ARCHIVED - Canada Border Services Agency Financial Statements For the Year Ended March 31, 2014

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Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2014, and all information contained in these statements rests with the management of the Canada Border Services Agency (CBSA). These financial statements have been prepared by management using the Government’s accounting policies, which are based on Canadian public sector accounting standards.

Management is responsible for the integrity and objectivity of the information in these financial statements.  Some of the information in the financial statements is based on management's best estimates and judgment, and gives due consideration to materiality. To fulfill its accounting and reporting responsibilities, management maintains a set of accounts that provides a centralized record of the CBSA’s financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the CBSA’s Departmental Performance Report, is consistent with these financial statements.

Management is also responsible for maintaining an effective system of internal control over financial reporting (ICFR) designed to provide reasonable assurance that financial information is reliable, that assets are safeguarded and that transactions are properly authorized and recorded in accordance with the Financial Administration Act and other applicable legislation, regulations, authorities and policies.

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the CBSA and through conducting an annual risk-based assessment of the effectiveness of the system of ICFR.

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments.

A risk-based assessment of the system of ICFR for the year ended March 31, 2014 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

The effectiveness and adequacy of the CBSA’s system of internal controls is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of CBSA’s operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the President of the CBSA.

The financial statements of the CBSA have not been audited.

Luc Portelance, President
Ottawa, Canada
July 22, 2014

Claude Rochette, Chief Financial Officer
Ottawa, Canada
July 22, 2014

Financial Statements - Agency Activities

Canada Border Services Agency (Agency Activities)
Statement of Financial Position (Unaudited)
As at March 31

(in thousands of dollars)
  2014 2013
Liabilities
Accounts payable and accrued liabilities (note 4) 215,763 132,629
Vacation pay and compensatory leave 64,885 56,521
Deposit accounts (note 5) 28,304 29,999
Environmental liabilities (note 6a) 2,320 2,296
Provision for claims and litigation (note 6b) 650 1,210
Employee future benefits (note 7) 183,278 231,277
Total net liabilities 495,200 453,932
Financial assets
Due from Consolidated Revenue Fund 207,458 123,813
Accounts receivable and advances (note 8) 15,903 13,939
Total gross financial assets 223,361 137,752
Financial assets held on behalf of Government
Accounts receivable and advances (note 8) (2,683) (2,643)
Total financial assets held on behalf of Government (2,683) (2,643)
Total net financial assets 220,678 135,109
Departmental net debt 274,522 318,823
Non-financial assets 
Prepaid expenses 177 214
Inventory (note 9) 12,643 11,480
Tangible capital assets (note 10) 738,438 642,732
Total non-financial assets 751,258 654,426
Departmental net financial position 476,736 335,603

Contingent liabilities (note 6)
Contractual obligations (note 11)
The accompanying notes form an integral part of these financial statements.

Canada Border Services Agency (Agency Activities)
Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
  2014
Planned Results
2014 2013
Expenses
Admissibility Determination 681,032 865,172 649,312
Internal Services 659,013 466,129 710,204
Immigration Enforcement 156,171 182,654 161,332
Risk Assessment 150,338 177,241 130,119
Revenue and Trade Management 80,792 101,862 90,635
Secure and Trusted Partnerships  50,259 51,429 41,623
Criminal Investigations  25,501 33,871 29,259
Recourse 10,766 12,844 12,300
Total expenses 1,813,872 1,891,202 1,824,784
Revenues 
Sales of goods and services  17,437 19,694 16,616
Other 3,225 3,008 1,765
Revenues earned on behalf of Government (7,003) (4,534) (3,485)
Total revenues 13,659 18,168 14,896
Net cost of operations before government funding and transfers 1,800,213 1,873,034 1,809,888
Government funding and transfers
Net cash provided by Government 1,659,892 1,765,541 1,682,157
Services provided without charge by other government departments (note 12a) 156,418 165,022 163,147
Change in due from Consolidated Revenue Fund - 83,645 30,858
Transfer of assets and liabilities with other government departments (note 13) - (41) -
Net revenue from operations after government funding and transfers (16,097) (141,133) (66,274)
Departmental net financial position - Beginning of year 261,144 335,603 269,329
Departmental net financial position - End of year 277,241 476,736 335,603

Segmented Information (Note 14)
The accompanying notes form an integral part of these financial statements.

Canada Border Services Agency (Agency Activities)
Statement of Change in Departmental Net Debt (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
  2014
Planned
Results
2014 2013
Net revenue from operations after government funding and transfers (16,097) (141,133) (66,274)
Changes due to tangible capital assets
Acquisition of tangible capital assets 95,825 166,913 124,384
Amortization of tangible capital assets (66,663) (70,321) (64,129)
Proceeds from disposal of tangible capital assets - (408) (371)
Net loss on disposal of tangible capital assets - (2,813) (262)
Adjustments to tangible capital assets - 2,376 7,257
Transfers to other government departments (note 13) - (41) -
Total change due to tangible capital assets 29,162 95,706 66,879
Change due to inventories - 1,163 (1,591)
Change due to prepaid expenses - (37) 80
Net (decrease) increase in departmental net debt 13,065 (44,301) (906)
Departmental net debt - Beginning of year 351,715 318,823 319,729
Departmental net debt - End of year 364,780 274,522 318,823

The accompanying notes form an integral part of these financial statements.

Canada Border Services Agency (Agency Activities)
Statement of Cash Flows (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
  2014 2013
Operating activities
Net cost of operations before government funding and transfers 1,873,034 1,809,888
Non-cash items:
Services provided without charge by other government departments (note 12a) (165,022) (163,147)
Amortization of tangible capital assets (70,321) (64,129)
Net loss on disposal of tangible capital assets (2,813) (262)
Adjustments to tangible capital assets 2,376 7,257
Variations in Statement of Financial Position:
Increase in accounts receivable and advances 1,924 3,275
(Decrease) increase in prepaid expenses (37) 80
Increase (decrease) in inventory 1,163 (1,591)
(Increase) in liabilities (41,268) (33,227)
Cash used in operating activities 1,599,036 1,558,144
Capital investment activities
Acquisitions of tangible capital assets 166,913 124,384
Proceeds from disposal of tangible capital assets (408) (371)
Cash used in capital investment activities 166,505 124,013
Net cash provided by Government of Canada 1,765,541 1,682,157

The accompanying notes form an integral part of these financial statements.

Canada Border Services Agency (Agency Activities)
Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

1. Authority and objectives

The Canada Border Services Agency (CBSA) is responsible for providing integrated border services that support national security and public safety priorities and facilitate the free flow of persons and goods. The Canada Border Services Agency Act received royal assent on November 3, 2005. The CBSA is a departmental corporation named in Schedule II of the Financial Administration Act and reports to Parliament through the Minister of Public Safety. The CBSA is funded through authorities from the Government of Canada.

