ARCHIVED - Canada Border Services Agency Financial Statements For the Year Ended March 31, 2013

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• Statement of Management Responsibility
• Financial Statements – Agency Activities
  • Statement of Financial Position (Unaudited) as at March 31
  • Statement of Operations and Departmental Net Financial Position (Unaudited) for the Year Ended March 31
  • Statement of Change in Departmental Net Debt (Unaudited) for the Year Ended March 31
  • Statement of Cash Flows (Unaudited) for the Year Ended March31
  • Notes to the Financial Statements (Unaudited) for the Year Ended March 31, 2013
    1. Authority and objectives
    2. Summary of Significant Accounting Policies
    3. Parliamentary Authorities
    4. Accounts Payable and Accrued Liabilities
    5. Deposit Accounts
    6. Employee Future Benefits
    7. Accounts Receivable and Advances
    8. Inventory
    9. Tangible Capital Assets
    10. Contingent Liabilities
    11. Contractual Obligations
    12. Related Party Transactions
    13. Segmented Information
    14. Correction of errors
    15. Comparative information
• Financial Statements – Administered Activities
  • Statement of Administered Assets and Liabilities (Unaudited) as at March 31
  • Statement of Administered Revenues (Unaudited) for the Year Ended March 31
  • Statement of Administered Cash Flows (Unaudited) for the Year Ended March 31
  • Notes to the Financial Statements (Unaudited) for the Year Ended March 31, 2013
    1. Authority and objectives
    2. Summary of Significant Accounting Policies
    3. Taxes Receivable
    4. Payable to Provinces
    5. Deposit Accounts
    6. Net amount due to the Consolidated Revenue Fund
    7. Excise Taxes
    8. Related Party Transactions
    9. Comparative Information
• Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting Fiscal Year 2012-2013
  1. Introduction
  2. CBSA’s system of internal control over financial reporting
     1. Internal Control Management
     2. Service Arrangements relevant to financial statements
  3. CBSA assessment results during fiscal year 2012-2013
     1. Design effectiveness testing of key controls
     2. Operating effectiveness testing of key controls
     3. On-going monitoring program
  4. CBSA’s action plan
     1. Progress during fiscal year 2012-2013
     2. Systems Improvements
     3. Status and action plan for the next fiscal year and subsequent years
     4. Automation and other Control Opportunities

Statement of Management Responsibility

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2013, 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 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 Canada Border Services 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 (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 Agency 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, 2013 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 Canada Border Services Agency’s system of internal controls is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the Agency’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.

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Financial Statements – Agency Activities

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

(in thousands of dollars)

	2013	2012 Restated (note 14)
Liabilities
Accounts payable and accrued liabilities (note 4)	$136,135	$105,737
Vacation pay and compensatory leave	56,521	56,148
Deposit accounts (note 5)	29,999	30,252
Employee future benefits (note 6)	231,277	228,568
Total net liabilities	453,932	420,705
Financial assets
Due from Consolidated Revenue Fund	$123,813	$92,955
Accounts receivable and advances (note 7)	13,939	10,656
Total gross financial assets	137,752	103,611
Financial assets held on behalf of Government
Accounts receivable and advances (note 7)	(2,643)	(2,635)
Total financial assets held on behalf of Government	(2,643)	(2,635)
Total net financial assets	135,109	100,976
Departmental net debt	318,823	319,729
Non-financial assets
Prepaid expenses	$214	$134
Inventory (note 8)	11,480	13,071
Tangible capital assets (note 9)	642,732	575,853
Total non-financial assets	654,426	589,058
Departmental net financial position	$335,603	$269,329

Contingent liabilities (note 10)
Contractual obligations (note 11)

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)

	2013 Planned Results	2013	2012 Restated (note 14)
Expenses
Internal Services	$708,077	$710,204	$752,858
Admissibility Determination	727,251	649,312	652,150
Immigration Enforcement	176,357	161,332	162,013
Risk Assessment	169,694	130,119	127,936
Revenue and Trade Management	76,650	90,635	92,563
Secure and Trusted Partnerships	50,382	41,623	45,535
Criminal Investigations	26,021	29,259	30,277
Recourse	11,225	12,300	14,158
Total expenses	1,945,657	1,824,784	1,877,490
Revenues
Sales of goods and services	14,856	16,616	14,017
Forfeitures of cash bonds	1,343	961	1,084
Miscellaneous	2,427	638	571
Interest, penalties and fines	166	166	270
Revenues earned on behalf of Government	0	(3,485)	(3,943)
Total revenues	18,792	14,896	11,999
Net cost of operations before government funding and transfers	$1,926,865	$1,809,888	$1,865,491
Government funding and transfers
Net cash provided by Government		1,675,339	1,822,134
Services provided without charge by other government departments (note 12a)		163,147	160,823
Change in due from Consolidated Revenue Fund		30,858	12,924
Transfer of assets and liabilities with other government departments (note 9)		6,818	584
Net revenue from operations after government funding and transfers		(66,274)	(130,974)
Departmental net financial position - Beginning of year		269,329	138,355
Departmental net financial position - End of year		$335,603	$269,329

