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Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2011, and all information contained in these statements rests with the management of the Canada Border Services Agency. These financial statements have been prepared by management in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector.
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 agency's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in the Canada Border Services Agency'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 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 agency; and through conducting an annual assessment of the effectiveness of the system of internal control over financial reporting. An assessment for the year ended March 31, 2011 was completed in accordance with the Policy on Internal Control and the results and action plans are summarized in the annex.
The system of internal control over financial reporting 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. The effectiveness and adequacy of the department's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the department'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 Canada Border Services Agency.
The financial statements of the Canada Border Services Agency have not been audited.
(in thousands of dollars)
2011 | 2010 Restated (Note 14) |
|
---|---|---|
ASSETS | ||
Financial assets | ||
Due from Consolidated Revenue Fund | 81,128 | 99,406 |
Accounts receivable and advances (Note 4) | 11,395 | 12,779 |
Total financial assets | 92,523 | 112,185 |
Non-financial assets | ||
Prepaid expenses | 113 | 85 |
Inventory (Note 13) | 13,971 | 7,386 |
Tangible capital assets (Note 5) | 447,172 | 412,256 |
Total non-financial assets | 461,256 | 419,727 |
Total | 553,779 | 531,912 |
LIABILITIES AND EQUITY OF CANADA | ||
Liabilities | ||
Accounts payable and accrued liabilities (Note 6) | 145,422 | 161,865 |
Deposit accounts (Note 7) | 30,605 | 31,554 |
Employee future benefits (Note 8) | 235,664 | 222,706 |
Total | 411,691 | 416,125 |
Equity of Canada | 142,088 | 115,787 |
Total | 553,779 | 531,912 |
Contingent liabilities (Note 9)
Contractual obligations (Note 10)
The accompanying notes form an integral part of these financial statements.
(in thousands of dollars)
2011 | 2010 | |
---|---|---|
Expenses | ||
Internal Services | 680,061 | 700,315 |
Conventional Border | 644,296 | 612,588 |
Enforcement | 270,418 | 236,756 |
Risk Assessment | 123,586 | 132,973 |
Trade | 72,167 | 76,192 |
Facilitated Border | 43,035 | 40,938 |
Recourse | 10,444 | 8,856 |
Total Expenses | 1,844,007 | 1,808,618 |
Revenues | ||
Conventional Border | 9,140 | 17,437 |
Enforcement | 5,636 | 4,185 |
Facilitated Border | 3,322 | 3,882 |
Internal Services | 1,426 | 390 |
Recourse | 66 | 0 |
Risk Assessment | 11 | 0 |
Trade | 2 | 0 |
Total Revenues | 19,603 | 25,894 |
Net Cost of Operations | 1,824,404 | 1,782,724 |
Segmented Information (Note 12)
The accompanying notes form an integral part of these financial statements.
(in thousands of dollars)
2011 | 2010 Restated (note 14) |
|
---|---|---|
Equity of Canada, beginning of year | 115,787 | 104,317 |
Net cost of operations | (1,824,404) | (1,782,724) |
Net cash provided by Government | 1,711,593 | 1,720,984 |
Change in due from the Consolidated Revenue Fund | (18,278) | (82,232) |
Services provided without charge by other government departments (Note 11) | 157,377 | 155,442 |
Transfer of assets from other government department (Note 5) | 13 | 0 |
Equity of Canada, end of year | 142,088 | 115,787 |
The accompanying notes form an integral part of these financial statements.
(in thousands of dollars)
2011 | 2010 | |
---|---|---|
Operating activities | ||
Net cost of operations | 1,824,404 | 1,782,724 |
Non-cash items: | ||
Services provided without charge by other government departments | (157,377) | (155,442) |
Amortization of tangible capital assets | (42,648) | (47,129) |
Gain on disposal and write-down of tangible capital assets | 4,980 | 2,159 |
Other | 1,099 | (470) |
Variations in Statement of Financial Position: | ||
(Decrease) increase in accounts receivable and advances | (1,384) | 1,609 |
Increase (decrease) in prepaid expenses | 28 | (56) |
Increase in inventory | 6,585 | 276 |
Decrease in accounts payable and accrued liabilities | 16,443 | 78,318 |
Decrease in deposit accounts | 949 | 753 |
(Increase) in employee future benefits | (12,958) | (15,508) |
Cash used in operating activities | 1,640,121 | 1,647,234 |
Capital investment activities | ||
Acquisitions of tangible capital assets | 71,697 | 73,941 |
Proceeds from disposal of tangible capital assets | (225) | (191) |
Cash used in capital investment activities | 71,472 | 73,750 |
Net Cash provided by Government of Canada | 1,711,593 | 1,720,984 |
The accompanying notes form an integral part of these financial statements.
The Canada Border Services Agency (Agency Activities) 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 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 authorities from the Government of Canada.
For financial reporting purposes, the activities of the Agency have been divided into two sets of financial statements: Agency Activities and Administered Activities. The financial statements - Agency Activities include those operational revenues and expenses which are managed by the Agency and utilized in running the organization. The financial statements - Administered Activities include those net revenues that are administered for someone other than the Agency, such as the federal government, a province or territory, or another group or organization. The purpose of the distinction between Agency and Administered activities is to facilitate, among other things, the assessment of the administrative efficiency of the Agency in achieving its mandate.
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.
In delivering efficient and effective border management that contributes to the security and prosperity of Canada, the Agency operates under the following program activities:
The financial statements have been prepared in accordance with Treasury Board accounting policies stated below, which are based with Canadian generally accepted accounting principles for the public sector. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.
Significant accounting policies are as follows:
(a) Parliamentary authorities
The Agency is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Agency 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 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.
(b) Net Cash Provided by the Government of Canada
The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF and all cash disbursements made by the Agency are paid from the CRF. The net cash provided by the Government of Canada is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.
(c) Amounts due from / to the Consolidated Revenue Fund
The amounts due from or to the Consolidated Revenue Fund 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 Agency is entitled to draw from the CRF without further appropriations to discharge its liabilities.
(d) Non-tax revenues
Non-tax revenues reported in this statement include revenues collected on behalf of the Government of Canada under the Immigration and Refugee Protection Act, the Agriculture and Agri-Food Administrative Monetary Penalties Act and other similar legislation.
Non-tax revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenue takes place.
(e) Expenses
All expenses are recorded on an accrual basis:
(f) Accounts receivable and advances
Accounts receivable and advances are stated at the lower of cost and net recoverable value; a valuation allowance is recorded for receivables where recovery is considered uncertain based on the specific identification and on percentages of aging of receivables.
