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Minister's Message

The past year has been a challenging one for the Canadian economy, as it has been for the economies of all industrialized countries. The global economic crisis put the fiscal and economic frameworks of all countries to the test. But Canada entered the recession with solid fundamentals - balanced budgets, decreasing debt and taxes, a strong financial sector and robust economic policies. Consequently, Canada is in a comparatively good position to effectively respond to this time of economic challenge.

The Industry Portfolio played a significant role in developing Canada's resiliency and ability to weather the current crisis. Composed of 11 departments, agencies, Crown corporations and quasi-judicial bodies, the Portfolio includes major instruments in the Government of Canada's tool kit for building a competitive economy.

The value and relevance of the National Research Council's (NRC) research and supporting activities is evidenced by investments which partners have made in collaborative projects. In 2008-09, the NRC had 596 active collaborative research agreements with Canadian and international partners (approximately 50 percent are industrial). NRC's active collaborations during the fiscal year were valued at $551 million including $179 million leveraged from foreign sources. NRC has also been successful in commercializing its technologies, generating 111 new licensing agreements (a 13-percent increase since 2007-08) and $9.6 million in licensing revenue and royalties to help fund additional Canadian research.

In January 2009, the government introduced Canada's Economic Action Plan, which contained stimulative measures to respond to the global recession. Industry Portfolio members played, and will continue to play, a central role in developing and implementing a signficant number of these critical initiatives. These measures range from programs to upgrade research infrastructure at Canada's universities and colleges, to helping small businesses bring innovative products to market, to supporting major tourism events, to enhancing community and recreational facilities and other municipal infrastructure in Ontario. For more information, visit the Canada's Economic Action Plan website.

As a country, we are emerging from the recession by creating a climate that encourages innovation, productivity and competitiveness – helping Canadian industry move to the forefront of the global knowledge economy. The Industry Portfolio members, and other federal departments and agencies are working in partnership so that Canada continues to enjoy a high standard of living and a prosperous future.

It is my pleasure to present the National Research Council's Departmental Performance Report for 2008-09.

President's Message

I submit for tabling in Parliament, the 2008-2009 Departmental Performance Report for the National Research Council of Canada.

The document demonstrates through specific examples how NRC contributes to the Government's Science and Technology Strategy and how NRC's value proposition To bring integrated S&T solutions in areas of critical importance to Canada is being implemented through its 2006-11 Strategy titled Science at Work for Canada. Specifically, it shows how, in 2008-09, NRC integrated its programs focused on areas critical to Canada's future with its implementation efforts in five key sectors and two national programs in support of the Strategy priorities; how it fostered a better integrated organization by assigning responsibilities to Vice Presidents and to some Directors General for NRC horizontal programs; and how it made changes to its financial system to enable horizontal reporting. In addition, NRC adopted a One-NRC client relationship management philosophy and created business guidelines. Finally, NRC integrated the Public Affairs Group into a Communications and Corporate Relations Branch and took steps to ensure that its human, capital, information technology and financial resources are fully aligned with NRC Strategy priorities.

This report is based on the principles contained in the Guide for the Preparation of Part III of the 2008-2009 Estimates: Reports on Plans and Priorities and Departmental Performance Reports. It adheres to the specific reporting requirements outlined in the Treasury Board guidance; it is based on the Strategic Outcomes and Program Activity Architecture that was approved by Treasury Board; it presents consistent, comprehensive, balanced and reliable information; it also provides a basis of accountability for the results achieved with the resources and authorities entrusted to it and it reports finances based on approved numbers from the Estimates and the Public Accounts of Canada.

I am sure you will find that this report presents a good picture of scientific innovation in Canada.

Dr. Pierre Coulombe, President

Section I – Overview

1.1 Raison d'être and Responsibilities

NRC is the Government of Canada's leading resource for science and technology (S&T) and innovation with a business focus on:

• improving the social and economic well-being of Canadians;
• fostering industrial and community innovation and growth through technology and industry support; and
• delivering excellence and leadership in research and development (R&D).

