Canada Border Services Agency Financial Statements For the Year Ended March 31, 2017

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, 2017, 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, 2017 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.

John Ossowski, President
Ottawa, Canada
August 24, 2017

Christine Walker, Chief Financial Officer
Ottawa, Canada
August 24, 2017


Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
Liabilities 2017 2016
Accounts payable and accrued liabilities (note 4) 134,140 167,205
Vacation pay and compensatory leave 60,820 60,246
Deposit accounts (note 6) 29,057 27,996
Environmental liabilities (note 5) 1,166 1,184
Provision for claims and litigation (note 12) 2,165 665
Employee future benefits (note 7) 58,423 78,478
Total liabilities 285,771 335,774
Financial assets 2017 2016
Due from Consolidated Revenue Fund 106,558 153,197
Accounts receivable and advances (note 8) 31,419 15,964
Total gross financial assets 137,977 169,161
Financial assets held on behalf of Government 2017 2016
Accounts receivable and advances (note 8) (3,818) (2,004)
Total financial assets held on behalf of Government (3,818) (2,004)
  2017 2016
Total net financial assets 134,159 167,157
  2017 2016
Departmental net debt 151,612 168,617
Non-financial assets  2017 2016
Inventory (note 9) 0 3,703
Tangible capital assets (note 10) 954,820 951,078
Total non-financial assets 954,820 954,781
  2017 2016
Departmental net financial position 803,208 786,164

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

Statement of Operations and Departmental Net Financial Position (Unaudited)
For the Year Ended March 31

(in thousands of dollars)
Liabilities 2017 Planned Results 2017 2016
Admissibility Determination  950,759 879,544 954,965
Internal Services 338,075 422,513 405,807
Risk Assessment 171,474 190,352 177,644
Immigration Enforcement  135,750 170,599 173,788
Revenue and Trade Management 97,089 116,496 91,719
Secure and Trusted Partnerships  44,312 43,695 43,866
Criminal Investigations  35,188 35,455 34,357
Recourse 12,119 11,044 12,134
Total expenses 1,784,766 1,869,698 1,894,280
Revenues 2017 Planned Results 2017 2016
Sales of goods and services  19,664 22,768 21,672
Miscellaneous Revenues 2,550 1,815 1,532
Revenues earned on behalf of Government  (3,784) (3,455) (3,336)
Total revenues  18,430 21,128 19,868
  2017 Planned Results 2017 2016
Net cost of operations before government funding and transfers 1,766,336 1,848,570 1,874,412
Government funding and transfers 2017 Planned Results 2017 2016
Net cash provided by Government   1,737,863 1,794,392
Services provided without charge by other government departments (note 13)   174,408 177,174
Change in due from Consolidated Revenue Fund   (46,639) (3,933)
Transfer of the transition payments for implementing salary payment in arrears   (18) (347)
  2017 Planned Results 2017 2016
Net cost of operations after government funding and transfers   (17,044) (92,874)
Departmental net financial position - Beginning of year   786,164 693,290
Departmental net financial position - End of year   803,208 786,164

Segmented information (note 14)
The accompanying notes form an integral part of these financial statements.

Statement of Change in Departmental Net Debt
For the Year Ended March 31

(in thousands of dollars)
  2017 2016
Net cost of operations after government funding and transfers (17,044) (92,874)
Changes due to tangible capital assets 2017 2016
Acquisition of tangible capital assets 109,080 165,960
Amortization of tangible capital assets (80,468) (76,748)
Proceeds from disposal of tangible capital assets (990) (501)
Net loss on disposal of tangible capital assets (23,976) (1,155)
Adjustments to tangible capital assets 96 177
Total change due to tangible capital assets 3,742 87,733
  2017 2016
Change due to inventories (3,703) (6,084)
Net decrease in departmental net debt (17,005) (11,225)
Departmental net debt - Beginning of year 168,617 179,842
Departmental net debt - End of year 151,612 168,617