(g) 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. If there are no longer any service potential, inventory is valued at the lower of cost or net realizable value.
(h) 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 Agency does not does not capitalize intangibles, works of art and historical treasures that have cultural, aesthetic or historical value, assets located on Indian Reserves and museum collections.
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 |
Information technology equipment | 5 years |
In-house-developed software | 7 years |
Purchased software | 3 years |
Vehicles | 5 years to 10 years |
Leasehold improvements | Lesser of the remaining term of lease or useful life of the improvement. |
Assets under construction are recorded in the applicable capital asset class in the year that they become available for use and are not amortized until they become available for use.
(i) Employee future benefits
(j) 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.
(k) Environmental liabilities
Environmental liabilities reflect the estimated costs related to the management and remediation of environmentally contaminated sites. Based on management's best estimates, a liability is accrued and an expense recorded when the contamination occurs or when the Agency becomes aware of the contamination and is obligated, or is likely to be obligated to incur remedial costs. If the likelihood of the Agency's obligation to incur these costs is either not determinable, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements.
(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 severance benefits, the allowances 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.
The Agency receives most of its funding through annual Parliamentary authorities. Items recognized in the Statement of Operations and the Statement of Financial Position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, the Agency 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
2011 | 2010 | |
---|---|---|
(in thousands of dollars) | ||
Net cost of operations | 1,824,404 | 1,782,724 |
Adjustments for items affecting net cost of operations but not affecting authorities: | ||
Services provided without charge by other government departments | (157,377) | (155,442) |
Amortization of tangible capital assets | (42,648) | (47,129) |
Increase in employee future benefits | (12,958) | (15,508) |
Revenue not available for spending | 7,003 | 4,749 |
Increase in vacation pay and compensatory leave | (2,836) | (4,692) |
Gain on disposal and write-down of tangible capital assets | 4,980 | 2,159 |
Increase in bad debt | (3,270) | (975) |
Increase in environmental liabilities | (1,994) | 70 |
Adjustment to prior year's expenditures | 975 | 886 |
Other | 1,188 | 232 |
Total | (206,937) | (215,650) |
Adjustments for items not affecting net cost of operations but affecting authorities: | ||
Acquisition of tangible capital assets | 71,697 | 73,941 |
Proceeds from disposal of tangible capital assets | (225) | (191) |
Increase in inventory | 6,585 | 276 |
Increase in prepaid expenses | 28 | (56) |
Total | 78,085 | 73,970 |
Current year authorities used | 1,695,552 | 1,641,044 |
(b) Authorities provided and used
2011 | 2010 | |
---|---|---|
(in thousands of dollars) | ||
Authorities Provided: | ||
Vote 10 – Operating expenditures | 1,515,563 | 1,538,564 |
Vote 15 – Capital expenditures | 181,239 | 116,639 |
Statutory amounts | 182,425 | 182,501 |
Total | 1,879,227 | 1,837,704 |
Less: | ||
Authorities available for future years | (178,688) | (158,121) |
Lapsed: - Operating | (4,987) | (38,539) |
Total | (183,675) | (196,660) |
Current year authorities used | 1,695,552 | 1,641,044 |
The following table presents details of the accounts receivable and advances:
2011 | 2010 | |
---|---|---|
(in thousands of dollars) | ||
Receivables from other other government departments and agencies | 7,321 | 8,028 |
Receivables from external parties | 7,540 | 5,159 |
Employee advances and other receivables | 1,554 | 1,602 |
Deposits in transit to the Receiver General | 149 | (76) |
Total | 16,564 | 14,713 |
Less: allowance for doubtful accounts on external receivables | (5,169) | (1,934) |
Total | 11,395 | 12,779 |
(in thousands of dollars)
The following table presents details of the tangible capital assets:
Cost | Accumulated amortization | 2011 | 2010 | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Capital asset class | Opening balance |
Acquisi- tions |
Transfers, disposals, write-offs | Closing balance |
Opening balance | Amorti-zation | Transfers, disposals, write-offs |
Closing balance |
Net book value |
Net book value |
Land | 4,525 | 55 | 0 | 4,580 | 0 | 0 | 0 | 0 | 4,580 | 4,525 |
Buildings | 182,346 | 3,860 | 0 | 186,206 | 62,971 | 6,030 | 0 | 69,001 | 117,205 | 119,375 |
Leasehold Improvements | 17,311 | 7,020 | 0 | 24,331 | 7,618 | 4,021 | 0 | 11,639 | 12,692 | 9,693 |
Works and infrastructure |
1,152 | 0 | (21) | 1,173 | 399 | 25 | (1) | 425 | 748 | 753 |
Machinery and equipment |
84,185 | 1,848 | 1,683 | 84,350 | 42,483 | 7,832 | 2,416 | 47,899 | 36,451 | 41,702 |
Information technology equipment, in-house-developed and purchased software |
171,232 | 534 | (5,360) | 177,126 | 105,029 | 22,133 | (510) | 127,672 | 49,454 | 66,203 |
Vehicles | 28,611 | 3,033 | 1,791 | 29,853 | 21,710 | 2,607 | 2,054 | 22,263 | 7,590 | 6,901 |
Assets under construction |
163,104 | 55,347 | (1) | 218,452 | 0 | 0 | 0 | 0 | 218,452 | 163,104 |
Total | 652,466 | 71,697 | (1,908) | 726,071 | 240,210 | 42,648 | 3,959 | 278,899 | 447,172 | 412,256 |
Disposals and transfers of assets under construction represent assets that were put into use in the year and have been transferred to the other capital asset classes as applicable.
Effective March 31, 2011, the Agency exchanged vehicles with a net book value increase of $ 13,000 to the Privy Council Office.
The following table presents details of accounts payable and accrued liabilities:
2011 | 2010 | |
---|---|---|
(in thousands of dollars) | ||
Payables to external parties | 44,143 | 47,889 |
Payables to other government departments and agencies | 30,208 | 47,183 |
Accrued salary, vacation pay and compensatory leave | 71,071 | 66,793 |
Total | 145,422 | 161,865 |
The deposit accounts were established to record cash and securities required to guarantee payment of customs duties and excise taxes on imported goods pursuant to the Customs Act and the Excise Tax Act and to guarantee the compliance of transporters and individuals with the provisions of the Immigration and Refugee Protection Act.
