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Proactive Disclosure

Proactive Disclosure

Audit of the Management of Food Labelling Activities

Management Response

Audit Report

Conducted By:
Internal Audit Directorate

Audit Report Approved December 4, 2008

Executive Summary
1.0 Introduction
- 1.1 Background
- 1.2 CFIA's Operating Context
- 1.3 Methodology
2.0 Observations and Recommendations
- 2.1 Strategic Direction
- 2.2 Accountability, Planning and Management Oversight
- 2.3 Reporting and Communication
- 2.4 Information Systems
- 2.5 Capacity and Capability
Appendix A - CFIA Mission, Vision and Values
- CFIA Vision
- CFIA Mission
- CFIA Values
Appendix B - Program Descriptions
- Fish Program
- Egg and Egg Products Program
- Dairy Program
- Honey Program
- Fresh Fruit and Vegetables Program
- Processed Products Program
- Fair Labelling Practices Program

Executive Summary

Background

The Canadian Food Inspection Agency (CFIA) administers and enforces the labelling provisions of the following Acts:

The Food and Drugs Act (FDA)
The Consumer Packaging and Labelling Act (CPLA)
The Meat Inspection Act (MIA)
The Fish Inspection Act (FIA)
The Canada Agricultural Products Act (CAPA)

Objective

Scope

The audit examined the management control framework for food labelling activities within the Agency. Organics labelling and meat labelling were excluded from the audit scope, but will be considered for future year's Risk-Based Audit Plans.

Approach

The audit was conducted over the period of November 2007 to June 2008. A preliminary survey was conducted and identified the following lines of enquiry:

Governance and Accountability
Information for Decision-Making
Capacity and Capability

The audit criteria were discussed with and agreed upon by the management of Policy and Programs Branch, Operations Branch, and Science Branch.

The approach included interviews, documentation review, and analysis. Interviews were conducted with CFIA staff and management located across Canada.

Key Findings

A number of government initiatives in the area of food labelling have been developed in recent years. The Agency has not yet fully clarified how its compliance strategies integrate the labelling requirements. Many food labelling activities are performed by the Agency. An opportunity exists to clarify the accountability structure for food labelling outcomes.

Agency management felt that the information they received on urgent food labelling matters is both timely and relevant. However, the communication of regular program performance was in need of improvement. This ability to gather data and report on program performance was complicated by the use of many different information systems for tracking food labelling compliance, activities, and issues across the various food programs.

The ability of the Agency to inspect and enforce food labelling requirements has been impacted by changes outside the scope of its control. Most significantly, the 2003 Nutrition Labelling Regulations were put into force with no additional resources allocated to the Agency for implementation. In addition, the capacity of the Agency to conduct inspections in the non-registered sector has diminished over the past 10 years.

Recommendations

Recommendation #1 - Strategy

It is recommended that Senior Management update and communicate a risk-based strategy for the Agency's food labelling activities.

Recommendation #2 - Accountability and Oversight

It is recommended that the Agency Senior Management ensure that an accountability structure is put in place that focuses on the achievement of defined food labelling objectives and that the organizational structure is aligned to support these accountabilities. A senior management forum should be identified that will oversee the governance, risk management and controls of the Agency's food labelling activities.

Recommendation #3 - Reporting

It is recommended that the Vice-Presidents collaborate to identify the information needed to effectively manage the Agency's food labelling activities. The Vice-Presidents should then ensure that an appropriate cycle of reporting is established to communicate this information on a regular basis to themselves and their management teams.

Recommendation - Information Management

None. Once the Agency addresses the recommendations related to strategic direction and accountability, it will be in a position to better define the information it requires to manage the labelling activities and ensure that the information systems capture this information.

Recommendation #4 - Resource-based Work Planning

It is recommended that the Food Programs, with information and support from Operations and Science Branches, plan a level of relevant food labelling activity that is resource-based and supports the Agency's food labelling strategy.

Recommendation #5 - Training and Manuals

The Vice-Presidents should ensure that all inspectors with a label inspection role are adequately trained to effectively enforce the labelling provisions within the respective food regulations and that program manuals are updated to guide their inspection activities.