NRC Mandate

Under the National Research Council Act, NRC's authorities include:

• Undertaking, assisting or promoting scientific and industrial research in different fields of importance to Canada.
• Establishing, operating and maintaining a national science library.
• Publishing and selling or otherwise distributing such scientific and technical information as the Council deems necessary.
• Investigating standards and methods of measurement.
• Working on the standardization and certification of scientific and technical apparatus and instruments and materials used or usable by Canadian industry.
• Operating and administering any astronomical observatories established or maintained by the Government of Canada.
• Administering NRC's research and development activities, including grants and contributions used to support a number of international activities.
• Providing vital scientific and technological services to the research and industrial communities.

More information on NRC's legislative framework.

NRC Accountability Framework

NRC is a departmental corporation of the Government of Canada, reporting to Parliament through the Minister of Industry. NRC works in partnership with the members of the Industry Portfolio to leverage complementary resources and exploit synergies in areas such as increasing the innovation capacity of firms through S&T, facilitating the growth of small and medium-sized firms (SMEs) and fostering the economic growth of Canadian communities. NRC's Council provides strategic direction and advice to the President and reviews organizational performance. The President is the leader, responsible for fulfilling corporate strategies and delivering results. Each of six Vice Presidents (Life Sciences, Physical Sciences, Engineering, Technology and Industry Support, Human Resources and Corporate Management) have responsibility for a portfolio of research Institutes, programs, centres or corporate branches. In addition, the Secretary General is responsible for NRC governance and accountability, ethics, conflict of interest, communications and corporate relations, corporate policy, and strategy and performance management.

1.2 Program Activity Architecture (PAA) 2008-09

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Research and Development encompasses NRC's responsibilities for performing R&D in strategic fields of science and engineering leading to the application of innovative technologies through commercialization and technology transfer in key economic and national S&T priority areas. These priority areas are environmental technologies, energy, health and related life science technologies and information and communication technologies, generating wealth for Canadians while being in alignment with the Government of Canada's S&T strategy and the Government of Canada's outcome of an innovative and knowledge-based economy. It also provides national science infrastructure for the benefit of industry, universities and government collaborators, such as facilities in astronomy and astrophysics and metrology.

Technology and Industry Support includes the provision of technology assistance, financial support and commercialization assistance to small- and medium-sized enterprises; dissemination of scientific, technical and medical information to industry, government and universities; and business-focused support to NRC executives and managers.

1.3 Performance Summary

2008-09 Financial Resources ($ millions)

Planned Spending	Total Authorities	Actual Spending
700.4	841.3	757.9

2008-09 Human Resources (FTEs)

Planned	Actual	Difference
4,331	4,310	21

Except where noted otherwise, all financial results are reported on a cash accounting basis for historical comparability.

The Total Authorities includes unspent revenues carried forward from previous years. This ability to carry forward unspent revenue is included in the National Research Council Act. The revenue carry forward at the end of the year was $69.4 M. This is a significant portion of the $83.4 M difference between the Actual Spending and the Total Authorities. If the Total Authorities are reduced by the revenue amount, the Adjusted Total Authorities are $771.9 M and the difference between this and the Actual Spending of $757.9 M is $14.0 M. This is the true lapse for fiscal 2008-2009 and is a result of $4.2 M frozen in the operating vote for Employee Benefit Plan, $7.6 M frozen in the capital vote ($6.0 M re-profiled and $1.6 M for the capital carry forward into 2009-10), and $2.2 M lapse in the Transfer Payment Vote.

Strategic Outcome 1: An innovative, knowledge-based economy for Canada through research and development, technology commercialization and industry support.

