Canadian Institutes of Health Research Annual Report 2012–13: Innovative, Strategic, Current

Financial Statement Discussion and Analysis

Disclaimer

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 and accompanying notes for the year ended March 31, 2013.

The responsibility for the integrity and objectivity of the FSD&A for the year ended March 31, 2013, and all information contained in the financial statements rests with the management of CIHR.

Highlights

1. Statement of Financial Position

Condensed Statement of Financial Position
(in millions of dollars)

As at March 31 % Change 2013 2012
Total liabilities -19.9% $12.1 $15.1
Total financial and non-financial assets -14.5% $12.4 $14.5

These corresponding decreases resulted directly from the following:

2. Statement of Operations and Departmental Net Financial Position

Condensed Statement of Operations and Departmental Net Financial Position
(in millions of dollars)

For the year ended March 31 % Change 2013 2012
Total expenses -0.8% $1,011.9 $1,020.5
Net cost of operations before government funding -1.0% $995.9 $1,005.7

These corresponding decreases are attributable to the 0.7% decrease in Parliamentary authorities provided by the Government of Canada to CIHR in 2012–13 as compared to the prior fiscal year.

Analysis

3. Risk Analysis

CIHR understands the importance of risk management and has integrated risk management considerations into its strategic and operational planning, business processes and decision making. CIHR has a risk management framework that sets out how CIHR identifies, assesses and mitigates risk. The framework also provides a governance model that promotes the accountability for risk management as well as defining the ongoing review and updating process for existing and potential risks to the organization. CIHR has identified four primary risks, as follows:

3.1. Reform of the Open Suite of Programs

There is a risk that CIHR’s reforms to the Open Suite of Programs, including changes to the peer review process, will not be understood or supported by external stakeholders.

To mitigate this risk, CIHR implemented a governance structure for the implementation of the reforms, developed an integrated plan and conducted a number of forums across the country with key stakeholders to get their input and feedback on the proposed changes. This work will be beneficial when the transition plan, which will pilot and phase in components of the changes, is implemented.

3.2. Knowledge Translation

Given CIHR’s lack of direct control over all the factors that influence the uptake and use of research, there is a risk that CIHR may not be able to fully achieve the knowledge translation (KT) component of its mandate and improve the health of Canadians through health research.

To mitigate this risk, CIHR has developed KT strategies for all CIHR Institutes and initiatives. CIHR has also established a core suite of KT programs and will monitor progress on KT activities and outcomes.

3.3. Results Management

There is a risk that CIHR will be unable to adequately and efficiently evaluate and report on its performance and make the necessary changes to ensure impact.

To mitigate this risk, CIHR will strengthen its performance measurement frameworks and activities at all levels (programs, initiatives and operations). This will improve CIHR’s ability to track and monitor performance outcomes related to research and operational activities. Currently underway are IT systems revisions to ensure an appropriate data architecture is in place to support information and reporting plans, and the development and implementation of data quality and monitoring standards.

3.4. Institute Organizational Model

Due to the institute virtual organizational model, there is a risk of disruptions and corporate memory loss during transitions that may compromise the Institutes’ ability to achieve planned outcomes or their mandate in support of CIHR’s strategic objectives.

To mitigate this risk, management has implemented an institute transition plan and renewal schedule. In addition, an ongoing process has been established to assess the performance of Scientific Directors.

4. Variance Analysis

4.1. Variances between current year actual results and budget

CIHR is financed by the Government of Canada through Parliamentary authorities. In 2012–13, CIHR was provided with $1,008.1M of Parliamentary authorities, a decrease of $7.1M (or 0.7%) as compared to 2011–12. The Government of Canada provided CIHR with reduced Parliamentary authorities in 2012–13, as follows:

Parliamentary Authorities (in millions of dollars) 2012–13
Strategy for Patient-Oriented Research 15.0
New funding for Business-Led Networks of Centres of Excellence 6.1
New funding for Centres of Excellence for Commercialization and Research 4.0
Transfers from the Public Health Agency of Canada 2.2
Budget 2012 Implementation (15.0)
Incremental reductions due to the sunsetting of programs
Pandemic Preparedness Strategic Research Initiative (4.3)
Isotopes Supply Initiative (4.9)
Incremental Funding for the Canada Graduate Scholarship program (7.0)
Reprofiling of Grant Programs (2.1)
Other Reductions (1.1)
Total reduction in Parliamentary Authorities $(7.1)

The foregoing 0.7% decreases in Parliamentary authorities paralleled the corresponding decreases in total Parliamentary authorities used by CIHR (1.2%), grants and awards expenses (1.1%) and the net cost of operations before government funding (1.0%).

4.2. Variances between current year actual results and prior year actual results

Segmented Information (in millions of dollars
(Refer to note 12 of the financial statements)

For the year ended March 31 % Change 2013 2012
Grants and awards -0.9% $956.7 $965.3
Total operating expenses 3.0% $62.8 $61.0

Grants and awards expenditures decreased by 0.9% (or $8.6M) primarily due to reduced expenditures within the Health Researchers program activity (the largest portion attributable to the Canada Graduate Scholarships program) and the Health and Health Services Advances program activity (particularly due to the sunsetting of the Pandemic Preparedness Strategic Research and Isotopes Supply Initiatives). These reductions were partially offset by the increased expenditures within the Health Knowledge program activity (mostly due to increased successful applicants within the Open Operating Grant Program) as displayed in the following graphic:

Grants and Awards by Program Activity

(in million of dollars)

Long description: Grants and Awards by Program Activity

Total operating expenses increased by 3.0% (or $1.8M) primarily due to increased employee salaries and benefits ($1.8M) and other slight variations across the other classes. The increase is a direct result of the required one-time adjustment related to severance termination, which occurred in 2011–12, and the pay equity settlement reached during 2012–13.

5. Trend Analysis

5.1. Grants and Awards

CIHR Net Cost of Operations and Grants and Awards Expenses

(in million of dollars)

Long description: CIHR Net Cost of Operations and Grants and Awards Expenses

5.2. Operating Expenses

Operating Expenses

(in million of dollars)

Long description: Operating Expenses

Financial Outlook: 2013–14

On March 21, 2013, Minister of Finance James Flaherty tabled in Parliament the Government budget for fiscal year 2013–14. Budget 2013 lays out a plan for jobs and economic growth and ensuring Canada’s economic advantage today will translate into the long-term prosperity of tomorrow. In doing so, the Government is taking the necessary actions in all areas that drive economic progress and prosperity by connecting Canadians with available jobs, helping manufacturers and businesses succeed in the global economy, creating a new building Canada plan, investing in world-class research and innovation, and supporting families and communities. More specifically, the Economic Action Plan 2013 includes additional funding1 which will affect CIHR’s outlook, as follows:

Consequently, CIHR is expected to continue to remain in good financial position as the Government of Canada returns to fiscal balance over the medium term. CIHR management anticipates that additional funding through permanent increases and transfers will enable CIHR’s total budget to reach $1B before year end.

Footnotes

Footnote 1

Jobs Growth and Long-term Prosperity – Economic Action Plan 2013 [ PDF (9.14 MB) - external link ].

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