The following table presents details on the deposit accounts:
Opening Balance |
Receipts | Payments | Closing Balance |
|
---|---|---|---|---|
(in thousands of dollars) | ||||
Guarantee deposit accounts | 26,540 | 8,418 | (9,553) | 25,405 |
Other deposit accounts | 5,014 | 278 | (92) | 5,200 |
Total deposit accounts | 31,554 | 8,696 | (9,645) | $30,605 |
(a) Pension benefits
The Agency's employees participate in the Public Service Pension 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 two 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 Agency contribute to the cost of the Plan. The 2010-2011 expense amounts to $127,763,000 ($131,477,000 in 2009-2010), which represents approximately 1.9 times (1.9 in 2009-10) the contributions by employees.
The Agency'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 Agency 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. Information about the severance benefits, measured as at March 31, is as follows:
2011 | 2010 | |
---|---|---|
(in thousands of dollars) | ||
Accrued benefit obligation, beginning of year | 222,706 | 207,198 |
Expense for the year | 27,250 | 29,135 |
Benefits paid during the year | (14,292) | (13,627) |
Accrued benefit obligation, end of year | 235,664 | 222,706 |
Contingent liabilities arise in the normal course of operations and their ultimate disposition is unknown. They are grouped into two categories as follows:
(a) Contaminated sites
Liabilities are accrued to record the estimated costs related to the management and remediation of contaminated sites where the Agency is obligated or likely to be obligated to incur such costs. The Agency identified three sites in 2011 (three sites in 2009-2010) where such action is possible and for which a liability of $2,286,000 ($292,000 in 2009-2010) has been recorded in accrued liabilities. No additional costs are known or expected. The Agency's ongoing efforts to assess contaminated sites may result in additional environmental liabilities related to newly identified sites, or changes in the assessments or intended use of existing sites. These liabilities will be accrued in the year in which they become likely and are reasonably estimable.
(b) Claims and litigation
Claims have been made against the Agency in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified for a total $1,559,500,000 ($1,650,000,000 in 2009-2010) at March 31, 2011. Based on the Agency's assessment, legal proceedings for claims estimated at $ 1,945,000 at March 31, 2011 ($ 2,762,600 in 2009-2010).
Some of these potential liabilities 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 and expense are recorded in the financial statements. As at March 31, 2011, the Agency has recorded an estimated liability of $290,000 ($290,000 in 2009-2010).
The nature of the Agency's activities can result in some large multi-year contracts and obligations whereby the Agency 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:
2012 | 2013 | 2014 | 2015 | 2016 and there-after | Total | |
---|---|---|---|---|---|---|
(in thousands of dollars) | ||||||
Operating contracts | 61,270 | 11,150 | 6,583 | 2,269 | 82 | 81,354 |
The Agency is related as a result of common ownership to all Government departments, agencies and Crown corporations of Canada. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the Agency 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 Agency received 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 Agency's Statement of Operations as follows:
2011 | 2010 | |
---|---|---|
(in thousands of dollars) | ||
Accommodation | 62,008 | 60,562 |
Employer's contribution to the health and dental insurance plans | 83,381 | 80,368 |
Workers' compensation coverage | 413 | 391 |
Legal services | 11,575 | 14,121 |
Total | 157,377 | 155,442 |
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 and audit services provided by the Office of the Auditor General are not included as an expense in the Agency's Statement of Operations.
(b) Administration of programs on behalf of other government departments
Under a memorandum of understanding signed with Statistics Canada on March 21, 1984, the Agency provides statistical information relating to imports and exports. During the year, the department incurred expenses of $2,547,947 ($3,094,211 in 2009-2010) on behalf of Statistics Canada.
Under an administrative arrangement signed with Canadian International Development Agency on May 4, 2009, the Agency administers a program to help develop the borders in Haiti. During the year, the department incurred expenses of $385,337 ($113,893 in 2009-2010) on behalf of Canadian International Development Agency.
Under an administrative arrangement signed with Canadian International Development Agency on December 15, 2009, the Agency commences a project to strengthen the State Customs Services of the Ukraine laboratory system. During the year, the department incurred expenses of $262,292 (nil in 2009-2010) on behalf of Canadian International Development Agency.
Under a memorandum of understanding signed with Industry Canada on September 16, 2008, the Agency administers a study to identify the causes of border wait times at the port level. During the year, the department incurred expenses of $33,024 ($10,676 in 2009-2010) on behalf of Industry Canada.
Under a memorandum of understanding signed with Human Resources and Skills Development Canada on November 19, 2002, the Agency captures and releases customs information on travelers. During the year, the department incurred expenses of $31,952 ($42,897 in 2009-2010) on behalf of Human Resources and Skills Development Canada.
Under a memorandum of understanding signed with the Department of Foreign Affairs and International Trade on October 21, 2010, the Agency provides risk management training for counter-terrorism capacity building program. During the year, the department incurred expenses of $26,110 (nil in 2009-2010) on behalf of the Department of Foreign Affairs and International Trade.
The expenses noted above are reflected in the financial statements of the other government department and not recorded in these financial statements.
(c) Administration of programs on behalf of CBSA
The Agency has arrangements with the Canada Revenue Agency for the provision of information technology services to CBSA, which are paid for on a quarterly basis for a total of $139,808,000 ($126,153,000 in 2009-2010).