Performance Indicators *	Targets	2008-09 Performance
Average incremental number of new and improved client products as a result of NRC's R&D activities compared to non-clients Average incremental client R&D expenditures as a result of NRC's R&D activities compared to non-clients Average incremental client R&D full-time equivalents employed as a result of NRC's R&D activities compared to non-clients	Establish baseline by 2009-10 with a 10% incremental difference in client innovation capacity in subsequent three years	NRC developed a statistical and econometric framework for measuring the economic impacts of its research and activities on its clients in comparison with non-clients. A key impact metric is client innovation capacity. This includes R&D capacity (i.e. R&D expenditures and R&D staff), commercialization (new and improved products and processes) as well as productivity. The analysis focuses on growth in client innovation capacity and NRC's influence on that growth. NRC worked with Statistics Canada to build the performance comparison models from 6 SME databases. Modeling and data analysis of over 10,000 client and matched non-client firms is on track for completion in 2009-10.

($ millions)

Program Activity	2007-08 Actual Spending	2008-09				Alignment to Government of Canada Outcomes
		Main Estimates	Planned Spending	Total Authorities	Actual Spending
Research and Development	465.8	417.6	419.2 **	552.4	455.5	An Innovative and Knowledge-based Economy
Technology and Industry Support	193.8	203.0	203.0 **	207.3	189.9
Internal Services	111.5	77.7	78.2 **	81.6	112.5

Note: Due to rounding, figures may not add to totals shown
^* Strategic outcome performance indicators were developed during 2008-09.
^** The distribution of Planned Spending across program activities differs in this report from that reported in the 2008-09 Report on Plans and Priorities (RPP) which does not include Internal Services as a separate program activity.

Contribution of Priorities to Strategic Outcome

Operational Priorities	Type	Performance Status
Priority 1 R&D in Key Sectors and Areas Critical to Canada's Future	Ongoing	Met All
Linkages to Strategic Outcome 1 NRC targeted key sectors of Canada's economy, focusing its resources to deliver the greatest impact. NRC concentrated on four research priority areas, aligned with the federal S&T Strategy, namely environmental science and technologies; natural resources and energy; health and related life sciences and technologies; and information and communication technologies. Some examples include: Environmental Science and Technology: NRC's flagship investments in environmental science are the cross-NRC fuel cell and the national bioproducts programs. NRC worked with Natural Resources Canada (NRCan) and Natural Sciences and the Engineering Research Council of Canada (NSERC) on the development of a national research strategy. Natural Resources and Energy: NRC worked with more than 5 Canadian SMEs and other Canadian partners on green aerospace technologies by conducting collaborative projects in environmentally sustainable technologies focused on lower emissions, alternative fuels, reduced noise, compliant lighter materials and sustainable processes. NRC's portfolio of energy research was aligned with the eight portfolios of NRCan's Program for Energy Research and Development and ecoETI and numerous projects were undertaken in collaboration with NRCan. Agreements for scientific collaboration in the field of water quality have also been signed with several research groups in Canada. Health and Life Science: NRC continued to work to improve the health and wellness of Canadians by discovering and translating novel solutions for preventing, diagnosing and treating infectious and neurodegenerative diseases. NRC integrated its unique platforms in neurobiology, glycobiology and immunobiology with those in converging technologies (IT, nanotechnology and material science) in areas of diagnostics, therapeutics and vaccines. Information and Communication Technologies (ICT): NRC recognizes the role of ICT as a pervasive enabler for a wide range of applications. Its goal is to co-create with industry the convergent platform technologies that will ensure future global competitiveness of Canadian firms. For example, a project to develop sensor networks for commercial buildings was launched with the support of multiple stakeholders from the construction industry, sensor manufacturers, universities and other government departments. The project has three thrusts: location and occupancy sensing in commercial buildings; data mining for building management systems; and an innovative sensor network for indoor air quality. To accelerate the commercialization of innovative products into the marketplace, NRC, NSERC and the Business Development Bank of Canada (BDC) worked to better align their programs and activities. The three federal agencies launched several pilot programs across Canada. Efforts to better serve clients included harmonizing due diligence processes and the co-location of both NRC industrial technology advisors at five BDC regional offices and the co-location of NSERC staff at two NRC Institutes. Together, the partners demonstrated commitment to strengthening Canadian SMEs' ability to use and profit from publicly funded expertise, technology and facilities; enhancing the exploitation of the results of public investments in public sector R&D; and, increasing the potential for success of high technology.

