Canada Border Services Agency Financial Statements For the Year Ended March 31, 2018

Table of contents

Statement of Management Responsibility Including Internal Control Over Financial Reporting

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

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

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

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

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

A risk-based assessment of the system of ICFR for the year ended was completed with limited activities. In the 2017 Financial Management Review of the CBSA, carried out by the Treasury Board secretariat Special Advisor, some deficiencies were noted in the risk based system of internal controls as a result of the Agency’s funding challenges.

Notwithstanding the limitations on the work done, the results of the Canada Border Service Agency’s Account Verification activities during the reporting period did not reveal any indication of material misstatements or any substantial irregularities. The completed portion of the ICFR assessment was performed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the annex.

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

The financial statements of the CBSA have not been audited.

John Ossowski, President
Ottawa, Canada
August 31, 2018

Jonathan Moor, Chief Financial Officer
Ottawa, Canada
August 31, 2018


Canada Border Services Agency (Agency Activities)

Statement of Financial Position (Unaudited)
As at March 31

(in thousands of dollars)
Liabilities 2018 2017
Accounts payable and accrued liabilities (note 4) 194,036 134,140
Vacation pay and compensatory leave 65,614 60,820
Deposit accounts (note 6) 30,213 29,057
Environmental liabilities (note 5) 1,188 1,166
Provision for claims and litigation (note 11) 665 2,165
Employee future benefits (note 7) 57,615 58,423
Total liabilities 349,331 285,771
Financial assets 2018 2017
Due from Consolidated Revenue Fund 153,336 106,558
Accounts receivable and advances (note 8) 45,913 31,419
Total gross financial assets 199,249 137,977
Financial assets held on behalf of Government 2018 2017
Accounts receivable and advances (note 8) (6,220) (3,818)
Total financial assets held on behalf of Government (6,220) (3,818)
  2018 2017
Total net financial assets 193,029 134,159
  2018 2017
Departmental net debt 156,302 151,612
Non-financial assets  2018 2017
Tangible capital assets (note 9) 994,134 954,820
Total non-financial assets 994,134 954,820
  2018 2017
Departmental net financial position 837,832 803,208

Contractual obligations (note 10)
Contingent liabilities (note 11)
The accompanying notes form an integral part of these financial statements.

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

(in thousands of dollars)
Expenses 2018 Planned Results 2018 2017
Admissibility Determination  1,040,526 926,094 879,544
Internal Services 386,755 457,213 422,513
Immigration Enforcement 217,098 179,814 170,599
Risk Assessment 195,462 178,397 190,352
Revenue and Trade Management 69,587 88,016 116,496
Secure and Trusted Partnerships  50,301 41,464 43,695
Criminal Investigations  33,341 35,088 35,455
Recourse 11,749 11,297 11,044
Total expenses 2,004,819 1,917,383 1,869,698
Revenues 2018 Planned Results 2018 2017
Sales of goods and services  20,333 24,124 22,768
Miscellaneous Revenues 2,380 843 1,815
Revenues earned on behalf of Government  (4,283) (3,824) (3,455)
Total revenues 18,430 21,143 21,128
  2018 Planned Results 2018 2017
Net cost of operations before government funding and transfers 1,986,389 1,896,240 1,848,570
Government funding and transfers 2018 Planned Results 2018 2017
Net cash provided by Government   1,723,158 1,737,863
Services provided without charge by other government departments (note 12)   160,937 174,408
Change in due from Consolidated Revenue Fund   46,778 (46,639)
Transfer of the transition payments for implementing salary payment in arrears   (9) (18)
  2018 Planned Results 2018 2017
Net cost of operations after government funding and transfers   (34,624) (17,044)
Departmental net financial position - Beginning of year   803,208 786,164
Departmental net financial position - End of year   837,832 803,208

Segmented information (note 13)
The accompanying notes form an integral part of these financial statements.