Segmented Information (Note 13)

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

(in thousands of dollars)

	2013	2012 Restated (note 14)
Net revenue from operations after government funding and transfers	$(66,274)	$(130,974)
Changes due to tangible capital assets
Acquisition of tangible capital assets	124,384	171,368
Amortization of tangible capital assets	(64,129)	(43,261)
Proceeds from disposal of tangible capital assets	(371)	(213)
Net (loss) or gain on disposal of tangible capital assets including adjustments	177	981
Transfers from (to) other government departments	6,818	(194)
Total change due to tangible capital assets	66,879	128,681
Change due to inventories	(1,591)	(900)
Change due to prepaid expenses	80	21
Net (decrease) increase in departmental net debt	(906)	(3,172)
Departmental net debt - Beginning of year	319,729	322,901
Departmental net debt - End of year	$318,823	$319,729

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

(in thousands of dollars)

	2013	2012 Restated (note 14)
Operating activities
Net cost of operations before government funding and transfers	$1,809,888	$1,865,491
Non-cash items
Services provided without charge by other government departments	(163,147)	(160,823)
Amortization of tangible capital assets	(64,129)	(43,261)
Gain on disposal and write-down of tangible capital assets including adjustments	177	981
Transfer of liabilities to other government department	0	(778)
Other	0	(1,435)
Variations in Statement of Financial Position
Increase (decrease) in accounts receivable and advances	3,275	696
Increase in prepaid expenses	80	21
(Decrease) increase in inventory	(1,591)	(900)
(Increase) decrease in accounts payable and adcrued liabilities	(30,398)	(16,453)
(Increase) in vacation pay and compensatory leave	(373)	(9)
Decrease in deposit accounts	253	353
(Increase) decrease in employee future benefits	(2,709)	7,096
Cash used in operating activities	1,551,326	1,650,979
Capital investment activities
Acquisitions of tangible capital assets	124,384	171,368
Proceeds from disposal of tangible capital assets	(371)	(213)
Cash used in capital investment activities	124,013	171,155
Net Cash provided by Government of Canada	$1,675,339	$1,822,134

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 (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:

• (a) The Risk Assessment program activity pushes the border out by seeking to identify high risk people and shipments as early as possible in the travel and trade continuum to prevent their departure to Canada.
• (b) Through the Secure and Trusted Partnerships program activity, the Agency 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.
• (c) Through the Admissibility Determination program activity, the Agency 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, and to administer and enforce the policies and guidelines that govern the reporting and verification of goods exported from Canada.
• (d) Under the Criminal Investigations program activity, the Agency investigates and pursues the prosecution of travelers, importers, exporters and/or other persons who commit criminal offences in contravention of Canada’s border-related legislation.
• (e) The Immigration Enforcement program activity 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.
• (f) The Recourse program activity provides the business community and individuals with an accessible mechanism to seek an impartial review of service-related complaints, trade decisions and enforcement actions taken by the Agency. This program activity ensures that the decisions taken by the Agency officials are fair, transparent and accurately reflect the Agency’s policies and the Acts administered by the Agency.
• (g) The Revenue and Trade Management program activity ensures that duties and taxes owed to the Government of Canada are collected in compliance with Canadian trade and imports reporting requirements. Through this program activity, the Agency also administers international and regional trade agreements and domestic legislation and regulations governing trade and commercial goods. 
• (h) The Internal Services program activity is a group of related activities and resources that are administered to support the needs of programs and other corporate obligations. The main activities are governance and management support, resource management services, and asset management services.

2. Summary of Significant Accounting Policies

These financial statements have been prepared using 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 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 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 2012-13 Report on Plans and Priorities.

(b) Net Cash Provided by Government

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 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 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.

Revenues that are non-respendable are not available to discharge the Agency’s liabilities.  While the President of the Agency 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

All 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) 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 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 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

(i)   Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer plan administered by the Government of Canada. The Agency's contributions to the Plan are charged to expenses in the year incurred and represent the Agency’s total obligation to the Plan. 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.