1.0 Introduction

Background

The Agency administers and/or enforces the labelling provisions of the following Acts (See Exhibit 1):

The Food and Drugs Act (FDA);
The Consumer Packaging and Labelling Act (CPLA);
The Meat Inspection Act (MIA);
The Fish Inspection Act (FIA); and
The Canada Agricultural Products Act (CAPA).

The FDA and CPLA describe the basic, mandatory information required on food labels and apply to all food sold in Canada, whether domestically produced or imported. The remaining Acts provide additional labelling requirements for specific products - namely meat, fish, eggs, dairy, processed products, fresh fruits and vegetables, maple and honey, collectively known as the 'federally registered' food sector. Food sold in Canada that is not subject to these additional requirements are referred to as the 'non-federally registered' food sector.

It is important to note that not all food labelling issues are related to food safety. Some food labelling requirements relate to consumer protection against fraud.

At the time of the audit, the CFIA was organized such that there was a program for each of the federally registered food groups, while the non-federally registered sector was organized into two programs: food safety (Food Safety Program) and food labelling (Fair Labelling Practices Program). Please note that these programs have additional responsibilities related to the provision of guidance that applies to all food commodities, registered and non-registered (e.g. guidance on health claims).

Exhibit 1 - The Legislative Framework for the Federally Registered and Non-Federally Registered Food Sectors

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Exhibit 1 - The Legislative Framework for the Federally Registered and Non-Federally Registered Food Sectors

The CFIA is responsible for the administration of food labelling policies related to misrepresentation and fraud in respect to food labelling, packaging and advertising described in the FDA, and the general agri-food, meat and fish labelling provisions respecting grade, quality and composition specified in CAPA, MIA, and FIA. In addition, the CFIA has responsibility for the administration of the food-related provisions of CPLA, including basic food label information, net quantity, metrication and bilingual labelling. The CFIA is responsible for the enforcement of all of the above requirements.¹

Health Canada's role in food labelling relates to the health and safety aspects of labelling (e.g. nutrition labelling).

1.2 CFIA's Operating Context

The CFIA's labelling activities are carried out in the context of the Agency's vision, mission and values (Appendix A).

The key CFIA labelling activities are as follows:

Setting regulations and policy in relation to CAPA, FIA, MIA, the non-health and safety provisions of FDA, and the food component of the CPLA
Leading and participating in international activities related to food labelling standards such as the Codex Committee on Food Labelling, NAFTA Technical Working Group on Food Labelling and Packaging and Standards
Participating in relevant activities associated with the evaluation of technical regulations/requirements under the WTO Agreement on Technical Barriers to Trade
Investigating consumer and trade complaints
Verifying the accuracy of net quantity declarations
Inspecting foods such as fish and meat cuts etc., which are packaged and labelled by the retailer, to identify the substitution of a commodity with a less expensive commodity (e.g. cod represented as "haddock", eye of round represented as "tenderloin")
Sampling food products for laboratory analysis to identify violations of prescribed compositional standards (e.g. excess fat in ground beef; presence of non-permitted additive in bread; absence of required component; the presence of a prohibited or undeclared component; or the absence of a declared component)
Analyzing to identify cases where food products are adulterated with a less expensive product or a non-permitted chemical (e.g. adulteration of olive oil with cheaper vegetable oil, or ground beef adulterated with pork, cereal, or sulphites, etc.)
Conducting audits and product inspections to identify inaccurate ingredient information, including undeclared food allergens
Recall activities associated with inaccurate labels, including undeclared food allergens.
Verifying, through formulation checks and laboratory analysis, the accuracy of nutrition information (e.g. 6 g fat per 100 g serving) and nutrient content claims (e.g. "low fat")
Identifying deceptive claims which are likely to create a misleading impression regarding the character, value, quantity, composition, merit or safety of a food product (e.g. disease prevention claims, "Alberta Beef", etc.)
Inspecting perishable graded products such as fresh fruits and vegetables and eggs etc. at retail, to identify products which have deteriorated and no longer meet quality standards prescribed for the grade claimed (e.g. excessive bruising or decay in apples, excessive cracking in eggs)
Verifying that all mandatory label information is properly declared (e.g. bilingual, etc.)