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

(in thousands of dollars)
  2018 2017
Net cost of operations after government funding and transfers (34,624) (17,044)
Change due to tangible capital assets 2018 2017
Acquisition of tangible capital assets 109,946 109,080
Amortization of tangible capital assets (77,295) (80,468)
Proceeds from disposal of tangible capital assets (31) (990)
Net loss on disposal of tangible capital assets (518) (23,976)
Adjustments to tangible capital assets 7,212 96
Total change due to tangible capital assets 39,314 3,742
  2018 2017
Change due to inventory - (3,703)
Net increase (decrease) in departmental net debt 4,690 (17,005)
Departmental net debt - Beginning of year 151,612 168,617
Departmental net debt - End of year 156,302 151,612

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

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

(in thousands of dollars)
Operating activities 2018 2017
Net cost of operations before government funding and transfers 1,896,240 1,848,570
Non-cash items: 2018 2017
Services provided without charge by other government departments (note 12) (160,937) (174,408)
Amortization of tangible capital assets (77,295) (80,468)
Net loss on disposal of tangible capital assets (518) (23,976)
Adjustments to tangible capital assets 7,212 96
Transition payments for implementing salary payments in arrears 9 18
Variations in Statement of Financial Position: 2018 2017
Increase in accounts receivable and advances 12,092 13,641
(Decrease) in inventory - (3,703)
(Increase) decrease in liabilities (63,560) 50,003
Cash used in operating activities 1,613,243 1,629,773
Capital investing activities 2018 2017
Acquisition of tangible capital assets 109,946 109,080
Proceeds from disposal of tangible capital assets (31) (990)
Cash used in capital investing activities 109,915 108,090
  2018 2017
Net cash provided by Government of Canada 1,723,158 1,737,863

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

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

1. Authority and Objectives

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

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

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

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

2. Summary of Significant Accounting Policies

These financial statements are prepared using the department’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:

3. Parliamentary Authorities

The Department 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 Department 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)
  2018 2017
Net cost of operations before government funding and transfers 1,896,240 1,848,570
Adjustments for items affecting net cost of operations but not affecting authorities: 2018 2017
Services provided without charge by other government departments (160,937) (174,408)
Amortization of tangible capital assets (77,295) (80,468)
Refund and adjustments to prior years' expenditures 2,744 3,339
Net loss on disposal of tangible capital assets (518) (23,976)
Decrease in employee future benefits 808 20,055
(Increase) decrease in vacation pay and compensatory leave (4,794) (574)
(Increase) decrease in environmental liabilities (22) 18
(Increase) decrease in claims and litigation 1,500 (1,500)
(Increase) accrued liabilities not charged to authorities (706) (499)
(Increase) in bad debt expense (355) (406)
Other 1,846 4,395
Total items affecting net cost of operations but not affecting authorities (237,729) (254,024)
Adjustments for items not affecting net cost of operations but affecting authorities: 2018 2017
Acquisition of tangible capital assets 109,946 109,080
Proceeds from disposal of tangible capital assets (31) (990)
(Decrease) in inventory - (3,703)
Transition payments for implementing salary payments in arrears 9 18
Total items affecting net cost of operations but not affecting authorities 109,924 104,405
Current year authorites used 1,768,435 1,698,951

(b) Authorities provided and used:

(in thousands of dollars)
Authorities provided: 2018 2017
Vote 1 - Operating expenditures 1,757,949 1,559,660
Vote 5 - Capital expenditures 296,526 194,757
Statutory amounts 159,863 172,582
Less: 2018 2017
Authorities available for future years (219,539) (209,487)
Lapsed: Operating (97,998) (15,826)
Lapsed: Capital (128,366) (2,735)
Current year authorities used 1,768,435 1,698,951

4. Accounts Payable and Accrued Liabilities

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

(in thousands of dollars)
  2018 2017
Accounts payable - Other government departments and agencies 34,344 16,929
Accounts payable - External parties 69,954 31,211
Total accounts payable 104,298 48,140
Accrued liabilities 89,738 86,000
Total accounts payable and accrued liabilities 194,036 134,140

5. Environmental Liabilities

Remediation of contaminated sites

The Government’s “Federal Approach to Contaminated Sites” sets out a framework for management of contaminated sites using a risk-based approach. Under this approach the Government has inventoried the contaminated sites identified on federal lands, allowing them to be classified, managed and recorded in a consistent manner. This systematic approach aides in the identification of the high risk sites in order to allocate limited resources to those sites which pose the highest risk to human health and the environment.

The Department has identified 5 sites (5 sites in 2017) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has identified 3 sites (3 sites in 2017) where action is required and for which a gross liability of $1,188 thousand ($1,166 thousand in 2017) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

This represents management’s best estimate of the costs required to remediate sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date.

