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Quarterly Financial Report

For the quarter ended September 30, 2012

Statement outlining results, risks and significant changes in operations, personnel and programs

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1. Introduction

This quarterly report has been prepared by management 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, Supplementary Estimates (A) as well as Canada’s Economic Action Plan 2012 (Budget 2012).

A summary description of the Canada Border Services Agency (CBSA) program activities can be found in Part II of the Main Estimates.

1.1 Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the CBSA’s spending authorities granted by Parliament and those used by the department, consistent with the Main Estimates and Supplementary Estimates for the 2012–2013 fiscal year.

The authority of Parliament is required before monies 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.

As part of the Parliamentary business of supply, the Main Estimates must be tabled in Parliament on or before March 1 preceding the new fiscal year.  Budget 2012 was tabled in Parliament on March 29, after the tabling of the Main Estimates on February 28, 2012.  As a result the measures announced in the Budget 2012 could not be reflected in the 2012-13 Main Estimates.

In fiscal year 2012-2013, frozen allotments will be established by Treasury Board authority in departmental votes to prohibit the spending of funds already identified as savings measures in Budget 2012.  In future years, the changes to departmental authorities will be implemented through the Annual Reference Level Update, as approved by Treasury Board, and reflected in the subsequent Main Estimates tabled in Parliament.

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

The quarterly financial report has not been subjected to an external audit or review.

1.2 CBSA Financial Structure

The CBSA has a financial structure composed mainly of voted budgetary authorities that include Vote 10 – Operating Expenditures and Vote 15 – Capital Expenditures, while the statutory authorities consist of contributions to employee benefit plans.

The CBSA also operates on the basis of a two-year appropriation, whereby any carry forward amount reported at the end of a fiscal year is available to be used the following year.  However, any portion of the carry forward amount not spent at the end of the two years is lost.  This process differs from that of other government departments as they can only claim five percent of their operating vote and twenty percent of their capital vote through the carry forward process each year.

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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 for the quarter ended September 30, 2012.

Graph 1:

Comparison of Net Budgetary Authorities and Expenditures as of June 30, 2011 and June 30, 2012 (in thousands $)
  2011-2012 2012-2013
Authorities 2,036,247 2,047,896
Expenditures 409,426 409,077

2.1 Significant Changes to Authorities

For the period ending September 30, 2012, the authorities provided to the Agency include Main Estimates, Supplementary Estimates (A), 2011-2012 Carry-Forward and Treasury Board Vote 30 (Paylist Expenditures).  This represents an overall increase in funding from the same time last year.

As at September 30, 2012, the Statement of Authorities (Table 1) reflects total authorities available of $2,047.9 million, compared to $2,036.2 million at the same quarter last year.  The result is a net increase of $11.7 million, which is primarily associated with Vote 10 – Operating Expenditures.

Vote 10 – Operating Expenditures

Increases - $159.4 million:

  • $99.3 million of carry-forward funding from 2011-2012
  • $22.1 million to ensure continued and secure border services
  • $11.0 million to support the reform of Canada’s refugee determination system (Balanced Refugee Reform Act)
  • $7.0 million for arming the Canada Border Officers at the border and addressing work-alone situations
  • $4.5 million for the implementation of the Harmonized Sales Tax (HST)
  • $3.9 million to transfer the administration of the federal immovable Property located at Rigaud, Quebec to the Minister of Public Safety for the Canada Border Services Agency 
  • $3.4 million for Canada’s anti-money laundering initiative
  • $3.0 million for the Canada Border Services Agency Assessment and Revenue Management (CARM) Project
  • $1.7 million transfer from the Royal Canadian Mounted Police - For administering relevant requirements of the Firearms Act 
  • $1.5 million to complete the design, development and deployment of biometrics in the temporary resident stream
  • $1.1 million for the implementation of the Public Security and Anti-Terrorism funded Marine Security Operations Centers Project
  • $0.7 million transfer from Citizenship and Immigrations Canada – To cover the application development and support of National Case Management System (NCMS)
  • $0.3 million from Treasury Board (TB) Vote 30 for Paylist Expenditures (includes severance pay, parental benefits, civilian severance pay and termination benefits etc.) 