The CBSA is responsible for the administration and enforcement of the following acts or portions of these acts: the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act, the Citizenship Act, the Immigration and Refugee Protection Act, as well as other acts on behalf of other federal departments and provinces.

For financial reporting purposes, the activities of the CBSA have been divided into two sets of financial statements: Agency Activities and Administered Activities. The Agency Activities financial statements include those operational revenues and expenses which are managed by the CBSA and utilized in operating the organization. The Administered Activities financial statements report on tax and non-tax revenues, assets and liabilities administered on behalf of the federal, provincial and territorial governments. The purpose of the distinction between Agency Activities and Administered Activities is to facilitate, among other things, the assessment of the administrative efficiency of the CBSA in achieving its mandate.

In delivering efficient and effective border management that contributes to the security and prosperity of Canada, the CBSA operates under the following program activities:

  • (a) Admissibility Determination – Through this program, the CBSA develops, maintains and administers the policies, regulations, procedures and partnerships that enable border services officers to intercept people and goods that are inadmissible to Canada and to process legitimate people and goods seeking entry into Canada within established service standards. In addition, the CBSA develops, maintains and administers the policies, regulations, procedures and partnerships to control the export of goods from Canada.
  • (b) Internal Services – This program is a group of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. The main activities are governance and management support, resource management services and asset management services. The CBSA’s Internal Services supports the achievement of the CBSA’s strategic outcome.
  • (c) Immigration Enforcement – This program determines whether foreign nationals and permanent residents who are or may be inadmissible to Canada are identified and investigated, detained, monitored and/or removed from Canada.
  • (d) Risk Assessment – This program pushes the border out by seeking to identify high risk people, goods and conveyances as early as possible in the travel and trade continuum to prevent inadmissible people and goods from entering Canada.
  • (e) Revenue and Trade Management – This program ensures that duties and taxes owed to the Government of Canada are collected in compliance with Canadian trade and imports reporting requirements. The program administers international and regional trade agreements and domestic legislation and regulations governing trade and commercial goods. Through its work on free trade negotiations, the program helps to strengthen international rules related to trade and open new markets for Canadians.
  • (f) Secure and Trusted Partnerships – This program, the CBSA works closely with clients, other government departments and international border management partners to enhance trade chain and traveler security while providing pre-approved, low-risk travelers and traders with streamlined and efficient border processes.
  • (g) Criminal Investigations – This program, the CBSA protects the integrity of border-related legislation and contributes to public safety and Canada’s economic security by investigating and pursuing the prosecution of persons who commit criminal offences in contravention of Canada’s border-related legislation.
  • (h) Recourse – This program provides the business community and individuals with an accessible mechanism to seek an impartial review of service-related complaints, program decisions and enforcement actions taken by the CBSA. This program ensures that its decisions are fair, transparent and accurately reflect the CBSA’s policies and the Acts administered by the CBSA.

2. Summary of significant accounting policies

These financial statements have been prepared in accordance with the Government’s accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

  • a) Parliamentary authorities - The CBSA is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the CBSA 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 Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting. The planned results amounts in the Statement of Operations and Departmental Net Financial Position are the amounts reported in the future-oriented financial statements included in the 2013-2014 Report on Plans and Priorities.
  • b) Net cash provided by Government - The CBSA operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the CBSA is deposited to the CRF, and all cash disbursements made by the CBSA 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.
  • c) Amounts due from or to the CRF - The amounts are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the CBSA is entitled to draw from the CRF without further appropriations to discharge its liabilities.
  • d) Revenues – Revenues from regulatory fees are recognized in the accounts based on the services provided in the year. Other revenues are accounted for in the period in which the underlying transaction or event that gave rise to the revenue takes place. Revenues that are non-respendable are not available to discharge the CBSA’s liabilities. While the President of the CBSA is expected to maintain accounting control, he has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented as a reduction of the entity’s gross revenues.
  • e) Expenses - Expenses are recorded on an accrual basis:
    • Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.
    • Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers’ compensation are recorded as operating expenses at their estimated cost.
  • f) Employee future benefits
    • Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multiemployer pension plan administered by the Government of Canada. CBSA's contributions to the Plan are charged to expenses in the year incurred and represent the total CBSA obligation to the Plan. CBSA’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.
    • Severance benefits: Employees entitled to severance benefits under labour contracts or conditions of employment earn these benefits as services necessary to earn them are rendered. 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.
  • g) Accounts receivable - Accounts receivable are stated at the lower of cost and net recoverable value. A valuation allowance is recorded for accounts receivable where recovery is considered uncertain based on the specific identification and aging of receivables.
  • h) Contingent liabilities - Contingent liabilities are potential liabilities which may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded. If the likelihood is not determinable or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.
  • i) Environmental liabilities - Environmental liabilities consist of estimated costs related to the remediation of environmentally contaminated sites. Remediation liabilities are recorded as accrued liabilities to recognize the estimated costs related to the management and remediation of contaminated sites where the CBSA is obligated, or likely to be obligated, to remediate the sites. If the responsibility to remediate is undeterminable, the amount is disclosed as a contingent liability. If the responsibility to remediate is undeterminable and a reasonable estimate cannot be made, the nature, source and extent of contamination is disclosed as a contingent liability.
  • j) Inventory - Inventory consists of forms, publications and uniforms held for future program delivery and not intended for resale. Inventory is valued at cost using the weighted average cost method. Where the service potential is impaired, inventory is valued at the lower of cost or net realizable value.
  • k) Tangible capital assets - All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. The CBSA does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value.

