Canada Border Services Agency Financial Statements For the Year Ended March 31, 2016

Table of contents

Statement of Management Responsibility Including Internal Control Over Financial Reporting

Responsibility for the integrity and objectivity of the accompanying financial statements for the year ended March 31, 2016, and all information contained in these statements rests with the management of the Canada Border Services Agency (CBSA). These financial statements have been prepared by management using the Government’s accounting policies, which are based on Canadian public sector accounting standards.

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

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

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

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

A risk-based assessment of the system of ICFR for the year ended March 31, 2016 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the annex.

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

The financial statements of the CBSA have not been audited.

Linda Lizotte-MacPherson, President
Ottawa, Canada
August 16, 2016

Christine Walker, Chief Financial Officer
Ottawa, Canada
August 16, 2016

Financial Statements - Agency Activities

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

(in thousands of dollars)
  2016 2015
Liabilities
Accounts payable and accrued liabilities (note 4) 167,205 173,226
Vacation pay and compensatory leave 60,246 66,631
Deposit accounts (note 6) 27,996 27,311
Environmental liabilities (note 5) 1,184 2,480
Provision for claims and litigation (note 12) 665 815
Employee future benefits (note 7) 78,478 82,894
Total liabilities 335,774 353,357
Financial assets
Due from Consolidated Revenue Fund 153,197 157,130
Accounts receivable and advances (note 8) 15,964 18,594
Total gross financial assets 169,161 175,724
Financial assets held on behalf of Government
Accounts receivable and advances (note 8) (2,004) (2,209)
Total financial assets held on behalf of Government (2,004) (2,209)
Total net financial assets 167,157 173,515
Departmental net debt 168,617 179,842
Non-financial assets 
Inventory (note 9) 3,703 9,787
Tangible capital assets (note 10) 951,078 863,345
Total non-financial assets 954,781 873,132
Departmental net financial position 786,164 693,290

Contractual obligations (note 11)
Contingent liabilities (note 12)
The accompanying notes form an integral part of these financial statements.

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

(in thousands of dollars)
  2016
Planned Results
2016 2015
Expenses
Admissibility Determination 1,006,690 954,965 955,235
Internal Services 359,131 405,807 392,280
Risk Assessment 171,874 177,644 184,805
Immigration Enforcement 159,500 173,788 189,962
Revenue and Trade Management 110,708 91,719 91,135
Secure and Trusted Partnerships  48,322 43,866 52,124
Criminal Investigations  26,644 34,357 37,932
Recourse 11,241 12,134 13,512
Total expenses 1,894,110 1,894,280 1,916,985
Revenues 
Sales of goods and services  20,310 21,672 19,634
Miscellaneous Revenues 2,861 1,532 1,305
Revenues earned on behalf of Government (4,741) (3,336) (2,748)
Total revenues 18,430 19,868 18,191
Net cost of operations before government funding and transfers 1,875,680 1,874,412 1,898,794
Government funding and transfers
Net cash provided by Government - 1,794,392 2,040,834
Services provided without charge by other government departments (note 13) - 177,174 164,049
Change in due from Consolidated Revenue Fund - (3,933) (50,328)
Transfer of the transition payments for implementing salary payment in arrears (note 14) - (347) (39,207)
Net cost of operations after government funding and transfers - (92,874) (216,554)
Departmental net financial position - Beginning of year - 693,290 476,736
Departmental net financial position - End of year - 786,164 693,290

Segmented Information (Note 15)
The accompanying notes form an integral part of these financial statements.

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

(in thousands of dollars)
  2016 2015
Net cost of operations after government funding and transfers (92,874) (216,554)
Changes due to tangible capital assets
Acquisition of tangible capital assets 165,960 181,138
Amortization of tangible capital assets (76,748) (56,432)
Proceeds from disposal of tangible capital assets (501) (456)
Net loss on disposal of tangible capital assets (1,155) (1,222)
Adjustments to tangible capital assets 177 1,879
Total change due to tangible capital assets 87,733 124,907
Change due to inventories (6,084) (2,856)
Change due to prepaid expenses - (177)
Net decrease in departmental net debt (11,225) (94,680)
Departmental net debt - Beginning of year 179,842 274,522
Departmental net debt - End of year 168,617 179,842