1.3 Methodology

Objective

The objective of the audit was to provide assurance to senior management that the management of CFIA's food labelling activities is carried out effectively and efficiently, with an appropriate accountability structure, and that they are adequate to fulfill our obligations under the relevant labelling legislation and regulations.

Scope

The audit scope included the Policy and Programs, Operations and Science branches of the CFIA. The audit examined the management control framework for food labelling, including its accountability structure.

Organic labelling was excluded from the audit scope because the Organic Products Regulations, part of the Canada Agricultural Products Act, are not yet in force. It is recommended that these activities be reviewed at some point in time after the regulations come into force on June 30, 2009.

The audit scope was also limited due to recent and important changes to the meat program's labelling activities. These changes are summarized below:

In January 2008, the CFIA's Meat Label and Recipe Registration Unit was moved from the Policy and Programs Branch to the Operations Branch;
In April 2008, the reporting structure within Policy and Programs Branch, including the meat program, was updated as part of the branch's re-alignment exercise; and
In June 2008, as a result of the Agency's strategic review exercise, it was announced that there would be proposed changes to the regulations that require pre-market registration.

In order to provide a complete assessment of meat labelling, it is recommended that CFIA's activities in this area be considered for inclusion in future risk-based audit plans.

Approach

The audit was conducted over the period of November 2007 to June 2008.

A preliminary survey was conducted to identify potential audit issues, clarify audit objectives, and to define the audit scope. Based on the survey completed in January 2008, the audit focussed on three key areas:

Governance and Accountability
Information for Decision-Making
Capacity and Capability

Criteria were developed based on the Treasury Board's (Office of the Comptroller General) Core Management Controls framework and were communicated to and accepted by Agency management.

The approach included interviews, documentation review and analysis. Interviews were conducted with CFIA staff and management from Policy and Programs Branch, Operations Branch, and Science Branch. The audit team interviewed key staff in the West, Ontario, Quebec, Atlantic and National Capital Areas.

A summary model of the audit criteria is presented in Exhibit 2.

Exhibit 2 - Summary Model of Audit Criteria

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Exhibit 2 - Summary Model of Audit Criteria

This model is not intended to represent a complete management control framework, but rather to illustrate those criteria chosen for further examination as a result of the preliminary survey.

2.0 Observations and Recommendations

The following section describes the findings, conclusions and the recommendations resulting from the audit approach described earlier in this report.

2.1 Strategic Direction

Audit Criteria

The CFIA should have a clearly defined and communicated strategic direction and strategic objectives for its food labelling activities, aligned with its mandate.

Observations

The Agency carries out numerous food labelling activities under five statutes (e.g. nutrition claims verification, label verification, food label policy setting) and a variety of units are responsible for those activities. During the audit examination, key Agency literature was reviewed and personnel involved with food labelling were interviewed and asked to describe the strategic direction for the Agency's food labelling activities. Given the increasing number of government initiatives in the area of food labelling (e.g. organic labelling, Product of Canada), the Agency has not fully clarified the strategy for how it will integrate these initiatives into its compliance strategies in each Program area.

In support of our observation, in the most recent Report on Plans and Priorities, the Agency highlighted that one of the activities for the 2008-09 fiscal year will be to begin the development of a policy framework to clarify the scope of CFIA's consumer protection mandate, which includes its labelling activities.

Furthermore, the Treasury Board Secretariat (TBS) noted in its 2007-2008 Management Accountability Framework Assessment of CFIA that the Agency's strategic outcome related to consumer protection and labelling was too high level, "Contributes to consumer protection and market access based on the application of science and standards." TBS indicated that it was not evident how CFIA could influence general consumer protection or market access.

Clarification of the requirements by Program area may support the alignment of the management controls around the Agency's food labelling activities. This will enable to the Agency to better structure its organization, monitor performance, and adjust priorities as needed. Recognizing that food labelling activities represent just one set of the Agency's areas of responsibility, any strategic decisions (and resulting resourcing decisions) in this area would need to be risk-based.

Recommendation #1 - Strategy

It is recommended that Senior Management update and communicate a risk-based strategy for the Agency's food labelling activities.

