ARCHIVED - Audit of the 2008–2009 Fiscal Year-End Cash
Cut-Off Procedures

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Internal Audit Report
September 2009

Table of Contents

• 1.0 Introduction
  • 1.1 Background
  • 1.2 Objective and Scope
  • 1.3 Statement of Assurance
• 2.0 Audit Opinion
• 3.0 Observations

Introduction

Background

The Government of Canada has reported on a full accrual basis for the preparation of its financial statements since 2001. To support accrual accounting, the 2008–2009 Receiver General Manual stipulates that monies negotiated on or before March 31, 2009, but not credited by the Bank of Canada or any other financial institution are classified as cash in transit (CIT). For the 2008–2009 fiscal year, the Canada Border Services Agency (CBSA) reported CAN$1.32 billion of CIT.

The CBSA collects approximately CAN$25 billion in revenue per year. To ensure that receipts are recorded in the proper fiscal year, the Comptrollership Branch issues instructions towards the end of every fiscal year to ports of entry and regional offices on the processing of cash payments received at year-end.

For its annual audit of the CBSA for the Public Accounts of Canada, the Office of the Auditor General of Canada relies on the work conducted by the CBSA's Internal Audit Directorate pertaining to year-end cash receipts cut-off procedures and recording amounts in the proper fiscal year. The Internal Audit Directorate performs the financial attestation relating to the year-end cash receipts cut-off, and provides an independent verification of the CIT calculation in order to provide assurance on the accuracy of the CIT amount reported by the CBSA.

Objective and Scope

The objective of the audit is to provide assurance that CIT is recorded in the appropriate fiscal year.

The audit was conducted between April and May 2009 and consisted of a review of current fiscal year-end procedures and operations in the Comptrollership Branch relating to the tracking, monitoring and recording of CIT at year-end. The scope focused on reviewing the Customs Revenue Reports (K10 forms)[ 1 ] that are entered into the CCS/G11 subsystem. These revenue reports represent the largest percentage of the CIT reported during the period (approximately 80%). K10 forms with values greater than CAN$1 million from April 1 to 8, 2009, were selected from all CBSA ports of entry and regional offices. The sample period was considered to represent the high-risk transactions (the transactions in which the "Date of Receipt" [ 2 ] field for cash receipts may have been recorded in the "new year" when they were in fact received in the "old year" and could be incorrectly identified as non-CIT). The audit included an analysis of the accuracy of the "Date of Receipt" field to supporting documentation, as well as a review of the sampling and CIT calculation process performed within the Comptrollership Branch.

K10 forms with "Date of Receipt" fields for old fiscal year transactions (March 29 to 31, 2009) were not selected as this period was considered to be low risk during audits conducted in preceding years and no errors were previously noted in this area.

Statement of Assurance

The audit engagement was planned and conducted in accordance with the Internal Auditing Standards for the Government of Canada.

Audit Opinion

The audit found that the CIT was properly recorded for the fiscal year ending March 31, 2009. The monitoring process put in place by the Comptrollership Branch was effective in determining the final CIT amount.

Observations

The sample reviewed during the audit included all K10 forms that had amounts greater than CAN$1 million for the period of April 1 to 8, 2009. Four items amounting to CAN$19,296,562 fell into this category and were limited to only two CBSA regions. The K10 packages were requested from those regions for further analysis and the audit found an exception within one of the K10 forms. The cash was identified as being received on March 31, 2009 (old year); however, the receipt date on the supporting documentation indicated April 1, 2009 (new year). The exception amount was CAN$3,910,300 and accounted for 20% of the total sample value. This exception was also identified within the other samples selected by the Comptrollership Branch as part of its monitoring work. The required correction to the old year was processed in the CBSA's Revenue Ledger through a journal voucher on May 15, 2009. The monitoring and sampling methodology used by the Comptrollership Branch also identified other discrepancies prior to the accrual cut-off date. These discrepancies were appropriately reviewed by the Branch, and necessary corrections were made to ensure a more accurate CIT calculation.

Due to the exception identified within the initial sample, the audit sample size was further expanded for the region where the error had occurred. Consequently, all amounts greater than CAN$100,000 processed during that period, for that region, were also reviewed. Two additional K10 packages, totalling CAN$583,554, were requested and examined, and no further errors were found.

During the manual review of the final CIT amount calculated by the Accrual Accounting Engine,[ 3 ] the Comptrollership Branch identified two K10 entries for which adjustments were required. These were processed in the CBSA's Revenue Ledger through a journal voucher on May 15, 2009, and no further issues were identified.

Notes

1. K10 Customs Revenue Reports provide information on all deposits, losses and adjustments relating to revenue. This information is entered into the subsystem of the Customs Commercial System (CCS) on the G11 screen. [Return to text]
2. This is the actual date when cash is received by the CBSA. [Return to text]
3. The Accrual Accounting Engine was implemented in the CBSA's Revenue Ledger to calculate the adjustments required to current revenue amounts to obtain the appropriate accrual balances. [Return to text]