Canada Border Services Agency: Quarterly Financial Report—For the quarter ended June 30, 2021

1. Introduction

This Quarterly Financial Report (QFR) has been prepared as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board. This quarterly report should be read in conjunction with the Main Estimates, Canada's Economic Action Plan 2020 (Budget 2020) and Canada's COVID-19 Economic Response Plan.

Information on the 'raison d'être', mandate, role and core responsibilities of the Canada Border Services Agency (CBSA) can be found in Part III Departmental Plan and Part II of the Main Estimates.

The QFR has not been subjected to an external audit or review, but has been tabled with the departmental Audit Committee.

1.1 Basis of presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying statement of authorities (Table 1) includes the department's spending authorities granted by Parliament, and those used by the department consistent with the Main Estimates and Supplementary Estimates (as applicable) for the 2020 to 2021 and 2021 to 2022 fiscal years. Please note that in the first quarter of 2020-21, CBSA had received 9/12th of its total funding due to delays caused by the COVID-19 pandemic. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

The authority of Parliament is required before money can be spent by the Government. Approvals are given in the form of annually approved limits through appropriation acts, or through legislation in the form of statutory spending authority for specific purposes.

When Parliament is dissolved for the purposes of a general election, section 30 of the Financial Administration Act authorizes the Governor General, under certain conditions, to issue a special warrant authorizing the Government to withdraw funds from the consolidated revenue fund. A special warrant is deemed to be an appropriation for the fiscal year in which it is issued.

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

2. Highlights of fiscal quarter and fiscal year-to-date (YTD) results

This section highlights the significant items that contributed to the net increase or decrease in resources available for the year and actual expenditures as of the quarter ended June 30, 2021.

2.1 Significant changes to authorities

For the period ending June 30, 2021, the authorities provided to the CBSA comprise of the Main Estimates, Supplementary Estimates (A), and Treasury Board (TB) approved Budget 2020 measures.

The Statement of authorities (Table 1) presents a net increase of $351.2 million or 20.6% of the agency's total authorities of $2,058.6 million at June 30, 2021 compared to $1,707.4 million total authorities at the same quarter last year due to only receiving 9/12th of Main Estimates last fiscal year.

This net increase in the authorities available for use is the result of an increase in Vote 1 – Operating Expenditures of $388.1 million, a decrease in Vote 5 – Capital of $20.9 million and a decrease in budgetary statutory authorities of $16.0 million, as detailed below.

Vote 1: Operating

The Agency's Vote 1 increased by $388.1 million or 28.4% (excluding the statutory authorities), compared to the same period last fiscal year, as the Agency only received 9/12th's of Main Estimates in the first quarter of 2020-21.

The Agency's full 2020-21 Main Estimates of $1,822.9 million in comparison to the Vote 1 Authorities of $1,755.6 million in the first quarter of 2021-22, results in a net decrease of $67.3M or 3.7%. The main increases contributing to the changes in operating funding include:

• $35.2 million in funding for Irregular Migration;
• $9.5 million for compensation adjustments;
• $9.5 million in conversion adjustment;
• $2.7 million in funding for the Gordie Howe International Bridge;
• $2.6 million in funding for the Passenger Protect Program (PPP);
• $1.3 million in funding for National Immigration Detention Framework; and
• $1.0 million in reprofiled funding for enhancing the operational response related to Gun and Gang Violence

The main decreases contributing to the changes in operating funding include:

• $95.5 million reduction in temporary funding related to Modernizing Canada's Border Operations;
• $14.6 million reduction in funding for Temporary Residents;
• $8.9 million in reprofiled funding for Integrated Cargo Security Initiative – Marine Container Examination Facilities (MCEF) project;
• $7.4 million reduction in funding for CBSA's Assessment and Revenue Management (CARM) project; and
• $2.7 million reduction in funding for Entry-Exit.

Vote 5: Capital

The Agency's Vote 5 decreased by $20.9 million or 15.7% (excluding the statutory authorities), compared to the same period last fiscal year, as the Agency only received 9/12th's of Main Estimates in the first quarter of 2020-21.

The Agency's full 2020-21 Main Estimates of $177.8 million in comparison to the Vote 5 authorities in the first quarter of 2021-22 of $112.4 million, results in a net decrease of $65.4M or 36.8%. The main increases contributing to the changes in capital funding include:

• $12.2 million in reprofiled funding for Integrated Cargo Security Initiative - Marine Container Examination Facilities (MCEF) project;
• $8.3 million in reprofiled funding for Postal Modernization Initiative (PMI);
• $5.9 million in funding for the Gordie Howe International Bridge;
• $2.4 million in funding for Irregular Migration; and
• $1.1 million to funding for the Passenger Protect Program (PPP).

The main decreases contributing to the changes in capital funding include:

• $49.7 million to implement and maintain CBSA's Assessment and Revenue Management (CARM) project as it moves though the design phase to the implementation phase to the managed services stage of the project;
• $20.9 million for the implementation of the National Immigration Detention Framework;
• $14.5 million reduction due to reprofiled funding for enhancing the operational response related to Gun and Gang Violence;
• $8.0 million reduction related to reprofiled funding for Border Infrastructure; and
• $2.2 million reduction in funding for Entry-Exit.