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

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

(in thousands of dollars)
  2016 2015
Operating activities
Net cost of operations before government funding and transfers 1,874,412 1,898,794
Non-cash items:
Services provided without charge by other government departments (note 13) (177,174) (164,049)
Amortization of tangible capital assets (76,748) (56,432)
Net loss on disposal of tangible capital assets (1,155) (1,222)
Adjustments to tangible capital assets 177 1,879
Transition payments for implementing salary payments in arrears (note 14) 347 39,207
Variations in Statement of Financial Position:
(Decrease) increase in accounts receivable and advances (2,425) 3,165
(Decrease) in prepaid expenses - (177)
(Decrease) in inventory (6,084) (2,856)
Decrease in liabilities 17,583 141,843
Cash used in operating activities 1,628,933 1,860,152
Capital investing activities
Acquisitions of tangible capital assets 165,960 181,138
Proceeds from disposal of tangible capital assets (501) (456)
Cash used in capital investment activities 165,459 180,682
Net cash provided by Government of Canada 1,794,392 2,040,834

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

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

1. Authority and objectives

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

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

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

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

2. Summary of significant accounting policies

These financial statements have been prepared using Government’s accounting policies stated below, which are based on Canadian public sector accounting standards. The presentation and results using the stated accounting policies do not result in any significant differences from Canadian public sector accounting standards.

Significant accounting policies are as follows:

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

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

3. Parliamentary Authorities

The CBSA receives most of its funding through annual parliamentary authorities. Items recognized in the Statement of Operations and Departmental Net Financial Position and the Statement of Financial Position in one year may be funded through parliamentary authorities in prior, current or future years. Accordingly, the CBSA has different net results of operations for the year on a government funding basis than on an accrual accounting basis. The differences are reconciled in the following tables:

(a) Reconciliation of net cost of operations to current year authorities used

(in thousands of dollars)
  2016 2015
Net cost of operations before government funding and transfers 1,874,412 1,898,794
Adjustments for items affecting net cost of operations but not affecting authorities:
Services provided without charge by other government departments (177,174) (164,049)
Amortization of tangible capital assets (76,748) (56,432)
Refund and adjustments to prior years' expenditures 5,272 8,145
Net loss on disposal of tangible capital assets (1,155) (1,222)
Decrease in employee future benefits 4,416 100,384
Decrease (increase) in vacation pay and compensatory leave 6,385 (1,746)
Decrease (increase) in environmental liabilities 1,296 (160)
Decrease (increase) in claims and litagation 150 (165)
(Increase) in accrued liabilities not charged to authorities (1,921) (2,116)
(Increase) decrease in bad debt expense (682) 28
Other 2,320 2,827
Total items affecting net cost of operations but not affecting authorities (237,841) (114,506)
Adjustments for items not affecting net cost of operations but affecting authorities:
Acquisition of tangible capital assets 165,960 181,138
Proceeds from disposal of tangible capital assets (501) (456)
(Decrease) in inventory (6,084) (2,856)
Transition payments for implementing salary payments in arrears 347 39,207
(Decrease) in prepaid expenses - (177)
Total items not affecting net cost of operations but affecting authorities 159,722 216,856
Current year authorities used 1,796,293 2,001,144

(b) Authorities provided and used

(in thousands of dollars)
  2016 2015
Authorities provided:
Vote 1 - Operating expenditures 1,512,906 1,694,361
Vote 5 - Capital expenditures 251,431 277,532
Statutory amounts 187,465 198,255
Less:
Authorities available for future years (65,136) (76,120)
Lapsed: Operating (23,837) (17,624)
Lapsed: Capital (66,536) (75,260)
Current year authorities used 1,796,293 (2,001,144)

4. Accounts Payable and Accrued Liabilities

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

(in thousands of dollars)
  2016
2015
Accounts payable - Other government departments and agencies 23,192 36,592
Accounts payable - External parties 46,617 51,097
Total accounts payable 69,809 87,689
Accrued liabilities 97,396 85,537
Total accounts payable and accrued liabilties 167,205 173,226

5. Environmental Liabilities

Remediation of contaminated sites

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

The CBSA has identified 5 sites (6 sites in 2014-2015) where contamination may exist and assessment, remediation and monitoring may be required.  Of these, the CBSA has assessed 3 sites (2 sites in 2014-2015) where action is possible for which a liability of $1,184,000 ($2,480,000 in 2014-2015) has been recorded.  This liability estimate has been determined after the sites are assessed and is based on scientific/engineering contractors reviewing the results of site assessments, and proposing possible remediation solutions. 