(ii)   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. 

(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 future 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.

3. Parliamentary Authorities

The Agency 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 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

(in thousands of dollars)

	2013	2012 Restated
Net revenue from operations after government funding and transfers	$1,809,888	$1,865,491
Adjustments for items affecting net cost of operations but not affecting authorities
Services provided without charge by other government departments	(163,147)	(160,823)
Amortization of tangible capital assets	(64,129)	(43,261)
Decrease (increase) in employee future benefits	(2,709)	7,096
(Increase) in vacation pay and compensatory leave	(373)	(9)
Gain on disposal and write-down of tangible capital assets	177	981
Recovery of bad debt (bad debt expense)	93	(760)
Decrease (increase) in environmental liabilities	125	(135)
Refund of prior years' expenditures	2,056	684
Decrease (increase) in contingent liabilities	2,350	(3,530)
Decrease (increase) in other	523	(713)
Total items affecting net cost of operations but not affecting authorities	(225,034)	(200,470)
Adjustments for items not affecting net cost of operations but affecting authorities
Acquisition of tangible capital assets	124,384	171,368
Proceeds from disposal of tangible capital assets	(371)	(213)
(Decrease) increase in inventory	(1,591)	(900)
Increase in prepaid expenses	80	21
Total items not affecting net cost of operations but affecting authorities	122,502	170,276
Current year authorities used	$1,707,356	$1,835,297

(b) Authorities provided and used

(in thousands of dollars)

	2013	2012
Authorities provided
Vote 10 – Operating expenditures	$1,702,510	$1,677,761
Vote 15 – Capital expenditures	197,232	239,192
Statutory amounts	187,945	191,565
Total Authorities provided	2,087,687	2,108,518
Less
Authorities available for future years	(379,419)	(272,828)
Lapsed: - Vote 10 - Operating expenditure	(912)	(393)
	(380,331)	(273,221)
Current year authorities used	$1,707,356	$1,835,297

4. Accounts Payable and Accrued Liabilities

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

(in thousands of dollars)

	2013	2012
Accounts payable - External parties	$42,329	$35,319
Accounts payable - Other government departments and agencies	32,425	25,792
Total accounts payable	74,754	61,111
Accrued liabilities	61,381	44,626
Total accounts payable and accrued liabilties	$136,135	$105,737

5. Deposit Accounts

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:

(in thousands of dollars)

	Opening Balance	Receipts	Payments	Closing Balance
Guarantee deposit accounts	$24,780	$7,294	$(7,751)	$24,323
Other deposit accounts	5,472	204	0	5,676
Total deposit accounts	$30,252	$7,498	$(7,751)	$29,999

6. Employee Future Benefits

(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 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 Agency contribute to the cost of the Plan. The 2012-2013 expense amounts to $133,626,000 ($137,438,000 in 2011-2012), which represents approximately 1.7 times (1.8 in 2011-2012) 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.

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)

	2013	2012
Accrued benefit obligation, beginning of year	$228,568	$235,664
Transferred to other government department, effective Nov 15, 2011	0	(577)
Subtotal	228,568	235,087
Expense for the year	30,228	40,846
Benefits paid during the year	(27,519)	(47,365)
Accrued benefit obligation, end of year	$231,277	$228,568

7. Accounts Receivable and Advances

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

(in thousands of dollars)

	2013	2012
Receivables - other government departments and agencies	$10,515	$8,335
Receivables - external parties	4,364	3,663
Employee advances and other receivables	1,793	1,533
Deposits in transit to the Receiver General	(69)	112
	16,603	13,643
Allowance for doubtful accounts on external receivables	(2,664)	(2,987)
Gross accounts receivable	13,939	10,656
Accounts receivable held on behalf of Government	(2,643)	(2,635)
Net accounts receivable	$11,296	$8,021

8. Inventory

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

(in thousands of dollars)

	2013	2012
Uniforms	$11,061	$12,502
Forms and publications	419	569
Total	$11,480	$13,071

The cost of consumed inventory recognized as an expense in the Statement of Operations and Departmental Net Financial Position is $ 5,764,400 ($ 5,275,000 in 2011-2012).