For the remaining 2 sites (2 sites in 2017), no liability for remediation has been recognized. These sites are at various stages of testing and evaluation and if remediation is required, liabilities will be reported as soon as a reasonable estimate can be determined. For other sites, the Department does not expect to give up any future economic benefits (there is likely no significant environmental impact or human health threats). These sites will be re-examined and a liability for remediation will be recognized if future economic benefits will be given up.

The following table presents the total estimated amounts of these liabilities by nature and source as at March 31, 2018 and March 31, 2017:

Nature and Source Number of Sites 2018 Estimated Liability 2018(2) Number of Sites 2017 Estimated Liability 2017(2)
Fuel Related Practices (1) 3 1,188,000 3 1,166,000
Totals 3 1,188,000 3 1,166,000

1. Contamination pimarily associaed with fuel storage and handling, e.g., accidental spills related to fuel stoage tanks or former fuel handling practices, e.g. peroleum hydrocarbons, polyaromatic hydrocarbons and BTEX.

2. It was determined that the ffects of discounting these liabilities for each fiscal year is immaterial for the CBSA. Therefore, a present value technique has not been used to calculate the discounted value of each site.

The Department’s ongoing efforts to assess contaminated sites may result in additional environmental liabilities.

6. Deposit Accounts

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

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

The following table presents details on the deposit accounts:

(in thousands of dollars)
  Opening Balance Deposits Refunds Forfeitures Closing Balance
Immigration guarantee fund 22,038 6,141 (4,835) (660) 22,684
General secuity deposits 7,019 510 - - 7,529
Total deposit accounts. 29,057 6,651 (4,835) (660) 30,213

7. Employee Future Benefits

(a) Pension benefits

The Department's employees participate in the Public Service Pension Plan (the “Plan”), which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plan benefits and they are indexed to inflation.

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

The 2017-2018 expense amounts to $108,754 thousand ($119,519 thousand in 2016-2017). For Group 1 members, the expense represents approximately 1.01 times (1.12 times in 2016-2017) the employee contributions and, for Group 2 members, approximately 1.00 times (1.08 times in 2016-2017) the employee contributions.

The Department's responsibility with regard to the Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the Consolidated Financial Statements of the Government of Canada, as the Plan's sponsor.

(b) Severance benefits

Severance benefits provided to the Department’s employees were previously based on an employee’s eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2018, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

The changes in obligations during the year were as follows:

(in thousands of dollars)
  2018 2017
Accrued benefit obligation, beginning of year 58,423 78,478
Expense (recovery) for the year 3,464 (14,924)
Benefits paid during the year (4,272) (5,131)
Accrued benefit obligation, end of year 57,615 58,423

8. Accounts Receivable and Advances

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

(in thousands of dollars)
  2018 2017
Receivables - Other government departments and agencies 38,753 26,198
Receivables - External parties 4,694 3,857
Employee advances and other receivables 5,320 4,257
  48,767 34,312
Allowance for doubtful accounts on external receivables (2,854) (2,893)
Gross accounts receivable 45,913 31,419
Accounts receivable held on behalf of Government (6,220) (3,818)
Net accounts receivable 39,693 27,601

9. Tangible Capital Assets

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

Asset class Amortization period
Buildings 30 years
Works and infrastructure 40 years
Machinery and equipment 10 years
Informatics hardware 5 years
Informatics software
Purchased software
In-house developed software
 
3 years
7 years
Vehicles
Motor vehicles
Ships and boats
 
5 years
10 years
Leasehold improvements Over the useful life of the improvement or lease term, whichever is shorter
Assets under construction Once in service, in accordance with asset type

Assets under construction are recorded in the applicable asset class in the year they are put into service and are not amortized until they are put into service.