Amortization of tangible capital assets, except land, is done on a straight-line basis over the estimated useful life of the asset as follows:

Asset class Amortization period
Buildings 30 years
Works and infrastructure   40 years
Machinery and equipment 10 years
Informatics hardware 5 years
Informatics software  
Purchased software 3 years
In-house developed software 7 years
Vehicles  
Motor vehicles 5 years
Ships and boats 10 years
Leasehold improvements Lesser of the remaining term of lease or useful life of the improvement
Assets under construction Once in service, in accordance with asset type
  • l) Measurement uncertainty - The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. The most significant items where estimates are used are contingent liabilities, environmental liabilities, the liability for employee future benefits, the allowance for doubtful accounts and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Parliamentary Authorities

The CBSA receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the CBSA 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:

(a) Reconciliation of net cost of operations to current year authorities used

(in thousands of dollars)
  2014 2013
Net cost of operations before government funding and transfers 1,873,034 1,809,888
Adjustments for items affecting net cost of operations but not affecting authorities:
Services provided without charge by other government departments (165,022) (163,147)
Amortization of tangible capital assets (70,321) (64,129)
Refund and adjustments to prior years' expenditures 5,971 2,056
Net loss on disposal of tangible capital assets (2,813) (262)
Decrease (increase) in employee future benefits 47,999 (2,709)
(Increase) in vacation pay and compensatory leave (8,364) (373)
(Increase) decrease in environmental liabilities (24) 125
Decrease in contingent liabilities 560 2,350
(Increase) in accrued liabilities not charged to authorities (862) -
(Increase) decrease in bad debt expense (386) 93
Decrease in other 2,709 962
Total items affecting net cost of operations but not affecting authorities (190,553) (225,034)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets 166,913 124,384
Proceeds from disposal of tangible capital assets (408) (371)
Increase (decrease) in inventory 1,163 (1,591)
(Decrease) increase in prepaid expenses (37) 80
Total items not affecting net cost of operations but affecting authorities 167,631 122,502
Current year authorities used 1,850,112 1,707,356


(b) Authorities provided and used

(in thousands of dollars)
  2014 2013
Authorities provided:
Vote 10 - Operating expenditures 1,770,005 1,702,510
Vote 15 - Capital expenditures 230,352 197,232
Statutory amounts 187,896 187,945
  2,188,253 2,087,687
Less:
Authorities available for future years (143,940) (379,419)
Lapsed: Vote 10 - Operating expenditure (194,201) (912)
  (338,141) (380,331)
Current year authorities used (1,850,112) 1,707,356


4. Accounts Payable and Accrued Liabilities

The following table presents details of the CBSA’s accounts payable and accrued liabilities:

(in thousands of dollars)
  2014
2013
Accounts payable - Other government departments and agencies 20,731 32,425
Accounts payable - External parties 57,826 42,329
Total accounts payable 78,557 74,754
Accrued liabilities 137,206 57,875
Total accounts payable and accrued liabilties 215,763 132,629

5. Deposit Accounts

The Immigration guarantee fund serves to record amounts collected and held, pending final disposition either by refund to the original depositor or forfeiture to the Crown, pursuant to the provisions of the Immigration and Refugee Protection Act

The General security deposits account serves to record general security deposits from transportation companies in accordance with the provisions of the Immigration and Refugee Protection Act

The following table presents details on the deposit accounts:

(in thousands of dollars)
  Opening
Balance
 
Receipts
 
Payments
Closing
Balance
Immigration guarantee fund 24,323 5,869 (8,127) 22,065
General security deposits 5,676 563 - 6,239
Total deposit accounts 29,999 6,432 (8,127) 28,304

6. Contingent Liabilities

Contingent liabilities are grouped into two categories as follows:

(a) Environmental Liabilities

Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the CBSA is obligated or likely to be obligated to incur such costs.

The CBSA has identified three sites (three sites in 2012-2013) where the CBSA is obligated, or likely to be obligated, to remediate for which a remediation liability of $2,320,000 ($2,296,000 in 2012-2013) has been recorded.

The CBSA’s ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments of existing sites. These liabilities will be accrued by the CBSA in the year in which they become likely and are reasonably estimable.

(b) Claims and litigation

Thirty-five (35) (27 in 2012-2013) general litigation claims have been made against the CBSA in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable. The CBSA has recorded an allowance for claims and litigations where it is likely that there will be future payment and a reasonable estimate of the loss can be made of $650,000 ($1,210,000 in 2012-2013). Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management, amount to $1,338,000 ($9,865,000 in 2012-2013).

7. Employee Future Benefits

(a) Pension benefits

The CBSA's employees participate in the Public Service Pension Plan (the “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/Quebec pension plan benefits and they are indexed to inflation.

Both the employees and the CBSA contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Canada’s Economic Action Plan 2012, employee contributors have been divided into two groups - Group 1 relates to existing plan members as of December 31, 2012 and Group 2 relates to members joining the Plan as of January 1, 2013. Each group has a distinct contribution rate.

The 2013-2014 expense amounts to $131,681,000 ($133,626,000 in 2012-2013). For Group 1 members, the expense represents approximately 1.6 times (1.7 in 2012-2013) the employee contributions and, for Group 2 members, approximately 1.5 times (1.6 times in 2012-2013) the employee contributions.

The CBSA'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.

(b) Severance benefits

The CBSA 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.

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Information about the severance benefits, measured as at March 31, is as follows:

(in thousands of dollars)
  2014
2013
Accrued benefit obligation, beginning of year 231,277 228,568
Expense for the year (17,153) 30,228
Benefits paid during the year (30,846) (27,519)
Accrued benefit obligation, end of year 183,278 231,277

8. Accounts Receivable and Advances

The following table presents details of the accounts receivable and advances:

(in thousands of dollars)
  2014
2013
Receivables - other government departments and agencies 11,883 10,446
Receivables - external parties 5,090 4,364
Employee advances and other receivables 2,003 1,793
Sub-total 18,976 16,603
Allowance for doubtful accounts on external receivables (3,073) (2,664)
Gross accounts receivable 15,903 13,939
Accounts receivable held on behalf of Government (2,683) (2,643)
Net accounts receivable 13,220 11,296


9. Inventory

The following table presents details of the inventory, measured at cost using the weighted average cost method.

(in thousands of dollars)
  2014
2013
Uniforms 12,075 11,061
Forms and publications 568 419
Total 12,643 11,480

The cost of consumed inventory recognized as an expense in the Statement of Operations and Departmental Net Financial Position and included in note 14 Segmented Information under Utilities, materials and supplies is $5,163,200 ($5,764,400 in 2012-2013).

10. Tangible Capital Assets

The following table presents details of the tangible capital assets:

(in thousands of dollars)
  Cost Accumulated amortization 2014 2013
Capital
asset
class
Opening Balance Acquisitions Adjustments(1) Disposals and write-offs Closing balance Opening Balance Amortization Adjustments(1) Disposals and write-offs Closing balance Net book value Net book value
Land 4,650 0 0 1 4,649 0 0 0 0 0 4,649 4,650
Buildings 260,765 2,044 150,817 6,312 407,314 107,547 22,918 (437) 3,947 126,081 281,233 153,218
Leasehold improvements 33,052 124 3,226 0 36,402 20,581 6,295 330 0 27,206 9,196 12,471
Works and
infrastructure
1,513 0 2,565 0 4,078 542 834 230 0 1,606 2,472 971
Machinery and
equipment
93,442 17,765 4,130 4,782 110,555 62,511 6,028 850 4,585 64,804 45,751 30,931
Informatics hardware 31,224 1,542 346 120 32,992 26,279 2,841 80 120 29,080 3,912 4,945
Informatics software - in-house developed 246,659 0 31,102 1,973 275,788 155,432 27,237 0 1,972 180,697 95,091 91,227
Informatics software - purchased 2,256 1,422 (105) 0 3,573 65 709 0 33 741 2,832 2,191
Motor vehicles 32,547 2,196 30 3,314 31,459 22,442 3,438 31 3,297 22,614 8,845 10,105
Ships and boats 221 84 287 0 592 174 21 246 0 441 151 47
Assets under construction 331,976 141,736 (188,733) 673 284,306 0 0 0 0 0 284,306 331,976
Total 1,038,305 166,913 3,665 17,175 1,191,708 395,573 70,321 1,330 13,954 453,270 738,438 642,732

(1) Adjustments include assets under construction of $188,733,000 that were transferred to the other categories upon completion of the assets.