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

2 sites are not considered a priority for action because information indicates there is likely no significant environmental impact or human health threats and there is likely no need for action unless new information becomes available indicating greater concerns, in which case, the site will be re-examined. 

The following table presents the total estimated amounts of these liabilities by nature and source as at March 31, 2016, and March 31, 2015:

Nature and Source Number of Sites 2016 Estimated Liability 2016 Number of Sites 2015 Estimated Liability 2015
Fuel Related Practices (1) 2 1,027,000 2 2,480,000
Landfill / Waste Sites (2) 1 157,000 - -
Totals 3 1,184,000 2 2,480,000
1. Contamination primarily associated with fuel storage and handling, e.g., accidental spills related to fuel storage tanks or former fuel handling practices, e.g. petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX.
2. Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX, other organic contaminants, etc.

6. Deposit Accounts

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

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

The following table presents details on the deposit accounts:

(in thousands of dollars)
  Opening
Balance
Deposits Refunds Forfeitures Closing
Balance
Immigration guarantee fund 21,092 7,046 (6,017) (744) 21,377
General security deposits 6,219 522 (122) - 6,619
Total deposit accounts 27,311 7,568 (6,139) (744) 27,996

7. Employee Future Benefits

(a) Pension benefits

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

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

The 2015-2016 expense amounts to $128,762,000 ($135,006,000 in 2014-2015).  For Group 1 members, the expense represents approximately 1.25 times (1.41 times in 2014-2015) the employee contributions and, for Group 2 members, approximately 1.24 times (1.39 times in 2014-2015) the employee contributions.

The CBSA'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 CBSA provides severance benefits to its employees based on eligibility, years of service and final salary.  These severance benefits are not pre-funded. Benefits will be paid from future authorities.

As part of collective agreement negotiations with certain employee groups, and changes to conditions of employment for executives and certain non-represented employees, the accumulation of severance benefits under the employee severance pay program ceased for these employees commencing in 2012. Employees subject to these changes have been given the option to be immediately paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits on termination from the public service. These changes have been reflected in the calculation of the outstanding severance benefit obligation.

Information about the severance benefits, measured as at March 31, is as follows:

(in thousands of dollars)
  2016
2015
Accrued benefit obligation, beginning of year 82,894 183,278
Expense for the year 4,193 67,847
Benefits paid during the year (8,609) (168,231)
Accrued benefit obligation, end of year 78,478 82,894

8. Accounts Receivable and Advances

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

(in thousands of dollars)
  2016
2015
Receivables - Other government departments and agencies 12,716 15,218
Receivables - External parties 3,910 4,492
Employee advances and other receivables 2,027 1,760
  18,653 21,470
Allowance for doubtful accounts on external receivables (2,689) (2,876)
Gross accounts receivable 15,964 18,594
Accounts receivable held on behalf of Government (2,004) (2,209)
Net accounts receivable 13,960 16,385

9. Inventory

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

(in thousands of dollars)
  2016
2015
Uniforms 3,703 9,787
Total 3,703 9,787

10. Tangible Capital Assets

The following table presents details of the tangible capital assets:

(in thousands of dollars)
  Cost Accumulated amortization 2016 2015
Capital
asset
class
Opening Balance Acquisitions Adjustments(1) Disposals and write-offs Closing balance Opening Balance Amortization Adjustments(1) Disposals and write-offs Closing balance Net book value Net book value
Land 4,649 - - - 4,649 - - - - - 4,649 4,649
Buildings 416,601 681 26,064 1,805 441,541 139,257 13,625 - 655 152,227 289,314 277,344
Leasehold improvements 35,729 - - 4,069 31,660 30,604 2,102 - 3,815 28,891 2,769 5,125
Works and
infrastructure
5,150 - - - 5,150 1,942 238 - - 2,180 2,970 3,208
Machinery and
equipment
116,058 10,738 171 14,545 112,422 66,198 7,997 60 14,342 59,913 52,509 49,860
Informatics hardware 51,137 1,721 105 906 52,057 40,520 3,076 - 907 42,689 9,368 10,617
Informatics software - in-house developed 283,674 - 175,552 - 459,226 205,832 43,667 1,621 - 251,120 208,106 77,842
Informatics software - purchased 4,066 - 1,631 - 5,697 2,312 2,848 - - 5,160 537 1,754
Motor vehicles 31,189 3,462 42 2,888 31,805 23,221 3,164 11 2,867 23,529 8,276 7,968
Ships and boats 708 39 - - 747 581 31 - - 612 135 127
Assets under construction 424,851 149,319 (201,696) 29 372,445 - - - - - 372,445 424,851
Total 1,373,812 165,960 1,869 24,242 1,517,399 510,467 76,748 1,692 22,586 566,321 951,078 863,345