9. Tangible Capital Assets

The following table presents details of the tangible capital assets:

(in thousands of dollars)

	Cost					Accumulated amortization					2013	2012
Capital asset class	Opening Balance	Acqui- sitions	Adjust- ments (1)	Dispo-sals and write-offs	Closing balance	Opening Balance	Amorti-zation	Adjust- ments(1)	Dispo-sals and write-offs	Closing balance	Net book value	Net book value
Land	4,580	0	70	0	4,650	0	0	0	0	0	4,650	4,580
Buildings	200,012	457	60,560	264	260,765	74,810	8,716	24,188	167	107,547	153,218	125,202
Leasehold Improve-ments	27,860	3,352	2,724	884	33,052	16,801	4,651	0	871	20,581	12,471	11,059
Works and infra-structure	1,297	0	216	0	1,513	444	33	65	0	542	971	853
Machinery and equipment	85,954	8,083	96	691	93,442	55,791	7,341	58	679	62,511	30,931	30,163
Information technology equipment, in-house-developed and purchased software	174,148	2,507	103,666	182	280,139	141,809	39,985	164	182	181,776	98,363	32,339
Vehicles	32,121	4,419	185	3,957	32,768	23,012	3,403	100	3,899	22,616	10,152	9,109
Assets under construc-tion	362,548	105,566	(135,685)	453	331,976	0	0	0	0	0	331,976	362,548
Total	888,520	124,384	31,832	6,431	1,038,305	312,667	64,129	24,575	5,798	395,573	642,732	575,853

1) Adjustments include assets under construction of $ 135,685 that were transferred to the other categories upon completion of the assets.

 During the year, the Agency exchanged assets with a net book value increase (decrease) of $ 6,818 as follows:

Public Works and Government Services Canada	6,958
Transport Canada	(204)
Environment Canada	34
Canadian Nuclear Safety Commission	26
Western Economic Development Canada	4

10. Contingent Liabilities

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 (four sites in 2011-2012) where such action is possible and for which a liability of $2,296,000 ($2,421,000 in 2011-2012) 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. While the total amount claimed in these actions is significant, their outcomes are not determinable. The Agency 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 $1,210,000 ($3,560,000 in 2011-2012).  Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management, amount to approximately $9,865,000 ($1,015,000 in 2011-2012 restated) at March 31, 2013.

11. Contractual Obligations

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:

(in thousands of dollars)

	2014	2015	2016	2017	2018 and there- after	Total
Operating contracts	$65,301	$10,595	$1,112	$918	$41	$77,967

12. Related Party Transactions

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 and Departmental Net Financial Position as follows:

(in thousands of dollars)

	2013	2012
Accommodation	$65,756	$63,677
Employer’s contribution to the health and dental insurance plans	87,563	86,899
Workers' compensation coverage	323	340
Legal services	9,505	9,907
Total	$163,147	$160,823

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 Agency’s Statement of Operations and Departmental Net Financial Position.

(b) Administration of programs on behalf of other government departments

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 $631,853 ($575,069 in 2011-2012) on behalf of Canadian International Development Agency. The expenses are reflected in the financial statements of the Canadian International Development Agency and not recorded in these financial statements.

Under an administrative arrangement signed with Canadian International Development Agency on December 15, 2009, the Agency commenced a project to strengthen the laboratory system of the State Customs Services of Ukraine.  During the year, the department incurred expenses of $534,364 ($543,640 in 2011-2012) on behalf of Canadian International Development Agency. The expenses are reflected in the financial statements of the Canadian International Development Agency and not recorded in these financial statements.

Under a memorandum of understanding signed with the Department of National Defence on July 6, 2011, the Agency conducts research on operational video based evaluation of infrastructure and technology. During the year, the department incurred expenses of $130,000 ($120,000 in 2011-2012) on behalf of the Department of National Defence. The expenses are reflected in the financial statements of the Department of National Defence and not recorded in these financial statements.

Under a memorandum of understanding signed with the Department of Foreign Affairs and International Trade on February 3, 2012, the Agency provides expertise for the Afghanistan-Pakistan cooperation process. During the year, the department incurred expenses of $113,476 ($62,153 in 2011-2012) of behalf of the Department of Foreign Affairs and International Trade.  The expenses are reflected in the financial statements of the Department of Foreign Affairs and International Trade and not recorded in these financial statements.

Under a memorandum of understanding signed with the Department of National Defence on June 27, 2011, the Agency conducts research on face recognition in video. During the year, the department incurred expenses of $100,000 ($150,000 in 2011-2012) on behalf of the Department of National Defence. The expenses are reflected in the financial statements of the Departmental of National Defence 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 $51,461,500 ($129,149,000 in 2011-2012).