2.2 Accountability, Planning and Management Oversight

Audit Criteria

Authority, responsibility, and accountability should be clear and communicated. A clear and effective organizational structure should be established and documented.

Operational plans and objectives aimed at achieving strategic objectives related to food labelling should be in place.

Effective oversight body (or bodies) should be established. The oversight body should have a clearly communicated mandate that includes roles with respect to the governance, risk management, and control of food labelling activities. The oversight body should request and receive sufficient, timely and accurate information.

Observations

The structure of the organization is such that many different units have responsibility for various food labelling activities. Food labelling activities are carried out by each of the food programs (i.e. meat, fish, processed products, honey, eggs, dairy, fresh fruit and vegetables, and fair labelling practices program). Policy-setting for food labelling issues covered by the FDA and CPLA is coordinated by the Consumer Protection Division within Policy and Programs Branch.

Although food labelling activities do take place in the organization, there is no clear sense of accountability for the achievement of results and accountability is defined in the context of carrying out activities. In the Agency's current structure, Policy and Programs Branch appears to be accountable for program design and the production of work plans, while Operations Branch appears to be accountable for the inspection activities. The two Branches are not accountable to each other and have different activity objectives, which has impacted their ability to create an efficient working relationship.

Furthermore, management indicated that the current planning process is not working as intended. Without clear objectives for food labelling activities, it is challenging to plan and allocate resources in an efficient and effective manner.

The accountability structure for the Agency requires more senior management attention to the oversight of food labelling activities. Interviewees could not identify a senior management forum that had a specific role with regard to overseeing the governance, risk management and controls for the Agency's food labelling activities. A more robust oversight function may provide incentive to develop a stronger management control system for these activities.

Recommendation #2 - Accountability and Oversight

2.3 Reporting and Communication

Audit Criteria

Reporting is reviewed and approved. Appropriate and timely food labelling information should be communicated.

Observations

The Agency communicates information on high-profile issues using briefing notes and other expedited forms of communication. Senior management indicated that the information they receive on urgent matters is both timely and relevant.

In general, regular reporting on program performance was felt to be a weakness of the Agency as a whole and is not unique to the food labelling activities. National programs do not produce or communicate regular reports to senior management on activities or compliance levels with regard to food labelling. Data on activities is available in several systems, but the raw data is rarely analyzed and formatted in a manner suitable for senior management-level decision-making. As such, there is an opportunity to improve the information provided to senior management to monitor performance, establish and adjust priorities, and assess the effectiveness of the controls over its activities.

In order to communicate working-level food labelling information for the purpose of planning, the Agency has established a Consumer Protection Technical Committee. The Committee terms of reference describes it as "a focal point to establish uniform priorities and strategies for dealing with consumer protection - food composition, economic fraud, labelling, and net quantity - inspection procedures across all CFIA food programs". It is not designed to be a senior management decision-making forum and does not have a role in the governance of the labelling components of the Agency's food programs.

The Committee membership includes players from all the food programs. As part of the committee process, several key deliverables are defined:

Identification and prioritization of consumer protection issues;
Development of risk management strategies for all food programs; and
Production of a Consumer Protection Technical Committee report.

To accomplish the Committee's goals, the Agency conducts environmental scans and establishes working groups. Participants indicated that it was a key driver of the Agency's food labelling activities. As noted in the audit preliminary survey, there had been some concerns in the past about the timeliness of this Committee's reports but it did meet in May 2008 and participants were largely positive about the exercise.

The Consumer Protection Division has also established its National Program Manager's Working Group whose purpose is to meet and discuss labelling issues and strategies and to share information on a regular basis amongst all the food programs. It was noted that attendance is weak from some food programs.

Recommendation #3 - Reporting

2.4 Information Systems

Audit Criteria

Development, implementation or changes to information systems are based on a strategic plan for information systems and responsive to achieving organizational strategic and operational objectives.