(d) Other transactions with related parties
2011 | 2010 | |
---|---|---|
(in thousands of dollars) | ||
Accounts receivable from other government departments and agencies | 7,321 | 8,028 |
Accounts payable to other government departments and agencies | 30,208 | 47,183 |
Expenses - other government departments and agencies | 410,354 | 381,519 |
Revenues - other government departments and agencies | 480 | 156 |
(in thousands of dollars)
Presentation by segment is based on the Agency's program activity 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 program activities, by major object of expenses and by major type of revenues. The segment results for the period are as follows:
2011 | 2010 | ||||||||
---|---|---|---|---|---|---|---|---|---|
Risk Assessment | Enforcement | Facilitated Border | Conventional Border | Trade | Recourse | Internal Services | Total | Total | |
Operating Expenses | |||||||||
Salaries and employee benefits | 109,050 | 177,376 | 39,151 | 585,377 | 67,291 | 9,482 | 355,272 | 1,342,999 | 1,314,237 |
Professional and special services | 3,209 | 40,918 | 78 | 10,008 | 276 | 341 | 214,190 | 269,020 | 254,932 |
Rental of land and buildings | 5,038 | 8,300 | 1,808 | 27,032 | 3,107 | 438 | 19,751 | 65,474 | 63,499 |
Transportation and telecommunication | 3,012 | 14,679 | 701 | 10,079 | 1,029 | 71 | 25,041 | 54,612 | 51,133 |
Amortization | 1,142 | 6,051 | 314 | 2,284 | 19 | 0 | 32,838 | 42,648 | 47,129 |
Repair and maintenance | 209 | 1,752 | 37 | 1,723 | 7 | 0 | 19,714 | 23,442 | 24,002 |
Other | 170 | 16,826 | 60 | 1,438 | 167 | 11 | 2,233 | 20,905 | 10,576 |
Materials and supplies | 1,004 | 2,242 | 281 | 3,514 | 219 | 41 | 9,260 | 16,561 | 22,818 |
Consumable machinery and equipment (parts) | 750 | 1,334 | 51 | 1,316 | 52 | 49 | 1,524 | 5,076 | 19,317 |
Bad debts | 2 | 940 | 554 | 1,525 | 0 | 11 | 238 | 3,270 | 975 |
Total Expenses | 123,586 | 270,418 | 43,035 | 644,296 | 72,167 | 10,444 | 680,061 | 1,844,007 | 1,808,618 |
Revenues | |||||||||
Sale of goods and services | 0 | 1,459 | 3,322 | 9,081 | 2 | 0 | 992 | 14,856 | 23,408 |
Miscellaneous | 0 | 2,890 | 0 | 0 | 0 | 66 | (25) | 2,931 | 563 |
Forfeitures of cash bonds | 0 | 1,280 | 0 | 0 | 0 | 0 | 0 | 1,280 | 1,181 |
Gain on sale of assets | 11 | 7 | 0 | 59 | 0 | 0 | 143 | 220 | 178 |
Interest, penalties and fines | 0 | 0 | 0 | 0 | 0 | 0 | 206 | 206 | 119 |
Seized property | 0 | 0 | 0 | 0 | 0 | 0 | 110 | 110 | 445 |
Total Revenues | 11 | 5,636 | 3,322 | 9,140 | 2 | 66 | 1,426 | 19,603 | 25,894 |
Net Cost of Operations | 123,575 | 264,782 | 39,713 | 635,156 | 72,165 | 10,378 | 678,635 | 1,824,404 | 1,782,724 |
The following table presents details of the inventory, measured at cost using the average cost method.
2011 | 2010 | |
---|---|---|
(in thousands of dollars) | ||
Uniforms | 13,491 | 6,895 |
Forms and publications | 480 | 491 |
Total | 13,971 | 7,386 |
The cost of consumed inventory recognized as an expense in the Statement of Operations is $ 5,158,900 ($ 11,595,500 in 2009-2010).
During the year, the Agency adopted the revised Treasury Board accounting policy TBAS 1.2: Departmental and Agency Financial Statements which is effective for the Agency for the 2010-11 fiscal year. The major change in the accounting policies of the Agency required by the adoption of the revised TBAS 1.2 is the recording of amounts due from the Consolidated Revenue Fund as an asset on the Statement of Financial Position.
The adoption of the new Treasury Board accounting policies have been accounted for retroactively with the following impact on the comparatives for 2009-10:
2010 As previously stated |
Effect of change | 2010 Restated |
|
---|---|---|---|
( in thousands of dollars) | |||
Statement of Financial Position: | |||
Total assets | 432,582 | 99,330 | 531,912 |
Total | 99,330 | ||
Total liabilities | 416,201 | (76) | 416,125 |
Equity of Canada | 16,381 | 99,406 | 115,787 |
Total | 99,330 | 531,912 |
Comparative figures have been reclassified to conform to the current year's presentation.
(in thousands of dollars)
2011 | 2010 Restated (note 12) |
|
---|---|---|
ADMINISTERED ASSETS | ||
Cash | 1,662,378 | 1,512,636 |
Amounts receivable from other Federal Government departments and agencies (Note 5) |
5,441 | 1,947,134 |
Taxes receivable (Note 6) | 1,416,872 | 1,284,657 |
TOTAL | 3,084,691 | 4,744,427 |
ADMINISTERED LIABILITIES | ||
Liabilities | ||
Amounts payable to other Federal Government departments and agencies |
192,445 | 56,035 |
Payable to provinces (Note 7) | 8,347 | 15,481 |
Taxes payable | 2,072 | 1,114 |
Deposit accounts (Note 8) | 9,065 | 8,931 |
Total | 211,929 | 81,561 |
Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada (Note 9) |
2,872,762 | 4,662,866 |
TOTAL | 3,084,691 | 4,744,427 |
The accompanying notes form an integral part of these financial statements.
(in thousands of dollars)
2011 | 2010 Restated (note 12) |
|
---|---|---|
Administered Revenues | ||
Tax revenues | ||
Excise taxes (Note 3) | 18,265,301 | 16,300,351 |
Customs import duties |
3,519,962 | 3,511,080 |
Excise duties | 1,414,434 | 1,256,842 |
TOTAL | 23,199,697 | 21,068,273 |
Non-tax revenues | ||
Interest, penalties and fines | 5,946 | 24,284 |
Seized property | 9,827 | 11,059 |
Sale of goods and services | 1,055 | 989 |
Miscellaneous | 147 | 722 |
Total | 16,975 | 37,054 |
Total Revenue Administered on behalf of the Government of Canada | 23,216,672 | 21,105,327 |
Less: Bad Debts (Note 4) | (10,049) | 27,146 |
Net Administered Revenues | 23,226,721 | 21,078,181 |
The accompanying notes form an integral part of these financial statements.
(in thousands of dollars)
2011 | 2010 Restated (note 12) |
|
---|---|---|
Total Net Administered Revenues | 23,226,721 | 21,078,181 |
Change in administered assets and liabilities: | ||
(Increase) in cash | (149,742) | (168,652) |
Decrease (Increase) in accounts receivable | 1,941,693 | (1,659,831) |
(Increase) in tax receivables | (132,215) | (24,797) |
Increase in accounts payable | 136,410 | 18,189 |
(Decrease) Increase in payable to provinces | (7,134) | 2,030 |
Increase (Decrease) in taxes payable | 958 | (417) |
Increase in deposit accounts | 134 | 1,909 |
Net cash Deposited in the Consolidated Revenue Fund of the Government of Canada |
25,016,825 | 19,246,612 |
Consisting of: | ||
Cash deposits to the Consolidated Revenue Fund | 25,592,068 | 21,554,869 |
Cash payments/refunds from the Consolidated Revenue Fund | (575,243) | (2,308,257) |
Net cash Deposited in the Consolidated Revenue Fund of the Government of Canada |
25,016,825 | 19,246,612 |
The accompanying notes form an integral part of these financial statements.