(d) Other transactions with related parties

(in thousands of dollars)

	2013	2012
Expenses - other government departments and agencies	353,459	481,254
Revenues - other government departments and agencies	1,066	469

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

13. Segmented Information

(in thousands of dollars)

Presentation by segment is based on the Agency’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 expenses and by major type of revenues.

	Risk Assessment	Secure Trusted Partner-ship	Admissi-bility Determi-nation	Criminal Investiga-tions	Immigra-tion Enforce-ment	Recourse	Revenue and Trade Manage-ment	Internal Services	2013 Total	2012 Total
Operating Expenses
Salaries and employee benefits	$114,396	$38,143	$596,755	$25,645	$87,727	$11,250	$83,745	$418,029	$1,375,690	$1,395,525
Professional and special services	2,926	599	5,719	947	43,840	260	1,435	133,472	189,198	236,647
Rental of land and buildings	5,468	1,838	28,598	1,226	4,300	538	4,001	25,395	71,364	68,345
Amortization	184	0	1,484	120	522	0	19	61,800	64,129	43,261
Transportation and telecommunication	5,523	495	6,703	392	14,628	145	991	21,499	50,376	59,547
Repair and maintenance	166	67	2,165	101	579	1	12	21,767	24,858	25,558
Materials and supplies	568	276	5,129	269	983	18	337	9,576	17,156	17,650
Consumable machinery and equipment (parts)	698	83	1,566	515	689	7	101	13,043	16,702	13,367
Other	190	145	1,196	44	8,076	81	48	5,625	15,405	16,830
(Recovery) Bad debts	0	(23)	(3)	0	(12)	0	(54)	(2)	(94)	760
Total operating expenses	130,119	41,623	649,312	29,259	161,332	12,300	90,635	710,204	1,824,784	1,877,490
Revenues
Sale of goods and services	0	4,961	520	0	976	0	10,159	0	16,616	14,017
Forfeitures of cash bonds	0	0	0	0	961	0	0	0	961	1,084
Miscellaneous	0	0	7	0	382	26	0	223	638	571
Interest, penalties and fines	0	0	0	0	0	0	0	166	166	270
Revenues earned on behalf of Government	0	(1,257)	(100)	0	(448)	(5)	(1,577)	(98)	(3,485)	(3,943)
Total revenues	0	3,704	427	0	1,871	21	8,582	291	14,896	11,999
Net cost of operations before government funding and transfers	$130,119	$37,919	$648,885	$29,259	$159,461	$12,279	$82,053	$709,913	$1,809,888	$1,865,491

14. Correction of errors

During the preparation of the 2012-2013 financial statements, the following errors were identified in the 2011-2012 financial statements. As a result, the 2011-2012 comparative figures included in these statements have been restated.

a) The amount reported for accounts receivable and advances as a financial asset in the 2011-2012 Statement of Financial Position was incorrect and the amount reported for accounts receivable and advances as a financial asset held on behalf of Government in the 2011-2012 Statement of Financial Position had not been appropriately netted from gross accounts receivable and advances. These errors have been corrected and the effects are shown in the table below.

b) The amount reported for transfer of assets and liabilities to other government departments in the 2011-2012 Statement of Operations and Departmental Net Financial Position was incorrect. The amount reported should have been the adjustment to the departmental net financial position as shown in the note on transfers to other government departments in 2011-2012, rather than the amount for total assets transferred. This error has been corrected and the effects are shown in the table below. There was no effect of this error on the reported amount for net revenue from operations after government funding and transfers.

c) The amount reported for gain on disposal of tangible capital assets in the 2011-2012 Statement of Cash Flows was incorrect. This error has been corrected and the effects are shown in the table below.

(in thousands of dollars)

	2012 As Previously stated	Effect of the adjustments			2012 Restated
		14 a)	14 b)	14 c)
Statement of Financial Position
Accounts receivable and advances	8,021	2,635			10,656
Accounts receivable and advances (held on behalf of Government)	2,635	(5,270)			(2,635)
Total net financial assets	103,611	(2,635)			100,976
Department net debt	317,094	2,635			319,729
Departmental net financial position	271,964	(2,635)			269,329
Statement of Operations and Departmental Net Financial Position
Net cash provided by Government	1,822,528		(394)		1,822,134
Transfer of assets and liabilities to other government departments	194		390		584
Other	(4)		4		0
Net revenue from operations after government funding and transfers	(130,974)				(130,974)
Departmental net financial position - beginning of year	140,990	(2,635)			138,355
Departmental net financial position - end of year	271,964	(2,635)			269,329
Statement of Change in Departmental Net Debt:
Departmental net debt - beginning of year	320,266	2,635			322,901
Departmental net debt - end of year	317,094	2,635			319,729
Statement of Cash Flows:
Gain on disposal and write-down of tangible capital assets	787			194	981
Transfer of liabilities to other government departments	(194)		(584)		(778)
Other	4	(1,435)	(4)		(1,435)
Decrease in accounts receivable	(739)	1,435			696
Cash used in operating activities	1,651,373		(394)		1,650,979
Net Cash provided by Government of Canada	1,822,528		(394)		1,822,134