Effective April 3, 2013, the CBSA transferred informatics hardware and software with a net book value of $41,000 to Shared Services Canada. This transfer is included in the adjustment columns (refer to note 13 for further detail on the transfer).

11. Contractual Obligations

The nature of the CBSA’s activities can result in some large multi-year contracts and obligations whereby the CBSA will be obligated to make future payments in order to carry out its programs or when services and goods are received.  Significant contractual obligations that can be reasonably estimated are summarized as follows:

(in thousands of dollars)
  2015 2016 2017 2018 2019 and there-after Total
Purchase contracts 88,443 7,924 1,339 163 13 97,882

12. Related Party Transactions

The CBSA is related as a result of common ownership to all Government departments, agencies and Crown corporations of Canada. The CBSA enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the CBSA received common services which were obtained without charge from other Government departments as disclosed below:

(a) Common services provided without charge by other government departments

During the year, the CBSA received services without charge from certain common service organizations, related to accommodation, legal services, the employer’s contribution to the health and dental insurance plans and workers’ compensation coverage. These services without charge have been recorded in the CBSA’s Statement of Operations and Departmental Net Financial Position as follows:

(in thousands of dollars)
  2014
2013
Employer’s contribution to the health and dental insurance plans 91,382 87,563
Accommodation 61,810 65,756
Legal services 11,470 9,505
Workers' compensation coverage  360 323
Total 165,022 163,147

The Government has centralized some of its administrative activities for efficiency, cost-effectiveness purposes and economic delivery of programs to the public. As a result, the Government uses central agencies and common service organizations so that one department performs services for all other departments and agencies without charge. The costs of these services, such as payroll and cheque issuance services provided by Public Works and Government Services Canada, audit services provided by the Office of the Auditor General, and telecommunication and network services provided by Shared Services Canada are not included as an expense in the CBSA’s Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with related parties

(in thousands of dollars)
  2014
2013
Expenses - other government departments and agencies 338,089 353,459
Revenues - other government departments and agencies 981 1,066

Expenses and revenues disclosed in (b) exclude common services provided without charge, which are already disclosed in (a).

13. Transfers to other government departments

Effective April 3, 2013, the CBSA transferred responsibility for the services related to the acquisition and provision of hardware and software, including security software, for end user devices to Shared Services Canada in accordance with the Order-in-Council 2013-0368, including the stewardship responsibility for the assets and liabilities related to these activities. Accordingly, the CBSA transferred the following assets to Shared Services Canada:

(in thousands of dollars)
  2014
Assets:  
Tangible capital assets (net book value) (note 10) 41
Adjustment to the departmental net financial position 41

During the transition period, the CBSA continued to administer the transferred activities on behalf of Shared Services Canada. The administered expenses amounted to $239,000 for the period between April 3, 2013 and March 31, 2014. The expenses are not recorded in these financial statements.

14. Segmented Information

(in thousands of dollars)

Presentation by segment is based on the CBSA’s program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2. The following table presents the expenses incurred and the revenues generated for the main programs, by major object of expense and by major type of revenues.

  Admissibility Determination Internal Services Immigration Enforcement Risk Assessment Revenue and Trade Management Secure and Trusted Partnership Criminal Investigations Recourse 2014
Total
2013
Total
Operating Expenses
Salaries and employee future benefits 746,199 272,847 99,301 118,872 83,810 45,465 30,254 11,450 1,408,198 1,375,699
Professional and special services 29,882 69,790 51,550 47,926 12,602 2,541 613 612 215,516 189,198
Rental of buildings and machinery 34,324 21,588 4,635 5,299 3,719 2,040 1,364 509 73,478 74,982
Amortization of tangible capital assets 1,227 68,132 594 214 9 29 116 0 70,321 64,129
Transportation and telecommunication 19,960 11,160 13,581 2,707 990 353 470 95 49,316 50,291
Machinery and equipment 9,957 8,917 902 1,199 145 234 640 57 22,051 17,131
Repairs and maintenance 12,021 8,197 274 391 57 128 81 4 21,153 24,858
Utilities, materials and supplies 9,635 5,239 874 700 437 300 358 101 17,644 18,582
Court awards and other settlements 119 2,630 8,726 35 1 0 4 27 11,542 6,393
Other 4,390 1,018 2,305 91 51 252 (7) 3 8,103 8,146
Bad debts 12 7 58 1 182 127 0 0 387 (94)
Provision for contingent liabilities 0 (536) 0 0 0 0 0 0 (536) (2,475)
Refunds and adjustments to prior years' expenditures (2,554) (2,860) (146) (194) (141) (40) (22) (14) (5,971) (2,056)
Total operating expenses 865,172 466,129 182,654 177,241 101,862 51,429 33,871 12,844 1,891,202 1,824,784
Revenues
Sale of goods and services 552 0 973 0 10,704 7,465 0 0 19,694 16,616
Other 133 358 2,440 44 0 0 21 12 3,008 1,765
Revenues earned on behalf of Government (137) (72) (682) (9) (2,137) (1,491) (4) (2) (4,534) (3,485)
Total revenues  548 286 2,731 35 8,567 5,974 17 10 18,168 14,896
Net cost of operations before government funding and transfers 864,624 465,843 179,923 177,206 93,295 45,455 33,854 12,834 1,873,034 1,809,888

The major categories of revenue are described below.

Immigration and Refugee Protection Regulations (IRPA) administration fees

The IRPA administration fee amounts are set out in Section 280 of the Immigration and Refugee Protection Regulations.

Transporters are required to pay administration fees to partially defray the cost of processing certain categories of inadmissible foreign nationals conveyed to Canada. The fees apply when a transporter carries a foreign national.