The Canada Border Services Agency (Agency) 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 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 purpose of these Administered Activities financial statements is to present information about tax-related revenues, expenses, assets and liabilities that the Agency administers on behalf of the federal government and provincial and territorial governments. Additional financial statements for Agency Activities include those operational revenues and expenses, which are managed by the Agency and utilized in running the organization.
The CBSA reports against accounting principles that are consistent with those applied in the preparation of the financial statements of the Government of Canada. As such, the CBSA Administered Activities stated accounting policies do not result in any significant differences from Canadian generally accepted accounting principles.
A summary of significant accounting policies are as follows:
(a) Tax Revenues
Tax revenues reported in this statement include revenues assessed under the authority of the Customs Act, the Customs Tariff, the Excise Act and the Excise Tax Act. These taxes include:
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 ended March 31. The Agency is not able to estimate the amount of unreported tax revenues. These revenues are recognized at the time the goods are released.
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, for example, if they do not declare or incorrectly declare goods imported. 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 assessed.
(b) Non-tax revenues
Non-tax revenues reported in this statement include revenues collected on behalf of the Government of Canada under the Immigration and Refugee Protection Act, the Agriculture and Agri-Food Administrative Monetary Penalties Act and other similar legislation.
Non-tax revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenue.
(c) Cash
Cash 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 (CRF) of the Government of Canada.
(d) Accounts receivable
Accounts receivable are stated at amounts expected to be ultimately realized; a provision is made for doubtful accounts where recovery is considered uncertain.
(e) Taxes receivable
Taxes receivable represent duties and taxes and other revenues assessed or estimated by the Agency but 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. This allowance for doubtful accounts reflects management's best estimate of the collectability of amounts assessed but not yet paid.
(f) Allowance for doubtful accounts
The allowance for doubtful accounts reflects management's best estimate of the collectability of amounts assessed, including the related interest and penalties, but not yet paid. The allowance for doubtful accounts is composed of two parts; which are reviewed on an annual basis. A portion of the allowance is based on the age of the accounts and the other portion is calculated based on accounts in appeal.
The allowance for doubtful accounts is adjusted by an annual provision for doubtful accounts and is reduced by amounts written off as uncollectable during the year. The annual provision is reported net of taxes receivable in the Statement of Administered Assets and Liabilities.
(g) Taxes payable
Taxes payable to importers represent refunds and related interest resulting from assessments completed after March 31 for excise duties, customs import duties and GST/HST for current or prior year imports.
(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) 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 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.
The economic recovery contributed to the increase in GST/HST assessed on imported goods.
The inception of HST in Ontario and British Columbia occurred in July 2010. Actual Provincial HST amounts assessed by the Agency are transferred to the Canada Revenue Agency for inclusion in the payments made to the Department of Finance Canada.
The following table presents details of the excise tax revenues:
2011 | 2010 Restated (note 12) |
|
---|---|---|
(in thousands of dollars) | ||
GST/HST | 18,365,500 | 16,294,528 |
Tax remission order | (42,146) | (40,333) |
Transfer of HST to Provinces | (137,447) | (14,432) |
Total | 18,185,907 | 16,239,763 |
Excise tax - gasoline | 43,755 | 28,714 |
Other excise tax | 35,639 | 31,874 |
Total | 79,394 | 60,588 |
Total excise taxes | 18,265,301 | 16,300,351 |
The allowance for doubtful accounts decreased significantly in 2011 as a result of fewer accounts in appeal and active uncollectable amounts. Furthermore, most accounts receivable write-offs this year formed part of the opening balance of the allowance for doubtful accounts and did not directly impact the bad debt expense. In addition, the allowance for doubtful accounts had been overestimated in previous years, resulting in a correction to the bad debt expense.
The combination of these factors contributed to a net credit balance in the bad debt expense.
This value represents amounts due to the Agency from other Federal Government departments and agencies. A change in the methodology relating to the accounting of HST transfers to the provinces was made in 2010. Commencing in 2011, the CRA began remitting 100% of the estimate to the Department of Finance Canada; with the Agency transferring actual Provincial HST amounts collected to the CRA on an annual basis.
The following table presents details of the amounts receivable:
2011 | 2010 Restated (note 12) |
|
---|---|---|
(in thousands of dollars) | ||
HST receivable from Canada Revenue Agency | 0 | 1,923,536 |
Receivables from other Federal Government departments and agencies |
5,441 | 23,598 |
Total | 5,441 | 1,947,134 |
Taxes receivable represent the customs duties, excise taxes, GST and HST due to the Receiver General for Canada as a result of importations into Canada.
The following table presents details of taxes receivable:
2011 | 2010 Restated (note 12) |
|
---|---|---|
(in thousands of dollars) | ||
Taxes receivable | 1,453,300 | 1,411,239 |
Less: allowance for doubtful accounts | (36,428) | (126,582) |
Net taxes receivable | 1,416,872 | 1,284,657 |
The following table presents details on the memorandums of understanding (MOUs) that have been established between the provinces and the Agency, whereby the Agency collects provincial sales, alcohol and tobacco taxes on behalf of the provinces and remits these collections directly to the provinces.
In 2011, Ontario and British Columbia became HST participating provinces; therefore, provincial sales tax was no longer remitted to these provinces.
2011 | 2010 | |
---|---|---|
(in thousands of dollars) | ||
Payable to provinces, beginning of year | 15,481 | 13,451 |
Receipts from taxpayers | 60,800 | 107,180 |
Refunds to taxpayers | (2,505) | (4,081) |
Payments to provinces | (65,429) | (101,069) |
Payable to provinces, end of year | 8,347 | 15,481 |
The deposit accounts were established to record cash and securities required to guarantee payment of customs duties and excise taxes on imported goods pursuant to the Customs Act and the Excise Tax Act.
The following table presents details on the deposit accounts:
Opening Balance |
Receipts | Payments | Closing Balance |
|
---|---|---|---|---|
(in thousands of dollars) | ||||
Guarantee deposit accounts | 8,931 | 3,346 | (3,212) | 9,065 |
The net amount due to the CRF on behalf of the Government of Canada is the difference between administered assets and other 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:
2011 | 2010 Restated (note 12) |
|
---|---|---|
(in thousands of dollars) | ||
Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada at the beginning of the year, opening balance | 4,662,866 | 2,497,370 |
Correction of previous years' unrecorded revenue | 333,925 | |
Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada at the beginning of the year, restated opening balance | 2,831,295 | |
Total net administered revenues | 23,226,721 | 21,078,181 |
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada |
(25,016,825) | (19,246,610) |
Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada at end of year | 2,872,762 | 4,662,866 |
Claims have been made against the Agency in the normal course of operations. These claims include appeals for previously assessed customs duties, excise duties, GST and HST. Based on the Agency’s assessment, legal proceedings for claims estimated at $36,000,000 ($176,000,000 in 2009-2010) were pending at March 31, 2011. Some of these potential liabilities 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 in the financial statements.