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)

	2013	2012
ADMINISTERED ASSETS
Cash on hand	437,475	1,837,622
Accounts receivable - other federal government departments and agencies	2,689	31,970
Taxes receivable (note 3)	2,892,685	1,435,921
Total	3,332,849	3,305,513
ADMINISTERED LIABILITIES
Accounts payable - other federal government departments and agencies	265,974	273,543
Payable to provinces (note 4)	8,811	9,232
Taxes payable	369	1,837
Deposit accounts (note 5)	13,043	12,739
Sub-Total	288,197	297,351
Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada (note 6)	3,044,652	3,008,162
Total	3,332,849	3,305,513

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

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

(in thousands of dollars)

	2013	2012
Administered Revenues
Tax revenues
Excise taxes (note 7)	20,337,711	19,927,035
Customs import duties	3,979,494	3,861,607
Excise duties	1,275,859	1,324,717
Total	25,593,064	25,113,359
Non-tax revenues
Interest, penalties and fines	15,051	12,784
Seized property	9,673	10,008
Sale of goods and services	1,374	1,412
Miscellaneous	307	184
Total	26,405	24,388
Total Revenue Administered on behalf of the Government of Canada	25,619,469	25,137,747
Less: Bad Debts	35,895	53,146
Net Administered Revenues	25,583,574	25,084,601

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)

	2013	2012
Net Administered Revenues	25,583,574	25,084,601
Variations in administered assets and liabilities:
(Increase) Decrease in cash on hand	1,400,147	(175,244)
(Increase) Decrease in accounts receivable - other federal government departments and agencies	29,281	(26,529)
(Increase) Decrease in taxes receivable	(1,456,764)	(19,049)
Increase (Decrease) in accounts payable - other federal government departments and agencies	(7,569)	81,098
Increase (Decrease) in payable to provinces	(421)	885
Increase (Decrease) in taxes payable	(1,468)	(235)
Increase (Decrease) in deposit accounts	304	3,674
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada	25,547,084	24,949,201
Consisting of:
Cash deposits to the Consolidated Revenue Fund	26,193,732	25,656,858
Cash payments/refunds from the Consolidated Revenue Fund	(646,648)	(707,657)
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada	25,547,084	24,949,201

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 (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 Agency administered activities reports on tax and non-tax revenues, assets and liabilities administered on behalf of the federal, provincial and territorial governments.

2. Summary of Significant Accounting Policies

The purpose of these 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 against 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) 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 ended March 31.  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.  Domestic HST and GST, as well as the input tax credits accorded for GST/HST paid on importations and domestic transactions, are not reflected in these statements as the CRA is responsible for their administration.  Excise taxes are also assessed on gasoline and other miscellaneous imports. 
• Customs import duties:  Consists of import duties assessed on imports.   They are shown net of any refunds, rebates and drawbacks.  
• Excise duties: Consists of tobacco, beer and liquor duties assessed on imports.  They are shown 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.

(b) 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 revenue.

(c) Cash on hand

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 of the Government of Canada.

(d) Taxes receivable

Taxes receivable represent duties and taxes 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.

(e) 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; 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.

(f) Payable to provinces

Payable to provinces represents amounts derived from memorandums of understanding (MOUs)  between the provinces and the Agency, whereby provincial sales, alcohol and tobacco taxes are collected and remitted to the provinces.

(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) 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.  Taxes Receivable

Taxes receivable represent the customs duties, excise taxes, GST and HST, penalties and interest due to the Receiver General for Canada as a result of importations into Canada.