Budgetary statutory authorities

The agency's Statutory Authority related to the employee benefit plan (EBP) decreased by $16.0 million, or 7.7% from the previous year.

2.2 Explanations of significant variances in expenditures from previous year

As indicated in the statement of authorities (Table 1), the agency's expenditures for year-to-date, at quarter end June 30, 2021 were $466.4 million, as compared to $433.1 million for year-to-date, quarter ending June 30, 2020. The net increase of $33.3 million or 7.7% in expenditures is mainly due to the following items:

• Increase of $31.3 million or 8.5% in Vote 1 Operating Expenditures year-to-date used at quarter end. The increase in expenditures is mainly attributed to the following items: $7.5 million payment to Justice Canada for legal expenses normally made in the second quarter of last year, $6.7 million increase in salaries due to collective agreements, and $5.5 million in vacation taken as leave as COVID-19 restrictions eased. As well as, $3.6 million in Building Protection Services due to COVID-19 border measures and requirements, $2.8 million increase in overtime due to border operations requirements and $2.1 million increase in Information Technology Consultants due to COVID-19.
• Increase of $6.0 million or 40.1% in Vote 5 Capital Expenditures year-to-date used at quarter end. The increase in expenditures is mainly attributed to Facilities Capital Projects.
• Decrease of $4.0 million in statutory expenditures.

As indicated in the departmental budgetary expenditures by standard object (Table 2), the net increase by standard object are mainly attributed to:

• Increase of $14.9 million for Personnel due to vacation expenses, salaries and overtime pay.
• Increase of $11.1 million Professional and Special Services for prepaid legal expenses and building protection which went down last fiscal year due to the COVID-19 pandemic.
• Increase of $7.1 million in Acquisition of land, buildings and equipment for Facilities Capital Projects.
• Increase of $2.7 million for Transportation and Communications due to relocation.
• Decrease of $4.5 million in Other subsidies and payments which can be mainly attributed to salary overpayments.

The planned revenue from the sales of services reflects the agency's revenue respending authority. The year-to-date revenue from the charge of services has decreased by $2.8 million or 68.7% due to the ongoing impacts of the COVID-19 pandemic.

3. Risks and uncertainties

The CBSA's changing operating environment makes the agency particularly susceptible to external drivers that are largely beyond its control. Together, these drivers have the potential to affect the organization's ability to adhere to its annual financial plan.

The agency is pursuing several large information technology (IT) and physical infrastructure projects. Most are multi-year in nature and represent substantial investments. In Q1, the COVID-19 pandemic necessitated a re-prioritization of certain agency activities to address pressing matters, which may result in scheduling delays for some projects.

In addition, because the CBSA depends on other government departments and/or external stakeholders for the development and implementation of many of its major projects, scheduling delays are even more likely. As each organization must also manage the repercussions the COVID-19 pandemic is having on its own operations, assisting the CBSA in the advancement of its projects in a timely basis can become challenging due to conflicting priorities. Despite these conditions, the Agency has met key deadlines and deliverables on many of the major projects currently underway and is on track for the next set of deliverables.

Beyond the effects of re-prioritization on the way resources are allotted, the COVID-19 pandemic will also likely prompt a need for adjustments to the design of certain projects, which could further delay the execution and delivery of said projects and result in funding lapses.

Delays can lead to other challenges as project costing does not always allow for fluctuating costs for materials commodities and other market rate price changes. Inflation also drives up costs on deferred or delayed projects.

The agency strives to mitigate financial risks by risk-rating its projects, conducting periodic project reviews, and by holding regular budget discussions. Such activities are informed and supported by agency quarterly integrated project reporting processes.

4. Significant changes in relation to operations, personnel and programs

4.1 Key senior personnel

Geneviève Binet, the Director General of Enterprise Transformation in the Chief Transformation Officer Branch, has assumed the responsibilities on an interim basis of Vice-President and Chief Transformation Officer following the departure of Patrick Boucher on April 19, 2021.

Scott Millar joined the Agency on June 7, 2021 to become the new Vice-President of the Strategic Policy Branch.

4.2 Operations

The COVID-19 pandemic has had significant impacts on agency operations. Travel restrictions were in place for the entirety of Q1 at all Canadian international border crossings. Travel of an optional or discretionary nature, including tourism, recreation and entertainment, is covered by these measures across all ports of entry in all modes of transportation: land, marine, air and rail. This has resulted in a dramatic decrease in traveller border volumes.

New safety protocols and procedures have been, or are being, developed to handle ongoing commercial volumes, continuing non-discretionary travel and to prepare for when discretionary travel resumes.

The COVID-19 pandemic also prompted a transition to telework for thousands of non-frontline employees. This has brought about new methods for communicating and collaborating, and while some limitations exist, the IT infrastructure has largely been able to successfully support this transition. Preparation is under way to integrate this new way of working into a future hybrid work model as the Agency transitions to a post-pandemic world later this year.

5. Approval by senior officials

6. Table 1: Statement of authorities (unaudited)

7. Table 2: Departmental budgetary expenditures by standard object (unaudited)