The Agency is related in terms of common ownership to all Government of Canada 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 also receives collection services to CBSA under Part V.I of the Customs Act.
This fiscal year two issues were noted which warranted a retroactive entry be entered in order to recognize revenues which were not recorded in previous fiscal years. A summary of the issues are as follows:
Consequently, the comparative financial statements for the year ended March 31, 2010, have been restated. The effect of these adjustments is presented in the table below.
2010 As Previously Stated |
Effect of Changes | 2010 Restated | |
---|---|---|---|
(in thousands of dollars) | |||
Statement of Administered Revenues | |||
Excise taxes (note 3) | 16,266,855 | 33,496 | 16,300,351 |
Customs import duties | 3,489,783 | 21,297 | 3,511,080 |
Total tax revenues | 21,013,480 | 54,793 | 21,068,273 |
Interest, penalties and fines | 24,270 | 14 | 24,284 |
Total non-tax revenues | 37,040 | 14 | 37,054 |
Total Revenue Administered on behalf of the Government of Canada | 21,050,520 | 54,807 | 21,105,327 |
Net Administered Revenues | 21,023,374 | 54,807 | 21,078,181 |
Statement of Administered Assets and Liabilities | |||
Amounts receivable from other Federal Government departments and agencies (Note 5) | 1,802,895 | 144,239 | 1,947,134 |
Taxes receivable (Note 6) | 1,040,162 | 244,495 | 1,284,657 |
Total Administered Assets | 4,355,693 | 388,734 | 4,744,427 |
Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada (Note 9) | 4,274,132 | 388,734 | 4,662,866 |
Total Administered Liabilities and net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada | 4,355,693 | 388,734 | 4,744,427 |
Statement of Administered Cash Flows | |||
Total Net Administered Revenues | 21,023,374 | 54,807 | 21,078,181 |
(Increase) in tax receivables | 30,010 | (54,807) | (24,797) |
Note 3: Excise Taxes | |||
GST/HST | 16,261,032 | 33,496 | 16,294,528 |
Total | 16,266,855 | 33,496 | 16,300,351 |
Note 5: Amounts Receivable from Other Federal Government Departments and Agencies | |||
HST receivable from Canada Revenue Agency | 1,779,297 | 144,239 | 1,923,536 |
Total | 1,802,895 | 144,239 | 1,947,134 |
Note 6: Taxes Receivable | |||
Taxes receivable | 1,166,744 | 244,495 | 1,411,239 |
Net taxes receivable | 1,040,162 | 244,495 | 1,284,657 |
Note To The Reader
With the Treasury Board Policy on Internal Control that became effective April 1, 2009, departments are required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR).
As part of this policy, departments are expected to conduct annual assessments of their system of ICFR, to establish an action plan to address any necessary adjustments, and to attach to their Statements of Management Responsibility a summary of their assessment results and action plan.
Effective systems of ICFR aim to achieve reliable financial statements and to provide assurance that:
The system of ICFR is designed to mitigate risks to a reasonable level based on an ongoing process to identify key risks, to assess the effectiveness of associated key controls, to adjust them as required, and to monitor the system in support of continuous improvement. As a result, the scope, pace and status of those departmental assessments of the effectiveness of their system of ICFR will vary from one organization to another ,based on risks and taking into account their unique circumstances.
It is important to note that the system of ICFR is not designed to eliminate all risks, but rather to mitigate risk to a reasonable level with controls that are balanced with and proportionate to the risks they aim to mitigate.
This document is the second annual annex to the Canada Border Services Agency (CBSA) Statement of Management Responsibility Including Internal Control over Financial Reporting which prefaces the financial statements for the fiscal year 2010-11. As required by the new Treasury Board Policy on Internal Control, effective April 1, 2009, this annex provides summary information of the measures taken by the CBSA since the last fiscal year to maintain an effective system of internal control over financial reporting (ICFR). In particular, it provides information on the results and related action plans of the assessments conducted by the CBSA as of March 31, 2011, along with some financial highlights pertinent to understanding the control environment of the Agency.
Detailed information on the CBSA‘s authority, mandate and program activities can be found in the Departmental Performance Report [Estimates] and Section I of the Report on Plans and Priorities [Estimates].
The CBSA conducts a significant portion of its financial activities in offices located in the regions and in headquarters branches. These activities are monitored, reviewed and verified by the Comptrollership Branch under the Direction of the Chief Financial Officer.
Agency activities (expenditures)
Financial statements (unaudited) of the Agency activities (expenditures) for fiscal-year 2010-11 can be found at [Corporate Documents]. Information can also be found in the Public Accounts of Canada [Receiver General for Canada].
The CBSA net cost of operations was $1.824 billion with salaries and employee benefits being the largest expense ($1.3 billion or 73 percent of total expenses). Other expenses included professional and special services ($269 million or 15 percent), rental of land buildings ($65 million or 4.0 percent and transportation and communication ($55 million or 3.0 percent).
For Agency activities, as of March 31, 2011, the CBSA reported total assets of $554 million which were mainly comprised of tangible capital assets ($447 million or 80 percent). The total reported liabilities for Agency activities were $412 million which were mainly comprised of employee severance benefits ($236 million or 57 percent) and accounts payable and accrued liabilities ($145 million or 35 percent).
Agency-administered activities (revenues)
Note: Agency-administered activities are summarized in section 6 of this annex.
Financial statements (unaudited) of the administered activities (revenues) for fiscal-year 2010-11 can be found at [Corporate Documents]. Information can also be found in the Public Accounts of Canada [Receiver General for Canada].
For fiscal-year 2010-11, the CBSA reported total tax revenues of $23.2 billion and total non-tax revenue of $17.0 million. For administered activities, as at March 31, 2011, the CBSA reported total assets of $3.0 billion; comprised of cash ($1.7 billion or 53.9 percent); accounts receivable from other federal government departments and agencies ($5.4 million or 0.2 percent); and taxes receivable ($1.4 billion or 45.9 percent). The total reported liabilities for administered activities were $211.9 million, with the majority due to other federal government departments ($192.4 million or 90.8 percent) and the provinces ($8.3 million or 3.9 percent). The low ratio of total liabilities, in comparison to total assets, is explained by the fact that the primary objective of reporting administered activities, separate from operating activities (Agency activities), is to report revenues which normally do not generate significant liabilities.
