Quarterly Financial Report for the Quarter Ended December 31, 2014

Table of Contents


1. Introduction

This quarterly financial report should be read in conjunction with the 2014-15 Main Estimates, Supplementary Estimates A and Supplementary Estimates B as well as Canada's Economic Action Plan 2012 (Budget 2012). It has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. It has not been subject to an external audit or review nor has it been subject to the approval of the Audit Committee.

The Canadian Institutes of Health Research (CIHR) is the Government of Canada's health research funding agency. Its mandate is to excel, according to internationally accepted standards of scientific excellence, in the creation of new knowledge and its translation into improved health for Canadians, more effective health services and products and a strengthened Canadian health care system.

CIHR invests in high quality health research and health research personnel to help create and apply new knowledge that can improve health outcomes for Canadians, lead to innovative products and services that improve Canada's health care system, and create high quality employment and commercial opportunities. CIHR's Health Research Roadmap: Creating innovative research for better health and health care outlines four strategic directions that are aligned with CIHR's corporate, business and operational priorities, including:

  1. Invest in world-class research excellence;
  2. Address health and health system research priorities;
  3. Accelerate the capture of health and economic benefits of health research; and 
  4. Achieve organizational excellence, foster ethics and demonstrate impact.

Further details on CIHR's authority, mandate and programs can be found in Part II of the Main Estimates and the Report on Plans and Priorities.

Basis of Presentation

The quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes CIHR's spending authorities granted by Parliament and those used by CIHR, consistent with the Main Estimates, Supplementary Estimates A and Supplementary Estimates B for the 2014-15 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before monies can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts or through legislation in the form of statutory spending authority for specific purposes.

As part of the departmental performance reporting process, CIHR prepares its annual departmental financial statements on a full accrual basis in accordance with Treasury Board accounting policies, which are based on Canadian public sector accounting standards.  The spending authorities voted by Parliament remain on an expenditure basis.

2. Highlights of fiscal quarter and fiscal year to date (YTD) results

As part of the 2012-13 Government of Canada spending review, organizations were asked to focus on achieving efficiencies in their operations, to better align resources to its core mandate, to transform internal processes and streamline operations, as well as to refocus business processes and its service delivery platforms. CIHR will continue to review and analyze its spending during the 2014-15 fiscal year in areas such as operating efficiency, internal services, effectiveness, affordability and relevance to ensure that it continues to meet its mandate as effectively and as efficiently as possible. Results for the third quarter of the fiscal year are as follows:

2.1 Financial Highlights – Statement of Authorities (Refer to Section 6)

As of December 31, 2014, total authorities available for use for CIHR have remained relatively consistent compared to 2013-14 with an increase of $3.4 million (0.3%) as shown in the tables below. As at December 31, 2014, total authorities used have increased by $10.7 million (1.6%) as compared to the prior fiscal year. CIHR has used 66.9% (66.0% in 2013-14) of its available authorities through the third quarter, which is consistent with the prior year spending pattern.

Table 2.1.1 – Changes to authorities available and authorities used by fiscal quarter and fiscal year by Vote ($ thousands)

2014-15 2013-14 Variance
Q3 Q3 Q3
Authorities available Authorities used % used Authorities available Authorities used % used (1) vs (3) (2) vs (4)
(1) (2) (3) (4)
Vote 1 - Operating expenditures 49,431   11,610 23.5% 50,168 11,251 22.4% -1.5% 3.2%
Vote 5 - Grants 946,201 178,284 18.8% 941,782 179,469 19.1% 0.5% -0.7%
Statutory authorities 5,696 1,424 25.0% 6,013 1,480 24.6% -5.3% -3.8%
Total 1,001,328 191,318 19.1% 997,963 192,200 19.3% 0.3% -0.5%

Table 2.1.2 – Changes to cumulative authorities available and authorities used by fiscal year and by Vote ($ thousands)

2014-15 2013-14 Variance
Cumulative Cumulative Cumulative
Authorities available Authorities used % used Authorities available Authorities used % used (1) vs (3) (2) vs (4)
(1) (2) (3) (4)
Vote 1 - Operating expenditures 49,431 36,182 73.2% 50,168 32,315 64.4% -1.5% 12.0%
Vote 5 - Grants 946,201 629,115 66.5% 941,782 622,146 66.1% 0.5% 1.1%
Budgetary statutory authorities 5,696 4,272 75.0% 6,013 4,426 73.6% -5.3% -3.6%
Total 1,001,328 669,569 66.9% 997,963 658,887 66.0% 0.3% 1.6%

Vote 1 – Operating Expenditures

Authorities available for use for Vote 1 - Operating expenditures have decreased slightly by $0.7 million through the third quarter (1.5%) as compared to the prior fiscal year due to minor technical adjustments. Authorities used during the third quarter for Vote 1 – Operating Expenditures have increased by $0.4 million (3.2%) as compared to the prior fiscal year, which is immaterial.

