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ARCHIVED - Financial Statements For the Year Ended March 31, 2010

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Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2010, and all information contained in these statements rests with the management of the Canada Border Services Agency. These financial statements have been prepared by management in accordance with Treasury Board accounting policies, which are based on Canadian generally accepted accounting principles for the public sector.

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

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

Management seeks to ensure the objectivity and integrity of data in its financial statements through careful selection, training, and development of qualified staff; through organizational arrangements that provide appropriate divisions of responsibility; through communication programs aimed at ensuring that regulations, policies, standards, and managerial authorities are understood throughout the agency; and through conducting an annual assessment of the effectiveness of the system of internal control over financial reporting. An assessment for the year ended March 31, 2010 was completed in accordance with the Policy on Internal Control and the results and action plans are summarized in the annex.

The system of internal control over financial reporting is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments. The effectiveness and adequacy of the department's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the department's operations, and by the Departmental Audit Committee, which oversees management's responsibilities for maintaining adequate control systems and the quality of financial reporting, and which recommends the financial statements to the President of the Canada Border Services Agency.

The financial statements of the Canada Border Services Agency have not been audited.

Stephen Rigby, President
Ottawa, Canada
August 7, 2010
Sylvain St-Laurent, Chief Financial Officer
Ottawa, Canada
August 7, 2010



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Statement of Operations (Unaudited) For the Year Ended March 31

(in thousands of dollars)

  2010 2009
  Risk Assessment Enforcement Facilitated Border Conventional Border Trade Recourse Internal Services Total Total
Operating Expenses                  
Salaries and employee benefits 104,177 163,366 34,549 560,612 71,708 8,375 371,450 1,314,237 1,282,812
Professional and special services 15,484 41,427 1,785 13,456 262 83 182,435 254,932 262,337
Rental of land and buildings 3,812 6,046 1,391 20,713 2,680 310 28,547 63,499 59,351
Transportation and telecommunication 3,295 11,911 435 6,647 946 79 27,820 51,133 70,598
Amortization 1,361 4,841 315 5,668 27 0 34,917 47,129 34,445
Repair and maintenance 197 1,596 2,093 26 148 0 19,942 24,002 23,966
Materials and supplies 458 2,250 89 3,163 292 6 16,560 22,818 20,348
Consumable machinery and equipment (parts) 4,108 1,178 123 751 89 2 13,066 19,317 34,907
Other 81 3,983 12 895 40 1 5,564 10,576 10,015
Bad debts 0 158 146 657 0 0 14 975 274
Total Expenses 132,973 236,756 40,938 612,588 76,192 8,856 700,315 1,808,618 1,799,053
                   
Revenues                  
Sale of goods and services 0 2,021 3,882 17,437 0 0 68 23,408 22,979
Forfeitures of cash bonds 0 1,181 0 0 0 0 0 1,181 1,567
Miscellaneous 0 538 0 0 0 0 25 563 3,016
Seized property 0 445 0 0 0 0 0 445 216
Gain on sale of assets 0 0 0 0 0 0 178 178 252
Interest, penalties and fines 0 0 0 0 0 0 119 119 172
Total Revenues  0 4,185 3,882 17,437 0 0 390 25,894 28,202
                   
Net Cost of Operations 132,973 232,571 37,056 595,151 76,192 8,856 699,925 1,782,724 1,770,851

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


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Statement of Financial Position (Unaudited) At March 31

(in thousands of dollars)

  2010 2009
ASSETS    
Financial assets    
Cash 0 121
Accounts receivable and advances (Note 4) 12,855 11,170
Total financial assets 12,855 11,291
     
Non-financial assets    
Prepaid expenses 85 141
Inventory 7,386 7,110
Tangible capital assets (Note 5) 412,256 383,825
Total non-financial assets 419,727 391,076
     
Total 432,582 402,367
     
LIABILITIES AND EQUITY OF CANADA    
     
Liabilities    
Bank indebtedness 76 0
Accounts payable and accrued liabilities (Note 6) 161,865 240,183
Deposit accounts (Note 7) 31,554 32,307
Employee severance benefits (Note 8) 222,706 207,198
Total 416,201 479,688
     
Equity of Canada (Deficit of Canada) 16,381 (77,321)
     
Total 432,582 402,367

Contingent liabilities (Note 9)
The accompanying notes form an integral part of these financial statements.


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Statement of Equity of Canada (Unaudited) For the Year Ended March 31

(in thousands of dollars)

  2010 2009
Deficit of Canada, beginning of year (77,321) (30,060)
Net cost of operations (1,782,724) (1,770,851)
Current year appropriations used (Note 3) 1,641,044 1,647,636
Revenue not available for spending (4,749) (6,207)
Change in net position in the Consolidated Revenue Fund (Note 3) 84,689 (69,863)
Services provided without charge from other government departments (Note 10) 155,442 152,024
Equity of Canada (Deficit of Canada), end of year 16,381 (77,321)

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


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

(in thousands of dollars)

  2010 2009
Operating activities    
Net cost of operations 1,782,724 1,770,851
     
Non-cash items:    
Services provided without charge by other government departments (155,442) (152,024)
Amortization of tangible capital assets (47,129) (34,445)
Gain on disposal and write-down of tangible capital assets 2,159 2,688
Other (349) 11
     
Variations in Statement of Financial Position:    
Increase (decrease) in accounts receivable and advances 1,685 (2,933)
(Decrease) in prepaid expenses (56) (125)
Increase (decrease) in inventory 276 (95)
(Increase) decrease in accounts payable and accrued liabilities 78,318 (69,592)
Decrease in deposit accounts 753 715
(Increase) in employee severance benefits (15,508) (24,414)
     
Cash used by operating activities 1,647,431 1,490,637
     
Capital investment activities    
Acquisitions of tangible capital assets 73,941 81,264
Proceeds from disposal of tangible capital assets (191) (275)
Cash used by capital investment activities 73,750 80,989
     
Financing activities    
Net cash provided by the Government of Canada (1,720,984) (1,571,562)
Net cash used 197 64
     
Cash, beginning of year 121 185
(Bank indebtedness) Cash at end of year (76) 121

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


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Notes to the March 31, 2010 Financial Statements (Unaudited)

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 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.