The CBSA relies on other organizations for the processing of certain transactions that are recorded in its financial statements.
With the exception of the revenue restatement identified in the Agency's Administered Activities Financial Statements, note 12, there are no significant changes that are relevant to the financial statements occurred at the CBSA during 2010-11.
The CBSA recognizes the importance of setting the tone from the highest level of senior management to help ensure that staff at all levels understand their roles in maintaining effective systems of ICFR, and the Agency is well equipped to exercise these responsibilities effectively. The CBSA's focus is to ensure risks are managed well through a responsive and risk-based control environment that enables continuous improvement and innovation.
Below are the CBSA'S key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its 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 and the Executive 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. The VP also chairs the Operations Committee.
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 chairs the Comptrollership Standing Committee (CSC), and, whose membership includes the Associate Vice-President of Operations, Vice Presidents of Programs and Science and Technology, the Chief Audit Executive and the Directors General from Operations and Programs.
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 Risk Officer – The Chief Risk Officer is responsible for providing objective advice to the President, Executive Vice-President and the Executive Committee on new and emerging risks, both internal and external, and on how the Agency is positioned to address them.
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.
Departmental Audit Committee (DAC) - The DAC is an advisory committee that provides objective views on the Agency's risk management, control and governance frameworks. The DAC was established in 2007 and it is comprised of the President, the EVP and four external members. As such, the DAC reviews the CBSA's risk profile and its system of internal control, including the assessment and action plans related to the system of ICFR.
The CBSA's control environment comprises a series of measures that provide employees with the knowledge, tools and resources required to identify and manage risk effectively. These measures include:
Over time, this includes assessment of the design effectiveness and the operating effectiveness of the system of ICFR which leads to ensuring the ongoing monitoring and continuous improvement of the departmental system of ICFR.
Note: Administered activities (revenues) are summarized in section 6 of this annex.
Entity-level controls (ELCs)[ 1 ]
The CBSA has completed the documentation and design effectiveness testing related to its entity-level controls and identified risk areas, in association with all responsible divisions, to compile the list of narrative and documentary evidence to support the identified controls.
Information technology general controls (ITGCs)
The CBSA has arrangements with the CRA for the provision of information technology services in relation to its Corporate Administration System (CAS). The CBSA has negotiated arrangements with the CRA to ensure that when the CRA conducts its ICFR reviews for the IT general controls related to CAS, this includes review of all applicable CBSA key controls.
Business process elements (directly related to CBSA's ICFR)
The CBSA performed a risk assessment using the financial statements at March 31, 2009 to determine its main accounts. Significance was assessed relative to qualitative and quantitative measures of materiality specified by departmental management. Once the main accounts were identified, they were then linked to the related financial processes (see listing below). The results of this assessment confirmed the key priority areas of CBSA's system of ICFR that need to be addressed in the implementation of the Policy on Internal Control.
Main Accounts | Key Business processes | ||||||||
---|---|---|---|---|---|---|---|---|---|
System Configured Controls | Asset Safe-guarding | Compensation / payroll | Payment requisitioning | Procure- ment |
Assets management | Hospitality & Travel | Acquisition by credit card | Year end procedures | |
Salaries & employees benefits | |||||||||
Professional services | |||||||||
Transportation & Communication | |||||||||
Capital Assets | |||||||||
Material & Supplies |
Entity-level controls (ELCs)
During 2010-11, the CBSA assessed the design effectiveness of entity-level controls by measuring it up with CBSA Management Accountability Framework (MAF) round VIII area of management requirements and related results. Based upon this assessment, minor gaps in the design of entity-level controls were identified which will be addressed by the CBSA in the 2011-12 fiscal year. Also, due to the redesign of the CBSA governance structure, a validation process with the Agency's key senior managers was initiated in the 2010-11 fiscal year, with the expectation that it will be completed during the 2011-12 fiscal year.
Information technology general controls (ITGCs)
The CBSA has negotiated arrangements with the CRA to ensure that when the CRA conducts its ICFR reviews for the IT general controls related to the Corporate Administration System (CAS), this includes a review of all applicable CBSA key controls.
During the 2010-11 fiscal year, the CRA assessed the ITGCs for CAS to ensure the key general computer controls that relate to the system's operations (including backup and recovery), security (information and physical), and implementation and maintenance processes (including change management and network/software support) are properly designed and implemented. For the results of this assessment, refer to CRA's Annex to the Statement of Management Responsibility, including Internal Controls Over Financial Reporting.
Business process controls
For each significant account, the CBSA completed the following steps:
Finally, these controls, if effectively applied on an ongoing basis, provide assurance that the financial information is complete, reliable, relevant and timely. In addition, there is assurance that all authorities and regulations are respected, in particular, Sections 33 and 34 of the Financial Administration Act (FAA).
During the 2010-11 fiscal year, a final validation and sign-off process of the Agency's key financial control frameworks by the Agency's key process senior managers has been initiated, with the expectation that this will be completed during the 2011-12 fiscal year.
The CBSA has also started to gather information on activities related to safeguarding assets and related key controls.
The CBSA has finalized Agency-wide testing of the operating effectiveness of its procurement and contracting financial control framework. The review was able to provide reasonable assurance that the CBSA Contracting Control Framework is operating efficiently and effectively. However, some deficiencies, such as inconsistencies in control process application and level of documentation requirements between various Agency regional offices, were noted. The CBSA intends to implement corrective actions during the 2011-12 fiscal year.