Inspection fees for food, plant and animal products

Inspection fees for food, plant and animal products are set out in the Canadian Food Inspection Agency (CFIA) Fees Notice pursuant to section 24 of the Canadian Food Inspection Agency Act. The fees are for passenger and initial import inspection services performed at airports and other Canadian border points of entry into Canada.

Nexus fees for pre-approved and frequent travellers

NEXUS fees are for processing applications related to a joint initiative between the CBSA and the United States Customs and Border Protection that simplifies border crossings for its members and enhances border security pursuant to section 13 (2) of the Canada Border Services Agency Act.  The NEXUS fees are a non-refundable processing and application fee for becoming a member of this program.

Free and Secure Trade (FAST) fees for pre-approved and frequent importers

FAST fees are for processing applications related to a joint initiative between the CBSA and United States Customs and Border Protection that enhances border and trade chain security while making cross-border commercial shipments simpler and subject to fewer delays.

Detector dog training services

The CBSA offers detector dog services to other enforcement agencies and jurisdictions within Canada and abroad, such as police forces in municipal, provincial and federal correctional authorities and foreign countries.

15. Comparative information

Comparative figures have been reclassified to conform to the current year’s presentation.


Financial Statements - Administered Activities

Statement of Administered Assets and Liabilities (Unaudited)
As at March 31

(in thousands of dollars)
  2014
2013
Administered assets
Cash on hand 1,969,873 437,475
Accounts receivable - other government departments and agencies 7,754 2,689
Accounts receivable - external parties (note 3) 1,453,140 2,892,685
Total 3,430,767 3,332,849
Administered liabilities
Accounts payable - other government departments and agencies 211,725 265,974
Accounts payable - provinces (note 4) 11,067 8,811
Accounts payable - external parties 753 369
Deposit accounts (note 5) 10,029 13,043
Sub-total 233,574 288,197
Net amount due to the Consolidated Revenue Fund of the Government of Canada (note 6) 3,197,193 3,044,652
Total 3,430,767 3,332,849

Contingent liabilities (note 7)
The accompanying notes form an integral part of these financial statements.

Luc Portelance, President
Ottawa, Canada
July 22, 2014

Claude Rochette, Chief Financial Officer
Ottawa, Canada
July 22, 2014

Statement of Administered Revenues (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
  2014
2013
Administered revenues
Tax revenues
Excise taxes (note 8) 21,353,801 20,397,386
Customs import duties 4,238,854 3,979,494
Excise duties 1,310,453 1,216,184
Total 26,903,108 25,593,064
Non-tax revenues
Interest, penalties and fines 12,318 15,051
Seized property 9,560 9,673
Sale of goods and services 851 1,374
Other 319 307
Total 23,048 26,405
Total administered revenues 26,926,156 25,619,469
Bad debt expense (29,212) (35,895)
Net administered revenues 26,896,944 25,583,574

The accompanying notes form an integral part of these financial statements.

Statement of Administered Cash Flows (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
  2014 2013
Net administered revenues 26,896,944 25,583,574
Variations in administered assets and liabilities:
(Increase) decrease in cash on hand (1,532,398) 1,400,147
(Increase) decrease in accounts receivable - other government departments and agencies (5,065) 29,281
(Increase) decrease in accounts receivable - external parties 1,439,545 (1,456,764)
Increase (decrease) in accounts payable - other government departments and agencies (54,249) (7,569)
Increase (decrease) in accounts payable - provinces 2,256 (421)
Increase (decrease) in accounts payable - external parties 384 (1,468)
Increase (decrease) in deposit accounts (3,014) 304
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada 26,744,403 25,547,084
Consisting of:
Deposits to the Consolidated Revenue Fund 27,340,696 26,193,732
Payments and refunds from the Consolidated Revenue Fund (596,293) (646,648)
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada 26,744,403 25,547,084

The accompanying notes form an integral part of these financial statements.

Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

1. Authority and objectives

The Canada Border Services Agency (CBSA) provides integrated border services that support national security priorities and facilitate the free flow of people and goods, including food, plants, animals and related products across the border.  The Canada Border Services Agency Act received royal assent on November 3, 2005.  The Agency is a departmental corporation named in Schedule II of the Financial Administration Act and reports to Parliament through the Minister of Public Safety.  The Agency is funded through appropriations from the Government of Canada.

The Agency is responsible for the administration and enforcement of the following acts or portions of these acts: the Customs Act, the Customs Tariff, the Excise Act, the Excise Tax Act, the Citizenship Act, the Immigration and Refugee Protection Act, as well as other acts on behalf of other federal departments and provinces.

The Agency Administered Activities financial statements report on assets, liabilities, tax and non-tax revenues administered on behalf of the federal, provincial and territorial governments.

2. Summary of Significant Accounting Policies

The purpose of these Agency Administered Activities financial statements is to present information about revenues, expenses, assets and liabilities that the Agency administers on behalf of the federal, provincial and territorial governments.  The Agency reports in accordance with accounting principles that are consistent with those applied in the preparation of the financial statements of the Government of Canada.

A summary of significant accounting policies are as follows:

(a) Cash on hand

Cash on hand includes amounts received in Agency offices or by Agency agents as at March 31 but not yet deposited to the credit of the Consolidated Revenue Fund of the Government of Canada.

(b) Accounts receivable

Accounts receivable represent taxes and duties and other revenues not yet collected.  All receivables are stated at amounts ultimately expected to be realized.  A provision is made for doubtful accounts where recovery is considered uncertain.

(c) Accounts payable – provinces

Accounts payable – provinces represents amounts in accordance with memorandums of understanding (MOUs) between the provinces and the Agency, whereby provincial sales, alcohol and tobacco taxes are collected and remitted to the provinces.

(d) Accounts payable – external parties

Accounts payable – external parties represent refunds, and related interest, to importers resulting from reassessments completed after March 31 for excise taxes, custom import duties and excise duties related to current or prior year imports.

(e) Contingent liabilities

Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur.  To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded.  If the likelihood is not determinable or if an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(f) Tax revenues

The determination of the Agency’s tax revenues is based on the taxes and duties assessed that relate to goods authorized by the Agency to enter into Canada during the fiscal year that ends March 31; therefore, domestic taxes are not reflected in these statements.  These revenues are recognized at the time the goods are released.

  • Excise taxes: Consists of the goods and services tax (GST) and the harmonized sales tax (HST) assessed on imports, net of the GST remission order to the Canada Revenue Agency (CRA) and the provincial portion of the HST.  The input tax credits accorded for GST and HST paid on importations are not reflected in these statements as the CRA is responsible for their administration.  Excise taxes are also assessed on gasoline and other imports. 
  • Customs import duties:  Consists of import duties assessed on imports.  They are reported net of refunds, rebates and drawbacks.  
  • Excise duties: Consists of tobacco, beer and liquor duties assessed on imports.  They are reported net of refunds, rebates and drawbacks.