Observations

Agency personnel make use of a variety of systems as they carry out their food labelling activities:

Operations Planning Module (OPM-MRRS) - is a work planning tool that allows inspection managers to plan key tasks and monitor progress against plans.
Self-Contained Personal Reporting and Inspection Tool (SPRINT) - captures and stores time utilization and compliance data for the Fair Labelling Practices Program.
Multi-Commodity Activities Program (MCAP) - captures and stores track lists, reference materials, and reposts on individual facility inspections, audits, and product inspections.
Lab Sampling and Tracking System (LSTS) - enables the electronic transmission of Sample Submission Forms to CFIA laboratories and allows for the electronic dissemination of results once CFIA testing is complete.
Issue Management System (IMS) - tracks information relating to the investigation and resolution of certain types of food related issues.

The systems are independent from each other and capture some of the same information. For example, both OPM-MRRS and SPRINT are used by Fair Labelling Practices inspectors to enter time reporting. This multiple re-entry of data is not an efficient use of inspectors' time and is a source of some frustration. The Quebec Area has opted out of using the SPRINT system's "Daily Register" which is the time utilization tool that collects data on activities that are not inspection related. The other CFIA Areas are using this register.

It was noted that there is inconsistency of data between systems where overlap occurs. For example, in 2007-2008, the Fair Labelling Practices Program (FLPP) had 2594 delivered inspections as per SPRINT data and 3084 delivered inspections as per OPM-MRRS data. Management was aware of the discrepancy between the two systems and indicated that the OPM-MRRS data was likely inflated by the incorrect coding of label verifications in response to complaints in the FLPP inspections category. For departmental reporting purposes, the SPRINT data is used as a FLPP inspection cannot be done without using that system.

Some programs (e.g. dairy and honey) do not have the capacity to track compliance electronically. This applies to the compliance levels on all requirements, not only labelling requirements. As a result, compiling data for regular reports is not done and compiling it for annual departmental reporting purposes is a significant manual task.

Recommendation - Information Management

Although no specific recommendation is being put forth at this time, as part of its follow-up on the effectiveness of oversight, Internal Audit will evaluate the information requested and received by senior management in its oversight of food labelling activities.

2.5 Capacity and Capability

Audit Criteria

The CFIA should provide employees with the necessary training, tools, resources, and information to support the discharge of its food labelling responsibilities.

Observations

Within the Agency, staffing and retention of dedicated labelling inspectors remains an issue. Factors impacting the Agency's ability to attract and retain these inspectors were identified as low pay in comparison to other inspectors and low morale in the program. An exact number of inspectors could not be determined due to system limitations and difficulties in tracking inspector hours by program activity.

The basis by which the Agency allocates its labelling inspection staff is unclear. For example, there are three dedicated labelling inspectors in the Toronto Region and the same number in the New Brunswick region. Interviewees felt there was an imbalance of staff to the level of work, especially in growing metropolitan areas (e.g. Toronto).

Labelling inspection in the non-registered sector is conducted under the Fair Labelling Practices Program (FLPP). The inspection delivery rate in this program has been declining over the past nine years. Using data from the program's SPRINT system, inspections have declined from a high of 4100 in 1999-2000 to last year's 2594 inspections (Exhibit 3).

Exhibit 3 - Inspection Delivery of FLPP 1999-2008

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Exhibit 3 - Inspection Delivery of FLPP 1999-2008

Beginning in 2006-2007, the Fair Labelling Practices Program (FLPP) initiated a risk-based targeted approach to inspection by directing inspection and laboratory resources towards products and establishments that pose the greatest risk to consumers. Violations are identified in areas including net quantity, composition, adulteration, absence of mandatory label information, nutrition labelling, bilingualism, and misleading claims. The number of inspections delivered, number of violations identified and the average number of violations per inspection delivered is presented in Exhibit 4.

Exhibit 4 - Inspection Delivery and Violations in FLPP

Fiscal Year	FLPP Label Inspections Planned by Programs Branch	FLPP Label Inspections Delivered by Operations Branch	% Delivered as per Programs Plans	Number of Violations	Average Number of Violations Per Inspection Delivered
2007-2008	4146	2594	63%	11959	4.6
2006-2007	4082	2646	65%	12386	4.7
2005-2006	5328	2610	49%	9561	3.7
2004-2005	5666	2949	52%	10533	3.6
2003-2004	5151	3335	65%	12390	3.7
2002-2003	4619	4084	88%	16117	3.9

* Number of inspections planned and delivered and violations data is from SPRINT system
Data Source: Policy and Programs Branch - Consumer Protection Directorate - Fair Labelling Practices Program

As indicated in Exhibit 4, the shift to risk-based targeted inspection in 2006-2007 increased the number of violations found per label inspection delivered in the FLPP.