Operating Expenditures Authorities used year-to-date have increased by $3.9 million (12.0%) as compared to the prior fiscal year due to the increased number of peer review committee meetings held in the first three quarters of the fiscal year, and due to a one-time transition payment of $1.4 million for implementing salary payment in arrears by the Government of Canada. Adopting payment in arrears means that employees will be paid on a bi-weekly basis for the ten days worked that concluded two weeks prior to payday. As a result, employees' pay will more accurately reflect actual time worked. Departments who find they are unable to absorb some or all of the cost of the transition payment within their existing available authorities will be able to seek relief from central sources if required.

Vote 5 – Grants

Authorities available for use for Vote 5 - Grants have increased by approximately $4.4 million (0.5%) through the third quarter as compared to the prior fiscal year, primarily as a result of:

Authorities used during the third quarter have decreased slightly by $1.2 million (0.7%) as compared to the prior fiscal year. Authorities used year-to-date as at December 31, 2014 are approximately $7.0 million (1.1%) higher than in 2013-14 due to timing differences with respect to the disbursement of grants by the organization. The increase in year-to-date grant expenditures is minimal and consistent with available grant authorities being $4.4 million (0.5%) higher than in the prior fiscal year. The percentages of available authorities used during the third quarter and cumulative year to date are consistent with those incurred in the same periods of the prior fiscal year (18.8% vs. 19.1% and 66.5% vs. 66.1%).

Overall results as at December 31, 2014 are consistent with the prior fiscal year.

Statutory Authorities

Budgetary statutory authorities (representing CIHR's contribution to employee benefit plans) available for use decreased year over year by $0.3 million (5.3%). Actual spending for statutory authorities through the third quarter is 75.0% of the total available authorities for use for the year. This is consistent with spending at the same point of the prior year (73.6%) and the nature of the expenditure (distributed equally throughout the fiscal year).

2.2 Financial Highlights – Statement of Departmental Budgetary Expenditures by Standard Object (Refer to Section 7)

As of December 31, 2014, total authorities available for use by the Canadian Institutes of Health Research have increased by $3.4 million (0.3%) as compared to the prior fiscal year. This increase is reflected in the following table, where expenditure types are re-grouped into three categories (Personnel, Other Operating Expenditures and Grants):

Table 2.2.1 – Changes to authorities available and authorities used by fiscal quarter and fiscal year and by expenditure type ($ thousands)

2014-15 2013-14 Variance
Q3 Q3 Q3
Authorities available Authorities used % used Authorities available Authorities used % used (1) vs (3) (2) vs (4)
(1) (2) (3) (4)
Personnel 40,218 10,965 27.3% 41,002 10,754 26.2% -1.9% 2.0%
Other operating expenditures 14,909 2,069 13.9% 15,179 1,977 13.0% -1.8% 4.7%
Transfer payments 946,201 178,284 18.8% 941,782 179,469 19.1% 0.5% -0.7%
Total 1,001,328 191,318 19.1% 997,963 192,200 19.3% 0.3% -0.5%

Table 2.2.2 – Changes to cumulative authorities available and authorities used by fiscal year and by expenditure type ($ thousands)

2014-15 2013-14 Variance
Cumulative Cumulative Cumulative
Authorities available Authorities used % used Authorities available Authorities used % used (1) vs (3) (2) vs (4)
(1) (2) (3) (4)
Personnel 40,218 32,446 80.7% 41,002 31,414 76.6% -1.9% 3.3%
Other operating expenditures 14,909 8,008 53.7% 15,179 5,327 35.1% -1.8% 50.3%
Transfer payments 946,201 629,115 66.5% 941,782 622,146 66.1% 0.5% 1.1%
Total 1,001,328 669,569 66.9% 997,963 658,887 66.0% 0.3% 1.6%

Personnel and Other Operating Expenditures

Authorities available for Personnel and Other Operating Expenditures for the period ended December 31, 2014, have decreased by $0.8 million (1.9%) and increased by $0.3 million (1.8%), respectively, as compared to the prior year.

Personnel authorities used increased by $0.2 million (2.0%) in the third quarter of 2014-15 as compared to the prior fiscal year. The percentage of authorities used for Personnel Expenditures through the third quarter (80.7%) is reasonable for this type of expenditure and is comparable to the prior fiscal year (76.6%). Restraint measures with respect to Personnel expenditures have been implemented for the remainder of the fiscal year to ensure adherence with available authorities.

The increase in Other Operating Expenditures authorities used during the third quarter of $0.1 million (4.7%) as compared to the prior fiscal year is insignificant. The decrease in available Other Operating Expenditures authorities of $0.3 million (1.8%) is also immaterial.

Authorities used for Other Operating Expenditures have increased by $2.7 million (50.3%) through the third quarter of 2014-15 for two reasons. Firstly, as CIHR has begun piloting its new funding program through its reform of open programs, an increased number of peer review committee meetings have taken place through the third quarter as compared to the prior fiscal year. Secondly, CIHR incurred a one-time transition payment of $1.4 million for implementing salary payment in arrears by the Government of Canada.

Grants

Authorities available for the period ended December 31, 2014 have increased by $4.4 million (0.5%) over the prior year, due primarily from increased transfers from other federal government departments to fund strategic health research priorities. Authorities used during the quarter ended December 31, 2014 have decreased minimally ($1.2 million, or 0.7%). The percentage of Grants authorities used through the third quarter of the fiscal year is consistent with prior year (66.5% and 66.1%, respectively).

