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Canadian Food Inspection Agency (CFIA) - Quarterly Financial Report (QFR) for the Quarter ended June 30, 2019

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 2019-20 Main Estimates and the Budget Implementation Vote. 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 2019-20 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 Agency Act 1997, c.6.

The CFIA administers and enforces 10 federal statutes and 23 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 and 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 Budget Implementation Vote for the 2019-20 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 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 results 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% 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 the document)

Authorities Available for Use

At the end of the first quarter, June 30, 2019 (Q1), the CFIA had $742.1 million of authorities available for use, as detailed in Table 1. This is an increase of $22.9 million (3.2%) compared to the end of the same quarter in 2018-19. Below is a breakdown of this variance.

Table 1: Authorities available for use for the year ending March 31, 2020 and March 31, 2019
(in thousands of dollars)
Authorities 2019-20 2018-19 Variances %
Vote 1 - Operating expenditures and contributions 574,296 553,561 20,735 3.7
Vote 5 - Capital expenditures 19,962 25,608 (5,646) (22.0)
Budgetary statutory authorities
Employee benefit plans 82,229 74,423 7,806 10.5
Compensation payments 12,500 12,500 0.0 0.0
Spending of revenues / Other 53,161 53,161 0.0 0.0
Total Authorities 742,148 719,253 22,895 3.2

Numbers may not add due to rounding.

The $20.7 million (3.7%) increase in Vote 1 – Operating expenditure and contribution authorities is largely due to new funding for collective bargaining agreements, for Food Policy for Canada (Budget 2019), for Bringing Innovation to Regulations (Budget 2019) and for Market Diversification (Fall Economic Statement). These increases are offset by a decrease in funding for Bovine Spongiform Encephalopathy (BSE), a transfer to Shared Services Canada (SSC) and decreases in temporary funding for Canadian Food Safety Information Network (CFSIN), Sidney Centre for Plant Health, and Geonomics Research and Development Initiative (GRDI).

The $5.6 million (22.0%) decrease in Vote 5 – Capital expenditure authorities is primarily due to the reduction in temporary funding for the Federal Infrastructure Initiative (FII) - Budget 2015 and Budget 2016, which has been fully delivered. This reduction is offset by the receipt of additional temporary funds for the CFSIN project.

The $7.8 million (10.5%) increase in employee benefits plan (EBP) is largely due to an internal transfer from operating to personnel, the EBP on the new collective bargaining funding, and the increase from 20% to 27% in the EBP calculation for new TB submissions.

Year-to-date expenditures

At the end of the 2019-20 first quarter, the CFIA had expenditures of $165.6 million as outlined in Table 2. This represents an overall increase of $3.9 million (2.4%) compared to the end of the same quarter in 2018-19. Below is a breakdown of the variance.

Table 2: Year-to-date expenditures used as of June 30, 2019 and June 30, 2018
(in thousands of dollars)
Expenditures 2019-20 2018-19 Variances %
Vote 1 - Operating expenditures and contributions 133,567 131,160 2,407 1.8
Vote 5 - Capital expenditures 2,798 3,950 (1,152) (29.2)
Budgetary statutory authorities
Employee benefit plans 18,478 18,008 470 2.6
Compensation payments 1,054 524 530 101.0
Spending of revenues / Other 9,720 8,036 1,684 21.0
Total Expenditures 165,617 161,678 3,939 2.4

Numbers may not add due to rounding.

The Agency's expenditures by vote as at June 30, 2019 were relatively stable compared to the same period in 2018-19. The minor variances did not meet the criteria to warrant further explanation.

Significant changes in the departmental budgetary expenditures by standard object (Annex B at end of the document)

Planned expenditures (equivalent to authorities) by standard object

When compared to the previous year, the 2019-20 planned expenditures (i.e. authorities) for personnel have increased by $35.7 million (8.3%) largely due to the receipt of collective bargaining funding from Treasury Board, an internal transfer from operating to personnel, and new funding for Food Policy for Canada (Budget 2019), for Bringing Innovation to Regulations (Budget 2019) and for the Market Diversification (Fall Economic Statement) initiative.

The 2019-20 planned expenditures for utilities, materials and supplies have decreased by $7.1 million (72.6%) primarily due to the decrease in temporary funding received for the implementation of FII projects, which have been fully delivered.

Expended during the quarter ended June 30, 2019 by standard object

The Agency's expenditures by standard object as at June 30, 2019 were relatively stable compared to the same period in 2018-19. The minor variances did not meet the criteria to warrant further explanation.

Risks and uncertainties

This quarterly financial report reflects the results of the current fiscal period in relation to the Main Estimates and the Budget Implementation Vote, for 2019-20. The Agency anticipates receiving further 2019-20 funding from the Supplementary Estimates and Treasury Board Central Votes. In addition to managing the delivery of the 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. 2018 and 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 in order to manage the incremental response costs associated with emergencies. This 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, exceptional circumstances could drive costs above the funding set aside.