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

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

(in thousands of dollars)
Operating activities 2017 2016
Net cost of operations before government funding and transfers 1,848,570 1,874,412
Non-cash items: 2017 2016
Services provided without charge by other government departments (note 13) (174,408) (177,174)
Amortization of tangible capital assets (80,468) (76,748)
Net loss on disposal of tangible capital assets (23,976) (1,155)
Adjustments to tangible capital assets  96 177
Transition payments for implementing salary payments in arrears 18 347
Variations in Statement of Financial Position 2017 2016
(Decrease) increase in accounts receivable and advances 13,641 (2,425)
(Decrease) in inventory (3,703) (6,084)
Decrease in liabilities 50,003 17,583
Cash used in operating activities 1,629,773 1,628,933
Capital investing activities 2017 2016
Acquisition of tangible capital assets 109,080 165,960
Proceeds from disposal of tangible capital assets (990) (501)
Cash used in capital investing activities 108,090 165,459
  2017 2016
Net cash provided by Government of Canada 1,737,863 1,794,392

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:

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)
  2017 2016
Net cost of operations before government funding and transfers 1,848,570 1,874,412
Adjustments for items affecting net cost of operations but not affecting authorities: 2017 2016
Services provided without charge by other government departments (174,408) (177,174)
Amortization of tangible capital assets (80,468) (76,748)
Refund and adjustments to prior years' expenditures 3,339 5,272
Net loss on disposal of tangible capital assets (23,976) (1,155)
Decrease in employee future benefits 20,055 4,416
(Increase) decrease in vacation pay and compensatory leave (574) 6,385
Decrease in environmental liabilities 18 1,296
(Increase) decrease in claims and litigation (1,500) 150
(Increase) in accrued liabilities not charged to authorities (499) (1,921)
(Increase) in bad debt expense (406) (682)
Other 4,395 2,320
Total items affecting net cost of operations but not affecting authorities (254,024) (237,841)
Adjustments for items not affecting net cost of operations but affecting authorities: 2017 2016
Acquisition of tangible capital assets 109,080 165,960
Proceeds from disposal of tangible capital assets (990) (501)
(Decrease) in inventory  (3,703) (6,084)
Transition payments for implementing salary payments in arrears  18 347
Total items not affecting net cost of operations but affecting authorities 104,405 159,722
  2017 2016
Current year authorities used 1,698,951 1,796,293
(b) Authorities provided and used
(in thousands of dollars)
Authorities provided: 2017 2016
Vote 1 – Operating expenditures 1,559,660 1,512,906
Vote 5 – Capital expenditures 194,757 251,431
Statutory amounts 172,582 187,465
Less: 2017 2016
Authorities available for future years (209,487) (65,136)
Lapsed: Operating (15,826) (23,837)
Lapsed: Capital (2,735) (66,536)
  2017 2016
Current year authorities used 1,698,951 1,796,293

4. Accounts Payable and Accrued Liabilities

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

Accounts Payable and Accrued Liabilities
(in thousands of dollars)
  2017 2016
Accounts payable - Other government departments and agencies 16,929 23,192
Accounts payable - External parties 31,211 46,617
Total accounts payable 48,140 69,809
Accrued liabilities 86,000 97,396
Total accounts payable and accrued liabilities 134,140 167,205

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 a total of 5 sites (5 sites in 2015-2016) where contamination may exist and assessment, remediation and monitoring may be required.  Of these, the CBSA has assessed 3 sites (3 sites in 2015-2016) where action is possible and for which a liability of $1,166,000 ($1,184,000 in 2015-2016) has been recorded.  This liability estimate has been determined after the sites are assessed and is based environmental experts reviewing the results of site assessments, and proposing possible remediation solutions. 
This represents management's best estimate of the costs required to remediate the sites to the current minimum standard for its use prior to contamination, based on information available at the financial statement date.

Of the remaining 2 sites (2 sites in 2015-2016), no liability for remediation has been recognized.  Some of these sites are at various stages of testing and evaluation and if remediation is required, liabilities will be reported as soon as a reasonable estimate can be determined.  For other sites, the CBSA 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.