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

  1. The Risk Assessment program activity ”pushes the border out” by seeking to identify high risk travelers and goods as early as possible before their arrival at Canada's borders.
  2. The Enforcement program activity ensures that appropriate enforcement actions are taken against travelers and goods which are non-compliant with border-related legislation and regulations.
  3. The facilitated border program activity facilitates border crossing for pre-approved low risk travelers, importers, carriers and goods in Canada and between Canada and the United States by providing a faster and more effective means of clearing the border.
  4. The Conventional border program activity allows for the admissibility of legitimate travelers (e.g. visitors, students, workers, immigrants and refugees) and goods (both of whom are not participants in a facilitation program) into and out of Canada thereby contributing to a strong Canadian economy through the tourism and business sectors.
  5. The Trade program activity ensures that the Canadian economy and business community gains maximum benefits from the administration of international and regional trade agreements, and domestic legislation governing trade in commercial goods.
  6. The Recourse program activity provides the business community and individuals with an accessible redress process that ensures a fair and impartial review of decisions and actions taken in support of border services legislation.
  7. 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.

2. Summary of Significant Accounting Policies

The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Parliamentary appropriations

The Agency is financed by the Government of Canada through Parliamentary appropriations. Appropriations provided to the Agency do not parallel financial reporting according to generally accepted accounting principles since appropriations are primarily based on cash flow requirements. Consequently, items recognized in the statement of operations and the statement of financial position are not necessarily the same as those provided through appropriations from Parliament. Note 3 provides a high-level reconciliation between the bases of reporting.

(b) Net Cash Provided by the Government of Canada

The Agency operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the Agency is deposited to the CRF and all cash disbursements made by the Agency are paid from the CRF. The net cash forwarded to the Government of Canada is the difference between all cash receipts and all cash disbursements including transactions between departments of the federal government.

(c) Change in net position in the Consolidated Revenue Fund

The change in net position in the Consolidated Revenue Fund is the difference between the net cash provided by Government and appropriations used in a year, excluding the amount of non respendable revenue recorded by the Agency. It results from timing differences between when a transaction affects appropriations and when it is processed through the CRF.

(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.

(e) Expenses

All expenses are recorded on an accrual basis:

  • Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment. The liability for vacation pay and compensatory leave is calculated at the salary levels in effect at the end of the year for all unused vacation pay and compensatory leave benefits accruing to employees.
  • Services provided without charge by other government departments for accommodation, workers' compensation benefits, the employer's contribution to the health and dental insurance plans and legal services are recorded as operating expenses at their estimated cost.

(f) Cash

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

(g) Accounts receivable and advances

Accounts receivable and advances are stated at amounts expected to be ultimately realized; a provision is made for doubtful accounts where recovery is considered uncertain based on the percentages of aging of receivables. The percentages have been increased this year to reflect the increased rate of the aging of receivables.

(h) Inventory

Inventory consists of forms, publications and uniforms and is not intended for resale. Items in the inventory are valued at cost using the weighted average cost method. Items that are considered obsolete are written off. The cost of inventory is charged to operations in the period in which the items are used.

(i) Tangible capital assets

All tangible capital assets having an initial cost of $10,000 or more are recorded at their acquisition cost. Amortization of capital assets, except land, is performed on a straight-line basis over the estimated useful lives of the assets 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 Over the useful life of the improvement or the lease term,
whichever is shorter.
Assets under construction Once in service, determined in accordance with asset type.

(j) Employee future benefits

  1. Pension benefits: Eligible employees participate in the Public Service Superannuation Plan, a multi-employer plan administered by the Government of Canada. The Agency's contributions to the Plan are charged to expense in the year incurred and represent the Agency's total obligation to the Plan. Current legislation does not require the Agency to make contributions for any actuarial deficiencies of the Plan.
  2. Severance benefits: Employees are entitled to severance benefits under labour contracts or conditions of employment. These benefits are accrued as employees render the services necessary to earn them. 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.

(k) 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.

(l) Environmental liabilities

Environmental liabilities reflect the estimated costs related to the management and remediation of 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 unlikely, or if an amount cannot be reasonably estimated, the costs are disclosed as contingent liabilities in the notes to the financial statements.

(m) Measurement uncertainty

The preparation of these financial statements, in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable.

The most significant items where estimates are used are contingent liabilities, environmental liabilities, the liability for employee severance benefits, the allowances for doubtful accounts and the useful life of tangible capital assets. Actual results could significantly differ from those estimated. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the year they become known.

(n) Comparative information – Change in reporting entity - transition

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.

3. Parliamentary Appropriations

The Agency receives most of its funding through Parliamentary appropriations. Items recognized in the statement of operations and the statement of financial position in one year may be funded through Parliamentary appropriations in prior, current or future years. Accordingly, the Agency has different net results for the year on a government funding basis than on an accrual accounting basis.

These differences are reconciled below:

(a) Reconciliation of net results to current year appropriations used

  2010 2009
  (in thousands of dollars)
     
Net cost of operations 1,782,724 1,770,851
     
Adjustments for items affecting net results
but not affecting appropriations
   
     
Add (Less):    
Revenue not available for spending 4,749 6,207
Services provided without charge (155,442) (152,024)
Bad Debt (975) (274)
Amortization of tangible capital assets (47,129) (34,445)
Employee severance benefits (15,508) (24,414)
Vacation pay and compensatory leave (4,692) (3,119)
Adjustment to prior year's expenditures 886 931
Environmental Liabilities 70 407
Gain on disposal and write-down of tangible capital assets 2,159 2,688
Other  41 (216)
Total (215,841) (204,259)
     
Adjustments for items not affecting net results but affecting appropriations    
     
Add (Less):    
Acquisition of tangible capital assets 73,941 81,264
Inventory variation  276 (95)
Prepaid expenses (56) (125)
Total 74,161 81,044
     
Current year appropriations used 1,641,044 1,647,636


(b) Appropriations provided and used

  2010 2009
  (in thousands of dollars)
     
Parliamentary appropriations    
Vote 10 – Operating expenditures 1,538,564 1,579,624
Vote 15 – Capital expenditures 116,639 115,505
Total 1,655,203 1,695,129
     
Statutory amounts     
Contributions to employee benefit plans 182,102 161,233
Spending proceeds from disposal of surplus crown assets 340 396
Refunds of amounts credited to revenues from previous years 59 42
Court Awards 0 11
Collection agency fees 0 4
Total 182,501 161,686
     