The following table presents details of the tangible capital assets:

Cost (in thousands of dollars)
Capital asset class Opening balance Acquisitions Adjustments Disposals and write-offs Closing balance
Land 4,605 - 2,803 - 7,408
Buildings 437,505 1,508 6,818 2,690 443,141
Leasehold improvements 34,832 - - 4,517 30,315
Works and infrastructure 6,714 579 - - 7,293
Machinery and equipment 111,985 8,005 11 5,976 114,025
Informatics hardware 55,315 7,519 - 7,013 55,821
Informatics software - in-house developed 490,915 - - 159 490,756
Informatics software - purchased 5,811 - 1,271 1,271 5,811
Motor vehicles 30,027 73   318 29,782
Ships and boats 882   165 3 1,044
Assets under construction 409,283 92,262 - 64 501,481
Total 1,587,874 109,946 11,068 22,011 1,686,877
Accumulated amortization (in thousands of dollars)
Capital asset class Opening balance Amortization Adjustments Disposals and write-offs Closing balance
Land - - - - -
Buildings 164,991 13,677 2,409 2,475 178,602
Leasehold improvements 31,312 1,087 - 4,518 27,881
Works and infrastructure 2,664 340 - - 3,004
Machinery and equipment 59,467 8,948 11 5,770 62,656
Informatics hardware 45,237 4,224 - 6,990 42,471
Informatics software - in-house developed 298,552 46,597 - 119 345,030
Informatics software - purchased 5,789 22 1,271 1,271 5,811
Motor vehicles 24,443 2,338 - 315 26,466
Ships and boats 599 62 165 4 822
Assets under construction - - - - -
Total 633,054 77,295 3,856 21,462 692,743
Net book value (in thousands of dollars)
Capital asset class 2018 2017
Land 7,408 4,605
Buildings 264,539 272,514
Leasehold improvements 2,434 3,520
Works and infrastructure 4,289 4,050
Machinery and equipment 51,369 52,518
Informatics hardware 13,350 10,078
Informatics software - in-house developed 145,726 192,363
Informatics software - purchased - 22
Motor vehicles 3,316 5,584
Ships and boats 222 283
Assets under construction 501,481 409,283
Total 994,134 954,820

10. Contractual Obligations

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

(in thousands of dollars)
  2019 2020 2021 2022 2023 2024 and subsequent Total
Purchase contracts 99,955 13,414 2,523 2,144 1,111 3 119,150

11. Contingent Liabilities

Contingent liabilities arise in the normal course of operations, and their ultimate disposition is unknown.

Claims and litigation

Claims have been made against the Department 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 Department has recorded an allowance for claims and litigations where it is likely that there will be a future payment and a reasonable estimate of the loss can be made.

Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $8,715 thousand ($10,215 thousand in 2016-2017) at March 31, 2018.

Claims and litigation with related parties included in the above amounts amount to nil (nil in 2017) at March 31, 2018.

12. Related Party Transactions

The Department is related as a result of common ownership to all government departments, agencies, and Crown corporations. Related parties also include individuals who are members of key management personnel or close family members of those individuals, and entities controlled by, or under shared control of, a member of key management personnel or a close family member of that individual.

The Department enters into transactions with these entities in the normal course of business and on normal trade terms.

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

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

(in thousands of dollars)
  2018 2017
Employer's contribution to the health and dental insurance plans 102,474 102,804
Accommodation 53,814 62,847
Legal services 4,332 8,461
Workers' compensation coverage 317 296
Total 160,937 174,408

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

(b) Other transactions with other government departments and agencies:

(in thousands of dollars)
  2018 2017
Expenses 346,339 333,634
Revenues 753 772

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

13. Segmented Information

Presentation by segment is based on the Department’s core responsibility. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2.

The major categories of revenue are described below:

Immigration and Refugee Protection Regulations administration fees

The administration fee amounts are set out in section 280 of the Immigration and Refugee Protection Regulations. Transporters are required to pay administration fees to partially defray the cost of processing certain categories of inadmissible foreign nationals conveyed to Canada. The fees apply when a transporter carries a foreign national.

Inspection fees for food, plant and animal products

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

NEXUS fees for pre-approved and frequent travellers

NEXUS fees are for processing applications related to a joint initiative between the Department and the United States Customs and Border Protection that simplifies border crossings for its members and enhances border security. Authority to collect these fees is pursuant to section 24(1) of the Presentation of Persons (2003) Regulations. The NEXUS fees are a non-refundable processing and application fee for becoming a member of this program.

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

FAST fees are for processing applications related to a joint initiative between the Department and United States Customs and Border Protection that enhances border and trade chain security while making cross-border commercial shipments simpler and subject to fewer delays. Authority to collect these fees is pursuant to section 24(1) of the Presentation of Persons (2003) Regulations.

