Archived - Canadian Food Inspection Agency – Quarterly Financial Report for the quarter ended June 30, 2022

ISSN: 2819-0270

On this page

• Introduction
• CFIA mandate
  • Basis of presentation
• Highlights of fiscal quarter and fiscal year-to-date (YTD)
  • Significant changes in the statement of authorities (Annex A at end of the document)
  • Significant changes in the departmental budgetary expenditures by standard object (Annex B at end of the document)
• Risks and uncertainties
  • COVID-19
  • Emergencies
  • Sunsetting Resources Renewal
  • The Centre for Plant Health
  • Program risk
• Significant changes in relation to operations, personnel and programs
  • Regulatory framework
  • Personnel
• Annex A – Statement of authorities (unaudited)
• Annex B – Departmental budgetary expenditures by standard object (unaudited)

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 2022 to 2023 Main Estimates, and authorities received from Treasury Board central votes. 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 2022 to 2023 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 11 federal statutes, 23 sets of regulations and 1 fee notice. 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 interim supplies granted for the 2022 to 2023 Main Estimates 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 through annual appropriation acts or legislation which provides statutory spending authority for specific purposes. The CFIA was granted its full supply for the 2022 to 2023 fiscal year in June 2022.

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, 2022 (Q1), the CFIA had $837.8 million of authorities available for use, as detailed in Table 1. This is an increase of $17.0 million (2.1%) compared to the end of the same quarter in 2021 to 2022. Below is a breakdown of this variance.

Compared to the end of the same quarter in 2021 to 2022, the Vote 1 – Operating expenditures and grant and contribution authorities available for use increased by $7.1 million (1.1%) largely due to the receipt of additional investing in CFIA funding ($7.4 million) in 2022 to 2023. The Vote 5 – Capital expenditures authorities available for use increased by $13.6 million mainly as a result of the receipt of additional Sidney Laboratory rebuild funding.

Compensation payments are statutory in nature, therefore the agency authorities will be adjusted accordingly in the final year-end allotment report to the equivalent of all expenditures above the initial compensation payments authorities of $12.5 million.

Year-to-date expenditures

At the end of the 2022 to 2023 first quarter, the CFIA had expenditures of $213.2 million as outlined in Table 2. This represents an overall increase of $28.6 million (15.5%) compared to the end of the same quarter in 2021 to 2022. Below is a breakdown of the variance.

Compared to the same quarter in previous year, the Q1 2022 to 2023 operating expenditures (Vote 1) increased by $6.8 million (4.4%) for increased personnel costs, travel costs and increased professional and special services costs. These increases were partially caused by costs associated with the avian influenza outbreak. Also the investing in CFIA funding has allowed the agency to increase staffing activities. The increased spending of $708 thousand in capital expenditures (Vote 5) is mainly due to the timing of payments for investment plan projects. The increased spending in revenues is mainly caused by the timing of payments to the Department of Justice for legal services.

The compensation payments in Q1 2022 to 2023 increased by $16.4 million (3,007.9%) compared to the end of the same quarter in 2021 to 2022 mainly due to higher payments made under the Health of Animals Act for avian influenza and chronic wasting disease. Since compensation payments are statutory in nature, the agency is within its authority to incur expenditures as required against the current compensation authority levels, these authorities will be adjusted accordingly at year-end to the equivalent of all expenditures related to compensation payments.

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

Compared to the same quarter in 2021 to 2022, the increase of $17.0 million of authorities is mainly due to the increased funding in a number of initiatives as mentioned above.

Total increases more significantly affected the following standard objects:

• Professional and special services $14.2 million (19.6%)
• Acquisition of machinery and equipment $14.0 million (99.6%)
• Rentals $3.0 million (21.4%)
• Utilities, materials and supplies $2.7 million (19.1%)

These increases have been partially offset by the temporary reduction on personnel funding ($-16.5 million) due to the timing of the receipt of the 2022 to 2023 COVID-19 funding.

Expended during the quarter ended June 30, 2022 and year-to-date expenditures by standard object

Compared to the same quarter in 2021 to 2022, the increase of $28.6 million of expenditures is mainly caused by the following:

• $16.4 million (2,685.9%) in transfer payment due to the payments for animal health compensation related to avian influenza and chronic wasting disease
• $6.0 million (65.0%) in professional and special services due to the timing of the payments to service providers for pre-arranged agreements, such as legal services
• $3.9 million (2.4%) in personnel due to the increased personnel costs, such as new rate of pay, increased staffing
• $2.6 million (292.7%) in transportation and communications. This increase is partially caused by costs associated with the avian influenza outbreak

Risks and uncertainties

This quarterly financial report reflects the results of the current fiscal period in relation to the Main Estimates for 2022 to 2023 and authorities received from Treasury Board central votes. The agency anticipates receiving further 2022 to 2023 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. Through science, innovation and evidence-based decision-making, the agency has a solid foundation to continue responding to challenges of the modern world, including a global food supply chain, climate change and emerging diseases.

