Canada Border Services Agency: Quarterly Financial Report—For the quarter ended June 30, 2022

1. Introduction

This Quarterly Financial Report (QFR) has been prepared as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This quarterly report should be read in conjunction with the Main Estimates, Canada's Economic Action Plan 2021 (Budget 2021) and Canada's COVID-19 Economic Response Plan.

Information on the 'raison d'être', mandate, role and core responsibilities of the Canada Border Services Agency (CBSA) can be found in Part III Departmental Plan and Part II of the Main Estimates.

The QFR has not been subjected to an external audit or review, but has been reviewed internally by the departmental Audit Committee.

1.1 Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying statement of authorities (Table 1) includes the department's spending authorities granted by Parliament, and those used by the department consistent with the Main Estimates and Supplementary Estimates (as applicable) for the 2021 to 2022 and 2022 to 2023 fiscal years. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before money can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts, or through legislation in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the consolidated revenue fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

The department uses the full accrual method of accounting to prepare and present its annual departmental financial statements that are part of the departmental results reporting process. However, the spending authorities voted by Parliament remain on an expenditure basis.

2. Highlights of fiscal quarter and fiscal year-to-date (YTD) results

This section highlights the significant items that contributed to the net increase or decrease in resources available for the year and actual expenditures as of the quarter ended June 30, 2022.

2.1 Significant changes to authorities

For the period ending June 30, 2022, the authorities provided to the CBSA comprise the Main Estimates, Supplementary Estimates (A), and Treasury Board (TB) approved Budget 2021 measures.

The Statement of authorities (Table 1) presents a net increase of $285.5 million or 13.9% of the agency's total authorities of $2,344.1 million on June 30, 2022 compared to $2,058.6 million total authorities at the same quarter last year.

This net increase in the authorities available for use is the result of an increase in Vote 1 – Operating Expenditures of $203.0 million, an increase in Vote 5 – Capital of $60.6 million and an increase in budgetary statutory authorities of $21.8 million, as detailed below.

Vote 1: Operating

The Agency's Vote 1 increased by $203.0 million or 11.6% (excluding the statutory authorities), compared to the same period last fiscal year.

In 2021 to 2022, the Agency received $1,755.6 million as Main Estimates in comparison to the Vote 1 authorities of $1,958.6 million in 2022 to 2023, results in a net increase of $203.0 million or 11.6%. The main increases contributing to the changes in operating funding include:

• $107.5 million for compensation adjustments
• $95.0 million in funding for Program Integrity
• $14.3 million in reprofiled funding for various initiatives from past fiscal years to future fiscal years
• $10.5 million increase in funding for 2021 to 2023 Immigration Levels Plans related to TB submission approved in 2021 to 2022
• $9.5 million in funding for Gordie Howe International Bridge Project

The main decreases contributing to the changes in operating funding include:

• $14.0 million reduction for government-wide Information Technology Operations
• $8.4 million reduction related to the sunsetting of cannabis funding
• $6.6 million reduction for Budget 2021 travel allotments
• $2.8 million reduction in funding for small internal projects
• $2.0 million reduction for Passenger Protect Program

Vote 5: Capital

The Agency's Vote 5 increased by $60.6 million or 53.9% (excluding the statutory authorities), compared to the same period last fiscal year.

In 2021 to 2022, the Agency received $112.4 million as Main Estimates in comparison to the Vote 5 authorities $173.1 million in 2022 to 2023, results in a net increase of $60.6 million or 53.9%. The main increases contributing to the changes in capital funding include:

• $45.9 million in reprofiled funding for various initiatives from past fiscal years to future fiscal years
• $32.8 million in funding for Land Border Crossing Project
• $5.2 million in funding for Gordie Howe International Bridge Project

The main decreases contributing to the changes in capital funding include:

• $8.9 million reduction in funding for National Immigration Detention Framework
• $8.3 million reduction in sunsetting Postal Modernization Initiative
• $3.7 million reduction for Passenger Protect Program
• $2.4 million reduction in funding for small internal projects

Budgetary statutory authorities

The agency's Statutory Authority related to the employee benefit plan (EBP) increased by $21.8 million, or 11.4% from the previous year.