The number of label inspections planned by FLPP in the Programs Branch exceeds the actual level of inspections delivered. The difference between the number of planned and actual label inspections may benefit from a joint review by Programs and Operations branches to assess the appropriate level of delivery required to maintain an effective compliance and enforcement strategy.

The labelling inspection capacity in the registered food programs (e.g. fish, eggs, dairy, honey, maple, processed products, and fresh fruits and vegetables) could not be determined due to the nature of food labelling inspection; it is an incremental task for an inspector in the course of his or her other inspection duties. The capacity of these programs to do labelling inspection work is directly related to the capacity of the programs to do inspection in general. Furthermore, many inspectors are multi-commodity inspectors; that is, they perform inspection work for a variety of programs, making it difficult to extract the proportion of time spent or results achieved in each program and the proportion of that time allocated to label inspection.

Recommendation #4 - Resource-Based Work Planning

Labelling inspection can require complex analysis. It is therefore important that inspectors are trained to assess labels in a consistent and effective manner. The general approach used in National Training Initiatives is a "train-the-trainer" methodology, augmented with on-the-job training. On-the-job training involves having a new inspector shadow a more experienced inspector. This approach does not include a mechanism to ensure the consistency of label inspection activities across the country. The train-the-trainer approach involves having a number of inspectors identified to become a "trainer". They are trained, usually centrally, on the topic and then go back to their respective regions and train their colleagues. Interviewees were largely negative about this methodology, indicating that trainers may not make good teachers, and that they frequently leave the program or Agency, leaving their region without training capacity. Again, this approach requires improvements to ensure consistency.

Some labelling training manuals are out of date and may not include revision date information. Some manuals reviewed were no longer available in editable electronic type format, although interviewees indicated that some effort had been made to scan them into electronic files. It should be noted, however, that the Nutrition Labelling Inspector Toolkit is both electronic and easily accessible on the Intranet. The 2003 Guide to Food Labelling and Advertising is also available electronically and communicated on the Internet. This document has been available since 1961, with major revisions in 1993 and 2003, and includes labelling requirements for specific products. It is meant to be a guide for industry, but was also identified as a good reference for inspectors.

Recommendation #5 - Training and Manuals

Appendix A - CFIA Mission, Vision and Values

CFIA Vision

To excel as a science-based regulator, trusted and respected by Canadians and the international community.

CFIA Mission

Dedicated to safeguarding food, animals and plants, which enhances the health and well-being of Canada's people, environment and economy.

CFIA Values

VALUE 1:
We value scientific rigour and technical competence. These play a crucial role in our decision-making. We do not manipulate science to achieve a desired outcome but acknowledge that other factors must be taken into account in this decision-making.

VALUE 2:
The reputation and credibility of the Agency are vital to our ability to deliver our mandate. As such, we behave, internally and externally, in a way that trust is preserved.

VALUE 3:
We are proud of the contributions we make to the quality of life of Canadians. We value dedication and responsiveness from all employees day to day and, particularly, during an emergency.

VALUE 4:
We value competent, qualified and motivated personnel, whose efforts drive the results of the Agency.

VALUE 5:
To develop effective policies and strategies, we value the perspectives of the stakeholders who are affected by our decisions.

VALUE 6:
We maintain our regulatory independence from all external stakeholders. We have the courage to make difficult and potentially unpopular decisions and recommendations, free from personal bias.

VALUE 7:
We are committed to our physical and psychological well-being.

Appendix B - Program Descriptions

Fish Program

Program Description

The Fish, Seafood and Production Program applies to products, federally-registered fish and seafood processing establishments, importers, fishing vessels and equipment used for handling, transporting, and storing fish. The key program objectives are to ensure that fish and seafood products are safe for public consumption; a fair and effective regulatory regime is in place for these products; and the products are accurately represented to the public.