Available for use in subsequent years    
Vote 10 – Operating expenditures  (91,678) (146,524)
Vote 15 – Capital expenditures (66,275) (62,505)
Total (157,953) (209,029)
     
Appropriations available for future years (168) (150)
Lapsed appropriations: Operating (38,539) 0
Total (38,707) (150)
     
Current year appropriations used  1,641,044 1,647,636

(c) Reconciliation of net cash provided by (forwarded to) Government to current year appropriations used

  2010 2009
  (in thousands of dollars)
     
Net cash provided by Government 1,720,984 1,571,562
     
Revenue not available for spending 4,749 6,207
     
Change in net position in the Consolidated Revenue Fund    
Variation in accounts receivable and advances (1,564) 2,997
Variation in accounts payable and accrued liabilities  (78,318) 69,592
Other adjustments (4,807) (2,726)
Total (84,689) 69,863
     
Other 0 4
Current year appropriations used  1,641,044 1,647,636

4. Accounts Receivable and Advances

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

  2010 2009
  (in thousands of dollars)
     
Receivables from other Federal Government departments and agencies 8,028 6,180
Receivables from external parties 5,159 4,306
Employee advances and other receivables 1,602 1,673
Total 14,789 12,159
Less: allowance for doubtful accounts on external receivables (1,934) (989)
     
Total 12,855 11,170


5. Tangible Capital Assets

(in thousands of dollars)

The following table presents details of the tangible capital assets:

  Cost Accumulated amortization 2010 2009
Capital asset class Opening
balance
Acquisi-
tions
Transfers, disposals, write-offs Closing
balance
Opening balance Amorti-zation Transfers, disposals,
write-offs
Closing
balance
Net book
value
Net book value
Land 4,467 58 0 4,525 0 0 0 0 4,525 4,467
Buildings 159,128 5,234 (17,984) 182,346 55,854 7,886 769 62,971 119,375 103,274
Leasehold Improvements 8,153 1,376 (7,782) 17,311 2,321 5,297 0 7,618 9,693 5,832
Works and
infrastructure
1,124 28 0 1,152 377 22 0 399 753 747
Machinery and
equipment
69,295 14,418 (472) 84,185 35,550 6,845 (88) 42,483 41,702 33,745
Information technology equipment,
in-house-developed
and purchased software
136,911 1,578 (32,743) 171,232 81,891 24,194 1,056 105,029 66,203 55,020
Vehicles 28,384 1,984 1,757 28,611 20,559 2,885 1,734 21,710 6,901 7,825
Assets under
construction
172,915 49,265 59,076 163,104 0 0 0 0 163,104 172,915
                     
Total 580,377 73,941 1,852 652,466 196,552 47,129 3,471 240,210 412,256 383,825

6. Accounts Payable and Accrued Liabilities

The following table presents details of accounts payable and accrued liabilities:

  2010 2009
  (in thousands of dollars)
     
Payables to external parties 47,889 41,133
Payables to other Federal Government departments and agencies 47,183 31,175
Accrued salary, vacation pay and compensatory leave 66,793 167,875
Total 161,865 240,183

7. 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:

  Opening
Balance
Receipts Payments Closing
Balance
  (in thousands of dollars)
Guarantee deposit accounts 27,765 22,801 (24,026) 26,540
Other deposit accounts 4,542 933 (461) 5,014
         
Total deposit accounts 32,307 23,734 (24,487) 31,554

8. Employee Severance 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 two percent per year of pensionable service, times the average of the best five consecutive years of earnings. The benefits are integrated with Canada/Quebec pension plan benefits and they are indexed to inflation.

Both the employees and the Agency contribute to the cost of the Plan. The 2009-2010 expense amounts to $131,477,000 ($116,410,000 in 2008-2009), which represents approximately 1.9 times (2.0 in 2008-09) 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 appropriations. Information about the severance benefits, measured as at March 31, is as follows:

  2010 2009
  (in thousands of dollars)
Accrued benefit obligation, beginning of year 207,198 182,784
Expense for the year 29,135 35,623
Benefits paid during the year (13,627) (11,209)
     
Accrued benefit obligation, end of year 222,706 207,198

9. Contingent Liabilities

(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 one site in 2010 (one site in 2009) where such action is possible and for which a liability of $292,000 ($362,000 in 2009) has been recorded. 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 known.

(b) Claims and litigation

Claims have been made against the Agency in the normal course of operations. Legal proceedings for claims totaling approximately $1,650,000,000 ($1,686,000,000 in 2009) were still pending as at March 31, 2010.

Some of these claims and appeals may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability and expense are recorded in the financial statements. As at March 31, 2010, the Agency has recorded an estimated liability of $290,000 ($290,000 in 2009).

10. Related Party Transactions

The Agency is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms. Also during the year, the Agency received services, which were obtained without charge from other government departments as presented in part (a).

(a) Services provided without charge

During the year, the Agency received without charge from other departments, accommodation, legal services, workers' compensation coverage and the employer's contribution to the health and dental insurance plans.

These services without charge have been recognized in the Agency's statement of operations as follows:

  2010 2009
  (in thousands of dollars)
Accommodation 60,562 58,403
Employer's contribution to the health and dental insurance plans 80,368 79,530
Workers' compensation coverage 391 346
Legal services 14,121 13,745
Total 155,442 152,024

The Government has structured some of its administrative activities for efficiency and cost-effectiveness such that one department performs these on behalf of all without charge. The costs of these services, which include payroll and cheque issuance services provided by Public Works and Government Services Canada, are not included as an expense in the Agency's statement of operations.

(b) Administration of programs

The Agency has arrangements with the Canada Revenue Agency for the provision of information technology services, which are paid for on a quarterly basis for a total of $127,740,000 in 2010 ($121,874,000 in 2009).

11. Comparative information – Change in reporting entity - transition

Separate financial statements have been prepared for the Agency's Activities and Agency's Administered Activities commencing in 2010. The purpose of this is to more accurately represent the actual cost of Agency operations from those revenues that are administered on behalf of the Government of Canada.

Comparative figures have been reclassified to conform to the current year's presentation. The 2009 amounts have been restated to exclude Agency Administered Activities. Furthermore, amounts payable to and receivable from Agency Administered Activities were eliminated upon consolidation in fiscal year 2009. These have been subsequently included within the restated 2009 amounts for comparative purposes.

