About the CFIA > Reporting to Parliament > Annual Report > Annual Report 2002 - 2003 6.0 FINANCIAL PERFORMANCEManagement Responsibility for Financial ReportingThe management of the Canadian Food Inspection Agency (the "Agency") is responsible for the preparation of all information included in its financial statements and Annual Report. These reports are legislated requirements as per Section 23 of the Canadian Food Inspection Agency Act. The accompanying financial statements have been prepared in accordance with the Canadian generally accepted accounting principles as per Section 31 of the Canadian Food Inspection Agency Act. The significant financial statement accounting policies are identified in note 2. Management is responsible for the integrity and objectivity of the information in these financial statements. Some of the information in the financial statements is based on management's best estimates and judgement and gives due consideration to materiality. To fulfil its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the Agency's financial transactions. Financial information and operating data contained in the ministry statements and elsewhere in the Public Accounts of Canada is consistent with these financial statements. Management maintains a system of financial management and internal control designed to provide reasonable assurance that the financial information is reliable and that assets are safeguarded, and that transactions are executed in accordance with prescribed regulations, within Parliamentary authorities, and are properly recorded to maintain accountability of Government funds. Management also seeks to ensure the objectivity and integrity of data in its financial statements by the careful selection, training and development of qualified staff, by organizational arrangements that provide appropriate divisions of responsibility, and by communications programs aimed at ensuring that regulations, policies, standards and managerial authorities are understood throughout the Agency. The Auditor General of Canada con ducts an independent audit and expresses an opinion
on the accompanying financial statements.
Ottawa, Canada, AUDITORS REPORTTo the President of the Canadian Food Inspection Agency and the Minister of Agriculture and Agri-Food I have audited the statement of financial position of the Canadian Food Inspection Agency as at March 31, 2003 and the statements of operations, equity of Canada and cash flows for the year then ended. These financial statements are the responsibility of the Agencys management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. In my opinion, these financial statements present fairly, in all material respects, the financial position of the Agency as at March 31, 2003 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. Sheila Fraser, FCA Ottawa, Canada
The accompanying notes are an integral part of these financial statements. Approved by:
|
Asset |
Useful life |
---|---|
Buildings | 20-30 years |
Machinery and equipment | 5-20 years |
Computer equipment and software | 3-10 years |
Vehicles | 7-10 years |
Leasehold improvements | Lease term |
Leasehold improvements | Lease term |
Amounts included in assets under construction are transferred to the appropriate asset classification when completed and in use. These amounts are then amortized according to the Agency's policy. |
(e) Employee severance benefits:
The Agency accrues its obligations and the related costs as the benefits accrue to employees. The Agency's liability for employee severance benefits is calculated using information derived from the results of the actuarially-determined liability for employee severance benefits for the Government as a whole.
Employee severance benefits on cessation of employment represent obligations of the Agency that are normally funded through parliamentary appropriations when the benefits are paid.
(f) Vacation pay:
Vacation pay is expensed as the benefits accrue to employees under their respective terms of employment.
The liability for vacation pay is calculated at the salary levels in effect at the end of the year for all unused vacation pay benefits accruing to employees.
Vacation pay liability payable on cessation of employment represents obligations of the Agency that are normally funded through parliamentary appropriations when the benefits are paid.
(g) Services provided without charge by other Government departments:
Estimates of amounts for employee benefits, accommodation and other services provided without charge by other Government departments are recorded as operating and administrative expenses by the Agency. A corresponding amount is credited directly to Equity of Canada.
(h) Contributions to Public Service Superannuation Plan:
The Agency's eligible employees participate in the Public Service Superannuation Plan administered by the Government of Canada. Both the employees and the Agency contribute to the cost of the Plan. Contributions by the Agency are expensed in the year incurred.
The Agency is not required under present legislation to make contributions with respect to actuarial deficiencies of the Public Service Superannuation Plan.
(i) Measurement uncertainty:
The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Employee severance benefits, contingencies, the valuation of property, plant and equipment and amortization are the most significant items where estimates are used. Actual amounts could differ from the current estimates. These estimates are reviewed annually and as adjustments become necessary, they are recognized in the financial statements in the period in which they become known.
