Statement of management responsibility, including internal control over financial reporting (2020-2021)

Consolidated statement of operations and organizational net financial position (unaudited)

For the Year Ended March 31
(in thousands of dollars)
2021 Planned Results 2021 2020
Expenses
Custody 1,641,566 1,938,239 2,034,506
Correctional Interventions 552,401 607,663 558,402
Community Supervision 167,953 181,369 179,864
Internal Services 350,737 412,532 367,909
Expenses incurred on behalf of Government - (37) (167)
Total expenses 2,712,657 3,139,766 3,140,514
Revenues
Sales of goods and services 70,348 40,306 52,027
Miscellaneous revenues 3,940 6,083 4,297
Revenues earned on behalf of Government (3,940) (3,098) (4,297)
Total revenues 70,348 43,291 52,027
Net cost of operations before government funding and transfers 2,642,309 3,096,475 3,088,487
Government funding and transfers
Net cash provided by Government 2,839,091 2,628,932
Change in due from Consolidated Revenue Fund 96,747 3,013
Services provided without charge by other government departments (note 14a) 177,801 165,464
Transfer of the transition payments for implementing salary payments in arrears (2) (1)
Transfer of tangible capital assets (to) other government departments (note 14c) - (1)
Other transfers of assets and liabilities from other government departments (note 14c) 45 21
Total Government Funding and Transfers 3,113,682 2,797,428
Net (revenue from) cost of operations after government funding and transfers (17,207) 291,059
Organizational net financial position - Beginning of year 1,897,165 2,188,224
Organizational net financial position - End of year 1,914,372 1,897,165

Segmented information (note 15)

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

Consolidated statement of change in organizational net debt (unaudited)

For the Year Ended March 31
(in thousands of dollars)
2021 2020
Net cost of (revenue from) operations after government funding and transfers (17,207) 291,059
Change due to tangible capital assets
Acquisition of tangible capital assets (note 11) 124,488 167,468
Amortization of tangible capital assets (note 11) (122,248) (125,833)
Proceeds from disposal of tangible capital assets (396) (1,103)
(Loss) gain on disposal of tangible capital assets (20) 336
Tangible capital assets adjustments (note 11) (2,610) (42,710)
Transfer (to) other government departments (note 14c) - (1)
Total change due to tangible capital assets (786) (1,843)
Change due to inventories not for resale 36,404 2,487
Change due to prepaid expenses - -
Net increase in organizational net debt 18,411 291,703
Organizational net debt - Beginning of year 468,837 177,134
Organizational net debt - End of year 487,248 468,837

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

Consolidated statement of cash flows (unaudited)

For the Year Ended March 31
(in thousands of dollars)
2021 2020
Operating activities
Net cost of operations before government funding and transfers 3,096,475 3,088,487
Non-cash items
Amortization of tangible capital assets (note 11) (122,248) (125,833)
Net (loss) gain on disposal of tangible capital assets (20) 336
Tangible capital assets adjustments (note 11) (2,610) (42,710)
Services provided without charge by other government departments (note 14a) (177,801) (165,464)
Transition payments for implementing salary payments in arrears 2 1
Variations in Consolidated Statement of Financial Position
(Increase) in accounts payable and accrued liabilities (note 4) (74,611) (310,466)
(Increase) in vacation pay and compensatory leave (35,311) (12,399)
Decrease in employee future benefits (note 5) 6,491 4,032
(Increase) decrease in Inmate Trust Fund (note 6) (3,575) 232
(Increase) decrease in environmental liabilities (note 7) (8) 562
Decrease in deferred revenue (note 8) 70 386
(Decrease) increase in accounts receivable, advances and loans (note 9) (3,156) 18,521
Increase in inventories (note 10) 31,346 6,903
Transfer of assets (from) other government departments (note 14c) (45) (21)
Cash used in operating activities 2,714,999 2,462,567
Capital investing activities
Acquisitions of tangible capital assets (note 11) 124,488 167,468
Proceeds from disposal of tangible capital assets (396) (1,103)
Cash used in capital investing activities 124,092 166,365
Net cash provided by Government of Canada 2,839,091 2,628,932

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

Notes to the consolidated financial statements (unaudited)

For the Year Ended March 31

1. Authority and Objectives

The constitutional and legislative framework that guides the Correctional Service of Canada (CSC) is set out by the Constitution Act 1982 and the Corrections and Conditional Release Act (CCRA).