COVID-19

Throughout the global COVID-19 pandemic, the CFIA has played a critical role in keeping international markets open to Canadian agricultural products. Within the CFIA, the COVID-19 incident command structure (ICS) was created to ensure the safety of employees and the continuation of departmental operations during this very challenging time. The pandemic posed challenges that required strategic and collective effort with our partners to overcome. The agency mobilized resources to ensure CFIA inspectors, scientists and veterinarians were on the front-lines, while also adapting through innovation and digitization (for example, virtual inspections, developing import certification and tracking applications).

To further assist in the mitigation of the pandemic, the CFIA activated its business continuity plan in order to prioritize critically important services during the COVID-19 pandemic. These early measures allowed the CFIA to continue to deliver critical services that preserve the integrity of Canada's Food Safety System while safeguarding its animal and plant resource base.

The Government of Canada through its COVID-19 Economic Response Plan provided the CFIA with $20 million per year in 2020 to 2021, 2021 to 2022 and 2022 to 2023 to respond to emerging vulnerabilities in inspection capacity in light of COVID-19 and to ensure an adequate, safe and reliable food supply for Canadians. These funds will allow the CFIA to continue to perform critical activities by maintaining inspection capacity and investing in equipment and technology to facilitate the delivery of inspection services despite the many challenges the COVID-19 pandemic poses.

As the CFIA moves forward through the COVID-19 pandemic, critical services for Canadians continue to be monitored and prioritized in order to ensure the safety of its employees and to carry on the delivery of frontline services that safeguard Canada's food system, along with the plant and animal resources on which Canadians depend.

Emergencies

The CFIA operates in an uncertain environment and in addition to the day to day work of CFIA employees, is prepared to respond to new or emerging threats and market pressures resulting from events such as the COVID-19 pandemic, highly pathogenic avian influenza, potato wart and other high-profile issues.

Through inspections and detection efforts, CFIA has worked with stakeholders to protect Prince Edward Island's (PEI) high-quality potatoes for Canadians and international trade by preventing, minimizing, and controlling the introduction and spread of potato wart in PEI farms. Although potato wart poses no threat to human health or food safety, it impacts the economic return for potato growers by reducing farm yield and detrimentally making infected potatoes unmarketable.

The CFIA also continues the response to cases of avian influenza (AI) in Canada. AI, also called "bird flu," is a viral infection that spreads easily and quickly among birds. Parts of North America, Europe, Asia and Africa are currently seeing bird flu outbreaks. In December 2021, CFIA confirmed the presence of AI in a poultry flock in Newfoundland. Since then, the agency has reported cases in poultry and non-poultry flocks in most provinces, at both commercial and private premises, with the most significant number of affected sites in Alberta and Ontario. It directly threatens the Canadian poultry and egg industry, contributing $5.5 billion to the gross domestic public in 2021. CFIA helps control the spread of AI by following the Notifiable Avian Influenza Hazard Specific Plan, part of an overall management plan that is used by CFIA to respond to an incursion of any animal disease requiring an emergency response in Canada.

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 the exceptional circumstances for 2022 to 2023 will drive costs above the funding set aside. The agency will continue to monitor, reallocate resources where possible and seek additional funding through engagement with central agencies.

Sunsetting resources renewal

In 2022 to 2023, funding for COVID-19 response: Addressing disruptions in food production and supply was renewed and will be received through Supplementary Estimates B.

Funding for daily shift inspection presence (DSIP) in federally registered meat processing establishments, improving food safety (IFS), securing market access (SMA) and Canadian Agriculture Partnership (CAP) initiatives will sunset in 2022 to 2023. All 4 initiatives will be seeking renewal in 2023 to 2024.

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 to upgrade the Centre for Plant Health, located near Sidney, British Columbia. An upgraded, world class plant health research facility will further enhance the safety of Canada's agriculture and agri-food sector, while facilitating the trade and economic growth that benefits all Canadians. Laboratories Canada and the CFIA continue the advancement of the detailed design of the laboratory including network connectivity. As a pathfinder project for Laboratories Canada, lessons learned and best practices will inform future science infrastructure projects. The Sidney Centre for Plant Health will adhere to Laboratories Canada's guiding principles and Government of Canada commitments, (such as greening government and accessibility). The design will be implemented using a phased approach. Substantial completion is scheduled for 2024, with full project completion, including move-in is scheduled for 2025.

The project is aligned with the government-wide strategy for federal science and technology infrastructure 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 food safety 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 continues to improve 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 2022 to 2023 Departmental Plan.

Significant changes in relation to operations, personnel and programs

Regulatory framework

The CFIA 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 1, 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 to 30 months based on food commodity, type of activity and business size. During the COVID-19 pandemic, the CFIA has continued to prioritize critical services to ensure the ongoing safety of the Canadian food supply.

Personnel

• Todd Cain joined the CFIA as the Chief Information and Innovation Officer on April 19, 2022
• Jean-Guy Forgeron joined the CFIA as the Executive Vice-President on April 4, 2022
• Dr. David Nanang was appointed as acting Vice-President of Science Branch starting on February 28, 2022
• Dr. Raman Srivastava joined the CFIA as the Vice-President, Human Resources Branch, on February 14, 2022

Original signed by:

Annex A – Statement of authorities (unaudited)

Annex B – Departmental budgetary expenditures by standard object (unaudited)