order to reduce risk in delivering its mandate, and to improve how it mobilizes resources in response to new threats. Information on keys risks and response strategies are outlined in the CFIA's 2017-18 Departmental Plan.

Significant Changes in Relation to Operations, Personnel and Programs

Regulatory Framework

The Canadian Food Inspection Agency is committed to strengthening Canada's world-class food safety system. The CFIA is preparing regulations under the Safe Food for Canadians Act that would strengthen Canada's reputation as a leader in food safety by establishing consistent, prevention-focused requirements for food that is imported or prepared for export or interprovincial trade.

In January 2017, the Safe Food for Canadians Regulations were published in the Canada Gazette, Part I for 90 days of public comment. Over 1,700 submissions were received from stakeholders, including food businesses and consumers. This feedback is being reviewed and analyzed in order to finalize the regulations and prepare for implementation. Final publication in the Canada Gazette, Part II is anticipated in spring/summer 2018.

Operations

On September 21, 2016, the U.S. Department of Agriculture (USDA) informed the CFIA of a positive bovine tuberculosis (TB) result associated with a five-year-old bovine from Alberta, Canada. The CFIA moved quickly to mobilize resources from across the Agency to support the response to this bovine TB outbreak. The CFIA's Western Area Emergency Operations Centre (EOC) and the National Emergency Operations Centre (NEOC) were activated.

The CFIA initiated an investigation into the case, working diligently with industry, producers and other government partners, which involves a significant number of premises, tracing of the movement of animals, and testing. The outbreak has been limited to Alberta and Saskatchewan; therefore, on February 10, 2017, NEOC was deactivated. The Western Area EOC remains active while the investigation is ongoing.

Personnel

As a member of the Health Portfolio, the CFIA received a new Minister in the August 28, 2017 cabinet shuffle announced by Prime Minister Justin Trudeau. The Honorable Ginette Petitpas Taylor became the new Minister of Health Canada, while former Minister of Health Canada, the Honorable Jane Philpott, became the new Minister to Indigenous Services.

Original signed by:

Paul Glover
President, CFIA

Yves Bacon
Vice President,
Corporate Management Branch and
Chief Financial Officer, CFIA

Ottawa, Ontario
Date: November 15, 2017

Ottawa, Ontario
Date: November 14, 2017

Annex A
Statement of Authorities (unaudited)
For the quarter ended September 30, 2017
(in thousands of dollars)
Fiscal year 2017-18 Fiscal year 2016-17
Total available for use for the year ending March 31, 2018 Table Note 1 Expended during the quarter ended September 30, 2017 Year to date used at quarter-end Total available for use for the year ending March 31, 2017Table Note 1 Used during the quarter ended September 30, 2016 Year to date used at quarter-end
Vote 1 – Operating expenditures and contributions 581,185 135,195 262,948 565,367 135,959 261,435
Vote 5 – Capital expenditures 64,368 8,460 13,237 99,050 8,742 11,872
Budgetary statutory authorities
Employee benefit plans 77,400 18,247 36,494 82,554 19,491 38,981
Compensation payments 3,500 1,408 4,023 3,500 900 2,052
Spending of revenues 53,161 9,579 16,301 53,161 14,001 21,657
Refunds of previous years revenue 0 0 4 0 4 18
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 779,614 172,889 333,007 803,632 179,097 336,015

Numbers may not add due to rounding.

Table Note

Table note 1

Includes only authorities granted by Parliament at quarter-end.

Return to table note 1 referrer

Annex B
Departmental budgetary expenditures by Standard Object (unaudited)
For the quarter ended September 30, 2017
(in thousands of dollars)
Fiscal year 2017-18 Fiscal year 2016-17
Planned expenditures for the year ending March 31, 2018 Table Note 2 Expended during the quarter ended September 30, 2017 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2017 Table Note 2 Expended during the quarter ended September 30, 2016 Year to date used at quarter-end
Expenditures:
Personnel 564,349 140,924 280,436 558,781 143,007 280,177
Transportation and communications 17,557 3,472 6,137 20,951 3,719 6,194
Information 4,776 284 430 4,357 1,416 1,459
Professional and special services 89,165 13,399 21,760 104,966 19,658 30,372
Rentals 16,395 3,006 3,238 15,131 1,611 2,559
Repair and maintenance 21,776 4,428 6,850 22,471 2,335 3,008
Utilities, materials and supplies 37,865 3,283 5,857 42,088 3,830 6,270
Acquisition of land, buildings and works 0 0 0 0 0 0
Acquisition of machinery and equipment 19,208 883 2,392 27,111 1,873 2,853
Transfer payments 4,319 1,416 4,031 4,319 900 2,075
Other subsidies and payments 4,204 1,794 1,876 3,457 748 1,048
Total gross budgetary expenditures 779,614 172,889 333,007 803,632 179,097 336,015

Numbers may not add due to rounding.

Table Note

Table note 2

Includes only authorities granted by Parliament at quarter-end.

Return to table note 2 referrer

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