CIHR Annual Report 2011–12: The Measure of Success
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, 2012.
The responsibility for the integrity and objectivity of the FSD&A for the year ended March 31, 2012, and all information contained in the financial statements rests with the management of CIHR.
Highlights
1. Statement of Financial Position
| As at March 31 | % Change | 2012 | 2011 |
|---|---|---|---|
| Total liabilities | -34.9% | $ 15.1 | $ 23.2 |
| Total financial and non-financial assets | -20.8% | $ 14.5 | $ 18.3 |
These corresponding decreases resulted directly from the following:
- CIHR's severance termination provisions and related adjustment, resulting in a decreased liability of $5.6M;
- A reduction in CIHR's operating expenditures to ensure control over expenditures in 2011–12, resulting in a decreased liability of $1.3M;
- Recognition of $3.3M of additional revenues in 2011–12, whereby CIHR disbursed funds on behalf of external parties to fund additional health research grants and awards, resulting in a decreased liability of $1.2M;
- The reductions in liabilities noted above also had a pervasive effect on financial and non-financial assets.
2. Statement of Operations and Departmental Net Financial Position
| As at March 31 | % Change | 2012 | 2011 |
|---|---|---|---|
| Total expenses | -1.9% | $ 1,020.5 | $ 1,040.0 |
| Net cost of operations before government funding | -2.2% | $ 1,005.7 | $ 1,028.6 |
These corresponding decreases are mostly attributable to the 1.4% decrease in Parliamentary authorities provided by the Government of Canada following the 2008 Strategic Review exercise.
Analysis
3. Risk and Uncertainties
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. As per the 2011–12 and 2012–13 Reports on Plans and Priorities, CIHR has identified five primary risks, as follows:
3.1 Health Research Roadmap Implementation
There is a risk that CIHR will be unable to fully deliver on the strategic directions outlined in the Health Research Roadmap within the defined timeframe, including risks that internal and external stakeholders will not understand or support the proposed changes and that ongoing operational requirements and competing priorities may prevent the resources from being focused on the implementation of the strategy.
To mitigate this risk, CIHR developed a three-year rolling plan for Health Research Roadmap implementation. The plan will ensure alignment with Roadmap of operational activities including internal and external stakeholder engagement.
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 and Monitoring
Performance reporting and evaluation are time-consuming, costly and at times burdensome to target audiences. There is a risk that CIHR will be unable to adequately and efficiently evaluate and report on its performance as well as the results of funded research, which could compromise our ability to be accountable to Canadians.
To mitigate this risk, CIHR will refresh 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.
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 on-going process has been established to assess the performance of Scientific Directors.
3.5 Budgeting
There is a risk that CIHR funds are not appropriately allocated to support the achievement of its strategic outcomes; that CIHR's planned staffing, project and programming activities exceed available funding, resulting in key planned activities and initiatives not being realized; and that funding via an annual appropriation may make it difficult for CIHR to plan and resource longer term activities and strategies, which in turn may limit CIHR's ability to initiate new programs that are required to achieve impact.
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 mitigate these risks, CIHR has established an integrated operational planning process and a vacancy management process and 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. CIHR will continue to track and monitor performance outcomes related to research and operational support activities.
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 2011–12, CIHR was provided with $1,015.2M of Parliamentary authorities, a decrease of $14.7M (or 1.4%) as compared to 2010–11. The Government of Canada provided CIHR with reduced Parliamentary authorities in 2011–12, as follows:
| Parliamentary Authorities (in millions of dollars) | 2011–12 |
|---|---|
| Incremental reductions – 2008 Strategic Review exercise | |
| Open Team Grant program | $(22.1) |
| Incremental reductions due to the sunsetting of programs | |
| Canada Graduate Scholarship program | (8.0) |
| Pandemic Preparedness Strategic Research Initiative | (6.5) |
| Strategy for Patient-Oriented Research | 15.0 |
| Vanier Canada Graduate Scholarships | 2.8 |
| Canada Excellence Research Chairs | 3.8 |
| Other | 0.3 |
| Total reduction in Parliamentary Authorities | $ (14.7) |
The foregoing 1.4% decreases in Parliamentary authorities paralleled the corresponding decreases in total Parliamentary authorities used by CIHR (1.7%), grants and awards expenses (1.5%) and the net cost of operations (2.2%).
4.2 Variances between current year actual results and prior year actual results
| As at March 31 | % Change | 2012 | 2011 |
|---|---|---|---|
| Grants and awards | -1.3% | $ 965.3 | $ 978.3 |
| Total operating expenses | -7.4% | $ 61.0 | $ 65.9 |
Grants and awards decreased by 1.3% (or $13M) primarily due to reduced expenditures within the Health Researchers program activity (the largest per cent attributable to the Canada Graduate Scholarship program) and the Health and Health Services Advances program activity (particularly due to the sunsetting of the Pandemic Preparedness Strategic Research Initiative) as displayed in the following chart:
Grants and Awards by Program Activity
(in millions of dollars)
Long description: Grants and Awards by Program Activity (in millions of dollars)
Total operating expenses decreased by 7.4% (or $4.9M) primarily due to decreased professional and special services ($3.1M) and employee salaries and benefits ($1.8M), as CIHR established an integrated operational planning process and a vacancy management process to implement fiscal restraint measures.
5. Trend Analysis
5.1 Grants and Awards (G&A)
CIHR Net Cost of Operations and Grants and Awards Expenses
(in millions of dollars)
- As evidenced by the above chart, net cost of operations and grants and awards expenses increase or decrease on a yearly basis in relative proportion to changes in the Parliamentary authorities provided to CIHR by the Government of Canada.
5.2 Operating Expenses
Operating Expenses
(in millions of dollars)
Long description: Operating Expenses (in millions of dollars)
- In 2011–12, salaries and employee benefits made up 75.0% of total operating expenses, compared to 72.0% in 2010–11. Although the ratio slightly increased, salaries and benefits decreased by 3.9% as compared to 2010–11 due to the successful implementation of CIHR's vacancy management process and the required adjustment for severance termination.
- Total operating expenses decreased by 7.5% in 2011–12 due to the implementation of fiscal restraint measures.
- The ratio of operating expenses to total expenses was 6.0% in 2011–12, consistent with prior fiscal years.
Financial Outlook: 2012–13
On March 29, 2012, Minister of Finance James Flaherty tabled in Parliament the Government budget for fiscal year 2012–13. Budget 2012 lays out a plan for jobs, growth and long-term prosperity. In doing so, the Government is taking the necessary steps to reinforce the fundamental strength and promise of the Canadian economy in order to sustain economic growth, create the high-quality jobs of tomorrow, preserve social programs and sound public finances, and deliver continued prosperity for generations to come. More specifically, the Budget includes significant savings to be reinvested in priority areas, which will impact CIHR's outlook, as follows:
- Reductions of $15M in 2012–13, $30M in 2013–14, $30M in 2014–15 and ongoing;
- Additional funding of $15M in 2012–13 and ongoing for CIHR for its Strategy for Patient-Oriented Research.
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 once all new funding initiatives are approved, its total Parliamentary authorities will decrease to $977.9M in 2012–13.
Supplemental content (right column)
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