Annual Report 2009-2010
Knowledge to Action: CIHR-Supported Health Research at Work for Canada and Canadians
[ Table of Contents ]
Financial Statement Discussion and Analysis
This Financial Statement Discussion and Analysis (FSD&A) should be read in conjunction with the Canadian Institutes of Health Research (CIHR) annual audited financial statements for the year ended March 31, 2010 and accompanying notes. The FSD&A and audited financial statements have been reviewed and approved by the CIHR Governing Council. CIHR's financial statements have been prepared in accordance with Canadian generally accepted accounting principles for the public sector. During the current fiscal year, CIHR has adopted the revised Treasury Board Accounting Standard TBAS 1.2: Departmental and Agency Financial Statements, which has affected the method of presentation, but has had no significant impact on CIHR's financial results.
The numbers presented in the discussion below have been rounded to the nearest $100,000.
In 2009-10, CIHR used $983.7 million of parliamentary authorities, an increase of $14.3 million (or 1.5%) as compared to 2008-09 parliamentary authorities used of $969.4 million. The main contributing factor to this increase pertains to the temporary expanded funding for the Canada Graduate Scholarships (CGS) program, totalling $14.0 million in 2009–10 for CIHR. This additional funding for CGS was the first year of three yearly funding increases for this program as announced in Budget 2009. CIHR and the two other granting agencies, Natural Sciences and Engineering Research Council of Canada (NSERC) and the Social Sciences and Humanities Research Council (SSHRC), received a total of $87.5 million in funding for CGS over three years. This incremental CGS funding will enable CIHR to fund 200 new three-year Doctoral awards each year through 2011–12, and 400 new one-year Master's awards per year through 2010–11.
CIHR's total assets ($20.7 million) and total liabilities ($26.2 million) are both slightly higher than in 2008–09. The acquisition of tangible capital assets ($1.1 million) during the 2009–10 fiscal year is fairly consistent with the prior year, which, along with amounts owing from the Consolidated Revenue Fund (virtually unchanged since 2008–09), makes up the majority of CIHR's total assets. The majority of capital asset acquisitions pertain to the capitalization of ResearchNet development costs. ResearchNet is an internet research portal that supports collaboration and information-sharing between researchers, research organizations, government, not-for-profit agencies, industry and the public in a secure environment. It is designed to provide the Canadian research community with an online "one-stop shop" to interact with funding agencies and to create significant efficiencies by making it simpler for researchers to apply for grants and rendering the CIHR peer-review process more efficient. CIHR's total liabilities increased by approximately 7.8% during the 2009–10 fiscal year due primarily to increased severance and vacation pay accruals resulting from higher employee salaries.
The 2009–10 net cost of operations for CIHR was $986.0 million, an increase of 1.4% (or $13.2 million) as compared to 2008–09. This is mainly caused by an increase in grants and awards expenses, as well as an increase in salaries and employee benefits. The overall rise in the 2009–10 costs which have been incurred were as expected due to the additional funding programs approved in prior year budgets, including increased support for the Canada Graduate Scholarships Program, the launch of both the Drug Safety and Effectiveness Network and the Business-Led Networks of Centres of Excellence.
The following graphic indicates how 2009–10 grants and awards expenses were allocated by CIHR's three strategic outcomes. CIHR's three strategic outcomes are: (1) Advances in Health Knowledge, achieved by funding excellent and ethical health research across all disciplines that are relevant to health; (2) People and Research Capacity, achieved by providing funding to develop and sustain health researchers in vibrant, innovative and stable research environments, and (3) Knowledge Translation and Commercialization, achieved by CIHR's knowledge translation activities and funding aimed to accelerate the transformation of research results into health benefits for Canadians and an improved health-care system, as well as helping to move new research breakthroughs toward potential commercial applications.
As displayed in the graphic below, Advances in Health Knowledge expenses decreased slightly in 2009–10 due primarily to the sunsetting of the Canadian Fabry Disease Initiative Study, a study conducted to gather additional information regarding the use of enzyme replacement therapies to treat patients suffering from Fabry Disease. Please also note that People and Research Capacity expenses increased in 2009–10 as a result of the $14.0 million temporary increase for the Canada Graduate Scholarships program announced in Budget 2009.
Grants and Awards by Strategic Outcome
* Figures do not include refunds of previous years' expenses.
Variance Analysis and Discussion
CIHR's 2009–10 grants and awards expenses were $938.3 million, an increase of 1.2% as compared to 2008–09. The main contributing factor to this increase is directly related to the additional funding CIHR received as a result of Budget 2009 for the Canada Graduate Scholarships program, which supports Canada's top graduate students, and helps to ensure a reliable supply of highly skilled personnel to meet the needs of Canada's knowledge economy. As discussed above, the Government of Canada, through the three federal granting councils, has provided an additional $87.5 million over three fiscal years (ending in 2011–12) in order to provide additional Canada Graduate Scholars with the support to pursue their career goals. Additionally, CIHR's reference levels with regards to other grants and awards programs have remained fairly consistent with the prior year.
Furthermore, CIHR's operating expenses have also increased by $3.5 million (or 5.9%) as compared to 2008–09. The majority of this increase is directly related to employee salaries and benefits, as CIHR has increased its human resource capacity in order to effectively administer its suite of grants and awards programs, including its expanded CGS program. Overall, both the grants and awards expenses and the operating expenses have increased as expected due to the additional parliamentary authorities provided to CIHR during 2009–10, thus explaining the rise in net cost of operations from $972.8 million in 2008–09 to $986.0 million in 2009–10.
CIHR Net Cost of Operations (in millions of dollars)
- CIHR net cost of operations increased to $986.0 million, an increase of $13.2 million (or 1.4%) as compared to 2008–09. This increase resulted from the aforementioned increase in CIHR parliamentary authorities for 2009–10 related to programs such as the CGS program.
