A decision to use external suppliers for information and technology services created short-term financial pain for the Canadian Wheat Board in 2004-05.
However, the move is expected to generate long-term gains now that the transition is over.
The board’s annual financial report for the 2004-05 crop year indicates that outsourcing its IT needs cost about $3 million, including severance payments to employees who lost their jobs and start-up costs associated with negotiating the outsourcing agreement.
That was partially offset by savings of $1.1 million in human resources and computer costs.
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However, the net result was an increase in total expenses for the board’s pool accounts of slightly less than $2 million, to $69.2 million from $67.6 million. That doesn’t includes the costs of administering the board’s producer payment options, which boosted total expenses to $69.9 million.
Board spokesperson Maureen Fitzhenry said the outsourcing will benefit the board and farmers in the long run.
“There are long-term costs savings and it also allows us to get more control over our IT costs,” she said.
The board is now able to adjust its IT activity, taking into account the development of new programs that require IT support or farmers’ financial situations, as opposed to having a large full-time staff.
Other changes in administrative costs from the previous year included:
- A decline of $2.2 million in human resources costs, reflecting the impact of layoffs announced in February 2004.
- Professional fees increased by more than $3 million to $10.2 million. The bulk of that increase was consultants’ fees associated with the IT outsourcing.
- Advertising and promotion costs increased to $1.9 million from $1.3 million the previous year, including $575,000 for a new branding policy designed to define Canadian wheat and barley in world markets, as well as advertising new producer payment options.
- Training and travel expenses totalled $2.8 million, up from $2.2 million the previous year.
CWB chair Ken Ritter said the almost $2 million increase in administration expenses can be attributed to inflation and short-term costs from restructuring.
