Annual Report 2009-2010

Knowledge to Action: CIHR-Supported Health Research at Work for Canada and Canadians

[ Table of Contents ]

Auditor's Report and Financial Statements

Canadian Institutes of Health Research
Management Responsibility for Financial Statements

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2010, and all information contained in these statements rests with the management of the Canadian Institutes of Health Research (CIHR). These financial statements have been prepared by management in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector.

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 judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of CIHR's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in CIHR's Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout CIHR.

The CIHR Audit Committee, selected jointly by the President and the Comptroller General and appointed by the Treasury Board, provides independent, objective advice, guidance, and assurance on the adequacy of the CIHR control and accountability processes. In accordance with the Treasury Board Directive on Departmental Audit Committees, the Audit Committee has reviewed the financial statements with management and external auditors and discussed any significant issues and findings from the audit prior to recommending acceptance of the financial statements to the President and Governing Council.

The Auditor General of Canada, the independent auditor for the Government of Canada, has expressed an opinion on the fair presentation of the financial statements of CIHR.

Approved by:

James Roberge, CMA
Chief Financial Officer

Alain Beaudet, MD, PhD
President

Ottawa, Canada
June 2, 2010

Auditor's Report

To the Canadian Institutes of Health Research and the Minister of Health

I have audited the statement of financial position of the Canadian Institutes of Health Research as at March 31, 2010 and the statements of operations, equity of Canada and cash flow for the year then ended. These financial statements are the responsibility of the Canadian Institutes of Health Research's 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 text 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 Canadian Institutes of Health Research as at March 31, 2010 and the results of its operations and its cash flow for the year then ended in accordance with Canadian generally accepted accounting principles.

Clyde M. MacLellan, CA
Assistant Auditor General
For the Auditor General of Canada

Ottawa, Canada
June 2, 2010

Canadian Institutes of Health Research
Statement of Financial Position
As at March 31

(in thousands of dollars)

2010 2009

Assets
Financial assets
Due from the Consolidated Revenue Fund $ 15,706 $ 15,612
Accounts receivable and advances (note 4) 691 624

Total financial assets 16,397 16,236

Non-financial assets
Prepaid expenses 246 150
Tangible capital assets (note 5) 4,008 3,753

Total non-financial assets 4,254 3,903

$ 20,651 $ 20,139
Liabilities and Equity of Canada
Liabilities
Accounts payable and accrued liabilities (note 6) $ 5,401 $ 5,462
Vacation pay and compensatory leave 1,475 1,123
Deferred revenue (note 7) 10,314 10,151
Employee future benefits(note 8) 9,027 7,591

26,217 24,327

Equity of Canada (5,566) (4,188)

$ 20,651 $ 20,139

Contingent liabilities (note 9)
Contractual obligations (note 10)

The accompanying notes are an integral part of these financial statements.

Approved by Governing Council:

Alain Beaudet, MD, PhD
President

Approved by Management:

James Roberge, CMA
Chief Financial Officer

Canadian Institutes of Health Research
Statement of Operations
For the Year Ended March 31

(in thousands of dollars)

2010 2009

Expenses
Advances in health knowledge $ 625,991 $ 635,264
People and research capacity 292,699 277,009
Knowledge translation and commercialization 76,493 70,932

Total expenses 995,183 983,205

Revenues
Advances in health knowledge 5,749 6,697
People and research capacity 2,688 2,920
Knowledge translation and commercialization 703 748

Total revenues 9,140 10,365

Net cost of operations $ 986,043 $ 972,840

Segmented information (note 12)

The accompanying notes are an integral part of these financial statements.

Canadian Institutes of Health Research
Statement of Equity of Canada
For the Year Ended March 31

(in thousands of dollars)

2010 2009

Equity of Canada, beginning of year $ (4,188) $ (3,715)
Net cost of operations (986,043) (972,840)
Net cash provided by Government 978,023 986,771
Change in Due from the Consolidated Revenue Fund 94 (20,759)
Services provided without charge by other government departments (note 11) 6,548 6,355

Equity of Canada, end of year $ (5,566) $ (4,188)

The accompanying notes are an integral part of these financial statements.