Other Policy on Internal Control implementation activities related to CBSA business were initiated in 2010-11 for the following processes:
Commitments from previous year's Annex | Status | Comments |
---|---|---|
Complete a sign-off process pertaining to the design and implementation of CBSA financial controls frameworks | Substantially advanced | Final certification anticipated by July 2011 |
Complete design effectiveness testing for procurement activities | Completed/ Exceeded | Operational effectiveness testing completed - the CBSA was able to advance one year sooner |
Complete design effectiveness testing for asset safeguarding | Substantially advanced | Inventory existing asset security documentation and controls initiated |
Initiate discussion to obtain some form of a Chief Financial Officer certification in relation to the ITGC controls of the external service provider (CRA) for CAS services | Completed | Design and implementation testing activities performed and completed - CRA Annex B clearly states CBSA-related controls tested |
Complete the formalization of an ongoing risk-based monitoring plan | Substantially advanced | The CBSA revised account verification strategy to serve as the Policy on Internal Control ongoing risk-based monitoring plan requirements for future fiscal years |
By end of 2011-12, the CBSA plans to:
Business process | Document | Design effectiveness | Operating effectiveness | Start ongoing monitoring activities |
---|---|---|---|---|
Entity-level controls (ELCs) | Complete | 2011-12 | TBD | TBD |
Information technology general controls (ITGCs) | Complete | Complete | 2011-12 | 2012-13 |
Payroll | Complete | Complete | 2011-12 | 2012-13 |
Payment requisitioning | Complete | Complete | 2011-12 | 2012-13 |
Capital asset s | Complete | Complete | 2011-12 | 2012-13 |
Year- end procedures/Financial reporting | 2011-12 | 2012-13 | 2012-13 | 2013-14 |
System configured controls | 2012-13 | 2013-14 | 2013-14 | TBD |
Cost recovery | 2012-13 | 2012-13 | 2013-14 | TBD |
Inventory | 2013-14 | 2013-14 | 2014-15 | TBD |
Procurement process | Complete | Complete | Complete | 2012-13 |
Acquisition cards | Complete | Complete | 2012-13 | 2013-14 |
Asset safeguarding | 2011-12 | 2012-13 | 2013-14 | TBD |
Hospitality/Travel | Complete | Complete | 2011-12 | 2013-14 |
The CBSA's administered activities reports on tax and non-tax revenues, assets and liabilities administered on behalf of the Government of Canada, province or territory. The Office of the Auditor General (OAG) does not provide audit assurance on CBSA's Administered Revenues; however they are audited as part of the year -end Public Accounts audit.
By examining those main areas and accounts which are reported, significance was assessed relative to qualitative and quantitative measures of materiality. Once the main accounts were identified, they were then linked to the related financial processes. The results of this assessment confirmed the key priority areas of CBSA's system of ICFR that need to be addressed in the implementation of the Policy on Internal Control.
For each significant account, processes and controls were identified that are in place relevant to ICFR, including policies and procedures. Given the magnitude of the current revenue system upgrading, key processes, with identification and documentation of key risks and control points, have yet to be established for most main accounts. Instead, the focus has been on the documentation of those key Agency expenditure areas. However, with the analysis and design of the Accounts Receivable Sub-ledger (ARL) and the CBSA Assessment and Revenue Management (CARM) systems, many business processes are being reviewed and documented.
Below is a listing of those key areas and accounts which are accounted for and reported within the administered activity program.
Key business processes in place, or currently being undertaken in order to improve internal controls over financial reporting, are noted below.
Information technology general controls (ITGCs)
The CBSA will be modernizing and making significant improvements to the systems and processes that support the administration of revenues. These improvements will also facilitate the Agency's capacity to meet the requirements under the Policy on Internal Control for ICFR. The CARM and the ARL systems are the principal initiatives which will enable these improvements. The ARL system is the first stage of system modernization and is expected to be completed in April 2013.
With the implementation of these systems, and the expected impact on business processes and related controls, the various phases (i.e., design and operating effectiveness and ongoing monitoring) to support ICFR will be developed as these systems are conceived and implemented.
Business process elements
Most key accounts and financial functions have not been documented through key financial control frameworks with identification of key process owners, risks and control points. With the development and implementation of ARL and CARM, key processes related to ICFR will be documented, including the mapping of key processes to the main accounts. Assessments of controls within the administered revenue function are conducted through internal audits.
At year end 2010-11, some measures and audits have been completed to improve and/or verify the effectiveness of certain internal controls in the Agency-administered activities (revenues). These measures and audits include the following:
The audit opinion from the 2009-10 audit and preliminary findings of the 2010-11 audit found that year-end cash cut-off procedures were appropriate and in place to record cash in transit.
In 2010-11, cash management reviews were conducted within all CBSA regions. Monitoring has shown some improvement in regional compliance; however some control weaknesses still exist in such areas as:
A framework for establishing and maintaining an effective cash management review function within the Agency was also developed this fiscal year. Its purpose was to clarify the roles and responsibilities of the various parties involved. Furthermore, monthly conference calls with regional offices have been put into place in order to communicate and address identified issues in a timely manner.
The audit found that some deficiencies exist in the effectiveness and reliability of the payment process. Areas noted include accountability for the payment process at both regional and headquarters offices; updating policies and procedures; and ongoing monitoring of the K84 account statement payment process. The recommendations made as a result of this audit are to be implemented beginning fall 2011. Progress has been made on the action plans in the following areas:
In fiscal year 2010-11, an external audit firm was contracted to provide an independent review of the CBSA's revenue reconciliation process. The objective of this audit was to provide assurance to CBSA management with respect to the adequacy of the processes and control activities related to the reconciliation of existing variances surrounding tax revenue data. The evaluation examined:
Recommendations were made for improvements in the process. CBSA will be implementing these recommendations in fiscal year 2011-12. However, some of the recommendations require systems changes and will be designed and implemented with the implementation of ARL and CARM.
An ARL project team has been established and significant progress has been made on documenting business process flows that will form part of the new system. Consultations have been done with internal stakeholders and implementation is expected in April 2013.
This audit allowed for the assessment of current accounts receivable processes and controls, as well as an examination of the extent to which the new ARL system will address any significant deficiencies that may exist in the current accounts receivable system. The recommendations and related action plans from this audit will allow for improved timeliness and accuracy of cash receipts and invoices and improve current monitoring practices. The audit noted that key deficiencies in the current accounts receivable process will be addressed with the implementation of ARL.
A comprehensive program assessment for revenue management was conducted in order to identify areas where effectiveness and efficiency could be improved. From this assessment, employee levels were examined as well as performance indicators and controls. The assessment allowed for an examination of the magnitude and extent of the revenue management function across the Agency, particularly within the ports of entries across Canada, where revenues are reported and cash is received and deposited.
Over the course of the next three fiscal years, the CBSA Action Plan includes the elements below.
Continue to make progress in documenting controls and processes related to the following areas:
Action plans to address any identified gaps/weaknesses will be developed, as required.
During 2010-11, further advancement was made in the implementation of the Accounts Receivable ledger (ARL) project .Work will begin to implement the CBSA Assessment and Revenue Management (CARM) project and there will be continued focus on implementation of the Accounts Receivable Sub-ledger (ARL) initiative. The primary goal of these initiatives is to provide a viable solution to obtain accurate, timely, complete and reliable financial information and manage and account for tax revenues efficiently and effectively.