The increases are offset by the following decreases – ($115.7 million):

  • $86.1 million transfer to Shared Services Canada to consolidate the resources and the personnel related to e-mail, data centers and data networks
  • $14.5 million for the E-Manifest initiative
  • $4.7 million in contributions to the employee benefit plan due to the rate decrease from 18% to 17.6%
  • $4.6 million to manage immigration cases involving classified information under Division 9 of the Immigration and Refugee Act (Security Certificates)
  • $4.3 million for the implementation of Strategic Review reallocations
  • $1.1 million of the transfer from the National Defence for public security initiatives
  • $0.4 million for the Accounts Receivable Ledger project

Vote 15 – Capital Expenditures

Increases - $55.4 million:

  • $15.6 million to ensure continued and secure border services
  • $15.1 million for the construction of 3 small ports at Lyleton, Goodland and Coulter in Manitoba
  • $13.5 million for the Canada Border Services Agency Assessment and Revenue Management (CARM) Project
  • $7.0 million to expand the commercial processing facilities at St-Bernard-de-Lacolle in Quebec
  • $2.0 million for the Accounts Receivable Ledger project
  • $1.7 million to transfer the administration of the federal immovable Property located at Rigaud, Quebec to the Minister of Public Safety for the Canada Border Services Agency 
  • $0.5 million to complete the design, development and deployment of biometrics in the temporary resident stream

The increases are offset by the following decreases - ($87.4 million):

  • $36.3 million of carry-forward funding from 2011-2012
  • $36.0 million for the modernization of three ports of entry in British Columbia (Kingsgate, Pacific Highway, Huntingdon) and one in Ontario (Prescott) which supports the economic recovery plan of the Government
  • $9.1 million for arming the Canada Border Officers at the border and addressing work-alone situations
  • $6.0 million to support the reform of Canada’s refugee determination system (Balanced Refugee Reform Act)

2.2 Explanations of Significant Variances in Expenditures from Previous Year

The quarter two Departmental Budgetary Expenditures by Standard Object (Table 2) indicates a decrease in expenditures of $0.3 million or $0.1% in 2012-2013 compared to 2011-2012, from $409.4 million to $409.1 million. 

The most notable variance by standard object from quarter two last year to this year are as follows:

  • Personnel expenditures increased by $7.9 million, due to individual salary increases from one year to the next;
  • Professional and Special Services expenditures decreased by $4.2 million, due to the Kingsgate Redevelopment Project which ended in fiscal year 2011-2012 and was in support of the economic recovery plan by the government;
  • Repair and maintenance expenditures increased by $2.0 million, due mainly to an increase in payments to Public Works and Government Services Canada (PWGSC) for non-capital projects, specifically the Arming initiative; and
  • Acquisition of land, building and work expenditures decreased by $5.9 million, due to constructions in 2012 of the Rigaud building and the construction of the new Port of Entry (POE) in Prescott.

The year to date decrease from quarter two this year compared to last year is $50.1 million.  The main reason for the decrease is that spending in professional and special services went down by $55.9 million from $129.9 million in 2011-12 to $74.0 million in 2012-2013, which can be attributed to the transfer of responsibility and functionality to Shared Services Canada (SSC).     

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3. Risks and Uncertainties

The CBSA is facing a rapidly changing and complex environment that expects to see an increase in the number of people and goods coming across the border over the next 10 years.  This will result in more complex threats, risks, and an increased focus on security.  In considering these factors the CBSA has embarked on business transformation initiatives that will allow the organization to be even more efficient and effective in the way it does business, more agile in dealing with challenges and containing costs.

Budget 2010 Cost Containment Measures have required the CBSA to finance, on a permanent basis, the costs of wage increases resulting from current and future collective agreements negotiated between 2010–2011 and 2012–2013. The ongoing impact of the Budget 2010 Cost Containment Measure is a reduction to base funding which limits the Agency’s ability to deliver on other programs and expected results.

In recognition of this tightening fiscal environment, the CBSA has taken a more rigorous approach to the management of revenues, expenditures, projects and forecasting and commitment monitoring.  These steps began in mid fiscal year 2009–2010 to address the rapidly changing economic climate. The Agency has introduced more comprehensive monthly analyses of trends and forecasts of full-time equivalents and salary and non-salary expenditures to ensure affordability and sustainability. These measures, along with other budgetary restrictions have been put in place to mitigate the impact of the operating freeze.