The following table presents the total estimated amounts of these liabilities by nature and source as at March 31, 2017, and March 31, 2016:

Nature and Source Number of Sites 2017 Estimated Liability 2017(2) Number of Sites 2016 Estimated Liability 2016(2)
Fuel Related Practices (1) 3 1,166,000 3 1,184,000
Totals 3 1,166,000 3 1,184,000
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. It was determined that the effects of discounting these liabilities for each fiscal year is immaterial for the CBSA. Therefore, a present value technique has not been used to calculate the discounted value of each site.

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:

Deposit Accounts
(in thousands of dollars)
  Opening Balance Deposits Refunds Forfeitures Closing Balance
Immigration guarantee fund 21,377 6,109 (4,658) (790) 22,038
General security deposits 6,619 400 - - 7,019
Total deposit accounts 27,996 6,509 (4,658) (790) 29,057

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 2016-2017 expense amounts to $119,519,000 ($128,762,000 in 2015-2016).  For Group 1 members, the expense represents approximately 1.12 times (1.25 times in 2015-2016) the employee contributions and, for Group 2 members, approximately 1.08 times (1.24 times in 2015-2016) 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

Severance benefits provided to the CBSA'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, 2017, substantially all settlements for immediate cash out were completed.  Severance benefits are unfunded and, consequently, the outstanding obligation will be paid from future authorities. 

The changes in obligations during the year were as follows:

Severance benefits
(in thousands of dollars)
  2017 2016
Accrued benefit obligation, beginning of year 78,478 82,894
Expense for the year (14,924) 4,193
Benefits paid during the year (5,131) (8,609)
Accrued benefit obligation, end of year 58,423 78,478

8. Accounts Receivable and Advances

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

Accounts Receivable and Advances
(in thousands of dollars)
  2017 2016
Receivables - Other government departments and agencies 26,198 12,716
Receivables - External parties 3,857 3,910
Employee advances and other receivables 4,257 2,027
  34,312 18,653
  2017 2016
Allowance for doubtful accounts on external receivables (2,893) (2,689)
Gross accounts receivable 31,419 15,964
Accounts receivable held on behalf of Government (3,818) (2,004)
Net accounts receivable 27,601 13,960

9. Inventory

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

Inventory
(in thousands of dollars)
  2017 2016
Uniforms - 3,703
Total - 3,703

10. Tangible Capital Assets

The following table presents details of the tangible capital assets:

Cost
(in thousands of dollars)
Capital asset class Opening balance Acquisitions Adjustments (1) Disposals and write-offs Closing balance
Land 4,649 - - 44 4,605
Buildings 441,541 39 338 4,413 437,505
Leasehold improvements 31,660 - 3,172   34,832
Works and infrastructure 5,150 911 653 - 6,714
Machinery and equipment 112,422 8,909 724 10,070 111,985
Informatics hardware 52,057 3,654 692 1,088 55,315
Informatics software - in-house developed 459,226 - 31,689 - 490,915
Informatics software - purchased 5,697 - 114 - 5,811
Motor vehicles 31,805 465   2,243 30,027
Ships and boats 747   203 68 882
Assets under
construction
372,445 95,102 (37,375) 20,889 409,283
Total    1,517,399      109,080             210        38,815    1,587,874
Accumulated amortization
(in thousands of dollars)
Capital asset class Opening balance Amortization Adjustments (1) Disposals and write-offs Closing balance
Land - - - - -
Buildings 152,227 13,631 31 898 164,991
Leasehold improvements 28,891 2,421 - - 31,312
Works and infrastructure 2,180 484 - - 2,664
Machinery and equipment 59,913 9,161 (33) 9,574 59,467
Informatics hardware 42,689 3,634 2 1,088 45,237
Informatics software - in-house developed 251,120 47,432 - - 298,552
Informatics software - purchased 5,160 515 114 - 5,789
Motor vehicles 23,529 3,137 - 2,223 24,443
Ships and boats 612 53 - 66 599
Assets under construction - - - - -
Total      566,321        80,468             114        13,849      633,054
Net book value
(in thousands of dollars)
Capital asset class 2017 2016
Land 4,605 4,649
Buildings 272,514 289,314
Leasehold improvements 3,520 2,769
Works and infrastructure 4,050 2,970
Machinery and equipment 52,518 52,509
Informatics hardware 10,078 9,368
Informatics software - in-house developed 192,363 208,106
Informatics software - purchased 22 537
Motor vehicles 5,584 8,276
Ships and boats 283 135
Assets under construction 409,283 372,445
Total      954,820      951,078