The Canadian customs and tax systems are predicated on self-assessment where importers are expected to understand the laws and comply with them.  This has an impact on the completeness of duty and tax revenues when importers fail to comply with laws.  The Agency has implemented systems and controls in order to detect and correct situations where importers are not complying with the various acts it administers.  These systems and controls include performing audits of importer records where determined necessary by the Agency. Such procedures cannot be expected to identify all undeclared or incorrectly declared importations or other cases of non-compliance.  The Agency does not estimate the amount of unreported duties and taxes. However, such amounts are included in revenues when identified during reassessment.

(g) Non-tax revenues

Non-tax revenues consists of items such as fees, penalties, interest and fines and are recognized in the period in which the underlying transaction or event occurred that gave rise to the non-tax revenue.

(h) Allowance for doubtful accounts

The allowance for doubtful accounts reflects management’s best estimate of the collectability of accounts receivable, including the related interest and penalties.  The allowance for doubtful accounts is composed of two parts, each of which is reviewed on an annual basis.  A portion of the allowance is based on the age of the accounts and the other portion is based on accounts under appeal.

(i) Tax remission order

The tax remission order provides for a remission of the GST and HST paid or payable by departments of the federal government on their taxable purchases of goods and services. The remission does not affect the net GST and HST ultimately retained by the government.

(j) Measurement uncertainty

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expense reported in the financial statements.  At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable.  The most significant item where estimates are used is for establishing the allowance for doubtful accounts.  Actual results could significantly differ from those estimated.  Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

3. Accounts Receivable – External Parties

Accounts receivable – external parties represent the GST and HST, custom import duties, excise duties, penalties and interest due to the Receiver General for Canada as a result of importations into Canada.

The following table presents details of accounts receivable – external parties:

(in thousands of dollars)
  2014
2013
Accounts receivable - external parties 1,545,410 3,002,804
Allowance for doubtful accounts (92,270) (110,119)
Accounts receivable - external parties 1,453,140 2,892,685

4. Accounts Payable - Provinces

The following table presents details of provincial sales, alcohol and tobacco taxes collected and remitted to the provinces:

(in thousands of dollars)
  2014
2013
Opening balance 8,811 9,232
Receipts from importers 74,826 45,323
Refunds to importers (477) (337)
Payments to provinces (72,093) (45,407)
Closing balance 11,067 8,811

5. Deposit Accounts

The deposit accounts were established to record cash and securities received to guarantee payment of excise taxes and customs duties on imported goods pursuant to the Excise Tax Act and the Customs Act.

The following table presents details on the deposit accounts:

(in thousands of dollars)
  2014
2013
Opening balance 13,043 12,739
Receipts 1,244 5,246
Payments (4,258) (4,942)
Closing balance 10,029 13,043

6. Net amount due to the Consolidated Revenue Fund of the Government of Canada

The net amount due to the Consolidated Revenue Fund (CRF) of the Government of Canada is the difference between administered assets held and collectible and administered liabilities payable by the Agency out of the CRF.

The change in the net amount due to the CRF during the fiscal year is presented in the table below:

(in thousands of dollars)
  2014
2013
Opening balance 3,044,652 3,008,162
Net administered revenues 26,896,944 25,583,574
Net cash deposited in the Consolidated Revenue Fund (26,744,403) (25,547,084)
Closing balance 3,197,193 3,044,652

7. Contingent Liabilities

Claims have been made against the Agency in the normal course of operations.  These claims represent appeals for previously assessed GST and HST, customs duties and excise duties. While the total amount claimed in these actions amount to approximately $76 million as at March 31, 2014 ($83 million as at March 31, 2013), their outcomes are not determinable and as a result no liability has been recorded in the financial statements (nil as at March 31, 2013).

8. Excise Taxes

The following table presents details of the excise tax revenues:

(in thousands of dollars)
  2014
2013
GST and HST 21,464,015 20,564,894
Tax remission order (33,766) (47,141)
Transfer of HST to Provinces (165,024) (206,903)
Other excise taxes 88,576 86,536
Excise taxes 21,353,801 20,397,386

9. Related Party Transactions

The Agency is related, as a result of common ownership, to all Federal Government departments, agencies and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. The Agency has an agreement with the Canada Revenue Agency (CRA) related to the provision of collection services under Part V.I of the Customs Act for which the CRA is funded through appropriations from the Government of Canada.

10. Comparative Information

Comparative figures have been reclassified to conform to the current year’s presentation.


Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting Fiscal Year 2013-2014

1. Introduction

This document is an annex to the Canada Border Services Agency (CBSA) Statement of Management Responsibility Including Internal Control over Financial Reporting for the fiscal year 2013-2014.  As required by the Treasury Board Policy on Internal Control, this document provides summary information on the measures taken by the CBSA to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides summary information on the results of the assessments conducted by the CBSA as of March 31, 2014, and the related action plans; it provides information on progress made so far, along with some highlights pertinent to understanding the control environment unique to the Agency.

Detailed information on the CBSA’s authority, mandate, and program activities can be found in the CBSA’s Departmental Performance Report and Report on Plans and Priorities

2. CBSA’s system of internal control over financial reporting

2.1 Internal Control Management

The Agency has an established governance and accountability structure to support its assessment efforts, and the oversight of its system of internal control.  The CBSA’s internal control management framework has been updated during the year 2013 - 2014 to correspond with the new CBSA corporate and governance structures.  The Agency’s internal control management framework includes:

  • organizational accountability structures as they relate to internal control management to support sound financial management including roles and responsibilities for senior managers in their areas of responsibility for control management;
  • values and ethics;
  • on-going communication and training on statutory requirements, policies, and procedures for sound financial management and control; and 
  • monitoring and regular updates at least semi-annually on internal control management, plus the provision of assessment results and action plan to the President and the Agency’s senior management and, when necessary or applicable, the Departmental Audit Committee (DAC).