The purpose of the federal correctional system, as defined by law, is to contribute to the maintenance of a just, peaceful and safe society by carrying out sentences imposed by courts through the safe and humane custody and supervision of offenders; and by assisting the rehabilitation of offenders and their reintegration into the community as law-abiding citizens through the provision of programs in penitentiaries and in the community (Corrections and Conditional Release Act, s.3).

It delivers its mandate under the following core responsibilities:

Care and Custody: CSC provides for the safety, security and humane care of inmates, including day-to-day needs of inmates such as food, clothing, accommodation, mental health services, and physical health care. It also includes security measures within institutions such as drug interdiction, and appropriate control practices to prevent incidents;

Correctional Interventions: CSC conducts assessment activities and program interventions to support federal offenders' rehabilitation and facilitate their reintegration into the community as law-abiding citizens. CSC also engages Canadian citizens as partners in its correctional mandate, and provides services to victims of crime;

Community Supervision: CSC supervises offenders in the community and provides structure and services to support their safe and successful reintegration into the community. Services include accommodation options, community health services, and the establishment of community partnerships. CSC manages offenders on parole, statutory release, and long-term supervision orders; and

Internal Services: Internal Services are those groups of related activities and resources that the federal government considers to be services in support of programs and/or required to meet corporate obligations of an organization. Internal Services refers to the activities and resources of the ten distinct service categories that support program delivery in the organization, regardless of the Internal Services delivery model in a department. The ten service categories are: Management and Oversight Services; Communications Services; Legal Services; Human Resource Management Services; Financial Management Services; Information Management Services; Information Technology Services; Real Property Services; Materiel Management Services; and Acquisition Management Services.

2. Summary of Significant Accounting Policies

These consolidated financial statements have been prepared using CSC'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

CSC is financed by the Government of Canada through Parliamentary authorities. Financial reporting of authorities provided to CSC 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 Consolidated Statement of Operations and Organizational Net Financial Position and in the Consolidated 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 Consolidated Statement of Operations and Organizational Net Financial Position are the amounts reported in the Consolidated Future-Oriented Statement of Operations included in the 2020-2021 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 2020-2021 Departmental Plan.

b) Consolidation

These consolidated financial statements include the accounts of the sub-entity for which the Commissioner is accountable. The accounts of this sub-entity, CORCAN Revolving Fund, have been consolidated with those of CSC and all intra-organizational balances and transactions have been eliminated.

c) Net Cash Provided by Government

CSC operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by CSC is deposited to the CRF and all cash disbursements made by CSC 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.

d) Amounts due from or to the Consolidated Revenue Fund (CRF)

Amounts due from or to the CRF 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 CSC is entitled to draw from the CRF without further authorities to discharge its liabilities.

e) Revenues

f) Expenses

Expenses are recorded on an accrual basis:

g) Employee future benefits

h) Accounts and loans receivable from external parties

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

i) Inventories

j) Tangible capital 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 11. 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 collections and Crown land to which no acquisition cost is attributable; and intangible assets.

k) Contingent liabilities and Contingent assets

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 consolidated financial statements.

Contingent assets are possible assets which may become actual assets when one or more future events occur or fail to occur. If the future event is likely to occur or fail to occur, the contingent asset is disclosed in the notes to the financial statements.

l) Environmental liabilities

An environmental liability for the remediation of contaminated sites is recognized when all of the following criteria are satisfied: an environmental standard exists, contamination exceeds the environmental standard, CSC 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 CSC's best estimate of the amount required to remediate the sites to the current minimum standard for its use prior to contamination. When the future cash flows required to settle or otherwise extinguish a liability are estimable, predictable and expected to occur over extended future periods, a present value technique is used. The discount rate used reflects the Government's cost of borrowing, associated with the estimated number of years to complete remediation.