Canadian Institutes of Health Research
Statement of Cash Flows
For the Year Ended March 31

(in thousands of dollars)

2010 2009

Operating activities
Net cost of operations $ 986,043 $ 972,840
Non-cash items:
Amortization of tangible capital assets (804) (696)
Services provided without charge by other government departments (note 11) (6,548) (6,355)

Variations in Statement of Financial Position:
Increase (decrease) in accounts receivable and advances 67 (333)
Increase in prepaid expenses 96 68
Decrease in accounts payable and accrued liabilities 61 18,897
(Increase) decrease in vacation pay and compensatory leave (352) 193
(Increase) decrease in deferred revenue (163) 1,860
(Increase) in future employee benefits (1,436) (1,018)

Cash used in operating activities 976,964 985,456

Capital investing activities
Acquisitions of tangible capital assets 1,059 1,315

Cash used in capital investing activities 1,059 1,315

Net cash provided by Government of Canada $ 978,023 $ 986,771

The accompanying notes are an integral part of these financial statements.

Notes to the Financial Statements for the Year Ended March 31, 2010
Canadian Institutes of Health Research

1. Authority and Objectives

The Canadian Institutes of Health Research (CIHR) was established in June 2000 under the Canadian Institutes of Health Research Act, replacing the former Medical Research Council of Canada. It is listed in Schedule II to the Financial Administration Act as a departmental corporation.

CIHR's objective is to excel, according to international standards of scientific excellence, in the creation of new knowledge, and its translation into improved health, more effective health services and products, and a strengthened Canadian health-care system. CIHR achieves these objectives through three strategic outcomes. The first strategic outcome is advances in health knowledge, achieved by funding excellent and ethical health research across all disciplines that are relevant to health. The second strategic outcome is people and research capacity, achieved by providing funding to develop and sustain health researchers in vibrant, innovative and stable research environments. The third strategic outcome is 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.

CIHR is led by a President who is the Chairperson of a Governing Council of not more than nineteen other members appointed by the Governor in Council. The Governing Council sets overall strategic direction, goals and policies and oversees programming, resource allocation, ethics, finances, planning and accountability.

CIHR has thirteen Institutes that focus on identifying the research needs and priorities for specific health areas, or for specific populations, then developing strategic initiatives to address those needs. Each Institute is led by a Scientific Director who is guided by an Institute Advisory Board, which strives to include representation of the public, researcher communities, research funders, health professionals, health policy specialists and other users of research results.

CIHR's grants, awards, and operating expenditures are funded by budgetary authorities. Employee benefits are funded by statutory authorities.

2. Significant Accounting Policies

These financial statements have been prepared in accordance with Treasury Board accounting policies stated below, which are based on Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.

Significant accounting policies are as follows:

(a) Parliamentary authorities – CIHR is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to CIHR does not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting.

(b) Net cash provided by Government – CIHR operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by CIHR is deposited to the CRF and all cash disbursements made by CIHR are paid from the CRF. The net cash provided by Government is the difference between all cash receipts and all cash disbursements including transactions between departments of the Government.

(c) Amounts due from the CRF are the result of timing differences at year end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the amount of cash that CIHR is entitled to draw from the CRF without further appropriations to discharge its liabilities.

(d) Revenues

(e) Expenses – Expenses are recorded on the accrual basis:

(f) Refunds of previous years' expenses – These amounts include the return of grants and awards funds to CIHR in the current fiscal year for expenses incurred in previous fiscal years due to cancellations; refunds of previous years' expenses related to goods or services; and adjustments of previous years' accounts payable. These refunds and adjustments are recorded against the related expenses in the financial statements but are recorded as revenue on an authority basis and therefore are excluded when determining current year authorities used.

(g) Employee future benefits

  1. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer defined benefit plan administered by the Government. CIHR's contributions to the Plan are charged to expenses in the year incurred and represent the total obligation of CIHR to the Plan. Current legislation does not require CIHR to make contributions for any actuarial deficiencies of the Plan.
  2. Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. The obligation relating to the benefits earned by employees is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(h) Accounts receivable and advances are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain.

(i) Contingent liabilities – Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense is recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(j) Tangible capital assets – All tangible capital assets having an individual initial cost of $5,000 or more are recorded at their acquisition cost. CIHR does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.

Amortization of tangible capital assets is done on a straight-line basis over the estimated useful life of the capital asset as follows:

Asset class Amortization period
Informatics hardware 3–5 years
Informatics software 3–10 years
Office equipment 10 years
Vehicles 5 years

Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.

