Future-Oriented Financial Statements
Canadian Institutes of Health Research
Statement of Management Responsibility
CIHR management is responsible for these future-oriented financial statements, including responsibility for the appropriateness of the assumptions on which these statements are prepared. These statements are based on the best information available and assumptions adopted as at December 31, 2010 and reflect the plans described in the Report on Plans and Priorities.
James Roberge, CMA
Chief Financial Officer
Date: December 31, 2010
Alain Beaudet, MD, PhD
Date: December 31, 2010
Canadian Institutes of Health Research
Future-oriented Statement of Operations
For the year ended March 31
|Estimated Results 2011||Forecast 2012|
|Expenses (Note 4)|
|Health Research Commercialization||44,002||46,380|
|Health and Health Services Advances||277,354||264,453|
|Revenues (Note 5)|
|Health Research Commercialization||503||492|
|Health and Health Services Advances||3,171||2,806|
|Net Cost of Operations||1,017,808||987,582|
The accompanying notes form an integral part of these future-oriented statements.
Canadian Institutes of Health Research
Notes to the Future-oriented Financial Statements
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 a sole strategic outcome which is sub-divided into five program activities. CIHR's strategic outcome is a world-class health research enterprise that creates, disseminates and applies new health knowledge across all areas of health research.
The first program activity is the creation of health knowledge by investing in world-class research excellence. The second program activity is health researchers by creating a well-trained base of investigators. The third program activity is health research commercialization which is achieved by CIHR's knowledge translation activities and funding aimed to promote the dissemination and application of new knowledge to improve health and health services; and, facilitate the commercialization of research. The fourth program activity is health and health advances by facilitating and strengthening collaborations between researchers and knowledge users and continuing to advance the science of knowledge translation and building the capacity of researchers and knowledge users to engage in knowledge translation. The fifth program activity is internal services by continuing to offer a world-class working environment and engaging and retaining a motivated, committed and productive workforce which strives to achieve organizational excellence.
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 assumptions
The future-oriented financial statements have been prepared on the basis of the government priorities and the plans of CIHR as described in the Report on Plans and Priorities.
The main assumptions are as follows:
- CIHR's activities will remain substantially the same as for the previous year.
- Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue.
- Estimated year end information for 2010-11 is used as the opening position for the 2011-12 forecasts.
These assumptions are adopted as at December 31, 2010.
3. Variations and Changes to the Forecast Financial Information
While every attempt has been made to accurately forecast final results for the remainder of 2010-11 and for 2011-12, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.
In preparing this financial statement, CIHR has made estimates and assumptions concerning the future. These estimates and judgements may differ from the subsequent actual results. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
Factors that could lead to material differences between the future-oriented financial statements and the historical financial statements include:
- The timing and amounts of acquisitions and disposals of property, plant and equipment may affect gains/losses and amortization expense.
- Economic conditions may affect the amount of revenue earned.
- Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.
Once the Report on Plans and Priorities is presented, CIHR will not be updating the forecasts for any changes to authorities or forecast financial information made in ensuing supplementary estimates.
4. Summary of Significant Accounting Policies
The future-oriented financial statements have been prepared in accordance with the 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:
- Parliamentary authorities – CIHR is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to CIHR do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Future-oriented Statement of Operations and the Future-oriented Statement of Financial Position are not necessarily the same as those provided through appropriations from Parliament. Note 5 provides a high-level reconciliation between the bases of reporting
- 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.
Revenues – are presented on an accrual basis:
Funds received from external parties for specified purposes are recorded upon receipt as deferred revenue. These revenues are recognized in the period in which the related expenses are incurred.
Funds that have been received are recorded as deferred revenue, provided CIHR has an obligation to other parties for the provision of goods, services or the use of assets in the future.
Other revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenue takes place.
Expenses – are presented on an accrual basis:
Grants and awards are recognized in the year in which the conditions for payment are met. In the case of grants which do not form part of an existing program, the expense is recognized when the Government announces a decision to make a non-recurring transfer, provided the enabling legislation or authorization for payment receives parliamentary approval prior to the completion of the financial statements.
Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.
Services provided without charge by other government departments for accommodation, the employer's contribution to the health and dental insurance plans and audit services are reported as operating expenses at their estimated cost.
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.
Employee future benefits
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.
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.
Tangible capital assets – All tangible capital assets and leasehold improvements having an initial cost of $5,000 or more are recorded at their acquisition cost. The department 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 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.
5. Parliamentary Authorities
CIHR receives most of its funding through annual Parliamentary authorities. Items recognized in the Future-Oriented Statement of Operations 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:
(in thousands of dollars) Estimated 2011 Forecast 2012 Vote 20 – Operating expenditures 52,328 50,007 Vote 25 – Grants 957,445 928,065 Statutory – Contributions to employee benefit plans 4,900 5,292 Forecast authorities available 1,014,673 983,364
Forecast authorities requested for the year ending March 31, 2012 are the planned spending amounts presented in the 2011-12 Report on Plans and Priorities. Estimated authorities requested for the year ending March 31, 2011 include amounts presented in the 2010-11 Main Estimates and Supplementary Estimates (A) and (B) and estimates of amounts to be allocated at year-end from Treasury Board central votes.
Reconciliation of net cost of operations to forecasted authorities used:
(in thousands of dollars) Estimated 2011 Forecast 2012 Net cost of operations 1,017,808 987,582 Adjustments for items affecting net cost of operations but not affecting authorities used:
Services provided without charge
Refunds of previous years' expenses
Increase in employee severance benefits
Amortization of tangible capital assets
Increase in vacation pay and compensatory leave
(78) (78) (4,292) (5,375) Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisitions of tangible capital assets
1,157 1,157 Forecast authorities available 1,014,673 983,364
6. 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:
7. Employee Benefits
CIHR's employees participate in the Public Service Pension Plan, which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plans benefits and they are indexed to inflation.
Both the employees and CIHR contribute to the cost of the Plan. The forecast expenses are $4,243,000 in 2010-11 and $4,250,000 in 2011-12, representing approximately 2.0 times the contributions of 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.
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, estimated as at the date of these statements, is as follows:
(in thousands of dollars) Estimated Results 2011 Forecast 2012 Accrued benefit obligation, beginning of year 9,027 9,764 Expense for the year 737 1,513 Accrued benefit obligation, end of year 9,764 11,277
8. Related party transactions
CIHR is related as a result of common ownership to all Government of Canada 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.
Common services provided without charge by other government departments
During the year CIHR is forecasted to receive without charge from other departments, accommodation, audit fees, and the employer's contribution to the health and dental insurance plans. These services without charge have been recognized in the CIHR's future-oriented Statement of Operations as follows:
(in thousands of dollars) Estimated Results 2011 Forecast 2012 Accomodation 3,450 3,605 Employer's contribution to the health and dental insurance plans 3,000 2,965 Audit Services 162 162 Total 6,612 6,732
The Government has structured some of its administrative activities for efficiency and cost-effectiveness purposes so that one department performs these on behalf of all without charge. The costs of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada are not included as an expense in CIHR's Statement of Operations.
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. Other federal departments and agencies are forecasted to administer approximately $90,000,000 in funds for grants and awards for both 2010-11 and 2011-12. These expenses are reflected in CIHR's Future-oriented Statement of Operations.
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