In addition, the CBSA is also in the process of maturing the integrated horizontal program management tables to oversee its business.  This is in addition to the organizational view currently in place. There has also been greater attention and focus given to adopting stronger controls and processes surrounding project reporting and monitoring.

The Agency ensures that integration exists between the investment plan and business plans, and that risk and complexities are considered when new business initiatives are proposed within the context of these plans.

The CBSA has also adopted Enterprise Risk Management (ERM) to ensure the Agency implements a consistent, systematic and disciplined approach to managing risks at all levels in and across the Agency.

The CBSA Enterprise Risk Profile (ERP) is a key component of the ERM Program. The ERP identifies and ranks the top risks to the Agency's achievement of its strategic objective. The goal is to strengthen the Agency's resilience to its changing environment by providing senior management with the risk-based information needed to make better-informed decisions.

Nineteen enterprise risks have been identified and organized into two categories: business risks and enabling risks. Business risks are the risks that the Agency is mandated to address on behalf of Canada. Enabling risks are risks to the Agency's ability to deliver on its mandate.

The ERP will be used as a key information source for important Agency decision-making processes such as: integrated business planning, resource allocation and investment planning. As such, the risk response strategies (i.e., the actions that will be taken to mitigate risks) will be incorporated in the 2012-2013 Integrated Business Plans.

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4. Significant Changes in Relation to Operations, Personnel and Programs

Key Senior Personnel

There has been a change in senior level personnel, most notably the appointment of a new Chief Financial Officer (CFO) in June, 2012.

External Reporting

New requirements for the reporting of financial information have been placed on departments as a result of the approval in 2010-2011 of the Policy on Financial Resource Management, Information and Reporting, amendment of the Treasury Board Accounting Standard (TBAS) 1.3, the new Directive on the Management of Travel, Hospitality and Conferences and the Parliamentary Budget Officer requests.

These policies/directives now require departments to produce auditable financial statements, comprehensive Future-Oriented Financial Statements and Quarterly Financial Reports, a comparative annual report on travel, hospitality and conference expenditures and reports on Supplementary Estimates by Program Activity to the Parliamentary Budget Officer. These reports have resulted in more requirements being placed on existing departmental personnel to retrieve, consolidate and produce these documents.

Budget 2012 Implementation

This section provides an overview of the savings measures announced in Budget 2012 that will be implemented in order to refocus government and programs; make it easier for Canadians and business to deal with their government; and, modernize and reduce the back office. 

The CBSA will achieve Budget 2012 savings of $143.4 million by fiscal year 2014-15 through efficiency measures and program reductions that align resources to its core mandate, scaling back where the need is reduced; transforming how it works internally; and by consolidating and streamlining.  With these changes the CBSA will focus on supporting management excellence and accountability across government.

In the first year of implementation, the CBSA’s savings target is $31.3 million. Savings will increase to $72.8 million in 2013-14 and will result in ongoing saving of $143.4 million by 2014-15.

As a result of Budget 2012, the CBSA will implement the plan to:

  • streamline and simplify our approach to internal services through the use of more technology and less cumbersome processes;
  • optimize programs to get better results at reduced costs;
  • transform programs in order to eliminate red tape, provide better services to Canadians, and reduce costs; and
  • adjust front-line service delivery where adjustments can be made without impacting service levels.

Impacts of Budget 2012 for this quarter are minimal and will be reflected in subsequent quarters.

Shared Services Canada

On August 4, 2011, Shared Services Canada (SSC) was created by an Order-in-Council (OIC) under the Financial Administration Act in order to adopt an enterprise-wide approach to e-mail, network and data centre services for the Government of Canada.

SSC was established as part of the PWGSC portfolio to streamline and reduce duplication in the government's IT services. SSC will consolidate the resources and personnel currently supporting e-mail, data centres and networks and associated internal services.

With the approval of the second OIC on November 15, 2011, some employees of the CBSA were transferred to SSC.