(k) Measurement uncertainty – The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, the liability for vacation pay and compensatory leave, employee severance benefits, the useful life of tangible capital assets, and services provided without charge. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary Authorities

CIHR receives most of its funding through annual Parliamentary authorities. Items recognized in the Statement of Operations and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, CIHR has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to current year authorities used
(in thousands of dollars)

2010 2009

Net cost of operations $ 986,043 $ 972,840
Adjustments for items affecting net cost of operations but not
affecting authorities:
Services provided without charge (6,548) (6,355)
Refunds of previous years’ expenses 5,434 2,901
Increase in employee severance benefi ts (1,436) (1,018)
Amortization of tangible capital assets (804) (696)
Increase in vacation pay and compensatory leave (352) 193
Other adjustments 242 168

(3,464) (4,807)
Adjustments for items not affecting net cost of operations but
affecting authorities:
Acquisitions of tangible capital assets 1,059 1,315
Increase in prepaid expenses 96 68

1,155 1,383

Current year authorities used $ 983,734 $ 969,416


(b) Authorities provided and used

(in thousands of dollars)

2010 2009

Authorities provided:
Vote 20 - Operating expenditures $ 52,698 $ 51,032
Vote 25 - Grants 929,327 917,670
Statutory amounts 5,745 5,302
Less:
Authorities available for future years (2,162) (2,145)
Lapsed: Operating (1,692) (1,649)
Lapsed: Grants (182) (794)

Current year authorities used $ 983,734 $ 969,416

4. Accounts Receivable and Advances

The following table presents details of CIHR's accounts receivable and advances balances:
(in thousands of dollars)

2010 2009

Receivables from other government departments and agencies $ 220 $ 216
Receivables from external parties 310 287
Employee advances 186 190

716 693
Allowance for doubtful accounts on receivables from external parties (25) (69)

$ 691 $ 624

5. Tangible Capital Assets

(in thousands of dollars)

Cost Accumulated amortization Net Book Value
Capital asset class Opening balance Acquisitions Disposals and write-offs Closing balance Opening balance Amortization Disposals and write-offs Closing balance 2010 2009
Informatics hardware 2,561 137 - 2,698 1,874 191 - 2,065 633 687
Informatics software 9,526 860 - 10,386 6,688 568 - 7,256 3,130 2,838
Office equipment 402 62 - 464 192 40 - 232 232 210
Vehicles 32 - - 32 14 5 - 19 13 18
Total $12,521 $1,059 - $13,580 $8,768 $804 - $9,572 $4,008 $3,753

Amortization expense (in thousands of dollars) for the year ended March 31, 2010, is $804 (2009 - $696).

6. Accounts Payable and Accrued Liabilities

The following table presents details of the CIHR's accounts payable and accrued liabilities:
(in thousands of dollars)

2010 2009

Accounts payable to other government departments and agencies $ 1,928 $ 1,460
Accounts payable to external parties 2,174 1,879

4,102
3,339
Accrued liabilities 1,299 2,123

$ 5,401 $ 5,462

7. Deferred Revenue

Deferred revenue represents the balance at year end of unearned revenues stemming from amounts received from external parties which are restricted to fund the expenditures related to specific research projects and amounts received for fees prior to services being performed. Revenue is recognized in the period that these expenditures are incurred or the service is performed. Details of the transactions related to this account are as follows:
(in thousands of dollars)

2010 2009

Opening balance $ 10,151 $ 12,011
Amounts received 9,301 8,353
Revenue recognized (9,138) (10,213)

Closing balance $ 10,314 $ 10,151

8. Employee Future Benefits

Employees of CIHR are entitled to specific benefits on or after termination or retirement, as provided for under various collective agreements or conditions of employment.

(a) Pension benefits: CIHR's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 per cent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with the Canada/Quebec Pension Plans benefits and they are indexed to inflation.

Both the employees and CIHR contribute to the cost of the Plan. The 2009-10 expense (in thousands of dollars) amounts to $4,148 ($3,827 in 2008-09), which represents approximately 2.0 times (2.0 in 2009) the contributions by employees.