The DAC provides advice to the President of the CBSA on the adequacy and functioning of the Agency’s risk management, internal control and governance frameworks and processes.  The work of the DAC is guided by the responsibilities identified in the Treasury Board Policy on Internal Audit in the Government of Canada, namely: the DAC comprises 2 internal members, 4 external members and Ex-Officio participants at each Committee meeting and, when necessary, officials of the Treasury Board Secretariat and the Office of the Comptroller General are invited to attend.  The external members are:  Richard J. Neville, FCA, a former Deputy Comptroller General of Canada; Louis F. O’Brien, a former Comptroller and Senior Vice-President of Canada Post; Pierre-Yves Bourduas, former Chair of the RCMP Organized Crime Committee; and Guylaine Leclerc, FCPA Quebec, a practising professional accountant

Below are the CBSA's key positions with responsibilities for maintaining and reviewing the effectiveness of Agency's system of ICFR:

  • President – The President, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the President chairs the Departmental Audit Committee.
  • Executive Vice-President – The Executive Vice-President (EVP) reports directly to the President. In this role, the EVP is the primary support to the President in discharging his obligations as Accounting Officer and for ensuring that an effective system of ICFR is in place and functioning as intended.
  • Vice Presidents – The Vice Presidents are responsible for maintaining and reviewing the effectiveness of the system of ICFR within their respective areas of responsibility.
  • Chief Financial Officer (CFO) – The CFO reports directly to the President and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective system of ICFR. The CFO is an ex-officio member of the DAC.
  • Agency Comptroller – Agency Comptroller provides the corporate and operational leadership for financial stewardship, including on-going communication and training on statutory requirements, policies, and procedures for sound financial management and control.
  • Values & Ethics – Internal control related to Values and Ethics are delivered through the Senior Ethics Official (SEO) and Senior Officer for Internal Disclosure (SOID). The SEO offers support and guidance on matters of values and ethics and the SOID provides a confidential, arm's-length resource and process on matters concerning wrongdoing in the workplace.
  • Chief Audit Executive (CAE) – The CAE reports directly to the President and provides assurance through periodic internal audits which are instrumental for the maintenance of an effective system of ICFR. The CAE is an ex-officio member of the DAC.

In 2013-2014, the DAC met 5 times to provide advice to the President of the CBSA and discuss CBSA business as follows:

  • April 30, 2013 – The focus was on the Audit of Management of Overtime – Program Review, Fraud – Roles and Responsibilities, Preliminary Survey of IT Outsources Services – Program Overview, Planning Survey of Trade Revenue and Management Programs, Report on the Port of Entry Capacity Check;
  • June 19, 2013 – The focus was on the Audit of Lookouts – Traveller Mode, Audit of Refugee Reform Initiative;
  • July 18, 2013 – The focus was on the Audit of Trusted Traders Programs, Financial Statement Closing Consultation and Internal Controls over Financial Reporting.;
  • November 6, 2013 – The focus was on the Audit of Telephone Reporting, Preliminary Survey of Enterprise Architecture and OAG Public Accounts
  • January 28, 2014 – The focus was on the Audit of Financial Forecasting, Audit of Leave

2.2 Service Arrangements relevant to financial statements

The CBSA relies on other Federal organizations for the processing of certain transactions that are recorded in its financial statements as follows:

Common Arrangements:

  • Public Works and Government Services Canada (PWGSC) centrally administers the payments of salaries and some of the CBSA’s procurement of goods and services.
  • Treasury Board Secretariat provides the Agency with information used to calculate various accruals and allowances, such as the accrued severance liability.
  • The Department of Justice provides legal services to the CBSA along with information necessary for the note to the financial statements on contingent liabilities.

Specific Arrangements:

  • Pursuant to ongoing arrangements, the Canada Revenue Agency (CRA)  provides information technology services for the collection of all outstanding debts including any duty, tax, fee, penalty, charge or other amount owing under the Customs Act, Customs Tariff, Excise Tax Act, Excise Act, Excise Act 2001, Special Import Measures Act, and/or related regulations.
  • The CBSA relies on the CRA for the processing of certain transactions or the provision of information that affects the CBSA’s financial statements, and the CRA is responsible for Information Technology General Controls (ITGC) design and operating effectiveness testing and the related remediation on behalf of the CBSA.  Following the review results of the design assessment of IT General (key) Controls that relate to the systems’ operations, security, implementation and maintenance, CRA management implemented action plans and the necessary adjustments to address recommended improvements to a number of controls.   
  • With the creation of the Shared Service Canada (SSC), some of the CBSA IT support services previously provided by the CRA are now provided by SSC and the ITGC assurance for those services are to be provided by the SSC in the Annex to its Statement of Management Responsibility, including Internal Controls Over Financial Reporting.  The CBSA participates in the Executive Oversight Committees between the CRA and the SSC because of the common infrastructure components shared by the CRA and the CBSA but provided by the SSC. 

3. CBSA assessment results during fiscal year 2013-2014

During 2013-2014, the Agency completed remaining design and operating effectiveness testing of key control areas.

3.1 Design effectiveness testing of key controls

The Agency completed the design effectiveness testing of the key control, Departmental Financial Authorities (DFA). 

Departmental Financial Authority (DFA): is an electronic instrument, based on appropriate segregation of duties or division of responsibilities. This solution will provide an electronic repository of Delegated Financial Authorities and Specimen Signature Cards and Contracting and Procurement Authority recordsagainst which to verify signatures on all documents requiring authorization or approval.   The new automated process will:

  • Reduce / minimize or eliminate manual intervention;
  • Facilitate the update of the Financial Signing Authority and Contracting and Procurement Authority records;
  • Improve internal controls through an automated and centralized repository;
  • Enable the future electronic authorization and approval of transactions.

The design and operating effectiveness was completed and greater consistency was achieved in the quality and availability of the documentation of controls and procedures.

3.2 Operating effectiveness testing of key controls

During the year, the Agency also finalized operating effectiveness testing of the Financial Systems Access configured controls, and Revenue Management Controls. As a result of operating effectiveness testing, the Agency identified the following:

Systems Access Configured Controls

The Systems Access key controls are properly working as in-active users are automatically locked and/or deleted from the financial system.  No remediation was identified.

Revenue Management Controls Framework

The Revenue Management Controls Framework is made up of several sub-frameworks including the documentation, accounting and revenue assessment controls, revenue recognition and billing controls, accounts receivable management controls, collection, deposit and recording of public money controls, review and monitoring of Revenue Management Review, bad debts determination and debt write-off controls.

Revenue Management Review sub-framework was identified for the 2013-14 operating effectiveness testing.  The testing focused on key Revenue Management Review including cashiering controls, proper assignment of roles and responsibilities, physical security and safekeeping facilities and the reporting of deposits in the Receiver General fiscal records. 

Testing results indicate that Revenue Management Review are in place and operating effectively throughout the Agency, and can withstand the rigour of a full audit. 