(1) Adjustments include assets under construction of $201,696,000 that were transferred to the other categories upon completion of the assets.

11. Contractual Obligations

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

(in thousands of dollars)
  2017 2018 2019 2020 2021 and there-after Total
Purchase contracts 127,209 21,588 7,943 734 52 157,526

12. Contingent Liabilities

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

Claims and litigation

Forty-five (45) (46 in 2014-2015) general litigation claims have been made against the CBSA in the normal course of operations. These claims include items with pleading amounts and others for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable.

The CBSA has recorded an allowance of $665,000 ($815,000 in 2014-2015) for claims and litigation where it is likely that there will be future payment and a reasonable estimate of the loss can be made. Claims and litigation for which the outcome is not determinable and a reasonable estimate can be made by management amount to $880,000 ($1,030,000 in 2014-2015).

13. Related Party Transactions

The CBSA is related as a result of common ownership to all Government departments, agencies and Crown corporations of Canada. The CBSA enters into transactions with these entities in the normal course of business and on normal trade terms. During the year, the CBSA received common services which were obtained without charge from other Government departments as disclosed below:

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

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

(in thousands of dollars)
  2016
2015
Employer’s contribution to the health and dental insurance plans 99,639 90,898
Accommodation 67,892 61,550
Legal services 9,330 11,262
Workers' compensation coverage 313 339
Total 177,174 164,049

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

(b) Other transactions with related parties

(in thousands of dollars)
  2016
2015
Expenses - other government departments and agencies 366,253 371,476
Revenues - other government departments and agencies 624 597

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

14. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-2015. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes.  This change to the pay system had no impact on the expenses of the Department. However, it did result in the use of additional spending authorities by the Department. Prior to year-end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Services and Procurement Canada, who is responsible for the administration of the Government pay system.

(in thousands of dollars)
  2016 2015
Assets:
Transfer of Accounts Receivable to Public Works and Government Services 347 39,207
Adjustment to the departmental net financial position 347 39,207

15. Segmented Information

Presentation by segment is based on the CBSA’s program alignment architecture. The presentation by segment is based on the same accounting policies as described in the Summary of significant accounting policies in note 2.

The major categories of revenue are described below.

Immigration and Refugee Protection Regulations administration fees

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

Inspection fees for food, plant and animal products

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

NEXUS fees for pre-approved and frequent travellers

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

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

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

Detector dog training services

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

The following table presents the expenses incurred and the revenues generated for the main programs, by major object of expense and by major type of revenues.

(in thousands of dollars)
  Admissibility Determination Internal Services Risk Assessment Immigration Enforcement Revenue and Trade Management Secure and Trusted Partnership Criminal Investigations Recourse 2016
Total
2015
Total
Operating Expenses
Salaries and employee future benefits 812,047 201,695 127,293 102,377 78,352 39,884 30,792 11,156 1,403,596 1,465,999
Professional and special services 42,584 93,726 29,389 51,761 5,735 807 618 323 224,943 215,279
Amortization of tangible capital assets 5,014 68,854 155 1,513 1,100 28 84 - 76,748 56,432
Rental of buildings and machinery 42,484 13,642 6,239 5,108 3,863 1,973 1,515 542 75,366 68,808
Transportation and telecommunication 22,426 5,493 3,183 10,398 976 348 361 48 43,233 47,564
Machinery and equipment 8,045 8,206 9,563 660 921 291 620 16 28,322 23,011
Repairs and maintenance 9,853 7,991 1,207 257 61 64 105 - 19,538 16,686
Other 5,052 7,554 39 2,607 24 59 3 1 15,339 12,729
Utilities, materials and supplies 7,873 2,550 650 921 419 146 305 31 12,895 16,048
Bad debts 21 8 1 61 320 270 - 1 682 (28)
Court awards and other settlements 90 164 4 22 20 - 17 19 336 2,277
Provision for contingent liabilities - (1,446) - - - - - - (1,446) 325
Refunds and adjustments to prior years' expenditures (524) (2,630) (79) (1,897) (72) (4) (63) (3) (5,272) (8,145)
Total operating expenses 954,965 405,807 177,644 173,788 91,719 43,866 34,357 12,134 1,894,280 1,916,985
Revenues
Sales of goods and services 462 - - 1,122 10,902 9,186 - - 21,672 19,634
Miscellaneous Revenues 254 286 18 940 4 - 9 21 1,532 1,305
Revenues earned on behalf of Government (103) (41) (3) (296) (1,568) (1,321) (1) (3) (3,336) (2,748)
Total revenues 613 245 15 1,766 9,338 7,865 8 18 19,868 18,191
Net cost of operations before government funding and transfers 954,352 405,562 177,629 172,022 82,381 36,001 34,349 12,116 1,874,412 1,898,794

16. Comparative information

Comparative figures have been reclassified to conform to the current year’s presentation.


Financial Statements - Administered Activities

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

(in thousands of dollars)
  2016
2015
Restated (note 10)
Administered assets
Cash on hand 2,312,492 2,165,789
Accounts receivable - other government departments and agencies 6,623 3,229
Accounts receivable - external parties (note 3) 881,625 1,054,010
Total 3,200,740 3,223,028
Administered liabilities
Accounts payable - other government departments and agencies 228,762 216,834
Accounts payable - provinces (note 4) 10,807 10,956
Accounts payable - external parties 284 1,964
Deposit accounts (note 5) 12,757 10,619
Sub-total 252,610 240,373
Net amount due to the Consolidated Revenue Fund of the Government of Canada (note 6) 2,948,130 2,982,655
Total 3,200,740 3,223,028

Contingent liabilities (note 7)
The accompanying notes form an integral part of these financial statements.

Linda Lizotte-MacPherson, President
Ottawa, Canada
August 16, 2016

Christine Walker, Chief Financial Officer
Ottawa, Canada
August 16, 2016

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

(in thousands of dollars)
  2016 2015
Administered revenues
Tax revenues
Excise taxes (note 8) 23,796,760 22,990,850
Customs import duties 5,371,603 4,581,247
Excise duties 1,417,998 1,473,152
Total 30,586,361 29,045,249
Non-tax revenues
Interest, penalties and fines 12,888 19,686
Seized property 6,626 7,415
Sale of goods and services 707 1,988
Other 293 615
Total 20,514 29,704
Total administered revenues 30,606,875 29,074,953
Bad debt expense (415) 50,664
Net administered revenues 30,607,290 29,024,289

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

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

(in thousands of dollars)
  2016 2015
Net administered revenues 30,607,290 29,024,289
Variations in administered assets and liabilities:
(Increase) decrease in cash on hand (146,703) (195,916)
(Increase) decrease in accounts receivable - other government departments and agencies (3,394) 4,525
(Increase) decrease in accounts receivable - external parties 172,385 (52,333)
Increase (decrease) in accounts payable - other government departments and agencies 11,928 5,109
Increase (decrease) in accounts payable - provinces (149) (111)
Increase (decrease) in accounts payable - external parties (1,680) 1,211
Increase (decrease) in deposit accounts 2,138 590
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada 30,641,815 28,787,364
Consisting of:
Deposits to the Consolidated Revenue Fund 31,221,775 29,458,860
Payments and refunds from the Consolidated Revenue Fund (579,960) (671,496)
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada 30,641,815 28,787,364

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

Notes to the Financial Statements (Unaudited)
For the Year Ended March 31

1. Authority and objectives

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

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

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

2. Summary of Significant Accounting Policies

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

A summary of significant accounting policies are as follows:

(a) Cash on hand

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

(b) Accounts receivable

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

(c) Accounts payable – provinces

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

(d) Accounts payable – external parties

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

(e) Contingent liabilities

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

(f) Tax revenues

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

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

(g) Non-tax revenues

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

(h) Allowance for doubtful accounts

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

(i) Tax remission order

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

(j) Measurement uncertainty

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

3. Accounts Receivable – External Parties

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

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

(in thousands of dollars)
  2016
2015
Restated
(note 10)
Accounts receivable - external parties 1,447,663 1,621,767
Allowance for doubtful accounts (566,038) (567,757)
Accounts receivable - external parties 881,625 1,054,010

4. Accounts Payable - Provinces

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

(in thousands of dollars)
  2016 2015
Opening balance 10,956 11,067
Receipts from importers 72,915 77,216
Refunds to importers (421) (484)
Payments to provinces (72,643) (76,843)
Closing balance 10,807 10,956

5. Deposit Accounts

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

The following table presents details on the deposit accounts: 

(in thousands of dollars)
  2016 2015
Opening balance 10,619 10,029
Receipts 4,744 3,296
Payments (2,606) (2,706)
Closing balance 12,757 10,619

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

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

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

(in thousands of dollars)
  2016
2015
Restated
(note 10)
Opening balance 2,982,655 3,197,193
Retroactive adjustment (note 10) 0 (451,463)
Opening Balance Restated 2,982,655 2,745,730
Net administered revenues 30,607,290 29,024,289
Net cash deposited in the Consolidated Revenue Fund (30,641,815) (28,787,364)
Closing balance 2,948,130 2,982,655

7. Contingent Liabilities

Claims have been made against the Agency in the normal course of operations.  These claims represent appeals for previously assessed GST and HST, customs duties and excise duties.  While the total amount claimed in these actions amount to approximately $51 million as at March 31, 2016 ($41 million as at March 31, 2015), their outcomes are not determinable and as a result no liability has been recorded in the financial statements (nil as at March 31, 2015).

8. Excise Taxes

The following table presents details of the excise tax revenues:

(in thousands of dollars)
  2016 2015
GST and HST 23,917,015 23,107,788
Tax remission order (40,965) (31,059)
Transfer of HST to Provinces (176,277) (174,128)
Other excise taxes 96,987 88,249
Excise taxes 23,796,760 22,990,850

9. Related Party Transactions

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

10. Restatement of Comparative Information

During fiscal year 2015-2016, the Agency implemented a new Accounts Receivable Ledger (ARL) as part of the first phase of the CBSA Assessment and Revenue Management project. The ARL captures all of the commercial accounts receivable balances.

After migrating existing Revenue Ledger accounts receivable balances to ARL, residual balances in the former receivable accounts were discovered. These amounts mainly reflect the overstatement of balances of accounts receivables since the creation of the Agency Revenue Ledger in 2007. The Agency performed a retroactive adjustment increasing the allowance for doubtful accounts by $451 million and decreasing the net amount due to the CRF of the Government of Canada as the overstatement of accounts receivable was not a result of an economic event of fiscal year 2015-2016 but occurred in prior years.

Consequently, the comparative financial statements for the year ended March 31, 2015 have been restated. The effects of these adjustments are presented in the table below.

(in thousands of dollars)
  2015
As Previously Stated
Effect
of Change
2015
Restated
Statement of Administered Assets and Liabilities:
Accounts receivable - external parties (note 3) 1,505,473 (451,463) 1,054,010
Total administered assets 3,674,491 (451,463) 3,223,028
Net amount due to the Consolidated Revenue Fund of the Government of Canada (note 6) 3,434,118 (451,463) 2,982,655
Total administered liabilities and net amount due to the Consolidated Revenue Fund of the Government of Canada 3,674,491 (451,463) 3,223,028
Note 3: Accounts Receivable - External Parties:
Allowance for doubtful accounts (116,294) (451,463) (567,757)
Total accounts receivable - external parties 1,505,473 (451,463) 1,054,010
Note 6: Net amount due to the Consolidated Revenue Fund of the Government of Canada:
Retroactive adjustment (note 10) 0 (451,463) (451,463)
Opening Balance Restated 3,197,193 (451,463) 2,745,730
Closing Balance 3,434,118 (451,463) 2,982,655

Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting Fiscal Year 2015-2016

1. Introduction

This document provides summary information on the measures taken by the Canada Boarder Services Agency (CBSA) to maintain an effective system of internal control over financial reporting (ICFR) including information on internal control management and assessment results and related action plans.

Detailed information on the CBSA’s authority, mandate, and program activities can be found in Departmental Performance Report and Report on Plans and Priorities.

2. Departmental system of internal control over financial reporting

2.1 Internal Control Management

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

The Departmental Audit Committee provides advice to the President of the CBSA on the adequacy and functioning of the Agency’s risk management, internal control and governance frameworks and processes.

2.2 Service Arrangements relevant to financial statements

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

Common Arrangements:

3. CBSA assessment results during fiscal year 2015-2016

The key new internal control frameworks accomplished and the changes to the ongoing monitoring of the current year’s activities are summarized below.

Account Receivable Ledger

A number of Internal Control Frameworks were developed for the new Account Receivable Ledger system and related nine key revenue sub-processes and master data process.

Compensation

Compensation internal control monitoring was deferred due to the introduction of the new payroll system “Phoenix”.

Entity Level Controls

Entity Level Controls testing was deferred to accommodate for the alignment efforts with the 2013 COSO Internal Control Framework.

Trade Program Revenue Refunds

Work in partnership with the Trade Program management of the Revenue Adjustment for Commercial Refund and Casual Refund to address internal control gaps of the revenue adjustment processes and overall development of a comprehensive management control framework.

4. Departmental action plan

4.1 Progress during fiscal year 2015-2016

Delegation of Financial Authority

In consideration of the “Delegation of Financial Authority” as a key element to ensure effective financial governance and efficient management of operations, CBSA had revamped its Delegation of Financial Signing Authority (DFSA) and developed compensating controls to mitigate financial delegation risks.

Acquisition cards

Tests performed on acquisition cards demonstrated key controls effectiveness to ensure compliance with CBSA and Treasury Board policies, directives and the sections 34 (Approval) of the Financial Administration Act (FAA). It was noted that provision of supporting documentation by the CBSA managers in order to demonstrate the FAA section 32 (commitment Control Authority) requires some improvement. Remediation activities have been initiated and ongoing monitoring of acquisition cards will be maintained as part of CBSA continuous account verification quality assurance strategy.

Hospitality and Travel

Tests performed on Hospitality and Travel demonstrated key controls effectiveness to ensure compliance with CBSA and Treasury Board policies and directives. No evidence of material control failures where remediation would be required has been identified.

Information Technology General Controls

The CRA is responsible for the Information Technology General Controls (ITGC) ongoing effectiveness testing and related remediation on behalf of the CBSA. As a result, of the ongoing review of IT General (key) Controls that relate to the systems’ operations, security, implementation and maintenance, no significant design control effectiveness deficiencies have been identified.

Shared Services Canada successfully completed Entity Level Controls for IT Infrastructure Services Framework and the related design effectiveness testing. It also successfully completed the ITGC for IT Infrastructure Services Framework.

4.2 Action plan for the next fiscal year and subsequent years

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

Rotational On-going Monitoring Plan for Internal Control over Financial Reporting
Key control areas Operating Effectiveness Testing Rotation
Fiscal Year
2016-2017
Fiscal Year
2017-2018
Fiscal Year
2018-2019
Entity level controls   Check Check
Information Technology General Controls (ITGCs) Check Check Check
Revenue Adjustments (Commercial Refund)   Check Check
Revenues and Account Receivable Ledger (ARL) for excise tax, custom imports duties and excise duties   Check Check
Capital Assets   Check  
Compensation Check Check Check
Budgeting and Forecasting   Check  
Confidential Human Source Program   Check  
Financial Statement, Public Accounts and Financial Close and Reporting processes   Check  
Procurement, Payable and Payments Check Check  
Non Tax Revenues and Account Receivable Ledger (ARL) for respendable and non-respendable   Check Check
Memorandum to Cabinet (MC)  and Treasury Board (TB) Submissions     Check
Future-Oriented Statement of Operations     Check
Quarterly Financial Report     Check
Section 6 of the Customs Act     Check

To ensure that the documented processes are complete and accurate and that key internal controls are in place and effective, CBSA will conduct the following in 2016-17:

Account verification Quality Assurance strategy: As part of its ongoing risk based account verification activities, the CBSA is proceeding with key control testing of the following key processes: Interdepartmental Settlements, Acquisition Cards, and Hospitality/events /Travel. All high risk transactions are subject to a full review before they are processed whereas sampling plan and methodology is used to extract and review samples of medium and low risk transactions. Any significant deficiencies observed are reported on a continuing basis to the CBSA senior management and the CFO and are taken into consideration in the annual assessment of the effectiveness of the CBSA system of internal control.

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