CIHR's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits: CIHR provides severance benefits to its employees based on eligibility, years of service and final salary. These severance benefits are not pre-funded. Benefits will be paid from future authorities. Information about the severance benefits, measured as at March 31, is as follows:
(in thousands of dollars)

2010 2009

Accrued benefit obligation, beginning of year $ 7,591 $ 6,573
Expense for the year 1,676 1,125
Benefits paid during the year (240) (107)

Accrued benefit obligation, end of year $ 9,027 $ 7,591

9. Contingent Liabilities

CIHR may be subject to legal claims in the normal course of business. In management's view, there are currently no such claims with a material impact on the financial statements and consequently, no provision has been made.

10. Contractual Obligations

CIHR is committed to disburse grants and awards in future years subject to the appropriation of funds by Parliament. In addition, the nature of CIHR's operating activities result in some multi-year contracts whereby CIHR will be committed to make some future payments when the goods or services are rendered. Future year contractual obligations are as follows:
(in thousands of dollars)

2011 2012 2013 2014 2015 and
thereafter
Total

Grants and awards $ 806,602 584,046 383,112 221,329 126,010 $ 2,121,099
Operating expenditures 2,297 106 48 13 8 2,472

Total $ 808,899 584,152 383,160 221,342 126,018 $ 2,123,571

11. Related Party Transactions

CIHR is related as a result of common ownership to all Government departments, agencies, and Crown Corporations. CIHR enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, CIHR received common services which were obtained without charge from other Government departments as disclosed below.

(a) Common services provided without charge by other government departments

During the year, CIHR received services without charge from certain common service organizations, related to accommodation, the employer's contribution to the health and dental insurance plans, and audit services. These services provided without charge have been recorded in CIHR's Statement of Operations as follows:
(in thousands of dollars)

2010 2009

Accommodation provided by Public Works and Government Services Canada $ 3,403 $ 3,386
Employer’s contribution to the health and dental insurance plans provided by Treasury Board Secretariat 2,916 2,746
Audit services provided by the Office of the Auditor General of Canada 229 223

Total $ 6,548 $ 6,355

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as the payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included in CIHR's Statement of Operations.

(b) Administration of CIHR funds by other government departments

Other federal departments and agencies administer funds on behalf of CIHR to issue grants, awards and related payments. During the year, other federal departments and agencies administered $89,302,698 in funds for grants and awards (2009 - $91,189,579), primarily pertaining to the Canada Research Chairs program. These expenses are reflected in CIHR's Statement of Operations as expenses.

12. Segmented Information

Presentation by segment is based on CIHR's strategic outcome. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and revenues generated for the main strategic outcomes, by major object of expenses and by major type of revenues. The segment results for the period are as follows:
(in thousands of dollars)

Advances in Health Knowledge People and Research Capacity Knowledge
Translation and
Commercialization
2010
Total
2009
Total

Transfer payments
Grants and awards $ 590,200 $ 275,963 $ 72,119 $ 938,282 $ 927,238
Refunds of previous years' grants and awards (3,418) (1,598) (418) (5,434) (2,901)

Total transfer payments 586,782 274,365 71,701 932,848 924,337

Operating expenses
Salaries and employee benefits 27,757 12,979 3,392 44,128 40,589
Professional and special services 4,432 2,073 542 7,047 5,838
Accomodation 2,140 1,001 262 3,403 3,386
Travel 2,075 970 253 3,298 3,854
Other 893 417 109 1,419 1,688
Furniture, equipment and software 775 363 95 1,233 1,733
Communication 631 295 77 1,003 1,084
Amortization of tangible capital assets 506 236 62 804 696

Total operating expenses 39,209 18,334 4,792 62,335 58,868

Total expenses 625,991 292,699 76,493 995,183 983,205

Revenues
Donations for health research 5,748 2,687 703 9,138 10,213
Cost sharing arrangements with other government departments - - - - 150
Endowments for health research 1 1 - 2 2

Total revenues 5,749 2,688 703 9,140 10,365

Net cost from continuing operations $ 620,242 $ 290,011 $ 75,790 $ 986,043 $ 972,840

13. Adoption of New Treasury Board Accounting Policies

During the year, CIHR adopted the revised Treasury Board accounting policy TBAS 1.2: Departmental and Agency Financial Statements, which is effective for CIHR for the 2009-10 fiscal year. This change has had no significant impact on CIHR's financial statements.

14. Comparative Information

Comparative figures have been reclassified to conform to the current year's presentation.

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