Operational Priorities	Type	Performance Status
Priority 2 Community Technology Clustering Initiatives	Previously committed	Met All
Linkages to Strategic Outcome 1 NRC increased Canada's competitive advantage through investment in technology clusters across the country. Since 2000-01, NRC invested over $554 M in 11 technology clusters across Canada. NRC's commitment to fostering technology clusters catalyzed technological progress, innovation and economic growth across Canada. NRC's clustering model encouraged local entrepreneurship and created people advantage leveraging NRC knowledge and by capitalizing on its local, national and international resources, S&T capabilities, networks and partnerships. During 2008-09, over 325 NRC specialists were engaged principally in sharing their specialised expertise with cluster actors. NRC's cluster initiatives delivered on the S&T Strategy's commitment to build a sustainable national economic advantage and a higher quality of life. NRC cluster initiatives worked with educational institutions and the private sector to build knowledge advantage through coordinated, leading-edge R&D programs and provided access to expertise and infrastructure. The cluster initiatives drove entrepreneurial advantage by enabling industry to translate knowledge into products, processes and services. They provided firms and related organizations with access to market and technical information and commercialization support to firms and related organizations. NRC worked with all cluster members (firms, provincial and municipal governments, communities, universities and technical colleges and organizations) to build people advantage by attracting highly skilled people to the regions, hiring and cross appointing researchers and providing hands-on training for over 430 students.

Operational Priorities	Type	Performance Status
Priority 3 Integrated Industry Support that Engages Key Players	Ongoing	Met All
Linkages to Strategic Outcome 1 The Canadian innovation system comprises all the organizations that support and conduct research and transform knowledge into products and services for sale into both domestic and international markets. NRC identified and acted on opportunities for addressing gaps and weaknesses in Canada's innovation system that limit the nation's capacity to generate and transform knowledge into real economic value. For example, NRC responded to over 1,200 requests for custom competitive scientific and technical information and intelligence services. NRC also provided over $70 M to innovation projects that supported 5733 jobs within SMEs generating a 4- to 12-fold net increase in wealth in Canada.

Management Priorities	Type	Performance Status
Priority 4 Program Management for a Sustainable and Agile Organization	Ongoing	Met All
Linkages to Strategic Outcome 1 NRC adopted a Human Resources Management (HRM) Strategy focused on engaging talent, building capability and driving innovation. The HRM strategy supports the achievement of the NRC Strategy by mitigating the risks identified through the annual human resources environmental scanning process and by highlighting opportunities to build sustainable competitive advantage. The adoption of the HRM strategy, to be integrated in NRC's Corporate Plan, responds to the Office of the Auditor General's recommendation of an Integrated HRM Plan for NRC. NRC implemented an integrated approach to planning, risk management and performance management, complete with a new 2010-11 MRRS and Program Activity Architecture that support decision-making and enable strategy execution. NRC merged the Public Affairs Group with the Corporate Communications Group to form a Communications and Corporate Relations Branch to achieve operational efficiencies and to approach NRC's internal and external communications more strategically. While the group continued its focus on supporting NRC's business needs and initiatives and Government of Canada priorities, a higher level of support was delivered with an emphasis on stakeholder relations and corporate marketing. NRC's capital investment strategy was aligned with its priorities and, in order of importance, with health and safety, security, environment, energy efficiency and infrastructure renewal, respectively. NRC made capital investments in infrastructure of $9.4 M. While some projects addressed urgent backlog maintenance and infrastructure renewal, many achieved energy reductions through electrical, mechanical, automation and building envelope replacement.