The following table presents details of taxes receivable:

(in thousands of dollars)

	2013	2012
Taxes receivable	3,002,804	1,514,568
Allowance for doubtful accounts	(110,119)	(78,647)
Taxes receivable	2,892,685	1,435,921

4. Payable to Provinces

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

(in thousands of dollars)

	2013	2012
Opening balance	9,232	8,347
Receipts from importers	45,323	41,951
Refunds to importers	(337)	(217)
Payments to provinces	(45,407)	( 40,849)
Closing Balance	8,811	9,232

5. Deposit Accounts

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:

(in thousands of dollars)

	2013	2012
Opening balance	12,739	9,065
Receipts	5,246	3,957
Payments	(4,942)	(283)
Closing Balance	13,043	12,739

6. Net amount due to the Consolidated Revenue Fund

The net amount due to the Consolidated Revenue Fund (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:

(in thousands of dollars)

	2013	2012
Opening balance	3,008,162	2,872,762
Net administered revenues	25,583,574	25,084,601
Net cash deposited in the Consolidated Revenue Fund	(25,547,084)	(24,949,201)
Closing Balance	3,044,652	3,008,162

7. Excise Taxes

The following table presents details of the excise tax revenues:

(in thousands of dollars)

	2013	2012
GST/HST	20,564,894	20,115,492
Tax remission order	(47,141)	(57,106)
Transfer of HST to Provinces	(206,903)	(203,854)
Other excise taxes	26,861	72,503
Excise taxes	20,337,711	19,927,035

8. Related Party Transactions

The Agency is related as a result of common ownership to all 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 also receives collection services from Canada Revenue Agency under Part V.I of the Customs Act.

9. 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 2012-2013

1. Introduction

This document provides summary information on the measures taken by the Canada Border Services Agency (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, 2013, 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 2012 - 2013 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.

In 2012-2013, the DAC met 4 times to provide advice to the President of the CBSA and discuss CBSA business as follows:

• June 8, 2012 – The focus was on Values and Ethics, Risk-based Audit Plan for the year, Assurance Overview Report, the Chief Audit Executive Annual Report, Beyond the Border (BtB) Action Plan, Risk Mitigation Strategies, Deficit Reduction Action Plan, Chief Financial Officer Report on the Current Financial Situation at the Agency, Audit of the National Targeting Implementation Project, the External Audit Status update, and Monitoring Report on Previous Audit Recommendations;
• July 18, 2012 – The focus was on the CBSA Financial Statements for 2011-2012, including the Annex to the Statement of Management Responsibility and Internal Controls over Financial Reporting;
• October 23, 2012 – The focus was on the Audit of Trusted Travellers, Compliance Audit of the HR Staffing process, Financial Audit by the OAG of the 2011-2012 Public Accounts of Canada, and the Risk-Based Audit Plan Budget, and

December 19, 2012 – The focus was on the Audit of Border Controls at Marine Ports of Entry, Review of the e-Manifest Project, the CBSA Internal Audit Charter and the Audit Committee Charter.

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 CFO is an ex-officio member of the DAC.

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.  The CBSA, CRA and the SSC will continue to pursue this trilateral governance model as required to ensure an effective transition of the CBSA services and systems, to a common enterprise infrastructure.

3. CBSA assessment results during fiscal year 2012-2013

3.1 Design effectiveness testing of key controls

The Department completed all remaining design effectiveness testing, with the exception of Financial Authorities, including those controls related to Asset Safeguarding, System Access Configuration and Revenue Management. 
As a result of design effectiveness testing, the Agency identified the following remediation as required:

• Greater consistency in the quality and availability of the documentation of controls and procedures of the Safeguarding of Assets between the headquarters and the regions;
• Improved documentation of the CBSA Revenue Management Process; and
• Enhanced documentation of the Financial System Access Controls including the definition of the key accounts and financial functions with the identification of key process owners, risks and control points, the mapping of key processes and the role and segregation of system users.

3.2 Operating effectiveness testing of key controls

During the year, the Agency also commenced operating effectiveness testing of the Financial Close and Reporting procedures. To date, operating effectiveness testing has identified opportunities for improvement with respect to the mapping of corporate accounting business processes. 