Detector dog training services

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

The following table presents the expenses incurred and revenues generated for the main core responsibilities, by major object of expense and by major type of revenue. The segment results for the period are as follows:

Operating Expenses (in thousands of dollars)
  Admissibility Determination Internal Services Immigration Enforcement Risk Assessment Revenue and Trade Management Secure and Trusted Partnership Criminal Investigations Recourse 2018 Total 2017 Total
Salaries and employee benefits 745,321 253,979 107,468 128,147 70,688 38,026 31,798 10,564 1,385,991 1,356,476
Professional and special services 64,445 106,798 48,163 33,808 4,194 1,175 346 183 259,112 241,031
Amortization of tangible capital assets 8,543 56,523 3,475 98 8,568 37 51  -  77,295 80,468
Rental of buildings and machinery 36,549 10,221 4,451 5,020 2,800 1,500 1,269 411 62,221 69,610
Transportation and telecommunication 24,118 5,215 10,682 2,066 955 258 376 44 43,714 35,829
Machinery and equipment 22,715 15,386 572 2,729 223 164 609 54 42,452 16,283
Repairs and maintenance 9,838 7,243 1,046 6,073 6 41 273 - 24,520 24,153
Utilities, materials and supplies 8,568 1,996 1,046 407 409 119 350 37 12,932 11,661
Other 5,884 918 2,830 47 13 2 13 (1) 9,706 35,339
Court awards and other settlements 104 410 38 2 1 3 4 562 298
Bad debts 9 2 43 - 159 142 - 1 356 407
Provision for contingent liabilities - (1,478) - - - - - - (1,478) 1,478
Refunds and adjustments to prior years' expenditures *** - - - - - - - - - (3,339)
Total operating expenses 926,094 457,213 179,814 178,397 88,016 41,464 35,088 11,297 1,917,383 1,869,698
Revenues
  Admissibility Determination Internal Services Immigration Enforcement Risk Assessment Revenue and Trade Management Secure and Trusted Partnership Criminal Investigations Recourse 2018 Total 2017 Total
Sales of goods and services 572 1 2,411 - 11,161 9,979 - - 24,124 22,768
Miscellaneous Revenues 37 134 620 1 - - 9 42 843 1,815
Revenues earned on behalf of Government (93) (21) (464) - (1,710) (1,529) (1) (6) (3,824) (3,455)
Total revenues  516 114 2,567 1 9,451 8,450 8 36 21,143 21,128
Net cost from operations before government funding and transfers 925,578 457,099 177,247 178,396 78,565 33,014 35,080 11,261 1,896,240 1,848,570

*** There is 2,744 Refunds and adjustments to prior year’s expenditures included as credits against individual operating expenditures in 2018 fiscal year and are not included on separate line items as they were in prior years.


Financial Statements - Administered Activities

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

(in thousands of dollars)
Administered assets 2018 2017
Cash on hand 350,358 449,333
Accounts receivable - other government departments and agencies 1,270 50
Accounts receivable - external parties (note 3) 3,362,913 2,935,179
Total 3,714,541 3,384,562
Administered liabilities 2018 2017
Accounts payable - other government departments and agencies 268,961 246,238
Accounts payable - provinces (note 4) 13,310 11,615
Accounts payable - external parties 452 386
Deposit accounts (note 5) 9,810 9,825
  292,533 268,064
Net amount due to the Consolidated Revenue Fund of the Government of Canada (note 6) 3,422,008 3,116,498
Total 3,714,541 3,384,562

Contingent liabilities (note 7)
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)
Administered revenues    
Tax revenues 2018 2017
Excise taxes (note 8) 25,252,550 23,900,136
Customs import duties 5,416,240 5,477,359
Excise duties 1,352,626 1,432,743
Total 32,021,416 30,810,238
Non-tax revenues 2018 2017
Interest, penalties and fines 44,380 29,976
Sale of goods and services 819 835
Other 111 111
Total 45,310 30,922
Total administered revenues 32,066,726 30,841,160
Bad debt expense 108,184 73,493
Net administered revenues 31,958,542 30,767,667