2.3 Other Non-Financial Highlights

Other non-financial highlights for the third quarter include:

3. Risks and uncertainties

CIHR is funded through voted parliamentary spending authorities and statutory authorities for operating expenditures and transfer payments. As a result, its operations are impacted by any changes to funding approved through Parliament. Therefore, delivering programs and services may depend on several risk factors such as economic fluctuations, technological and scientific development, evolving government priorities, and central agency or government-wide initiatives.

CIHR is continuously adapting to the ever-changing health research landscape to ensure that the research it funds contributes to the health and well-being of Canadians. CIHR is currently managing a number of risks with respect to several change management initiatives, including the Reform of its Open Suite of Programs and the Institute Model Review. These initiatives aim to improve and modernize how CIHR delivers its programs to benefit all Canadians. The changes currently being implemented at CIHR are significant. The primary risk associated with both the Reform of the Open Programs and the Institute Model Review is that CIHR will be unable to make needed program, policy or other changes to adapt to or efficiently meet emerging or evolving needs. CIHR Management has already implemented several mitigation measures to monitor and measure the associated risks, including:

In addition, CIHR Management is developing a new financial framework to more effectively align CIHR's resources to its strategic research priorities.

If not properly mitigated, the risks associated with these key initiatives could result in a loss of credibility for CIHR from both key external and internal stakeholders and the public at large, leading to possible damage to CIHR's reputation.

4. Significant changes in relation to operations, personnel and programs

There have been no significant changes in relation to operations, personnel and programs during the quarter.

5. Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that are being implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize administrative processes.

In the first year of implementation (2012-13), CIHR achieved savings of $15.0 million. Savings increased to $30.0 million in 2013-14 and will result in ongoing savings of $30.0 million ($24.5 million in Grants and $5.5 million in Operating Expenditures) in 2014-15 and all future years. These savings were achieved through efficiency measures and program reductions that better align CIHR's resources to its core mandate, scaling back where the need is reduced, transforming how it works internally, and by consolidating and streamlining. To realize the required Operating savings of $5.5 million, CIHR streamlined its operations, merged functions and units through a restructuring exercise which included the reduction of portfolios and a realignment of management functions.

The measures implemented have explicitly spared critical CIHR programs such as the Open Operating Grants Program. In fact, Budget 2012 clearly stated that CIHR's programming in support of basic research, student scholarships, and industry-related research initiatives and collaborations was to be maintained.

Overall the 2012 Budget Implementation exercise has had minimal impact on CIHR's ability to meet its mandate and to provide programs directed at the health research community and its other stakeholders. There are no specific financial risks or uncertainties for CIHR related to these savings.

Approved by:

[Original signed by]

Alain Beaudet, MD, PhD  
President 

Ottawa, Canada
March 1, 2015

[Original signed by]

Thérèse Roy, CPA, CA (Québec)
Chief Financial Officer

6. Statement of Authorities (unaudited)

For the quarter ended December 31, 2014

Fiscal year 2014-2015 Fiscal year 2013-2014
(in thousands of dollars) Total available for use for the year ending
March 31, 20151
Used during the quarter ended
December 31, 2014
Year to date used at quarter-end Total available for use for the year ended
March 31, 20141
Used during the quarter ended
December 31, 2013
Year to date used at quarter-end
Vote 1 – Operating expenditures 49,431 11,610 36,182 50,168 11,251 32,315
Vote 5 – Grants 946,201 178,284 629,115 941,782 179,469 622,146
Budgetary statutory authorities 5,696 1,424 4,272 6,013 1,480 4,426
Total authorities 1,001,328 191,318 669,569 997,963 192,200 658,887

7. Departmental budgetary expenditures by Standard Object (unaudited)

For the quarter ended December 31, 2014

Fiscal year 2014-2015 Fiscal year 2013-2014
(in thousands of dollars) Planned expenditures for the year ending
March 31, 20151
Expended during the
quarter ended December 31, 2014
Year to date used at quarter-end Planned expenditures for the year ending
March 31, 20141
Expended during the
quarter ended December 31, 2013
Year to date used at quarter-end
Expenditures:
Personnel 40,218 10,965 32,446 41,002 10,754 31,414
Transportation and communications 5,785 600 2,383 4,384 541 2,107
Information 1,185 146 404 1,059 173 329
Professional and special services 5,678 922 2,591 7,918 699 1,710
Rentals 898 148 769 311 94 525
Repair and maintenance 110 10 16 171 18 25
Utilities, materials and supplies 224 20 74 238 25 77
Acquisition of machinery and equipment 1,029 68 258 1,098 24 89
Transfer payments 946,201 178,284 629,115 941,782 179,469 622,146
Other subsidies and payments - 155 1,513 - 403 465
Total budgetary expenditures 1,001,328 191,318 669,569 997,963 192,200 658,887

Footnotes

Footnote 1

Includes only Authorities available for use and granted by Parliament at quarter-end.

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