1.4 Risk Analysis

NRC prepared a Corporate Risk Profile in 2007-08 that fed into the planning and development of management priorities for 2008-09. The related risk management strategy addressed key developments and issues arising from that profile including: release of the federal S&T Strategy; the report of the Independent Panel of Experts on Inter-Sectoral Partnerships for Non-Regulatory Federal Laboratories; NRC implementation of its Strategy and resource focusing; studies that identified limited awareness and understanding of NRC by the Canadian public and other stakeholder groups; and addressing accountability requirements. Correspondingly, high priority risks were defined not only around the limited awareness issue, but also to address: ongoing funding and financial challenges due to growing costs; attracting and retaining high quality people (HQP) with increasing global competition for the limited pool; and addressing external accountability requirements while supporting the implementation of NRC's Strategy.

The risks identified above must be addressed in order for NRC to effectively achieve its Strategic Outcome of an innovative knowledge-based economy for Canada through R&D, technology commercialization and industry support. NRC's continued success in innovation performance is driven by HQP. They are, in turn, drawn by NRC's strong reputation as a research organization and by the calibre of its scientists, as well as its excellent infrastructure. While NRC is generally known by its industry clients and partners, it needs to continue to maintain scientific excellence by sustaining and building on these aforementioned elements while gaining access to research/ operational funding. By doing so, NRC can ensure its value to industry, and Canada more broadly. In addition, NRC needs to enhance communication of these assets to the scientific and technical talent within Canada and around the world, in order to attract and retain these resources.

NRC determined priority areas in its 2008-09 risk mitigation action plan. These priorities focused NRC's efforts where they would have the most impact, addressing critical underlying issues that affect NRC at multiple levels. Examples of progress include:

Building the NRC image, and promoting its reputation and awareness: A Director General (DG) of Communications position was created in early 2009. The new DG position was part of broader re-structuring of this group to address communications-related issues. A Corporate Communications Strategy was approved in 2008 and its implementation will focus on: building multiple levels of engagement with stakeholders – growing awareness of NRC's value in the national innovation system; and broader support for the organization in the longer term.

Financial sustainability: This continues as an ongoing challenge for NRC. In 2008-09, NRC managed the results of an internal re-alignment exercise to prioritize NRC efforts, as well as a Strategic Review exercise led by the Treasury Board Secretariat (TBS). Work is focused on implementing coordinated strategies to reduce risks associated with funding pressures (e.g., cost savings, alternative funding resources) and ensuring longer term financial sustainability.

1.5 Expenditure Profile

Actual spending for 2008-09 was $757.9 million. Since 2006-07, actual spending increased by $15.8 million (or 2.1%). Actual spending has averaged $757.0 million over the three years and has remained relatively constant, varying less than 2% from average. The downward trend in planned spending is a result of initiatives such as Clusters and TRIUMF, which are currently under review for renewal of funding.

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Voted and Statutory Items
($ millions)

Vote # or Statutory Item (S)	Truncated Vote or Statutory Wording	2006-07 Actual Spending	2007-08 Actual Spending	2008-09 Main Estimates	2008-09 Actual Spending
55	Operating expenditures	445.6	422.9	385.5	429.6
60	Capital expenditures	49.9	45.1	39.7	42.4
65	Grants and contributions	136.0	148.1	143.6	141.8
(S)	Spending of revenues pursuant to the National Research Council Act	55.6	96.7	83.5	87.2
(S)	Contributions to employee benefit plans	54.6	57.6	46.0	56.5
(S)	Spending of proceeds from Disposal of Crown Assets	0.3	0.7		0.1
(S)	Collection Agency Fees	0.1	0.0		0.0
(S)	Loss on foreign exchange				0.3
Total		742.1	771.1	698.3	757.9

Note: Due to rounding, figures may not add to totals shown.

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