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)
  2018 2017
Net administered revenues 31,958,542 30,767,667
Variations in administered assets and liabilities: 2018 2017
(Increase) decrease in cash on hand 98,975 1,863,159
(Increase) decrease in accounts receivable - other government departments and agencies (1,220) 6,573
(Increase) decrease in accounts receivable - external parties (427,734) (2,053,554)
Increase (decrease) in accounts payable - other government departments and agencies 22,723 17,476
Increase (decrease) in accounts payable - provinces 1,695 808
Increase (decrease) in accounts payable - external parties 66 102
Increase (decrease) in deposit accounts (15) (2,932)
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada 31,653,032 30,599,299
Consisting of: 2018 2017
Deposits to the Consolidated Revenue Fund 32,206,340 31,174,896
Payments and refunds from the Consolidated Revenue Fund (553,308) (575,597)
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada 31,653,032 30,599,299

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

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

1. Authority and objectives

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

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

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

2. Summary of Significant Accounting Policies

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

A summary of significant accounting policies are as follows:

(a) Cash on hand

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

(b) Accounts receivable

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

(c) Accounts payable – provinces

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

(d) Accounts payable – external parties

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

(e) Contingent liabilities

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

(f) Tax revenues

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

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; in those cases, the Agency does not estimate the amount of duties and taxes. However, such amounts are included in revenues when identified during reassessment.

(g) Non-tax revenues

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

(h) Allowance for doubtful accounts

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

(i) Tax remission order

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

(j) Measurement uncertainty

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

3. Accounts Receivable – External Parties

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

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

(in thousands of dollars)
  2018 2017
Accounts receivable - external parties 3,659,352 3,123,439
Allowance for doubtful accounts (296,439) (188,260)
Accounts receivable - external parties 3,362,913 2,935,179

4. Accounts Payable - Provinces

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

(in thousands of dollars)
  2018 2017
Opening balance 11,615 10,807
Receipts from importers 87,339 76,530
Refunds to importers (408) (501)
Payments to provinces (85,236) (75,221)
Closing balance 13,310 11,615

5. Deposit Accounts

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

The following table presents details on the deposit accounts:

(in thousands of dollars)
  2018 2017
Opening balance 9,825 12,757
Receipts 531 1,405
Payments (546) (4,337)
Closing balance 9,810 9,825

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

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

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

(in thousands of dollars)
  2018 2017
Opening balance 3,116,498 2,948,130
Net administered revenues 31,958,542 30,767,667
Net cash deposited in the Consolidated Revenue Fund (31,653,032) (30,599,299)
Closing balance 3,422,008 3,116,498

7. Contingent Liabilities

Claims have been made against the Agency in the normal course of operations. These claims represent appeals for previously assessed GST and HST, customs duties and excise duties. While the total amount claimed in these actions amount to approximately $69 million as at March 31, 2018 ($34 million as at March 31, 2017), their outcomes are not determinable and as a result no liability has been recorded in the financial statements (nil as at March 31, 2017).

8. Excise Taxes

The following table presents details of the excise tax revenues:

(in thousands of dollars)
  2018 2017
GST and HST 25,415,835 24,024,708
Tax remission order (23,034) (30,204)
Transfer of HST to Provinces (236,527) (205,248)
Other excise taxes 96,276 110,880
Excise taxes 25,252,550 23,900,136

9. Related Party Transactions

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


Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting Fiscal Year 2017-2018

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) including information on internal control management and assessment results and related action plans.

Detailed information on the CBSA’s authority, mandate, and program activities can be found in the Departmental Results Report 2016-2017 and the Departmental Plan 2017-2018.

2. Departmental system of internal control over financial reporting

2.1 Internal Control Management

The CBSA has a well-established governance and accountability structure to support its assessment efforts and the oversight of its system of internal control. The Agency’s Internal Control Financial Management Framework, approved by the President and the Comptrollership Branch Management Committee, is in place and includes:

The Departmental Audit Committee 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.

2.2 Service Arrangements relevant to financial statements

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

Common Arrangements:

3. CBSA assessment results during fiscal year 2017-2018

The key findings and significant adjustments required from the current year’s assessment activities are summarized below.

New or significantly amended key controls: In the current year, there were no significantly amended key controls in existing processes which required a reassessment.

Ongoing monitoring program: As part of its rotational ongoing monitoring plan, the Agency completed its reassessment of the financial controls within the business processes of payments and payables including acquisition cards, hospitality, travel and interdepartmental settlements. For the most part, the testing results did not reveal any indication of material misstatements or any other substantial irregularities. The key controls that were tested performed as intended, with remediation required as follows:

Information technology general controls (ITGCs): Services provided by CRA and SSC related to CBSA common arrangement include internal controls testing for those information technology general controls (ITGCs). As a result of the ongoing review performed of IT General (key) Controls that relate to the system operations, security, implementation and maintenance, no significant design control effectiveness deficiencies have been identified.