3. Parliamentary appropriations:
The Agency receives the majority of its funding through parliamentary appropriations, which are based primarily on cash flow requirements. Items recognized in the statement of operations and the statement of Equity of Canada in one year may be funded through parliamentary appropriations in prior and future years. Accordingly, the Agency has different net results of operations for the year on a government funding basis than on a Canadian generally accepted accounting principles basis. These differences are reconciled below.
(a) Reconciliation of net cost of operations to total parliamentary appropriations used:
2003 | 2002 | ||||
---|---|---|---|---|---|
Net cost of operations | $ | 506,311 | $ | 489,049 | |
Less: items not requiring use of appropriations: | |||||
Amortization of property, plant and equipment | (19,372) | (16,391) | |||
Services provided without charge by other government departments | (43,086) | (38,429) | |||
Gain on disposal of property, plant and equipment | 423 | 6 | |||
444,276 | 434,235 | ||||
Proceeds from disposal of assets | (1,043) | (471) | |||
Net changes in future funding requirements (note 7) | 937 | (16,391) | |||
Acquisitions of property, plant and equipment funded by operating appropriation | 20,237 | 12,147 | |||
Funded by operating appropriations | 464,407 | 429,520 | |||
Acquisitions of property, plant and equipment funded by capital appropriation | 6,253 | 8,279 | |||
Total parliamentary appropriations used | $ | 470,660 | $ | 437,799 | |
(b) Reconciliation of parliamentary appropriations voted to parliamentary appropriations used:
2003 | 2002 | ||||
---|---|---|---|---|---|
Parliamentary appropriations--voted: | |||||
Vote 30 -- Operating expenditures | $ | 415,092 | $ | 369,176 | |
Statutory contributions to employee benefit plans and compensation payments | 65,129 | 75,108 | |||
480,221 | 444,284 | ||||
Vote 35 -- Capital expenditures | 16,845 | 15,763 | |||
497,066 | 460,047 | ||||
Less: | |||||
Lapsed appropriation -- operating | (15,814) | (14,764) | |||
Lapsed appropriation -- capital | (10,592) | (7,484) | |||
(26,406) | (22,248) | ||||
Total parliamentary appropriations used | $ | 470,660 | $ | 437,799 |
4. Property, plant and equipment:
2003 | 2002 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Cost | Accumulated amortization |
Net book value |
Cost | Accumulated amortization |
Net book value |
|||||||
Land | $ | 3,334 | $ | $ | 3,334 | $ | 3,334 | $ | $ | 3,334 | ||
Buildings | 243,142 | 118,480 | 124,662 | 236,764 | 110,830 | 125,934 | ||||||
Machinery and equipment | 48,389 | 20,255 | 28,134 | 36,225 | 18,258 | 17,967 | ||||||
Computer equipment and software | 33,091 | 17,821 | 15,270 | 26,470 | 12,207 | 14,263 | ||||||
Vehicles | 22,999 | 12,065 | 10,934 | 19,874 | 12,001 | 7,873 | ||||||
Assets under construction | 4,514 | 4,514 | 11,806 | 11,806 | ||||||||
Leasehold improvements | 3,910 | 1,451 | 2,459 | 2,201 | 569 | 1,632 | ||||||
$ | 359,379 | $ | 170,072 | $ | 189,307 | $ | 336,674 | $ | 153,865 | $ | 182,809 | |
Net acquisitions of $22,705,000 for the 2003 fiscal year (2002--$15,139,000) include $26,490,000 (2002--$20,426,000) of additions and $3,785,000 (2002--$5,287,000) of disposals.
5. Deferred revenue:
The Agency conducts joint projects with external organizations related to food inspection and animal and plant health. Funds received from external organizations are administered through specified purpose accounts.
2003 | 2002 | |||
---|---|---|---|---|
Balance, beginning of year | $ | 1,905 | $ | 1,412 |
Add: amounts received from external organizations | 2,624 | 1,129 | ||
Less: revenues recognized in the year | (2,605) | (636) | ||
Balance, end of year | $ | 1,924 | $ | 1,905 |
6. Employee benefits:
Included in salaries and employee benefits are the following expenditures paid by the Agency with respect to employee future benefits related to the Public Service Superannuation (PSSA) Plan and severance pay:
2003 | 2002 | |||
---|---|---|---|---|
Contributions to the PSSA | $ | 39,349 | $ | 35,935 |
Employee severance benefits | $ | 2,438 | $ | 1,838 |
The ratio of employer to employee contributions toward the PSSA is 2.6:1 (2002--2.6:1). |
7. Equity of Canada:
Included in the total Equity of Canada of $111,501,000 (2002--$104,066,000) as at March 31 is $77,806,000 (2002--$78,743,000) which represents transactions, incurred by the Agency, to provide services with future funding requirements. The net change in future funding requirements is $(937,000). Significant components of this amount are liabilities related to employee severance benefits and vacation pay liabilities. These will need to be funded by Treasury Board in future years as they are paid.