3.3 On-going monitoring program

Finally, the Agency performed on-going monitoring in the following control areas to ensure effectiveness of controls, namely Entity Level Controls, Capital Assets – Asset Under Construction, Acquisition Cards and Information Technology General Controls (ITGCs) and the results were as follows:   

  • Entity Level Controls - In 2013-2014, the CBSA targeted monitoring effort on control principles in its Control Environment relating to Commitment to Competence, Executive and Audit Committees, Management’s Philosophy and Operating Style, Organizational Structure and the Assignment of Authority and Responsibility.  At year end, monitoring and validation exercises demonstrate controls effectiveness.
  • Compensation –The CBSA implemented a new automated Section 34 system during 2013-2014 for overtime approval.  As a result, the framework will need to be updated to reflect the new process in place. Testing originally planned has been postponed to 2014-2015.
  • Capital Assets - Assets Under Construction Key controls tested performed effectively against compliance and yield sufficient results to support a full audit.  It was noted that increased supporting documentation, specifically of the S.32 (Commitment Control Authority) and S. 34 (Payment for Work, Goods or Services) of the Financial Administration Act would enhance the audit trail.
  • Acquisition Cards Key controls tested demonstrated effectively against compliance with Treasury Board policies/directives and s.34 FAA approval and yield sufficient results to support a full audit.  It was noted that improvements to management of supporting documentation, specifically of the S.32 (Commitment Control Authority) of the Financial Administration Act would enhance the audit trail. Remediation has been initiated and includes acquisition card monitoring in 2013-2014, as part of the CBSA account verification quality assurance strategy.
  • Information Technology General Controls (ITGCs) – The CBSA relies on the CRA for the processing of certain transactions or information that affect financial statements including commensurate internal controls testing for general computer controls. In 2013-14, the CRA completed planned ongoing monitoring of the general computer controls. As a result of ongoing monitoring, the CRA identified the following required remediation: though progress has been made, the need to alterations to scheduled job programs needs to be methodically approved by management prior to implementation in the production environment. 

4. CBSA’s action plan

4.1 Progress during fiscal year 2013-2014

During 2013-2014, the Agency has continued to make significant progress in assessing and improving its key controls.  Below is a summary of the main progress made by the CBSA based on the plans identified in the previous fiscal year’s annex:   

Element in Previous Year’s (2012-2013)

  • Action Plan
    • Design Effectiveness and Remediation of deficiencies: Departmental Financial Authorities
    • Status:
      • Design effectiveness completed and greater consistency achieved in the quality and availability of the documentation of controls and procedures as a new automated process has been put into place.
  • Action Plan
    • Operational effectiveness testing and remediation of deficiencies: Systems Access configured controls, Revenue Management
    • Status:
      • Operational effectiveness testing completed and remediation of deficiencies:
        • Systems Access configured controls: The Systems Access key controls are properly working as in-active users are automatically locked and/or deleted from the financial system. No remediation was identified.
        • Revenue Management: Testing of Revenue Management Review has been completed. Re-examination of the periodic on-site reviews of Revenue Management Review during 2013-2014 has demonstrated that the controls are operating effectively and can stand the rigour of a full audit.
  • Action Plan
    • On-Going Monitoring: Entity Level Controls, Capital Assets, Acquisition Cards, compensation and Information Technology General Controls (ITGCs)
    • Status:
      • Rotational assessment completed for Entity Level Controls, Capital Assets and Acquisition Cards.
      • Information Technology General Controls (ITGCs) - remediation initiated with Canada Revenue Agency (CRA).

4.2 Systems Improvements

During 2013-2014, further advancement was made in the implementation of the Accounts Receivable ledger (ARL) project and this was project was aligned to the Assessment and Revenue Management (CARM) project. The primary goal of these initiatives is to provide a viable solution to the current difficulties encountered in obtaining accurate, timely, complete and reliable financial information for an efficient and effective management of, and accounting for tax revenues. During the development and construction phases of both initiatives, particular attention is being deployed in order to ensure internal control systems are embedded in the new solutions.

4.3 On-Going Status and action plan for the next fiscal year and subsequent years

Building on progress to date, the CBSA has completed the full assessment of its system of ICFR in 2014-2015 and subsequent years. At that time, the Agency will be applying its rotational on-going monitoring plan to reassess control performance on a risk basis across all control areas.  The status and action plan for the completion of the identified control areas for 2014-2015 and subsequent years is as follows:

Key control Areas

  • Compensation
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2014-15
  • Capital Assets - Capital Vote
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2015-16
  • Capital Assets - AUC Monitoring and Capitalization
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2015-16
  • Procurement/P2P
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2015-16
  • Acquisition Cards
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2014-15
  • Hospitality / Travel
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2014-15
  • Systems Access configured controls
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2014-15
  • Information Technology General Controls (ITGCs)
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2014-15
  • Entity Level Controls (ELCs)
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2014-15
  • Revenue Management Controls
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2014-15
  • Payment Requisitioning (Section 33 FAA)
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2015-16
  • Safeguarding of Assets
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2015-16
  • Financial Close Procedures/Financial Reporting
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • Complete
      • On-going monitoring rotation
        • 2015-16
  • Financial Close Procedures/Financial Reporting - Accruals: PAYEs/RAYEs
    • Assessment elements
      • Design effectiveness testing and remediation
        • 2015-2016
      • Operational effectiveness testing and remediation
        • 2015-2016
      • On-going monitoring rotation
        • 2016-2017
  • Departmental Financial Authorities
    • Assessment elements
      • Design effectiveness testing and remediation
        • Complete
      • Operational effectiveness testing and remediation
        • 2014-15
      • On-going monitoring rotation
        • 2014-15
  • Budgeting and Forecasting
    • Assessment elements
      • Design effectiveness testing and remediation
        • 2014-2015
      • Operational effectiveness testing and remediation
        • 2015-2016
      • On-going monitoring rotation
        • 2016-2017
  • Interdepartmental Settlements
    • Assessment elements
      • Design effectiveness testing and remediation
        • 2014-2015
      • Operational effectiveness testing and remediation
        • 2014-2015
      • On-going monitoring rotation
        • 2014-2015

4.4 Key Control Opportunities

The following financial control frameworks will be documented:

Budgeting and Forecasting: The Operating Budget is based on certain principles. These principles may help to resolve specific issues that arise during implementation of the operating budget.

  • Departments and agencies must live within approved budgets.
  • Benefiting from Operating Budgets will depend on empowering line managers and employees.
  • Increased managerial flexibility will require a corresponding increase in managerial accountability.
  • Departments have to comply with all legislation and policies.

A framework will be created to document and identify key control process that the Agency follows when creating and submitting forecast and not exceeding approved budgets.

Interdepartmental Settlements: The costing, charging and recovery of expenditures incurred in the transfer of goods or services between budgetary appropriations (within a department or between departments), to facilitate more accurate distribution of costs among programs, and to encourage the efficient use of available resources within the government. A framework will be created to document and identify key control process that the Agency follows with Interdepartmental Settlements in line with the new Directive on Account Verification recommendations effective June 1, 2014.

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