The following table outlines the restated comparison of key amounts:

  Administered Activities Agency Activities Total (restated) Total (Previously Reported) Difference  
  2009 + 2009 = 2009 - 2009 = 2009  
  (in thousands of dollars)
Statement of Operations                    
Total Tax Revenues 22,622,415 + 0 = 22,622,415 - 22,622,415 = 0  
Total Non-Tax Revenues 72,642 + 28,202 = 100,844 - 100,844 = 0  
Total Expenses 67,605 + 1,799,053 = 1,866,658 - 1,866,659 = -1 *
Total Net Revenues (Cost of Operations) 22,627,452 + (1,770,851) = 20,856,601 - 20,856,600 = 1 *
   *  The difference is due to the rounding as a result of adding amounts from two different trial balances, compared to the rounding when using one trial balance.
Statement of Financial Position                    
Total Assets 2,557,220 + 402,367 = 2,959,587 - 2,957,608 = 1,979 **
Total Liabilities 59,850 + 479,688 = 539,538 - 537,559 = 1,979 **
Total Equity of Canada (Deficit of Canada) 2,497,370 + (77,321) = 2,420,049 - 2,420,049 = 0  
  **  The difference is due to the total payables and receivables between CBSA Administered Activities and CBSA Agency Activities eliminated from the Financial Statements in last year's presentation since both trial balances were included.  This year, the payables and receivables are on different financial statements and cannot be eliminated.



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

(in thousands of dollars)

  2010 2009
  Conventional Border Trade Enforcement Internal Services Total Total
Administered Revenues            
Tax revenues            
Excise taxes (Note 3) 16,266,855 0 0 0 16,266,855 17,348,016
Customs import duties 3,476,703 13,080 0 0 3,489,783 4,036,148
Excise duties 1,256,842 0 0 0 1,256,842 1,238,251
Total 21,000,400 13,080 0 0 21,013,480 22,622,415
             
Non-tax revenues            
Interest, penalties and fines 22,860 0 1,410 0 24,270 23,763
Seized property 10 0 11,049 0 11,059 46,241
Sale of goods and services 685 0 304 0 989 1,924
Miscellaneous 714 0 0 8 722 714
Total 24,269 0 12,763 8 37,040 72,642
             
Total Revenue Administered on
behalf of the Government of Canada
21,024,669 13,080 12,763 8 21,050,520 22,695,057
             
Bad Debts 27,146 0 0 0 27,146 67,605
             
Net Administered Revenues 20,997,523 13,080 12,763 8 21,023,374 22,627,452

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


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Statement of Administered Assets and Liabilities (Unaudited) At March 31

(in thousands of dollars)

  2010 2009
ADMINISTERED ASSETS    
     
Cash 1,512,636 1,343,984
Amounts receivable from other Federal Government
departments and agencies (Note 4)
1,802,895 143,064
Taxes receivable (Note 5) 1,040,162 1,070,172
     
TOTAL 4,355,693 2,557,220
     
ADMINISTERED LIABILITIES    
     
Liabilities    
Amounts payable to other Federal Government
departments and agencies
56,035 37,846
Payable to provinces (Note 6) 15,481 13,451
Taxes payable 1,114 1,531
Deposit accounts (Note 7) 8,931 7,022
Total Liabilities 81,561 59,850
     
Net amount due to the Consolidated Revenue Fund
on behalf of the Government of Canada (Note 8)
4,274,132 2,497,370
     
TOTAL 4,355,693 2,557,220

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

Return to Top of Page

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

(in thousands of dollars)

  2010 2009
     
Total Net Administered Revenues 21,023,374 22,627,452
Change in administered assets and liabilities:    
(Increase) in cash (168,652) (72,870)
Decrease (Increase) in accounts receivable (1,659,831) 3,638,383
Decrease in tax receivables 30,010 306,436
(Decrease) Increase in accounts payable 18,189 (1,811,885)
Increase in payable to provinces 2,030 6,544
Increase in deposit accounts 1,909 497
(Decrease) in tax payables (417) (21,039)
     
Net cash Deposited in the Consolidated Revenue Fund
of the Government of Canada
19,246,612 24,673,518
     
Consisting of:    
Cash deposits to the Consolidated Revenue Fund 21,554,869 28,066,029
Cash payments/refunds from the Consolidated Revenue Fund (2,308,257) (3,392,511)
     
Net cash Deposited in the Consolidated Revenue Fund
of the Government of Canada
19,246,612 24,673,518

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


Notes to the March 31, 2010 Financial Statements (Unaudited)

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.

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

  1. The Risk Assessment program activity ”pushes the border out” by seeking to identify high risk travelers and goods as early as possible before their arrival at Canada's borders.
  2. The Enforcement program activity ensures that appropriate enforcement actions are taken against travelers and goods which are non-compliant with border-related legislation and regulations.
  3. The facilitated border program activity facilitates border crossing for pre-approved low risk travelers, importers, carriers and goods in Canada and between Canada and the United States by providing a faster and more effective means of clearing the border.
  4. The Conventional border program activity allows for the admissibility of legitimate travelers (e.g. visitors, students, workers, immigrants and refugees) and goods (both of whom are not participants in a facilitation program) into and out of Canada thereby contributing to a strong Canadian economy through the tourism and business sectors.
  5. The Trade program activity ensures that the Canadian economy and business community gains maximum benefits from the administration of international and regional trade agreements, and domestic legislation governing trade in commercial goods.
  6. The Recourse program activity provides the business community and individuals with an accessible redress process that ensures a fair and impartial review of decisions and actions taken in support of border services legislation.
  7. 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.

2. Summary of Significant Accounting Policies

The financial statements have been prepared in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector.

Significant accounting policies are as follows:

(a) Tax Revenues

Tax revenues reported in this statement include revenues assessed under the authority of the Customs Act, the Customs Tariff, the Excise Act and the Excise Tax Act. These taxes include:

  • 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 transfer of HST to the Department of Finance Canada. 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.
  • Excise duties: Consists of tobacco, beer and liquor duties assessed on imports. These are shown net of refunds, rebates and drawbacks.
  • Customs import duties: Consists of import duties assessed on imports, net of any refunds, rebates and drawbacks.

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.

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

(b) Non-tax revenues

Non-tax revenues reported in this statement include revenues collected on behalf of the Government of Canada under the Immigration and Refugee Protection Act, the Agriculture and Agri-Food Administrative Monetary Penalties Act and other similar legislation.

