Annual Report 2008-2009

Research with Impact

[ Table of Contents ]

Financial Statement Discussion and Analysis

Financial Highlights

• The 2008-09 net cost of operations for CIHR was $972.8 million, a decrease of 2.6% as compared to 2007-08.
• CIHR grants and awards expenses totalled $927.2 million in 2008-09, a decrease of approximately 3.0% as compared to 2007-08.
• CIHR's operations and administration expenses totalled $58.9 million, an increase of $3.6 million (or 6.5%) over 2007-08. Operations and administration expenses were comprised of $40.6 million in salaries and employee benefits (68.9%) and $18.3 million in non-salary expenses (31.1%). Operations and administration expenses continue to comprise less than the target maximum value of 6.0% of total CIHR expenses.
• Total assets ($20.1 million) and total liabilities ($24.3 million) are both significantly lower than in 2007-08 due primarily to a $20 million decrease in grants payable in 2008-09. The $20 million Gairdner Foundation grant was accrued as at March 31, 2008 and was disbursed during the 2008-09 year. This $20 million decrease in grants payable also resulted in a corresponding $20 million decrease in the "Due from the Consolidated Revenue Fund" balance during the 2008-09 fiscal year.
• The acquisition of tangible capital assets ($1.3 million) is relatively consistent with the prior year. The amortization of tangible capital assets ($0.7 million) decreased by 62.7% as compared to 2007-08 due to a change in the estimated useful life of CIHR's largest asset class (Informatics software).
• CIHR parliamentary appropriations for 2008-09 totalled $974.0 million, a decrease of $19.7 million (or 2.0%) as compared to 2007-08.
• CIHR did not spend all available and planned funding in 2008-09. CIHR had surplus parliamentary appropriations totalling $4.6 million, which was 76.5% less than in 2007-08. A surplus of $3.8 million occurred in the Operating expenditures parliamentary appropriation due to projects being cancelled or not starting as quickly as planned along with improvements in operational efficiencies. There was also a minor surplus ($0.8 million) in the Grants parliamentary appropriation.

Analysis

CIHR's growth is almost entirely dependent on increases to its appropriations as approved by Parliament. The 2.0% decrease in parliamentary appropriations (or $19.7 million) in 2008-09 resulted primarily from a decrease to appropriations for the Centres of Excellence for Commercialization and Research (CECR) program. In 2007-08, CIHR received $73.5 million of parliamentary appropriations in support of the launch of the new CECR program, whereas in 2008-09 $4.4 million in appropriations was provided for the CECR program. This decrease to CIHR parliamentary appropriations for the CECR program was partially offset by CIHR receiving increased parliamentary appropriations from the $34 million base budget increase announced in the 2008 Federal Budget, as well as additional 2008-09 appropriations for CIHR in key targeted strategic areas such as the Canada Graduate Scholarships program ($4.8 million), pandemic preparedness research ($3.4 million), HIV/AIDS research ($3.2 million), the National Anti-Drug Strategy ($0.9 million) and Fabry's disease ($0.8 million). CIHR also received approximately $1.5 million more in transfers from other government departments (primarily from the Public Health Agency of Canada (PHAC) and Health Canada) than it did in 2007-08 to fund research projects in key research areas such as Hepatitis C and influenza research.

A reduction in CIHR parliamentary appropriations also resulted in commensurate decreases to its net cost of operations and grant and award expenses. The CIHR net cost of operations decreased by 2.6% (or $26.2 million) in 2008-09 as compared to 2007-08. Grants and Awards expenses in 2008-09 totalled $927.2 million, a decrease of $28.9 million or 3.0% as compared to 2007-08.

The following graphic indicates how 2008-09 Grants and Awards expenses were allocated by program area. Priority is given to funding health research and researchers through open competitions, strategic initiatives and knowledge translation. CIHR also participates with other federal granting agencies (NSERC, SSHRC) in a number of tri-agency programs, including the Canada Research Chairs, the Networks of Centres of Excellence, and the Centres of Excellence for Commercialization and Research.