Collective bargaining

The majority of the CFIA's collective agreements that had expired were renegotiated in 2018-19. PIPSC Scientific and Analytical (S&A) Group was the last outstanding agreement, and it was signed on June 28, 2019. In accordance with the 2013 Speech from the Throne and Fall Update, as collective agreement settlements were negotiated, retroactive and ongoing salary increases applicable to the 2014-15 and 2015‑16 fiscal years had to be absorbed by the Agency.

Efforts are currently underway to implement the new salary rates and to provide salary retroactive payments.

The Centre for Plant Health

As part of the Government's commitment to establishing and maintaining modern federal science infrastructure, Budget 2017 provided $80 million over five years, starting in 2017-18, to replace the Centre for Plant Health, located near Sidney, British Columbia. A new, world class plant health research facility will help support the safety of Canada's agriculture and agri-food sector, while facilitating trade and economic growth that benefits all Canadians. The project entered the detailed planning stage in May 2019 and is aligned with Laboratories Canada, which was funded under Budget 2018 with an additional $2.8 billion for Public Services and Procurement Canada to begin the process for the construction of more multi-purpose, collaborative, federal science and technology facilities.

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 key risks and response strategies are outlined in the CFIA's 2019-20 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. On January 15, 2019 the Safe Food for Canadians Regulations (SFCR) came into force. The SFCR improves and strengthens Canada's food safety system, enables industry to innovate, and creates greater market access opportunities for Canadian food products exported abroad.

The SFCR reduces unnecessary administrative burden on businesses by replacing 14 sets of existing regulations with one, and helps maintain and grow market access for Canada’s agri-food and agricultural sector. The SFCR are the result of careful, informed policy development supported by extensive consultations with CFIA staff and Canadians across the country. The regulations make our food system even safer by focusing on prevention and allowing for faster removal of unsafe food from the marketplace.

Some of the requirements for the SFCR were implemented when the regulations came into force, while other requirements are being phased in over a period of 12-30 months based on food commodity, type of activity and business size.

Personnel

On February 25, 2019, Prime Minister Justin Trudeau announced Siddika Mithani as the new President of the CFIA, effective February 27, 2019.

Original signed by:

Siddika Mithani, Ph.D.
President, CFIA

Dominique Osterrath
Vice President,
Corporate Management Branch and
Chief Financial Officer, CFIA

Ottawa, Ontario
Date: August 20, 2019

Ottawa, Ontario
Date: August 15, 2019

Annex A
Statement of authorities (unaudited)
For the quarter ended June 30, 2019
(in thousands of dollars)
Fiscal year 2019-20 Fiscal year 2018-19
Total available for use for the year ending March 31, 2020 Table Note 1 Used during the quarter ended June 30, 2019 Year to date used at quarter-end Total available for use for the year ending March 31, 2019Table Note 1 Used during the quarter ended June 30, 2018 Year to date used at quarter-end
Vote 1 - Operating expenditures and contributions 574,296 133,567 133,567 553,561 131,160 131,160
Vote 5 - Capital expenditures 19,962 2,798 2,798 25,608 3,950 3,950
Budgetary statutory authorities
Employee benefit plans 82,229 18,478 18,478 74,423 18,008 18,008
Compensation payments 12,500 1,054 1,054 12,500 524 524
Spending of revenues 53,161 9,630 9,630 53,161 8,026 8,026
Refunds of previous years revenue 0 90 90 0 10 10
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 742,148 165,617 165,617 719,253 161,678 161,678

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 June 30, 2019
(in thousands of dollars)
Fiscal year 2019-20 Fiscal year 2018-19
Planned expenditures for the year ending March 31, 2020 Table Note 2 Expended during the quarter ended June 30, 2019 Year to date used at quarter-end Planned expenditures for the year ending March 31, 2019 Table Note 2 Expended during the quarter ended June 30, 2018 Year to date used at quarter-end
Expenditures
Personnel 596,113 145,349 145,349 560,371 140,226 140,226
Transportation and communications 17,419 2,222 2,222 18,863 2,645 2,645
Information 2,072 246 246 2,576 312 312
Professional and special services 69,964 11,346 11,346 65,856 9,931 9,931
Rentals 11,086 854 854 14,587 490 490
Repair and maintenance 9,814 591 591 11,396 3,105 3,105
Utilities, materials and supplies 9,822 2,362 2,362 16,941 2,160 2,160
Acquisition of land, buildings and works 0 0 0 0 0 0
Acquisition of machinery and equipment 9,640 1,393 1,393 12,445 1,402 1,402
Transfer payments 13,969 1,054 1,054 13,969 524 524
Other subsidies and payments 2,249 200 200 2,249 883 883
Total gross budgetary expenditures 742,148 165,617 165,617 719,253 161,678 161,678

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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