Non-tax revenues are accounted for in the period in which the underlying transaction or event occurred that gave rise to the revenue.

(c) Cash

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

(d) Accounts receivable

Accounts receivable are stated at amounts expected to be ultimately realized; a provision is made for doubtful accounts where recovery is considered uncertain.

(e) Taxes receivable

Taxes receivable represent duties and taxes and other revenues assessed or estimated by the Agency but not yet collected. All receivables are stated at amounts ultimately expected to be realized. A provision is made for doubtful accounts where recovery is considered uncertain. This allowance for doubtful accounts reflects management's best estimate of the collectability of amounts assessed but not yet paid.

(f) Allowance for doubtful accounts

The allowance for doubtful accounts reflects management's best estimate of the collectability of amounts assessed, including the related interest and penalties, but not yet paid. The allowance for doubtful accounts is composed of two parts; which are reviewed on an annual basis. A portion of the allowance is based on the age of the accounts and the other portion is calculated based on accounts in dispute.

The allowance for doubtful accounts is adjusted by an annual provision for doubtful accounts and is reduced by amounts written off as uncollectable during the year. The annual provision is reported net of taxes receivable in the Statement of Administered Assets and Liabilities.

(g) Taxes payable

Taxes payable to importers represent refunds and related interest resulting from assessments completed after March 31 for excise duties, customs import duties and GST/HST for current or prior year imports.

(h) Contingent liabilities

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

(i) Measurement uncertainty

The preparation of these financial statements, in accordance with Treasury Board accounting policies which are consistent with Canadian generally accepted accounting principles for the public sector, 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 item where estimates are used is the allowances 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.

(j) Comparative information – Change in reporting entity - transition

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.

3. Excise Taxes

The economic recession contributed to the reduction in GST/HST assessed on imported goods.

Furthermore, a change in methodology relating to the accounting of HST transfers to the provinces was also implemented. Prior to this fiscal year, the transfers of HST to the Department of Finance Canada were conducted by way of monthly installments based on a remittance schedule set by that department. The proportions remitted by the CBSA and the CRA were derived based on the net GST/HST revenues assessed by each agency, respectively. Commencing this fiscal year, the proportions remitted by the Agency and the CRA were reassessed and subsequently reduced. Consequently, the CRA will be remitting 100% of the estimate to the Department of Finance Canada and the Agency will be transferring actual Provincial HST revenues collected on an annual basis.

The following table presents details of the excise tax revenues:

  2010 2009
  (in thousands of dollars)
     
GST/HST 16,261,032 19,243,932
Tax remission order (40,333) (89,363)
Transfer of HST to Provinces (14,432) (1,888,287)
Total 16,206,267 17,266,282
     
Excise tax - gasoline 28,714 34,448
Other excise tax 31,874 47,286
Total 60,588 81,734
     
Total excise taxes 16,266,855 17,348,016

4. Amounts Receivable from Other Federal Government Departments and Agencies

This value represents amounts due to the Agency from other Federal Government departments and agencies. Due to the change in methodology relating to the accounting of HST transfers to the provinces, the CRA will now be remitting 100% of the estimate to the Department of Finance Canada; with the Agency transferring actual Provincial HST amounts collected to the CRA on an annual basis. As the Agency had previously been remitting to the Department of Finance Canada on a monthly basis, the resultant overpayment will be recovered from the CRA.

The following table presents details of the amounts receivable:

  2010 2009
  (in thousands of dollars)
     
HST receivable from Canada Revenue Agency 1,779,297 0
Receivables from other Federal Government
departments and agencies
23,598 143,064
Total 1,802,895 143,064

5. Taxes Receivable

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

The following table presents details of taxes receivable:

  2010 2009
  (in thousands of dollars)
     
Taxes receivable 1,166,744 1,209,436
Less: allowance for doubtful accounts (126,582) (139,264)
Net taxes receivable 1,040,162 1,070,172

6. Payable to Provinces

The following table presents details on the memorandums of understanding (MOUs) that have been established between the provinces and the Agency, whereby the Agency collects provincial sales, alcohol and tobacco taxes on behalf of the provinces and remits these collections directly to the provinces.


  2010 2009
  (in thousands of dollars)
     
Payable to provinces, beginning of year 13,451 6,907
Receipts from taxpayers 107,180 179,841
Refunds to taxpayers (4,081) (2,361)
Payments to provinces (101,069) (170,936)
Payable to provinces, end of year 15,481 13,451

7. 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:

  Opening
Balance
Receipts Payments Closing
Balance
  (in thousands of dollars)
         
Guarantee deposit accounts 7,022 2,213 (304) 8,931

8. Net amount due to the Consolidated Revenue Fund

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

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

  2010 2009
  (in thousands of dollars)
     
Net amount due to the Consolidated Revenue Fund on behalf
of the Government of Canada at the beginning of the year
2,497,370 4,543,436
Total net administered revenues 21,023,374 22,627,452
Net cash deposited in the Consolidated Revenue Fund of the
Government of Canada
(19,246,612) (24,673,518)
Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada at end of year 4,274,132 2,497,370

9. Contingent Liabilities

Claims have been made against the Agency in the normal course of operations. Appeals for previously assessed customs duties, excise duties, GST and HST have been received in the amount of $176,000,000 ($111,000,000 in 2009).

Some of these claims and appeals may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability and expense are recorded in the financial statements. In this regard, the Agency has not recorded an estimated liability for claims and appeals (2009 “NIL”).

10. Related Party Transactions

The Agency is related in terms of common ownership to all Government of Canada departments, agencies and Crown corporations. The Agency enters into transactions with these entities in the normal course of business and on normal trade terms.

11. Comparative Information – Change in Reporting Entity - Transition

Separate financial statements have been prepared for the Agency's Administered Activities and Agency Activities commencing in 2010. The purpose of this is to more accurately represent the actual cost of Agency operations from those revenues that are administered on behalf of the Government of Canada.

Comparative figures have been reclassified to conform to the current year's presentation. The 2009 amounts have been restated to exclude Agency Activities. Furthermore, amounts payable to and receivable from Agency Activities were eliminated upon consolidation in fiscal year 2009. These have been subsequently included within the 2009 amounts for comparative purposes.