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 financial statements.

m) Measurement uncertainty

The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in the consolidated 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 areas where estimates are used are contingent liabilities, environmental liabilities, the liability for employee future benefits, the fair value of non-monetary transactions related to leased tangible capital assets 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 consolidated financial statements in the year they become known.

Environmental liabilities as discussed in Note 7 are subject to measurement uncertainty due to the evolving technologies used in the estimation of the costs for remediation of contaminated sites, the use of future estimated costs, and the fact that not all sites have had a complete assessment of the extent and nature of remediation. Changes to underlying assumptions, the timing of the expenditures, the technology employed, or the revisions to environmental standards or changes in regulatory requirements could result in significant changes to the environmental liabilities recorded.

n) Related party transactions

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:

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

3. Parliamentary Authorities

CSC receives most of its funding through annual Parliamentary authorities. Items recognized in the Consolidated Statement of Operations and Organizational Net Financial Position and the Consolidated Statement of Financial Position in one year may be funded through Parliamentary authorities in prior, current or future years. Accordingly, CSC 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)
2021 2020
Net cost of operations before government funding and transfers 3,096,475 3,088,487
Adjustments for items affecting net cost of operations but not affecting authorities:
Add (Less):
Amortization of tangible capital assets (note 11) (122,248) (125,833)
Net loss on disposal of tangible capital assets and other adjustments (1,364) (41,464)
Services provided without charge by other government departments (note 14a) (177,801) (165,464)
(Increase) in vacation pay and compensatory leave (35,311) (12,399)
Decrease in employee future benefits 6,491 4,032
(Increase) decrease in environmental liabilities (8) 562
Refund of prior years' expenditures 4,810 14,674
Other (3,222) (293,931)
(328,653) (619,823)
Adjustments for items not affecting net cost of operations but affecting authorities:
Add (Less):
Acquisitions of tangible capital assets (note 11) 124,488 167,468
Transition payments for implementing salary payments in arrears 2 1
Increase in inventories 31,346 6,903
Other 7,559 9,785
163,395 184,157
Current year authorities used 2,931,217 2,652,821

b) Authorities provided and used

(in thousands of dollars)
2021 2020
Vote 1 - Operating expenditures 2,750,492 2,314,024
Vote 5 - Capital expenditures 200,234 187,722
Vote 10 - Support for the CSC - 16,235
Statutory items:
CORCAN Revolving Fund 8,879 3,880
Other Statutory Items 249,202 219,530
3,208,807 2,741,391
Less:
Authorities available for future years (Excluding CORCAN) 205 1,007
CORCAN Revolving Fund available (overexpended) authority 11,966 (6,121)1
Lapsed authorities: Vote 1 - Operating expenditures 187,172 54,370
Lapsed authorities: Vote 5 - Capital expenditures 78,247 23,079
Lapsed authorities: Vote 10 - Support for the CSC - 16,235
Current year authorities used 2,931,217 2,652,821

1 During the year, CORCAN's revolving fund authority was exceeded due to a series of factors related to the COVID-19 pandemic.

4. Accounts Payable and Accrued Liabilities

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

(in thousands of dollars)
2021 2020
Accounts payable - Other government departments and agencies 73,379 49,842
Accounts payable - External parties 77,900 83,725
Total accounts payable 151,279 133,567
Accrued liabilities 659,019 602,120
Total accounts payable and accrued liabilities 810,298 735,687

5. Employee Future Benefits

a) Pension Benefits

CSC'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 CSC 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 2020‑2021 expense amounts to $173,851 thousand ($155,119 thousand in 2019‑2020). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2019‑2020) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2019-2020) the employee contributions.

CSC'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 CSC'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, 2021, 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 the obligations during the year were as follows:

(in thousands of dollars)
2021 2020
Accrued benefit obligation - Beginning of year 58,919 62,951
Expenses for the year (1,369) 138
Benefits paid during the year (5,122) (4,170)
Accrued benefit obligation - End of year 52,428 58,919

6. Inmate Trust Fund

Pursuant to section 111 of the Corrections and Conditional Release Regulations, this account is credited with all moneys brought into the institution by an inmate on admission or readmission, and all moneys that are received on the inmate's behalf while in custody, including, monetary gifts from a third party, payments for program participation, pay earned while on work release or conditional release in the community, moneys received from a third party for work performed in an institution or a CSC approved inmate operated business enterprise, sale of hobby craft or custom work, a payment, allowance or income paid by either a private or government source. Deductions may be made from this account for issues such as debts to the Crown, the Inmate Welfare Fund, canteen expenditures, telephone calls, payments to assist in the reformation and rehabilitation of the inmate, and any other payments for which the inmate is liable.