3.3 On-going monitoring program

In the current year, the Agency performed on-going monitoring in the following control areas, namely Entity Level Controls, Compensation, Payment Requisitioning (s.33 of the Financial Administration Act verification), Capital Assets, Acquisition Cards, Hospitality/Travel, and the Information technology general controls (ITGC) processes. The results were as follows:   

• Entity Level Controls - In 2012-2013, the Values and Ethics elements of the Control Environment were identified as the highest risk area, monitoring and validation exercises at year-end have shown that appropriate action has been implemented to raise professional integrity awareness, and foster ethical and professional conduct across the CBSA. No significant deficiencies have been observed.    
• Compensation – Key controls are in place both at HQ and in the regions, and key controls tested demonstrated effectiveness against compliance. It was noted, however, that timeliness of letters of offer and peer verification could be improved. Direction was issued to staffing and compensation communities to reinforce peer verification and measures to ensure that letters of offer would be issued prior to a candidates start date. Issues identified with respect to timeline of letters of offer and peer verification have been addressed.
• Payment processing (s.33 FAA Verification) – Key controls tested performed effectively. No significant deficiencies were identified but there is room for improvements in respect to management of supporting documentation and verification checklist to enhance the audit trail. Remediation has been initiated. 
• Capital assets – Key controls tested performed effectively. No significant deficiencies were identified.  Opportunity for improvement to management of supporting documentation, specifically of the section 32 (Commitment Control Authority) of the Financial Administration Act (FAA) would enhance the audit trail. Remediation has been initiated. 
• Acquisition Cards – Key controls tested performed effectively to demonstrate compliance with Treasury Board Secretariat policies and section 34 of the FAA approval. No significant deficiencies have been observed but there is room for improvement with respect to the proper exercise of section 32 (Commitment Control Authority). Remediation has been initiated and it includes acquisition card monitoring in 2013-2014 as part of CBSA account verification quality assurance strategy.
• Hospitality /Travel –Key controls tested performed effectively against compliance with Treasury Board policies and found no evidence of material control failures where remediation would be required.
• Information Technology General Controls (ITGCs) – The CBSA relies on the CRA for the processing of specific expenditure transactions and the information generated affects financial statements; these include commensurate internal control testing for general computer controls.  In 2012-2013, the CRA completed on-going monitoring of design and operating effectiveness for 60% of the general computer controls related to: Information Systems Operations, Information Security, and Systems Implementation and Maintenance.  This included the testing of controls relevant to the CBSA, the determination of which control activities were transferred to Shared Services Canada (SSC), and the testing of the control activities which are jointly owned with SSC.  The CRA completed assessment testing of 23 of its 37 (62%) general computer controls related to Information Systems Operations, Information Security, and Systems Implementation and Maintenance for both the CRA and the CBSA.  These assessment activities included the determination of control activities slated for transfer to the SSC and the testing of 13 control activities that the CRA jointly owns with the SSC.

With respect to identified remediation activities, 17 general computer control improvements are within CRA’s area of controls of which 7 apply to the CBSA.  All of these (except 1 that is still under development) were re-tested and 9 (5 of which apply to the CBSA) still require remediation.  These ITGC activities relate to:

• formal approval by management for system changes; and
• retention of documentation for audit purposes.

For more information on the implementation, operating effectiveness testing and ongoing monitoring of the CBSA’s ITGCs, refer to Canada Revenue Agency’s (CRA’s) Annex to the Statement of Management Responsibility including Internal Controls Over Financial Reporting (http://www.cra-arc.gc.ca/gncy/nnnl/2011-2012/fn-stmnt-dtd-dmnstrd-tvts-eng.html).

4. CBSA’s action plan

4.1 Progress during fiscal year 2012-2013

During 2012-2013, 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:   

4.2 Systems Improvements

During 2012-2013, advancement was made in the implementation of an Accounts Receivable Ledger (ARL) project and the Assessment and Revenue Management (CARM) project. The primary goal of these initiatives is to ensure accurate, timely, complete and reliable financial information for efficient and effective management and accounting of tax revenues. During the development and construction phases of both initiatives, particular attention is being deployed to ensure internal control are embedded in the new solutions.

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

Building on progress to date, the CBSA is positioned to complete the full assessment of its system of ICFR in 2013-2014 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 2013-2014 and subsequent years is as follows:

4.4 Automation and other Control Opportunities

With the implementation of new financial automation functionalities, specifically for electronic authentication and authorization of payment requisitions, the following financial control frameworks will be assessed:

• Departmental Financial Authority (DFA): an electronic instrument, based on appropriate segregation of duties or division of responsibilities, with specific reference to Sections 32 (Commitment Control Authority), 33 (Payment Authority), and 34 (Contract Performance Authority) of the FAA;
• Automated access: role access automation of the financial system for the delegated authorities and financial data administrators;
• Procurement: an automated process to streamline and simplify Agency procurement operations beginning in 2013-2014;
• “My-Travel”: a new automated tool using the CBSA’s financial system to assist employees with online completion of travel authorization the travel advance and the travel claim; and,
• Accounts Receivable Ledger Integration  into the Revenue Management Control framework.