The following table outlines the restated comparison of key amounts:

  Administered Activities Agency Activities Total (restated) Total (Previously Reported) Difference
  2009 + 2009 = 2009 - 2009 = 2009
  (in thousands of dollars)
                   
Statement of Operations                  
Total Tax Revenues 22,622,415 + 0 = 22,622,415 - 22,622,415 = 0
Total Non-Tax Revenues 72,642 + 28,202 = 100,844 - 100,844 = 0
Total Expenses 67,605 + 1,799,053 = 1,866,658 - 1,866,659 = -1*
Total Net Revenues (Cost of Operations) 22,627,452 + (1,770,851) = 20,856,601 - 20,856,600 = 1*

  *  The difference is due to the rounding as a result of adding amounts from two different trial balances, compared to the rounding when using one trial balance.

Statement of Financial Position                  
Total Assets 2,557,220 + 402,367 = 2,959,587 - 2,957,608 = 1,979**
Total Liabilities 59,850 + 479,688 = 539,538 - 537,559 = 1,979**
Total Equity of Canada (Deficit of Canada) 2,497,370 + (77,321) = 2,420,049 - 2,420,049 = 0

  **  The difference is due to the total payables and receivables between CBSA Administered Activities and CBSA Agency Activities eliminated from the Financial Statements in last year's presentation since both trial balances were included.  This year, the payables and receivables are on different financial statements and cannot be eliminated.

 


The Canada Border Services Agency
Annex to the Statement of Management Responsibility for the Agency Activities & Administered Revenue Financial Statements Fiscal Year 2009-10

With the new Treasury Board Policy on Internal Control, effective April 1, 2009, departments are now required to demonstrate the measures they are taking to maintain an effective system of internal control over financial reporting (ICFR).

As part of this policy, departments are expected to conduct annual assessments of their system of ICFR, establish action plan(s) to address any necessary adjustments, and to attach to their Statements of Management Responsibility a summary of their assessment results and action plan.

Effective systems of ICFR aim to achieve reliable financial statements and to provide assurances that:

  • transactions are properly authorized and recorded in accordance with the Financial Administration Act;
  • financial records are properly maintained;
  • assets are safeguarded from risks such as waste, abuse, loss, fraud and mismanagement; and
  • applicable laws, regulations, policies are complied with.

It is important to note that the system of ICFR is not designed to eliminate all risks, but rather to mitigate risk to a reasonable level, incorporating controls that are balanced and proportionate to the risks they aim to mitigate.

The maintenance of an effective system of ICFR is an ongoing process designed to identify and prioritize risks and the controls to mitigate these risks, as well as to monitor its performance in support of continuous improvement. As a result, the scope, regularity and status of departmental assessments of the effectiveness of their system of ICFR will vary from one organization to another based on risks and taking into account their unique circumstances.

1. Introduction

This document is attached to the Canada Border Services Agency (CBSA) Statement of Management Responsibility Including Internal Control over Financial Reporting as required by the new Treasury Board Policy on Internal Control, effective April 1, 2009. This document provides summary information of the measures taken by the CBSA to maintain an effective system of internal control over financial reporting (ICFR). Specifically, it provides information of the assessments conducted by the CBSA and the related status of ICFR as of March 31, 2010; which includes progress, results, action plans and financial highlights pertinent to the CBSA’s control environment. For fiscal year 2009-10, the financial statements for the Agency’s activities (expenditures) and administered activities (revenues) are reported separately.

1.1 Authority, mandate and program activities

Detailed information on the CBSA's authority, mandate and program activities can be found in the Departmental Performance Report [Estimates & Supply] and the Report on Plans and Priorities [Estimates & Supply].

The CBSA conducts a significant portion of its financial activities in offices located in the Regions and the Headquarters Branches. These activities, which include the processing and recording of financial transactions, are monitored, reviewed and verified by the Comptrollership Branch under the Direction of the Chief Financial Officer.

1.2 Financial highlights

Agency activities (expenditures)

Financial statements (unaudited) of the Agency activities (expenditures) for fiscal-year 2009-2010 can be found at [Corporate Documents]. Information can also be found in the Public Accounts of Canada [Receiver General for Canada].

  • The CBSA net cost of operations was $1.8 billion with salaries and employee benefits being the largest expense ($1.3 billion or 73% of total expenses). Other expenses include professional and special services ($255 million or 14%), rental of land buildings ($64 million or 3.5% and transportation and communication ($51 million or 2.8%).
  • For Agency activities, as at March 31, 2010, the CBSA reported total assets of $433 million which were mainly comprised of tangible capital assets ($412 million or 96%). The total reported liabilities for Agency activities were $416 million which were mainly comprised of employee severance benefits ($ 223 million or 54%) and accounts payable and accrued liabilities ($162 million or 39%).

Agency administered activities (revenues)

Financial statements (unaudited) of the Administered activities (revenues) for fiscal-year 2009-2010 can be found at [Corporate Documents]. Information can also be found in the Public Accounts of Canada [Receiver General for Canada].

  • For fiscal-year 2009-2010, the CBSA reported total tax revenues of $21 billion and total non-tax revenue of $37 million.
  • For Administered activities, as at March 31, 2010, the CBSA reported total assets of $4.3 billion; comprised of Cash ($1.5 billion or 35%); amounts receivable from other Federal Government departments and agencies ($1.8 billion or 41%); and, taxes receivable ($1 billion or 23%). The total reported liabilities for Administered activities were $82 million with the majority due to other Federal Government departments ($56 million or 68%) and the provinces ($15 million or 18%). The low ratio of total liabilities, in comparison to total assets, is explained by the fact the primary objective of reporting Administered activities, separate from operating activities (Agency activities), is to report revenues which normally do not generate significant liabilities.

1.3. 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.

  • The CBSA has arrangements with the Canada Revenue Agency (CRA) for the provision of information technology services and for the provision of 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.
  • 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 Department with information used to calculate various accruals and allowances, such as the accrued severance liability. The Department of Justice provides professional advises with respect to potential liabilities and claims to which the CBSA may be subject in the normal course of operations.

1.4 Material changes in fiscal-year 2009-2010

As previously stated, for fiscal year 2009-2010, the financial statements have been divided in two: Agency Activities (expenditures) and Administered Activities (revenues). This change has been implemented to inform the readers of the financial statements of the cost of operations (Agency activities) separate from the revenues administered on behalf of the Government of Canada.