2008-09 Grants and Awards Expenses^*

$927.2 million

* Figures do not include refunds of previous years' expenses.

As the graphic indicates, CIHR invests the largest share of its budget on grants and awards through open competitions, enabling individual researchers, or groups of investigators, to pursue research projects in any area of health research. Applications for grants and awards undergo rigorous peer review by committees of experts in the field. This process helps to ensure that only excellent health research proposals that meet internationally accepted standards of excellence are funded by CIHR.

Strategic initiatives comprise the second largest area of grants and awards investments and it targets high priority research areas identified by CIHR's Institutes after broad consultations with stakeholders and partners. These strategic initiatives address emerging health threats and other important health issues of concern to Canadians including areas of health research such as obesity, cancer, vulnerable populations such as youth and aboriginals, pandemic preparedness, HIV/AIDS, or measures to improve the effectiveness of the Canadian health-care system.

Knowledge Translation (KT) is a critical and growing part of CIHR's mandate focused on the synthesis, exchange and ethically sound application of knowledge to accelerate the capture of the benefits of research for Canadians through improved health, more effective services and products and a strengthened health-care system. In 2008-09, grants and awards expenses related directly to Knowledge Translation increased by 16.8%.

As noted earlier, the key business driver for CIHR is being provided parliamentary appropriations by the Federal Government. The table below summarizes the parliamentary appropriations received by CIHR in fiscal year 2008–09:

Summary of Parliamentary Appropriations

(in millions of dollars)

		2008-09 Main Estimates	2008-09 Supplementary Estimates	2008-09 Total Appropriations
Operating Expenses
	Salaries (including Employee Benefits)	29.7	7.9	37.6
	Non-Salary Expenses	17.6	1.1	18.7
	Total - Operating Expenditures	47.3	9.0	56.3
Grants and Awards
	CIHR ongoing budget	674.4	-	674.4
	Canada Research Chairs	103.6	-	103.6
	Networks Centres of Excellence	27.5	(1.4)	26.1
	HIV/AIDS research initiative	21.2	-	21.2
	Canada Graduate Scholarships Program	18.9	0.3	19.2
	Institute Support Grants	13.0	-	13.0
	Fabry's Disease & Expensive Drugs	12.4	-	12.4
	Pandemic Preparedness research initiative	6.4	0.5	6.9
	International Polar Year research initiative	3.9	-	3.9
	Budget 2008 increase	-	29.3	29.3
	CECR funding	-	4.4	4.4
	Business-Led Networks of Centres of Excellence	-	1.7	1.7
	Other Program Funding	-	1.6	1.6
	Total - Grants & Awards	881.3	36.4	917.7
Total 2008-09 CIHR Parliamentary Appropriations		928.6	45.4	974.0
Total 2008-09 Authorities Spent				969.4
Total Surplus of Appropriations for 2008-09				4.6

Note: CIHR received a $34 million ongoing budget increase through the 2008 Federal Budget, which as per the table above, was allocated to CIHR's 2008–09 parliamentary appropriations through the Supplementary Estimates. Of that $34 million, $29.3 million was allocated to Vote 25 (Grants) and the remaining $4.7 million was allocated to Vote 20 (Operating Expenses), employee benefits and accommodation charges.

CIHR had a surplus of parliamentary appropriations totalling $4.6 million in 2008–09 as follows:

	Vote	Surplus Appropriations
20	Operating Expenses	$ 3.8 million
25	Grants	$ 0.8 million
	Total Surplus of Parliamentary Appropriations	$ 4.6 million

• The majority of surplus funds in 2008–09 are from Vote 20 (Operating Expenses). The surplus funds in Vote 20 (Operating Expenses) are mainly due to projects being cancelled or not starting as quickly as planned, as well as improvements in operational efficiencies. Please note that CIHR is able to carry forward up to 5% of its operating budget from one period into the next fiscal year should it not be fully spent in a particular fiscal year. CIHR can carry forward $2.1 million of its 2008–09 operating budget lapse to the 2009-10 fiscal year, meaning its actual lapse is only $2.5 million for 2008–09.
• CIHR does not have the authority to carry forward any unspent Grants appropriations from one year to the next. CIHR did, however, only lapse $0.8 million in its Grants Vote for 2008–09, $16.5 million (or 95%) less than was lapsed in the previous fiscal year. Overall lapsed funds decreased by 76.5% as compared to 2007–08.