(1) Adjustments include assets under construction of $37,375,000 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:

Purchase contracts
(in thousands of dollars)
2018 2019 2020 2021 2022 and there-after Total
99,996 14,225 1,487 638 302 116,648

12. Contingent Liabilities

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

Claims and litigation

Forty-five (45) (45 in 2015-2016) 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 $2,165,000 ($665,000 in 2015-2016) 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 $10,215,000 ($880,000 in 2015-2016).

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:

Common services provided without charge by other government departments

(in thousands of dollars)
  2017 2016
Employer's contribution to the health and dental insurance plans 102,804 99,639
Accommodation 62,847 67,892
Legal services 8,461 9,330
Workers' compensation coverage 296 313
Total 174,408 177,174

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

Other transactions with related parties
(in thousands of dollars)
  2017 2016
Expenses - other government departments and agencies 333,634 366,253
Revenues - other government departments and agencies 772 624

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

14. 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.

Segmented Information

Operating Expenses

(in thousands of dollars)
  Admissibility Determination Internal Services Risk Assessment Immigration Enforcement Revenue and Trade Management Secure and Trusted Partnership Criminal Investigations Recourse
Salaries and employee future benefits 745,784 220,572 132,082 102,592 73,488 39,900 31,709 10,349
Professional and special services 41,538 100,423 42,964 46,239 7,697 1,274 738 158
Amortization of tangible capital assets 7,441 60,067 144 3,692 9,002 34 88  - 
Rental of buildings and machinery 36,935 14,173 6,188 5,001 3,460 1,870 1,501 482
Transportation and telecommunication 18,206 4,595 2,525 9,207 595 271 399 31
Other  4,571 7,492 17 2,391 20,838 13 17  - 
Repairs and maintenance 14,691 5,752 2,726 268 556 40 119 1
Machinery and equipment  3,690 7,986 3,423 344 386 (24) 477 1
Utilities, materials and supplies 7,250 2,211 480 905 309 125 360 21
Provision for contingent liabilities  -  1,482  -   -   -   -   -   - 
Bad debts 14 7  -  36 181 168  -  1
Court awards and other settlements 79 86 5 19 46  -  59 4
Refunds and adjustments to prior years' expenditures (655) (2,333) (202) (95) (62) 24 (12) (4)
Total operating expenses 879,544 422,513 190,352 170,599 116,496 43,695 35,455 11,044
Revenues
  Admissibility Determination Internal Services Risk Assessment Immigration Enforcement Revenue and Trade Management Secure and Trusted Partnership Criminal Investigations Recourse
Sales of goods and services 627 5 1 1,007 10,973 10,154  -  1
Miscellaneous Revenues 205 389 12 1,153  -  22 34
Revenues earned on behalf of Government (117) (55) (2) (304) (1,542) (1,427) (3) (5)
Total revenues  715 339 11 1,856 9,431 8,727 19 30
  Admissibility Determination Internal Services Risk Assessment Immigration Enforcement Revenue and Trade Management Secure and Trusted Partnership Criminal Investigations Recourse
Net cost from operations before government funding and transfers 878,829 422,174 190,341 168,743 107,065 34,968 35,436 11,014