2. The CBSA's control environment relevant to ICFR

The CBSA recognizes the importance of setting the tone from the top to help ensure that staff at all levels understand their roles in maintaining effective systems of ICFR and is well equipped to exercise these responsibilities effectively. The CBSA’s focus is to ensure risks are managed well through a responsive and risk-based control environment that enables continuous improvement and innovation.

2.1 Key positions, roles and responsibilities

The following are the CBSA’s key positions and committees with responsibilities for maintaining and reviewing the effectiveness of its system of ICFR.

President – The President, as Accounting Officer, assumes overall responsibility and leadership for the measures taken to maintain an effective system of internal control. In this role, the President chairs the Departmental Audit Committee and the Executive Management Committee. In addition, there are five standing committees that support the Executive Management Committee which address: Operations, Technology, Comptrollership, Programs, and Human Resources.

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 internal control is in place and functioning as intended. The EVP also chairs the Operations committee.

Chief financial Officer (CFO) – The CFO reports directly to the President and provides leadership for the coordination, coherence and focus on the design and maintenance of an effective system of ICFR. The CFO chairs the Comptrollership Standing committee (CSC), and associate VP of operations, and its membership includes the Vice Presidents of Programs and Science and Technology, the Chief Audit Executive and Director Generals from Operations and Programs. The CSC monitors operating and capital budgets, Administered activities (revenues), reviews financial and administrative strategies, identify risks and recommends mitigation strategies.

Vice Presidents– The Vice Presidents are responsible for maintaining and assessing the effectiveness of the system of ICFR within their respective areas of responsibility.

Chief Audit Executive (CAE)– The CAE reports directly to the President and provides assurance through periodic internal audits which are instrumental to the maintenance of an effective system of ICFR.

Departmental Audit Committee (DAC) - The DAC is an advisory committee that provides objective views on the Agency’s risk management, control and governance frameworks. The DAC was established in 2007 and it is comprised of the President, the EVP and four external members. As such, the DAC reviews the CBSA’s Risk Profile and its system of internal control, including the assessment and action plans relating to the system of ICFR.

2.2 Key measures taken by the CBSA

The CBSA's control environment incorporates a series of measures that provide employees with the knowledge, the tools and resources required to identify and manage risk effectively. These measures include:

  • an Office of Senior Ethics Official and Senior Officer for Internal Disclosure;
  • the CBSA code of conduct;
  • a division dedicated to Internal Control for Financial Reporting under the direction of the Agency Comptroller;
  • annual performance agreements with clearly set out financial management responsibilities;
  • departmental policies tailored to the CBSA’s control environment;
  • regularly updated delegated authorities matrix;
  • documentation of key processes and identification of key control points to support the management and oversight of its system of ICFR.

2.3 CBSA’s ICFR assessment baseline

In 2004, the Government of Canada commenced an initiative to determine the ability of departments to sustain control-based audits of their financial statements, thus placing reliance on well functioning internal controls. As a result in 2006, the largest departments, including the CBSA, began formalizing their approach to managing their systems of ICFR, including readiness assessments and action plans.

Whether it is to support control-based audits or meet the requirements of the Policy on Internal Control, the CBSA needs to be able to maintain an effective system of ICFR with the objective to provide reasonable assurance that:

  • transactions are properly authorized and recorded in accordance with the Financial Administration Act;
  • financial records are properly maintained;
  • that assets are safeguarded; and,
  • applicable laws, regulations, policies are complied with.

In view of that, the CBSA is required to assess the design and operating effectiveness of its system of ICFR as well as to put in place an on-going monitoring program to sustain and continuously improve the system of ICFR.

Design effectiveness means to ensure that key control points are identified, documented, in place and that they are aligned with the risks they aim to mitigate and that any required remediation is addressed. This includes the mapping of key processes and IT systems to the main accounts by location as applicable.

Operating effectiveness means that key controls have been tested over a defined period and that any required remediation is addressed.

On-going monitoring program means that a systematic integrated approach to monitoring is in place, including periodic risk-based assessments and timely remediation. This on-going monitoring program covers all departmental control levels which include corporate and entity general computer and business process controls.

3. The CBSA’s System of ICFR – agency activities (expenditures)

3.1 Agency activities (expenditures) – assessment

In continuing the preparation for its control-based audit of the financial statements, the CBSA has taken measures to assess its system of ICFR starting with the following financial statements main accounts:

  • Salaries and employee benefits;
  • Professional and special services;
  • Transportation and telecommunication;
  • Capital Assets;
  • Materials & Supplies.

The CBSA documented key processes using a standardized format. Key processes were identified considering both the quantitative and qualitative nature of the process and associated risks. Control frameworks have been created for the following:

  • Compensation / Payroll;
  • Payment Requisitioning (FAA section 33);
  • Capital Assets including Real Property;
  • Hospitality;
  • Travel;
  • Payment Methods:
    • Departmental Bank Account Cheques;
    • Acquisition card.

For each significant account/location, the CBSA completed the following steps:

  • Gathered information pertaining to processes and locations, risks and controls relevant to ICFR, including appropriate policies and procedures;
  • Mapped out key processes with the identification and documentation of key risk and control points on the basis of materiality, volumes, complexity, geographic dispersion, past history, external attention and reliance on third-party.

The CBSA has also documented its corporate (entity) level controls. Other key activities such as Procurement activities, Asset Security control frameworks and IT general system controls (IT infrastructure) will be completed during fiscal year 2010-2011.

In developing control frameworks, the CBSA has also taken into account information available from recent audits, including a recent independent testing of the opening balance sheet.

3.2 Agency activities (expenditures) - results

As of year end 2009-10, the CBSA was in the process of finalizing its control frameworks of all key expenditure processes. The testing of operating effectiveness of the payment requisitioning process was also underway.

3.2.1 Design effectiveness of key controls - agency activities (expenditures)

When undertaking design effectiveness testing, the CBSA completed all documentation and ensured whether the process and related documentation is in place and corresponded to actual practices. These activities covered both headquarters and all regional offices. Design effectiveness also included ensuring appropriate alignment of each key control with the risks they aimed to mitigate.

Based on design effectiveness testing phase, the Agency has better articulated particular control frameworks that support the overall effective control environment. For example, the following improvements were identified:

Documentation:

  • Greater consistency in the quality, reliability and availability of documentation of processes, controls and procedures.