Risks and Uncertainties

CIHR continuously assesses opportunities, challenges and risks at three levels: strategic, programmatic and corporate. The major risks facing CIHR, as identified by the organization are as follows:

• Research takes time and a sustained investment. A large portion of CIHR's budget is committed to grants and awards that extend over three to five years. CIHR is continually challenged by the need to provide this longer-term funding while maintaining its capacity to fund new projects. To meet this challenge, CIHR has introduced investment modelling to better forecast the future impacts of funding decisions and the concept of "steady-state" dynamics to ensure relative stability in the number of applications funded and success rates, over time.
• Finding the appropriate balance between strategic (i.e. targeted) and investigator-initiated research is critical to success in health research. The balance varies from one field of health to another so that no single formula exists. CIHR's Governing Council approves CIHR's budget including the strategic allocation of grant funding to its various programs. A single management committee, chaired by the President of CIHR, reviews the results of the grants and awards competitions, to ensure scientific excellence and coherence with Governing Council direction. Together these measures help ensure that CIHR achieves the appropriate balance.
• There is a risk that CIHR may not be able to fulfill its knowledge translation mandate, which could result in the inability to demonstrate impact, and a lost opportunity to transform the results of the new knowledge created by CIHR funding into new health and health-care practices, products or services for the benefit of Canadians. This risk is being mitigated in two ways. The first is the establishment and planned expansion of knowledge translation programs that encourage researchers to synthesize and disseminate their results and work directly with knowledge users to find solutions. The second is the establishment of the infrastructure within CIHR to act as a convener and to promote the synthesis and dissemination of specific research results.
• The current level of operating funding limits CIHR's ability to implement some of its planned business transformation initiatives. This could result in delays in the development of processes, information and tools to support effective management and decision making. To mitigate this risk CIHR has implemented an integrated operational planning process which requires managers to plan activities and identify resource requirements or issues on an annual basis and a process to review progress against these plans on a quarterly basis. CIHR is also developing a five-year investment roadmap that plots the planned evolution of its programming and operating budget.

Rising Demand for Research Funding

• CIHR is confronted with increased application pressure from the health research community caused in part by a robust and growing community of practitioners, CIHR's broadened 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 have 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 to seek additional parliamentary appropriations to ensure that Canada does not lose many of 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.

Variance Analysis

Change in Key Financial Indicators

As evidenced by the table below, CIHR's net cost of operations and grants and awards expenses have decreased slightly in relative proportion to the decreased parliamentary appropriations received by CIHR in 2008–09. Operations and administration expenses increased as compared to 2007–08 due primarily to higher employee salaries and benefits.

(in millions of dollars)

	2008–09	2007–08	Increase / (Decrease)	% Increase / (Decrease)
Parliamentary Appropriations	974.0	993.7	(19.7)	(2.0 %)
Net Cost of Operations	972.8	999.0	(26.2)	(2.6 %)
Grants & Awards Expenses	927.2	956.1	(28.9)	(3.0 %)
Operations and Administration Expenses	58.9	55.3	3.6	6.5 %
Salaries and Employee Benefits Expenses	40.6	36.5	4.1	11.2 %

• In 2008–09, the ratio of operations and administration expenses to total expenses incurred was approximately 6.0%, an increase of 0.5% from 2007–08.