Segmented Information - 2016-2017 Comparison

Operating Expenses

(in thousands of dollars)
  2017 Total 2016 Total
Salaries and employee future benefits 1,356,476 1,403,596
Professional and special services 241,031 224,943
Amortization of tangible capital assets 80,468 76,748
Rental of buildings and machinery 69,610 75,366
Transportation and telecommunication 35,829 43,233
Other  35,339 15,339
Repairs and maintenance 24,153 19,538
Machinery and equipment  16,283 28,322
Utilities, materials and supplies 11,661 12,895
Provision for contingent liabilities 1,482 (1,446)
Bad debts 407 682
Court awards and other settlements 298 336
Refunds and adjustments to prior years' expenditures (3,339) (5,272)
Total operating expenses 1,869,698 1,894,280
Revenues
  2017 Total 2016 Total
Sales of goods and services 22,768 21,672
Miscellaneous Revenues 1,815 1,532
Revenues earned on behalf of Government (3,455) (3,336)
Total revenues  21,128 19,868
  2017 Total 2016 Total
Net cost from operations before government funding and transfers 1,848,570 1,874,412

15. 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)
For The Year Ended March 31

(in thousands of dollars)
Administered assets 2017 2016
Cash on hand 449,333 2,312,492
Accounts receivable - other government departments and agencies 50 6,623
Accounts receivable - external parties (note 3) 2,935,179 881,625
Total 3,384,562 3,200,740
Administered liabilities 2017 2016
Accounts payable - other government departments and agencies 246,238 228,762
Accounts payable - provinces (note 4) 11,615 10,807
Accounts payable - external parties 386 284
Deposit accounts (note 5) 9,825 12,757
Sub-total 268,064 252,610
Net amount due to the Consolidated Revenue Fund of the Government of Canada (note 6) 3,116,498 2,948,130
Total 3,384,562 3,200,740

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

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

(in thousands of dollars)
Administered revenues - tax revenues 2017 2016
Excise taxes (note 8) 23,900,136 23,796,760
Customs import duties 5,477,359 5,371,603
Excise duties 1,432,743 1,417,998
Total 30,810,238 30,586,361
Administered revenues - non-tax revenues 2017 2016
Interest, penalties and fines 29,976 19,514
Sale of goods and services 835 707
Other 111 293
Total 30,922 20,514
Administered revenues 2017 2016
Total administered revenues 30,841,160 30,606,875
Bad debt expense 73,493 (415)
Net administered revenues 30,767,667 30,607,290

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)
  2017 2016
Net administered revenues 30,767,667 30,607,290
Variations in administered assets and liabilities: 2017 2016
(Increase) decrease in cash on hand 1,863,159 (146,703)
(Increase) decrease in accounts receivable - other government departments and agencies 6,573 (3,394)
(Increase) decrease in accounts receivable - external parties (2,053,554) 172,385
Increase (decrease) in accounts payable - other government departments and agencies 17,476 11,928
Increase (decrease) in accounts payable - provinces 808 (149)
Increase (decrease) in accounts payable - external parties 102 (1,680)
Increase (decrease) in deposit accounts (2,932) 2,138
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada 30,599,299 30,641,815
Consisting of: 2017 2016
Deposits to the Consolidated Revenue Fund 31,174,896 31,221,775
Payments and refunds from the Consolidated Revenue Fund (575,597) (579,960)
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada 30,599,299 30,641,815

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

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 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; 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 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:

Accounts receivable – external parties
(in thousands of dollars)
  2017 2016
Accounts receivable - external parties 3,123,439 1,447,663
Allowance for doubtful accounts (188,260) (566,038)
Accounts receivable - external parties 2,935,179 881,625

4. Accounts Payable - Provinces

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

Accounts Payable - Provinces
(in thousands of dollars)
  2017 2016
Opening balance 10,807 10,956
Receipts from importers 76,530 72,915
Refunds to importers (501) (421)
Payments to provinces (75,221) (72,643)
Closing balance 11,615 10,807

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: 

Deposit Accounts
(in thousands of dollars)
  2017 2016
Opening balance 12,757 10,619
Receipts 1,405 4,744
Payments (4,337) (2,606)
Closing balance 9,825 12,757

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:

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

(in thousands of dollars)
  2017 2016
Opening balance 2,948,130 2,982,655
Net administered revenues 30,767,667 30,607,290
Net cash deposited in the Consolidated Revenue Fund (30,599,299) (30,641,815)
Closing balance 3,116,498 2,948,130

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 $34 million as at March 31, 2017 ($51 million as at March 31, 2016), their outcomes are not determinable and as a result no liability has been recorded in the financial statements (nil as at March 31, 2016).