- CIHR's net cost of operations has increased significantly over the past number of years, from $801.8 million in 2005–06 to $986.0 million in 2009–10. This increase of $184.2 (or 23.0%) is consistent with the steady growth in parliamentary authorities, with the focus of adding new strategic programs.
CIHR Grants and Awards Expenses (in millions of dollars)
- CIHR grants and awards expenses increased by $11.1 million (or 1.2%) in 2009–10 and by $169.5 (or 22.0%) since 2005–06 due to increased parliamentary authorities received by CIHR for its expanding suite of grants and awards programs.
- CIHR grants and awards expenses have increased by 22.0% since 2005–06, an average yearly increase of approximately 5.4%. The main contributing factor for this significant increase is that CIHR has commenced the funding of several new grants and awards programs during the past five years, including initiatives such as Pandemic Preparedness, Drug Safety and Effectiveness Network, and the Vanier Canada Graduate Scholarships.
CIHR Operations and Administration Expenses (in millions of dollars)
- In 2009–10, salaries and employee benefits made up 70.8% of total operating expenses, compared to 68.9% in 2008–09. The increase in CIHR's salaries and benefits and other operating expenses is consistent with the overall increase in grants and awards expenses.
- CIHR operating expenses have increased by 31.4% during the past few fiscal years, from $47.4 million in 2005–06 to $62.3 million in 2009–10. The steady growth in these expenses has mirrored the increase in total authorities, as well as the increase in grant and awards expenses.
- As shown in the chart above, the proportion of the operating budget allocated to salaries and employee benefits has increased each year over the past five fiscal years.
CIHR understands the importance of risk management and is committed to ensuring that risk management considerations are integrated into its strategic and operational planning, business processes and decision-making. In 2009–10, Governing Council approved the Risk Management Framework that sets out how CIHR identifies, assesses and mitigates risk. The Framework also provides a governance model that promotes accountability for risk management.
Health Research Roadmap
CIHR's new Strategic Plan, the Health Research Roadmap, sets out an ambitious agenda that will enable the agency to realize its full mandate in all its complexity, show leadership within the wider health research community and demonstrate accountability and results to the people of Canada. The Plan is not without risk, and sound risk management will play a critical role in whether CIHR will be successful in meeting its goals. A number of risks have been identified related to the implementation of the Health Research Roadmap, however, CIHR has taken the necessary steps to ensure that it is ready to mitigate and manage these risks throughout the Plan's implementation. Examples of such risks are listed below:
- The risk that key stakeholders, including students and researchers, universities and other research institutions, and other funders of health research such as other governmental organizations, charities and the private sector, do not understand or support the Plan. This risk will be mitigated by actively communicating and consulting with all affected parties. CIHR will need to demonstrate flexibility, adjusting the Plan as required to better respond to new developments and the evolving needs and priorities of others.
- The Plan is contingent on the successful implementation of a number of key reforms including: how peer review is conducted; establishing a fully integrated suite of open programs that can support excellence in all pillars and across all stages of a researcher's career; and a new, focused approach for ensuring that strategic investments address specific health research and system priorities. Individually and collectively, these reforms pose significant challenges and risk. Interdependencies among the reforms mean that they must be implemented concurrently. Staff will have to maintain existing systems/processes during the development period and manage a phased transition from old to new. The project management resources, expertise and experience to manage an implementation of this scale and complexity are limited and must compete with other activities such as the International Review Panel for staff time.
- Additionally, the Plan is creating high expectations within the health research community as well as for CIHR's partners. CIHR firmly believes that it must be accountable for implementing the Plan and transparent regarding its impacts. To ensure that the Health Research Roadmap truly guides CIHR's activities, annual implementation plans will be published that will detail how the strategic directions have been addressed to date by highlighting uptake, progress and completion of identified activities as well as activities planned for the next fiscal year.
Rising Demand for Research Funding
CIHR continues to be confronted with increased application pressure from the health research community resulting in part from a robust and growing community of practitioners, CIHR's mandate to serve all health research disciplines and by the significant investments in health-related infrastructure being made by federal and provincial governments and other funders.
Notwithstanding the more than doubling of CIHR's budget since its inception in 2000, the percentage of successful grant and award applicants in major competitions has fallen at a time when the number of applications that are assessed by peer review committees as being deserving of funding has tripled over that same timeframe.
Going forward, it will be very important for CIHR to rigorously prioritize its activities and seek additional parliamentary authorities to ensure that Canada continues to retain its outstanding investigators and fully reap the contribution they can make to improving the health of Canadians, increasing the effectiveness of health services and products and strengthening the Canadian health-care system.
Future Financial Outlook: 2010–2011
CIHR's foreseeable future is expected to continue to remain in good financial position as it continues to grow through its increased authorities approved by Parliament. CIHR anticipates its parliamentary authorities in 2010–11 to exceed $1 billon for the first time since its inception. It is expected that CIHR's total authorities will increase by $18.3 million (1.9%) as compared to 2009–10, from $987.8 million to approximately $1.006 billion in 2010–11. Future growth opportunities will present themselves through Budget 2010 via an ongoing annual increase to CIHR's base budget by $16.0 million, an additional $10.0 million over two years for the Isotope Supply Initiative to support research, development and demonstration of new technologies, to optimize the use of medical isotopes and alternative medical imaging technologies, and to establish a clinical trials network, $45.0 million over five years allocated among the three federal granting councils to establish a new and prestigious post-doctoral fellowships program, as well as $15.0 million per year to be shared between CIHR, NSERC and SSHRC that will help support additional collaborative projects in community colleges across Canada.
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