Change in Expenses by Strategic Outcome

(in millions of dollars)

Strategic Outcome	2008–09	2007–08	Increase / (Decrease)	% Increase / (Decrease)
Advances in Health Knowledge	635.3	547.8	87.5	16.0 %
People and Research Capacity	277.0	317.4	(40.4)	(12.7 %)
Knowledge Translation and Commercialization	70.9	143.1	(72.2)	(50.5 %)
Total Expenses	983.2	1,008.3	(25.1)	(2.5 %)

• Total expenses decreased by 2.5% in 2008–09 as compared to 2007–08 due to decreased parliamentary appropriations allocated to CIHR.
• The increase in expenses allocated to the "Advances in Health Knowledge" strategic outcome resulted from CIHR management allocating a greater portion of its 2008–09 grants and awards budget to the Open Operating Grants Program as well as increased expenses in priority areas of health research such as pandemic preparedness research, HIV/AIDS research, obesity and childhood health.
• Expenses allocated to the "People and Research Capacity" strategic outcome decreased in 2008–09 as a result of CIHR management allocating a lesser portion of its 2008–09 grants and awards budget to salary and training award programs. In addition, CIHR incurred a one-time expense in 2007–08 resulting from the $20 million grant disbursed to the Gairdner Foundation to support the "Canada Gairdner International Awards".
• The decrease in expenses allocated to the "Knowledge Translation and Commercialization" strategic outcome is due to significantly reduced funding for the CECR program in 2008–09, dropping to $4.4 million in 2008–09 from $73.5 million in 2007–08. Expenditures for the CECR program were much higher in 2007–08 due to the launch of this new program. CIHR expects that future streams of CECR funding will be consistent with funding received in 2008–09.

Trend Analysis

CIHR Parliamentary Appropriations

(in millions of dollars)

• CIHR parliamentary appropriations declined by $19.7 million (or 2.0%) in 2008–09 as compared to 2007–08 due to a reduction in parliamentary appropriations for the CECR program. This is the first time since CIHR inception in 2000 that CIHR parliamentary appropriations have decreased from one fiscal year to the next.
• Despite a decline in parliamentary appropriations in 2008–09, CIHR parliamentary appropriations have risen by $216.1 million over the past five fiscal years, from $757.9 million in 2004–05 to $974.0 million in 2008–09.
• CIHR parliamentary appropriations have increased by 28.5% since 2004–05, an average yearly increase of approximately 6.6%.

CIHR Net Cost of Operations

(in millions of dollars)

• CIHR net cost of operations decreased to $972.8 million, a decline of $26.2 million (or 2.6%) as compared to 2007–08. This decrease resulted from the aforementioned decline in CIHR parliamentary appropriations for 2008–09.
• Despite a decrease to CIHR net cost of operations in 2008–09, the net cost of operations has increased significantly over the past five years, from $748.9 million in 2004–05 to $972.8 million in 2008–09.
• CIHR net cost of operations has increased by $223.9 million or 29.9% since 2004–05, an average yearly increase of approximately 7.0%.

CIHR Grants and Awards Expenses

(in millions of dollars)

• CIHR grants and awards expenses decreased by $28.9 million (or 3.0%) in 2008–09 due to decreased parliamentary appropriations received by CIHR.
• Despite a slight decrease in 2008–09, CIHR grants and awards expenses have increased by $213.3 million since 2004–05, from $713.9 million to $927.2 million in 2008–09.
• CIHR grants and awards expenses have increased by 29.9% since 2004–05, an average yearly increase of approximately 7.0%.

CIHR Operations and Administration Expenses

(in millions of dollars)

• CIHR operations and administration expenses have increased by 23.7% during the past five fiscal years, from $47.6 million in 2004–05 to $58.9 million in 2008–09.
• In 2008–09, salaries and employee benefits made up 68.9% of total operations and administration expenses, compared to 57.8% in 2004–05.
• 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 management will ensure that operations and administration expenses remain less than 6.0% of total expenses in future fiscal years.