8. Excise Taxes

The following table presents details of the excise tax revenues:

Excise Taxes
(in thousands of dollars)
  2017 2016
GST and HST 24,024,708 23,917,015
Tax remission order (30,204) (40,965)
Transfer of HST to Provinces (205,248) (176,277)
Other excise taxes 110,880 96,987
Excise taxes 23,900,136 23,796,760

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. Comparative Information

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


Annex to the Statement of Management Responsibility Including Internal Control over Financial Reporting Fiscal Year 2016-2017

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 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 and 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 2016-2017

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

New or significantly amended key controls

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

Ongoing monitoring program

As part of its rotational ongoing monitoring plan, the Agency completed its reassessment of the financial controls within the business processes of the payables at year-end, acquisition cards, hospitality, travel and interdepartmental settlements. For the most part, the key controls that were tested performed as intended, with remediation required as follows:

Information technology general controls (ITGCs)

Services provided by CRA and SSC related to CBSA common arrangement include internal controls testing for those information technology general controls (ITGCs). As a result of the ongoing review performed of IT General (key) Controls that relate to the system operations, security, implementation and maintenance, no significant design control effectiveness deficiencies have been identified.

4. Agency action plan

4.1 Progress during fiscal year 2016-2017

The CBSA continued to conduct its ongoing monitoring according to the previous fiscal year's rotational plan as shown in the following table.

Previous year's rotational ongoing monitoring plan for current year Status
Delegation of Financial Signing Authorities, Travel, Hospitality, Interdepartmental Settlements Development and updating of the financial internal control framework completed as planned; no remedial actions required.
Entity Level Control Entity Level Controls testing was deferred to accommodate for the alignment efforts with the 2013 COSO Internal Control Framework.
Trade program management of the adjustment for Commercial refund, Budgeting allocation and forecasting,  Account Receivable Ledger, Capital assets and Compensation The internal control update and testing frameworks of those CBSA financial related business activities were deferred in order to allow a reasonable period of stabilization pertaining to new implemented system applications.

In 2016-17, the CBSA conducted the following work in addition to the progress made in ongoing monitoring:

The internal control Financial Statements and Month-year end frameworks were updated, no remedial actions required.

4.2 Action plan for the next fiscal year and subsequent years

The CBSA's rotational ongoing monitoring plan over the next three years, based on an annual validation of the high-risk processes and control and related adjustments to the ongoing 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
2017-2018
Fiscal Year
2018-2019
Fiscal Year
2019-2020
Entity level controls applicable not applicable not applicable
Information Technology General Controls (ITGCs) applicable applicable applicable
Revenue Adjustments (Commercial Refund) not applicable not applicable not applicable
Procurement, Payable and Payments applicable applicable applicable
Relocation applicable not applicable not applicable
Revenues and Account Receivable Ledger (ARL) for excise tax, custom imports duties and excise duties not applicable applicable applicable
Casual Refund Program not applicable not applicable not applicable
Capital Assets not applicable not applicable applicable
Compensation not applicable applicable not applicable
Financial Statement, Public Accounts and Financial Close and Reporting processes not applicable not applicable not applicable
Liabilities (PAYE) not applicable not applicable not applicable
Budgeting and Forecasting not applicable applicable not applicable
Non Tax Revenues and Account Receivable Ledger (ARL) for respendable and non-respendable not applicable not applicable not applicable
Memorandum to Cabinet (MC)  and Treasury Board (TB) Submissions not applicable not applicable applicable
Future-Oriented Statement of Operations, Quarterly Financial Report not applicable not applicable not applicable
Section 6 of the Customs Act not applicable not applicable not applicable

In addition to the ongoing monitoring rotational plan, CBSA plans to conduct the following deferred assessment work and remediation to be completed in the 2017-18 fiscal year.

Finally, 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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