8. Compensation payments:
The Health of Animals Act and the Plant Protection Act allow for the Minister, via the Agency, to compensate owners of animals and plants destroyed pursuant to the Acts. During the year, compensation payments incurred pursuant to the Health of Animals Act totalled $4,649,000 (2002--$24,394,000).
9. Year 2000 repayable appropriation:
In order to finance the Agency's requirements with respect to the Year 2000 Government-Wide Mission-Critical Systems, the Agency negotiated an increase of its appropriation with the Treasury Board in the amount of $15,400,000. The funding was to be used to finance the Agency's requirements to upgrade and/or replace existing systems, equipment, computer applications and infrastructure components that were not Year 2000 compliant.
In total, the Agency has spent $12,539,000 with respect to the Year 2000 Government-Wide Mission-Critical Systems. The remaining $2,861,000 of the $15,400,000 funding was used for expenditures of an operating nature.
The second of three equal annual consecutive instalments in the amount of $5,133,000 was repaid by the Agency in fiscal 2003 through a mandatory decrease in the Agency's parliamentary appropriations.
10. Related party transactions:
The Agency is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms applicable to all individuals and enterprises. In addition, the Agency has several agreements with Agriculture and Agri-Food Canada related to the operation of their finance and administrative systems and some administrative activities with Health Canada related to the operations and maintenance of the Winnipeg Laboratory.
Also, during the year, the Agency received utilities, rental of space and services which were obtained without charge from other government departments and agencies; the value of those services aggregated about $43 million (2002--$38 million).
The total value of services provided by related parties, including services provided without charge, totalled $90 million (2002--$91 million) and are included as expenditures in the Statement of Operations. These services have been provided by the following departments and agencies:
2003 | 2002 | |||
---|---|---|---|---|
Public Works and Government Services Canada | $ | 42,256 | $ | 47,232 |
Treasury Board | 25,877 | 24,765 | ||
Agriculture and Agri-food Canada | 6,636 | 9,100 | ||
Health Canada | 5,153 | 3,571 | ||
Department of Justice | 3,218 | 1,520 | ||
Canada Customs and Revenue Agency | 3,450 | 3,082 | ||
Other | 3,356 | 1,464 | ||
$ | 89,946 | $ | 90,734 | |
Accounts payable and accrued liabilities includes amounts payable of $10,578,000 (2002--$12,428,000) for services provided by federal departments and agencies. The amounts receivable from related parties totalled $1,042,000 (2002--$916,000) and are included in accounts receivable. |
11. Commitments and contingencies:
(a) At March 31, 2003, the Agency had commitments relating to capital projects, operating leases and other agreements arising in the normal course of business. The minimum future payments are as follows:
2004 | 2005 | 2006 | Total | |
---|---|---|---|---|
Capital projects | 1,551 | 603 | 9 | 2,163 |
Operating leases | 9 | 9 | ||
Other agreements | 1,992 | 207 | 2,199 | |
Total | 3,552 | 810 | 9 | 4,371 |
(b) The Agency is a defendant in certain cases of pending and threatened litigation which arose in the normal course of operations. The total determinable amount of claims has been estimated at $194 million (2002--$188 million). The current best estimate of the amount likely to be paid in respect of these claims and potential claims has been recorded. Management believes that final settlement will not have a material adverse effect on the financial position or results of operations of the Agency.
(c) During the year, the Agency continued to conduct environmental assessments of its potentially contaminated sites and carried out remedial actions where required. The Agency completed an environmental assessment at its Lethbridge Laboratory where phases I and II were completed; remedial costs have been evaluated at $430,000. The amount has been recorded as an expense in the Statement of Operations.
Other sites are under evaluation where a monitoring program is in place to detect possible contaminants. Further evaluation is required to determine the presence of contaminants and any remedial costs, where applicable. However, management believes the amounts will not be significant.
(d) The Agency does not carry insurance on its property. This is in accordance with the Government of Canada policy of self insurance.
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