4. Agency action plan

4.1 Progress during fiscal year 2017-2018

In 2017-18, the CBSA has proceeded with limited activities in the establishment, monitoring and maintaining of its risk-based system of ICFR. It mainly continued to conduct its ongoing monitoring according to the previous fiscal year’s rotational plan as shown in the following table.

Progress During Fiscal Year 2017-18
Previous year's rotational ongoing monitoring plan for current year Status
Entity Level Control Updating of the financial internal control framework to address the 17 COSO principles has been completed and testing of design and operating effectiveness is planned for 2018-19.
Information Technology General Controls (ITGCs) CRA completed its on-going monitoring (OGM) testing exercise to assess the ongoing design and operating effectiveness of CBSA financial system (CAS), no correctives measures identified.
Payables and payments Substantial work has been completed as part of CBSA’s account verification / quality assurance program during 2017-18. Even though compliance improvements were observed, some high risk areas still record unacceptable error rates. The main deficiencies noted are: unsubstantiated FAA section 32 commitment authority, insufficient supporting documentation and inconsistent reconciliation activities. CBSA is in the process of deploying electronic solutions for the exercise and documentation of FAA sections 32 and 34 for acquisition cards as well as electronic maintenance of supporting documentation within its financial system CAS. Full implementation of these solutions and training of involved staff is planned to be completed during 2018-19.
Procurement and Relocation Updating of the procurement and relocation financial internal control frameworks and testing of their design and operating effectiveness were deferred due to CBSA’s funding challenges.

 

In addition to the progress made in its ongoing monitoring, CBSA conducted the following additional work in 2017-18:

4.2 Action plan for the next fiscal year and subsequent years

The CBSA’s rotational ongoing monitoring plan over the next three years, based on an annual validation of the high-risk processes and control and related adjustments to the ongoing monitoring plan as required, is shown in the following table.

Rotational On-going Monitoring Plan for Internal Control over Financial Reporting
Key control areas Operating Effectiveness Testing Rotation
Fiscal Year
2018-2019
Fiscal Year
2019-2020
Fiscal Year
2020-2021
Entity level controls applicable not applicable not applicable
Information Technology General Controls (ITGCs) applicable applicable applicable
Revenues and Account Receivable Ledger (ARL) for excise tax, custom imports duties and excise duties applicable not applicable applicable
Revenue Adjustments (Commercial Refund) not applicable applicable applicable
Casual Refund Program not applicable not applicable applicable
Non Tax Revenues and Account Receivable Ledger (ARL) for respendable and non-respendable not applicable applicable not applicable
Payables and Payments applicable applicable applicable
Procurement applicable applicable applicable
Relocation not applicable not applicable applicable
Capital Assets applicable not applicable applicable
Compensation applicable applicable applicable
Financial Statement, Public Accounts and Financial Close and Reporting processes applicable not applicable applicable
Liabilities (PAYE) not applicable applicable not applicable
Budgeting and Forecasting applicable not applicable applicable
Memorandum to Cabinet (MC)  and Treasury Board (TB) Submissions applicable not applicable applicable
Future-Oriented Statement of Operations, Quarterly Financial Report not applicable applicable applicable
Section 6 of the Customs Act not applicable applicable applicable
Project Management applicable applicable applicable

The ongoing CBSA monitoring rotational plan integrates the new requirements of the 2018 Management Accountability Framework (MAF) and some of the assessment work deferred from previous years. Specifically, this includes:

Finally, CBSA plans to develop a Quality Assurance/Account Verification program (section 33 of the FAA) that would cover all types of payments including acquisition cards and compensation. As part of this assurance program and ongoing risk based account verification activities, CBSA will be proceeding with key control testing of the following key payment processes: Invoices with or without PO, Interdepartmental Settlements, Acquisition Cards, Travel cards, Hospitality, Event and Travel claims. All high risk transactions are subject to a full review before they are processed, whereas sampling plan and methodology is used to extract and review samples of medium and low risk transactions. Any significant deficiencies observed are reported on a continuing basis to the CBSA senior management and the CFO, and are taken into consideration in the annual assessment of the effectiveness of the CBSA system of internal control.

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