2.2 Explanations of significant variances in expenditures from previous year

As indicated in the statement of authorities (Table 1), the agency's expenditures for year-to-date, at quarter ends June 30, 2022 were $524.4 million, as compared to $466.4 million for year-to-date, quarter ending June 30, 2021. The net increase of $58.0 million or 12.4% in expenditures is mainly due to the following items:

• Increase of $63.3 million or 15.9% in Vote 1 Operating Expenditures year-to-date used at quarter ends. The increase in expenditures is mainly attributed to a $50.0 million increase for various salaries, overtime and vacation expenses. In addition, to a $12.6 million increase due to Operating expenses such as: damage and other claims against the crown, Information Technology Consultants, and other professional services
• Decrease of $10.8 million or 51.7% in Vote 5 Capital Expenditures year-to-date used at quarter ends. The decrease in expenditures is mainly attributed to Facilities Capital Projects and capital expenditures for Information Technology Consultants
• Increase of $5.5 million in statutory expenditures

As indicated in the departmental budgetary expenditures by standard objects (Table 2), the net increase by standard object is mainly attributed to:

• Increase of $56.2 million for Personnel due to vacation expenses, salaries and overtime pay
• Increase of $5.2 million in Other subsidies and payments which can be mainly attributed to a settlement of a claim against the crown
• Increase of $3.3 million for Transportation and Communications due to travel
• Increase of $2.1 million in Acquisition of machinery and equipment for telecommunications and personal computer equipment
• Increase of $0.9 million in Repair and Maintenance can be attributed to office furniture and other equipment repairs and maintenance, facilities non-capital projects and repair of computer equipment
• Decrease of $8.5 million in Acquisition of land, buildings and equipment related to Facilities Capital Projects

The planned revenue from the sales of services reflects the agency's revenue respending authority. The year-to-date revenue from the charge of services has increased by $2.3 million or 184.7% due to the reopening of borders and increased travel after the lifting of COVID-19 restrictions. The increased travel has resulted in higher regular revenues collected in programs such as Nexus.

3. Risks and uncertainties

The CBSA's changing operating environment makes the agency particularly susceptible to external drivers that are largely beyond its control. Together, these drivers have the potential to affect the organization's ability to adhere to its annual financial plan.

Since the beginning of the year, the annual inflation rate rose significantly to levels not seen in decades. Combined with a very competitive labour market, these factors heightened the Agency's exposure to risks that relate to achieving its goals in a timely fashion and within allocated budgets.

Furthermore, despite the easing of health restrictions in the first quarter, the workforce remained affected by the COVID-19 pandemic. The health restrictions still in effect and the transition to a Hybrid Work Model exacerbated the effects on labour force availability to complete major projects on time.

For example, the agency is pursuing several large information technology (IT) and physical infrastructure projects; most are multi-year in nature and represent substantial investments. Because the CBSA depends on other government departments and/or external stakeholders for the development and implementation of many of these projects, any delays due to the COVID-19 pandemic both within and outside the Agency can have a significant impact on the budgets for major projects. Even short delays may incur considerable additional costs for materials commodities and other market rate priced services.

Despite these conditions, the Agency has met key deadlines and deliverables on many of the major projects currently underway and is on track for the next set of deliverables. The agency strives to mitigate financial risks by risk-rating its projects, conducting periodic project reviews, and by holding regular budget discussions. Such activities are informed and supported by the Agency's quarterly integrated project reporting processes.

4. Significant changes in relation to operations, personnel and programs

4.1 Key senior personnel

John Ommanney, Director General of Travellers Policy and Programs, was appointed to the new position of Associate Vice-President of Travellers Branch on June 13, 2022.

John Ossowski, President of the Canada Border Services Agency, retired on June 24, 2022.

Ted Gallivan, Executive Vice-President, stepped in as Acting President until a new president is announced.

4.2 Operations

Travel restrictions started to ease at the border as key indicators for the COVID-19 pandemic improved early in the first quarter. However, travellers entering Canada were still required to submit their mandatory vaccination and pre-entry COVID-19 testing information in the ArriveCan application to help manage traffic flows at the ports of entry.

On April 1, 2022, fully vaccinated travellers no longer needed to provide a pre-entry COVID-19 test result to enter Canada by air, land, or water. This requirement was replaced with an obligation to submit to testing if randomly selected at the port of entry, with no requirement to quarantine while awaiting the result. The pre-entry testing requirement for partially or unvaccinated travellers remained in effect.

As traveller volumes increased dramatically in the first quarter, significant delays were observed at major ports of entry by air. To help alleviate this situation, the random testing of arriving travellers at airports was suspended on June 11, 2022, pending a review of the testing protocols.

On June 13, 2022, the U.S. Embassy in Canada announced that the requirement for a pre-entry COVID-19 test result for fully vaccinated travellers was dropped as a condition of entering the United States by air, land, and sea. However, proof of vaccination remained a requirement. This has contributed to further increases in traveller volumes at all ports of entry on both sides of the border.

Finally, on June 20, 2022, the vaccination requirement for the federal public service was suspended; employees were no longer required to be vaccinated as a condition of employment. With the lifting of most restrictions at workplaces in Canada, the gradual transition from telework to a Hybrid Work Model for thousands of non-frontline employees in the Agency began. The implementation of the new work model is expected to pick up speed in the second quarter of 2022 to 2023.

5. Approval by senior officials

6. Table 1: Statement of authorities (unaudited)

7. Table 2: Departmental budgetary expenditures by standard object (unaudited)