Data reconciliation and integrity:

  • Improved quality, reliability and availability of documentation, reconciliations and source data
  • Improved identification of roles & responsibilities;
  • Greater consistency of reconciliations and source data which varied between financial services areas across headquarters and the regions.

IT general system management controls:

  • The CBSA is negotiating the inclusion of a clear statement on the ownership of IT assets in the Memorandum of Understanding with CBSA external IT service provider.

Monitoring and quality assurance of financial statement preparation:

  • Improved challenge functions and quality assurance over the trial balance or amounts and disclosures in the financial statements.

In fiscal year 2010-2011, a cascading certification process will be introduced, requiring process owners, accountable managers and executives to attest to the design and implementation of controls.

3.2.2 Operating effectiveness of key controls

In 2009-10, the CBSA commenced the assessment of operating effectiveness of the payment requisition key controls. The Agency identified and tested these key controls, based on risk and location, defined the appropriate test-period as well as the method and frequency of testing. Remediation requirements have been partially addressed and plans are underway to complete it before end of 2010-11 fiscal year.

3.2.3 Progress as of March 2010

During 2009-2010, CBSA has continued to make significant progress in assessing and improving its key controls over ICFR. Below is a summary of the main progress achieved by the CBSA.

The CBSA has completed work to address the following necessary adjustments:

  • Completion of the documentation and design testing of key processes and controls of financial services at the headquarters, and regional levels, as well as the National Financial Transaction Centre (where the Payment requisitioning function is centralized for the CBSA). This included the identification of process owners, mapping of each process to the financial statements key accounts assertion based.
  • Revision and completion of the documentation of the existing entity level controls, required as a result of an Agency wide reorganization effective April 1, 2010.

The CBSA has substantially advanced work to address the following necessary adjustments:

  • Streamlining and standardization of key controls between the financial services areas, both in the regions and headquarters, with the National Financial Transaction Centre (NFTC). “Payment authorization” (section 33) is centralized at the NFTC.
  • Evaluation and development of a materiality threshold for the Agency, taking into account quantitative and qualitative misstatements.
  • Establishment of a division dedicated to the implementation of an effective system of Internal Control for Financial Reporting under the direction of the Agency Comptroller.

Building on the progress to date, the CBSA is positioned to complete the assessment of its system of ICFR in 2011-12. As of March 2010, the design effectiveness phase was well under way.

3.3 Agency activities (expenditures) – action plan

By end of fiscal year 2010-11, the CBSA plans to:

  • Complete all areas that have been substantially advanced in 2009-10, including a certification process pertaining to the design and implementation of controls, and in particular, the operating effectiveness of key controls at all levels and required remediation.
  • Complete design effectiveness phase for procurement activities and Asset Security
  • Initiate independent assurance report requirement on the internal controls of the external service provider for IT services.
  • Complete the formalization of an ongoing risk-based monitoring plan and fraud risk assessments for all control frameworks including the test-period as well as the method, frequency of testing, and the selection of locations.

By end of fiscal year 2011-12, the CBSA plans to:

  • Implement an on-going risk-based monitoring program to sustain the effectiveness of the Agency’s system of ICFR. This includes training to enhance the awareness and knowledge of internal controls over financial reporting and associated responsibilities across the CBSA.

4. The CBSA's System of ICFR – administered activities (revenues)

4.1 Administered activities (revenues) – assessment

The CBSA will be modernizing and making significant improvements to the systems and processes that support the administration of revenues. These improvements will also facilitate the Agency’s capacity to sustain a control-based audit and meet the requirements under the Policy on Internal Control for ICFR. The CBSA Assessment and Revenue Management (CARM) and the Accounts Receivable Sub-ledger (ARL) systems are the principal initiatives which will enable these improvements, and are scheduled to begin in fiscal year 2010-11. With the implementation of these systems and expected impact on business processes and related controls, the various phases (Design and Operating effectiveness and On-going monitoring) to support ICFR will be developed as these systems are conceived and implemented.

4.2 Administered activities (revenues) – results

As at year end 2009-10, certain measures and audits have been completed to improve and/or verify the effectiveness of certain internal controls in the Agency administered activities (revenues). These measures and audits include the following:

Internal Audit of Cash Cut-Off Procedures:

  • The audit opinion from the 2008-09 audit and preliminary findings of the 2009-10 audit indicate that Cash In Transit (CIT) was properly recorded at year end and the monitoring process implemented was effective in determining the CIT at year end.

Cash Management Review:

  • In 2009-10, Cash Management reviews for each port of entry were implemented in all regions, taken into account materiality and risk.

Audit of the Payment Process for Importer/Broker Account Statements:

  • The audit found that some deficiencies exist in the effectiveness and reliability of the payment process. The recommendations made as a result of this audit are to be implemented beginning fall 2010.

4.3 Administered activities (revenues) – action plan

By end of fiscal year 2010-11, the CBSA plans to:

Revenue Management

  • Perform a high level diagnostic, which when completed, will identify gaps and weaknesses in relation to :
    • Policies and guidelines;
    • Governance / Roles and responsibilities;
    • System;
    • Controls;
    • Processes;
    • Performance.
  • A preliminary action plan is to be developed to mitigate the risks and address the gaps / weaknesses identified in the above mentioned assessment.

Systems Improvements

In 2010-11, work will begin to implement the CBSA Assessment and Revenue Management (CARM) and the Accounts Receivable Sub-ledger (ARL). The primary focus of these initiatives is to provide a viable solution to obtain accurate, timely, complete and reliable financial information and manage and account for tax revenues efficiently and effectively.

By end of fiscal year 2011-12, the CBSA plans to:

Revenue Management

  • Develop and begin the implementation of the plan to remedy weaknesses and gaps in:
    • Policies and guidelines;
    • Governance / Roles and responsibilities;
    • System;
    • Controls;
    • Processes;
    • Performance.

Systems Improvements

In 2011-12, work will continue to implement the CBSA Assessment and Revenue Framework (CARM) and the Accounts Receivable Sub-ledger (ARL).

By end of fiscal year 2012-13, the CBSA plans to:

Revenue Management

  • Complete the implementation of the plan to remedy weaknesses and gaps in:
    • Policies and guidelines;
    • Governance / Roles and responsibilities;
    • System;
    • Controls;
    • Processes;
    • Performance.

Systems Improvements

  • In 2012-13, the ARL system implementation will be completed. The CARM system implementation will continue until 2017 which is the expected completion date for that initiative.