(in thousands of dollars)
2021 2020
Beginning of year 17,500 17,732
Receipts 41,904 38,433
Disbursements (38,329) (38,665)
End of year 21,075 17,500

7. 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 aids in 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.

CSC has identified a total of 43 sites (45 sites in 2020) where contamination may exist and assessment, remediation and monitoring may be required. Of these, CSC has identified 20 sites (24 sites in 2020) where action is required and for which a gross liability of $1,748 thousand ($1,915 thousand in 2020) has been recorded. This liability estimate has been determined based on site assessments performed by environmental experts.

In addition, a statistical model based upon a projection of the number of sites that will proceed to remediation and upon which current and historical costs are applied is used to estimate the liability for a group of unassessed sites. As a result, there are 13 unassessed sites (13 sites in 2020) of which 7 sites are projected to have a liability (7 sites in 2020) estimate of $909 thousand ($734 thousand in 2020) which has been recorded using this model.

These two estimates combined, totalling $2,657 thousand ($2,649 thousand in 2020), 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.

For the remaining 9 sites (14 sites in 2020), 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 these sites, CSC does not expect to give up any future economic benefit (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 and the total undiscounted future expenditures as at March 31, 2021 and March 31, 2020. When the liability estimate is based on a future cash requirement, the amount is adjusted for inflation using a forecast CPI rate of 2.0% (2.0% in 2020). Inflation is included in the undiscounted amount.

The following table presents the total estimated amounts of these liabilities by nature and source as at March 31, 2021, and March 31, 2020.

Nature & source of liability
2021 2020
Nature & Source Total Number of Sites(5) Number of Sites with a liability Estimated Liability and Total Undiscounted Expenditures(4) (in thousands of dollars) Total Number of Sites(5) Number of Sites with a liability Estimated Liability and undiscounted expenditures(4) (in thousands of dollars)
Fuel Related Practices (1) 16 7 615 19 8 632
Landfills/Waste Sites (2) 18 12 1,015 17 15 1,037
Other (3) 9 8 1,027 9 8 980
Totals 43 27 2,657 45 31 2,649

(1) Contamination primarily associated with fuel storage and handling, e.g. accidental spills related to fuel storage tanks or former fuel handling practices, e.g. petroleum hydrocarbons, polyaromatic hydrocarbons and BTEX.

(2) Contamination associated with former landfill/waste site or leaching from materials deposited in the landfill/waste site, e.g. metals, petroleum hydrocarbons, polyaromatic hydrocarbons, BTEX, other organic contaminants, etc.

(3) Contamination from other sources, e.g. use of pesticides, herbicides, fertilizers at agricultural sites; use of PCBs, firefighting training areas, firing ranges and training facilities, etc.

(4) It was determined that the effects of discounting of these liabilities for each fiscal year is immaterial for CSC. Therefore, the present value technique has not been used to calculate the discounted value for each site.

(5) The total number of sites includes closed sites as reported below for the current fiscal year.

Also during the year 4 sites (4 sites in 2020) were closed as they were either remediated or assessed to confirm that they no longer meet all the criteria required to record a liability for contaminated sites and 2 sites (1 site in 2020) were re-opened as additional remediation strategies are taking place.

CSC's ongoing efforts to assess contaminated sites may result in additional environmental liabilities.

8. Deferred Revenue

Deferred revenue represents the balance at year-end of unearned revenues stemming from amounts received from external parties which are restricted to fund the expenditures related to specific projects, and amounts received for fees prior to services being performed. Revenue is recognized in the period that these expenditures are incurred or in which the service is performed. Details of the transactions related to this account are as follows:

(in thousands of dollars)
2021 2020
Opening balance 251 637
Amounts received 16,841 19,459
Revenue recognized (16,911) (19,845)
Ending balance 181 251

9. