Canada Border Services Agency financial statements for the year ended March 31, 2020

Table of contents

• Statement of management responsibility including internal control over financial reporting
• Canada Border Services Agency: Agency Activities
  • Statement of financial position (unaudited) as at March 31
  • Statement of operations and departmental net financial position (unaudited) for the year ended March 31
  • Statement of change in departmental net debt (unaudited) for the year ended March 31
  • Statement of cash flows (unaudited) for the year ended March 31
  • Notes to the financial statements (unaudited) for the year ended March 31
    • 1. Authority and objectives
    • 2. Summary of significant accounting policies
    • 3. Parliamentary authorities
    • 4. Accounts payable and accrued liabilities
    • 5. Environmental liabilities
    • 6. Deposit accounts
    • 7. Employee future benefits
    • 8. Accounts receivable and advances
    • 9. Tangible capital assets
    • 10. Contractual obligations
    • 11. Contingent liabilities
    • 12. Related party transactions
    • 13. Segmented information
    • 14. Comparative information
• Canada Border Services Agency: Administered activities
  • Statement of administered assets and liabilities (unaudited)
  • Statement of administered revenues (unaudited)
  • Statement of administered cash flows (unaudited)
  • Notes to the financial statements (unaudited) for the year ended March 31
    • 1. Authority and objectives
    • 2. Summary of significant accounting policies
    • 3. Accounts receivable: External parties
    • 4. Accounts payable: Provinces
    • 5. Deposit accounts
    • 6. Net amount due to the Consolidated Revenue Fund of the Government of Canada
    • 7. Contingent liabilities
    • 8. Excise taxes
    • 9. Related party transactions
• Annex to the statement of management responsibility including internal control over financial reporting fiscal year 2019 to 2020
  • 1. Introduction
  • 2. The CBSA's system of internal control over financial reporting
    • 2.1 Internal control management
    • 2.2 Common service arrangements
  • 3. CBSA's assessment results for the 2019 to 2020 fiscal year
    • 3.1 New or significantly amended key controls
    • 3.2 Ongoing monitoring program
  • 4. CBSA’s action plan for the next fiscal year and subsequent years

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, 2020, 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, 2020 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the annex.

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

The financial statements of the CBSA have not been audited.

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 2 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 core responsibilities:

(a) Border management: The Canada Border Services Agency assesses risk to identify threats, manages the free flow of admissible travellers and commercial goods into, through and out of Canada, and manages non-compliance.

(b) Border enforcement: The Canada Border Services Agency contributes to Canada's security by supporting the immigration and refugee system when determining a person's admissibility to Canada, taking the appropriate immigration enforcement actions when necessary, and supporting the prosecution of persons who violate our laws.

(c) Internal services: Internal support services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

2. Summary of significant accounting policies

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

Significant accounting policies are as follows:

(a) Parliamentary authorities: The Department is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to the Department do not parallel financial reporting according to generally accepted accounting principles since authorities are primarily based on cash flow requirements. Consequently, items recognized in the Statement of Operations and Departmental Net Financial Position and in the Statement of Financial Position are not necessarily the same as those provided through authorities from Parliament. Note 3 provides a reconciliation between the bases of reporting.

The planned results amounts in the "Expenses" and "Revenues" sections of the Statement of Operations and Departmental Net Financial Position are the amounts reported in the Future-oriented Statement of Operations included in the 2019 to 2020 Departmental Plan. Planned results are not presented in the "Government funding and transfers" section of the Statement of Operations and Departmental Net Financial Position and in the Statement of Change in Departmental Net Debt because these amounts were not included in the 2019 to 2020 Departmental Plan.

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

(c) Amounts due from or to the CRF: These amounts are the result of timing differences at year-end between when a transaction affects authorities and when it is processed through the CRF. Amounts due from the CRF represent the net amount of cash that the Department is entitled to draw from the CRF without further authorities to discharge its liabilities.

(d) Revenues: Revenues from regulatory fees are recognized based on the services provided in the year.

Miscellaneous revenues are recognized in the period the event giving rise to the revenues occurred. Revenues that are non-respendable are not available to discharge the Department's liabilities.

While the President of the CBSA is expected to maintain accounting control, the President has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented as a reduction of the entity's gross revenues.

(e) Expenses: Expenses are recorded on an accrual basis:

Vacation pay and compensatory leave are accrued as the benefits are earned by employees under their respective terms of employment.

Services provided without charge by other government departments for accommodation, employer contributions to the health and dental insurance plans, legal services and workers' compensation are recorded as operating expenses at their carrying value.

(f) Employee future benefits:

• i. Pension benefits: Eligible employees participate in the Public Service Pension Plan, a multi-employer pension plan administered by the Government. The Department's contributions to the Plan are charged to expenses in the year incurred and represent the total departmental obligation to the Plan. The Department'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.
• ii. Severance benefits: The accumulation of severance benefits for voluntary departures ceased for applicable employee groups. The remaining obligation for employees who did not withdraw benefits is calculated using information derived from the results of the actuarially determined liability for employee severance benefits for the Government as a whole.

(g) Accounts receivable and advances: Accounts receivable and advances are initially recorded at cost. When necessary, an allowance for valuation is recorded to reduce the carrying value of accounts receivable and advances to amounts that approximate their net recoverable value.

(h) Non-financial assets: The costs of acquiring land, buildings, equipment and other capital property are capitalized as tangible capital assets and, except for land, are amortized to expense over the estimated useful lives of the assets, as described in Note 9. All tangible capital assets and leasehold improvements having an initial cost of $10,000 or more are recorded at their acquisition cost. Tangible capital assets do not include immovable assets located on reserves as defined in the Indian Act, works of art, museum collection and Crown land to which no acquisition cost is attributable; and intangible assets.

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

(j) Environmental liabilities: An environmental liability for the remediation of contaminated sites is recognized when all the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, the Government is directly responsible or accepts responsibility, it is expected that future economic benefits will be given up and a reasonable estimate of the amount can be made. The liability reflects the Government's best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination.

The recorded liabilities are adjusted each year, as required, for inflation, new obligations, changes in management estimates and actual costs incurred.

If the likelihood of the Government's responsibility is not determinable, a contingent liability is disclosed in the notes to the consolidated statements.

(k) Measurement uncertainty: The preparation of these financial statements requires management to make estimates and assumptions that affect the reported and disclosed amounts of assets, liabilities, revenues and expenses reported in the financial statements and accompanying notes at March 31. The estimates are based on facts and circumstances, historical experience, general economic conditions and reflect the Government's best estimate of the related amount at the end of the reporting period. The most significant items where estimates are used are contingent liabilities, environmental liabilities, the liability for employee future benefits, the allowance 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.

(l) Related party transactions, other than inter-entity transactions, are recorded at the exchange amount.

Inter-entity transactions are transactions between commonly controlled entities. Inter-entity transactions, other than restructuring transactions, are recorded on a gross basis and are measured at the carrying amount, except for the following:

• i. Services provided on a recovery basis are recognized as revenues and expenses on a gross basis and measured at the exchange amount.
• ii. Certain services received on a without charge basis are recorded for departmental financial statement purposes at the carrying amount.

3. Parliamentary authorities

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

4. Accounts payable and accrued liabilities

5. Environmental liabilities

Remediation of contaminated sites

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

The Department has identified 5 sites (5 sites in 2019) where contamination may exist and assessment, remediation and monitoring may be required. Of these, the Department has identified 4 sites (3 sites in 2019) where action is required and for which a gross liability of $1,771 thousand ($1,318 thousand in 2019) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

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

For the remaining 1 site (2 sites in 2019), no liability for remediation has been recognized. This site is at various stages of testing and evaluation and if remediation is required, a liability will be reported as soon as a reasonable estimate can be determined. For other sites, the Department does not expect to give up any future economic benefits (there is likely no significant environmental impact or human health threats). These sites will be re-examined and a liability for remediation will be recognized if future economic benefits will be given up.

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.

7. Employee future benefits

(a) Pension benefits

The Department's employees participate in the Public Service Pension Plan (the "Plan"), which is sponsored and administered by the Government of Canada. Pension benefits accrue up to a maximum period of 35 years at a rate of 2 percent per year of pensionable service, times the average of the best 5 consecutive years of earnings. The benefits are integrated with Canada/Québec Pension Plan benefits and they are indexed to inflation.

Both the employees and the Department contribute to the cost of the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to Economic Action Plan 2012, employee contributors have been divided into 2 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 2019 to 2020 expense amounts to $133,426 thousand ($145,347 thousand in 2018 to 2019). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2018 to 2019) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2018 to 2019) the employee contributions.

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

(b) Severance benefits

Severance benefits provided to the Department's employees were previously based on an employee's eligibility, years of service and salary at termination of employment. However, since 2011 the accumulation of severance benefits for voluntary departures progressively ceased for substantially all employees. Employees subject to these changes were given the option to be paid the full or partial value of benefits earned to date or collect the full or remaining value of benefits upon departure from the public service. By March 31, 2020, substantially all settlements for immediate cash out were completed. Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities.

8. Accounts receivable and advances

9. Tangible capital assets

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

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

10. Contractual obligations

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

11. Contingent liabilities

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

Claims and litigation

Claims have been made against the Department in the normal course of operations. These claims include items with pleading amounts and other for which no amount is specified. While the total amount claimed in these actions is significant, their outcomes are not determinable.

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

Claims and litigations for which the outcome is not determinable and a reasonable estimate can be made by management amount to approximately $2,735 thousand ($8,125 thousand in 2018 to 2019) at March 31, 2020.

Claims and litigation with related parties included in the above amounts amount to nil (nil in 2019) at March 31, 2020.

12. Related party transactions

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

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

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

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

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 Services and Procurement Canada and audit services provided by the Office of the Auditor General, and telecommunication and network services provided by Shared Services Canada are not included in the Department’s Statement of Operations and Departmental Net Financial Position.

(b) Other transactions with other government departments and agencies

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

13. Segmented information

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

The major categories of revenue are described below:

Immigration and Refugee Protection Regulations administration fees

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

Inspection fees for food, plant and animal products

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

NEXUS fees for pre-approved and frequent travellers

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

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

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

Detector dog training services

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

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

14. Comparative information

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

Canada Border Services Agency: Administered activities

Notes to the financial statements (unaudited) for the year ended March 31

1. Authority and objectives

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

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

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

2. Summary of significant accounting policies

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

A summary of significant accounting policies are as follows:

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

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

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

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

(e) Contingent liabilities: Contingent liabilities are potential liabilities that may become actual liabilities when 1 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.

• 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 provincial portion of the HST. The input tax credits accorded for GST and HST paid on importations are not reflected in these statements as the CRA is responsible for their administration. Excise taxes are also assessed on gasoline and other imports
• Customs import duties: Consists of import duties assessed on imports. They are reported net of refunds, rebates and drawbacks
• Excise duties: Consists of tobacco, beer and liquor duties assessed on imports. They are reported net of refunds, rebates and drawbacks

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

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

(h) Allowance for doubtful accounts: The allowance for doubtful accounts reflects management's best estimate of the collectability of accounts receivable, including the related interest and penalties. The allowance for doubtful accounts is composed of 2 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.

4. Accounts payable: Provinces

Accounts payable: Provinces consist of provincial sales, alcohol and tobacco taxes collected and remitted to the provinces.

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.

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.

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 $138 million as at March 31, 2020 ($22 million as at March 31, 2019), their outcomes are not determinable and as a result no liability has been recorded in the financial statements (nil as at March 31, 2019).

8. Excise taxes

9. Related party transactions

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

Annex to the statement of management responsibility including internal control over financial reporting fiscal year 2019 to 2020

1. Introduction

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

Detailed information on the CBSA's authority, mandate and core responsibilities can be found in the Departmental Plan 2019 to 2020 and the Departmental Results Report 2019 to 2020.

2. The CBSA's 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. An internal control financial management framework, approved by the President, is in place and includes:

• organizational accountability structures as they relate to internal control management to support sound financial management, including the roles and responsibilities of senior managers in their areas of responsibility for control management
• values and ethics
• ongoing communication and training on statutory requirements, policies and procedures for sound financial management and control
• at least semi-annual monitoring of, and regular updates to, internal control management, as well as the provision of related assessment results and action plans to the President and senior management and, the Departmental Audit Committee (DAC)

The DAC provides advice to the President on the adequacy and functioning of the CBSA's risk management, control and governance frameworks and processes.

2.2 Service arrangements relevant to financial statements

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

2.2.1 Common service arrangements

• Public Services and Procurement Canada, which administers the payment of salaries and the procurement of goods and services, and provides accommodation services
• Shared Services Canada, which provides information technology (IT) infrastructure services
• Department of Justice Canada, which provides legal services
• Treasury Board of Canada Secretariat, which provides information on public service insurance and centrally administers payment of the employer's share of contributions toward statutory employee benefit plans

Readers of this annex may refer to the annexes of the above-noted departments for a greater understanding of the systems of internal control over financial reporting related to these specific services.

The CBSA relies on other external service providers for the processing of certain information or transactions that are recorded in its financial statements, as follows:

2.2.2 Specific arrangements

Canada Revenue Agency (CRA), which provides IT services and the ongoing internal controls monitoring of the shared SAP financial system. CRA also provides accounts receivable collection services for customs duties, taxes, fees, penalties, and other amounts owing under the Customs Act, Customs Tariff, Excise Tax Act, Excise Act 2001, and related regulations.

3. The CBSA's assessment results for the 2019 to 2020 fiscal year

The following table summarizes the status of the ongoing monitoring activities according to the previous fiscal year's rotational plan.

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

3.1 New or significantly amended key controls

In the current fiscal year, there were no significantly amended key controls in existing processes that required a reassessment.

The CBSA determined that Section 6 of the Customs Act was immaterial to financial reporting. It has been removed from the CBSA's rotational ongoing monitoring plan.

The CBSA Assessment and Revenue Management (CARM) system will incorporate the existing Accounts Receivable Ledger (ARL) system. After its implementation, design and operational effectiveness testing will be conducted on the CARM business process key controls.

3.2 Ongoing monitoring program

As part of its rotational ongoing monitoring plan, the CBSA completed its reassessment of the financial controls within the following business processes:

• Budgeting and forecasting
• Accounts payable and payments (acquisition cards)

For the most part, the key controls that were tested performed as intended, with remediation required as follows:

• Control deficiencies that should be addressed to improve the control environment of budgeting and forecasting were identified in the key control areas of budget allocation and distribution, forecasting and monitoring year-end actuals against forecasts. A management action plan addressing findings and recommendations will be developed by the process owners
• Control deficiencies that should be addressed to improve the control environment of acquisition cards were identified in the key control areas of administration and management; and statement reconciliation. Remedial actions have been started by the process owners

4. The CBSA's action plan for the next fiscal year and subsequent fiscal years

The CBSA's rotational ongoing monitoring plan over the next 5 fiscal years is shown in the following table. The ongoing monitoring plan is based on:

• an annual validation of the high-risk processes and controls
• related adjustments to the ongoing monitoring plan as required

Date modified:

2020-12-07