The CBSA has transferred $86.1 million in 2012-2013 and future years, which was addressed in the 2012-2013 Annual Reference Level Update and reflected in the 2012-2013 Main Estimates.

New Programs

On December 7, 2011, Prime Minister Stephen Harper and U.S. President Barack Obama announced a Canada–U.S. Action Plan in support of last February’s Declaration of a Shared Vision for Perimeter Security and Economic Competitiveness (Perimeter Vision). The CBSA will play an instrumental role in implementing the Action Plan; there are eleven initiatives that the Agency will lead, another six in which the Agency plays a key supporting role and eleven in which the Agency has an interest.

Although the action plan has been announced, details of the individual initiatives have not yet been tabled in Parliament.  As such, the Perimeter Vision initiatives have not been included in the current Investment Plan to respect Budget confidentiality.  As initiatives are approved, they will be incorporated into the CBSA Investment Plan process.

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5. Approval by Senior Officials

Approved by:

Luc Portelance
President
Claude Rochette
Chief Financial Office


Ottawa, Canada
November 29, 2012


Canada Border Services Agency

Quarterly Financial Report

For the quarter ended September 30, 2012

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6. Table 1: Statement of Authorities (Unaudited)

  Fiscal Year 2012-2013   Fiscal Year 2011–2012
(in thousands of dollars) Total available for use for the year ending March 31, 2013* ** Used during the quarter ended September 30, 2012 Year-to-date used at quarter end   Total available for use for the year ending March 31, 2012* Used during the quarter ended September 30, 2011 Year-to-date used at quarter end
Vote 10 - Net Operating Expenditures 1,663,019 347,477 656,488   1,619,958 338,133 696,672
Vote 15 - Capital Expenditures 203,386 16,044 23,850   235,396 25,998 34,283
Budgetary statutory authorities     0       0
Employee benefit plans 181,491 45,373 90,746   180,893 45,223 90,446
Other   183 344     72 119
Total budgetary authorities 2,047,896 409,077 771,428   2,036,247 409,426 821,520

* Includes authorities available for use and granted by Parliament at quarter-end

** Total available for use does not reflect measures announced in Budget 2012.

Canada Border Services (Agency Activities)

Quarterly Financial Report

For the quarter ended September 30, 2012

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7. Table 2: Departmental Budgetary Expenditures by Standard Object (Unaudited)

  Fiscal Year 2012-2013   Fiscal Year 2011–2012
(in thousands of dollars) Planned expenditures for the year ending March 31, 2013* ** Expended during the quarter ended September 30, 2012 Year-to-date used at quarter end   Planned expenditures for the year ending March 31, 2012* Expended during the quarter ended September 30, 2011 Year-to-date used at quarter end
Expenditures              
Personnel 1,242,085 332,951 634,126   1,311,168 325,037 625,143
Transportation and communications 98,613 13,587 23,167   84,506 14,396 24,562
Information 2,415 398 602   3,107 313 499
Professional and special services 484,501 38,104 74,004   427,346 42,282 129,939
Rentals 13,476 2,371 4,695   11,455 2,426 3,674
Repair and maintenance 36,668 4,983 8,785   34,621 2,976 5,413
Utilities, materials and supplies 30,151 3,826 7,471   37,578 4,577 6,862
Acquisition of land, buildings and works*** 62,413 9,647 15,574   92,171 15,590 21,977
Acquisition of machinery and equipment*** 46,215 3,484 4,906   28,241 2,736 3,877
Transfer payments 0 0 0   0 0 0
Other subsidies and payments 41,068 3,121 3,547   15,764 417 864
Total gross budgetary expenditures 2,057,606 412,472 776,877   2,045,957 410,750 822,810
               
Less revenues netted against expenditures              
Sales of Services 9,710 3,428 5,509   9,710 1,349 1,349
Other Revenue 0 -33 -60   0 -25 -59
Total revenues netted against expenditures 9,710 3,395 5,449   9,710 1,324 1,290
Total net budgetary expenditures 2,047,896 409,077 771,428   2,036,247 409,426 821,520

* Includes authorities available for use and granted by Parliament at quarter-end

** Planned expenditures do not reflect measures announced in Budget 2012.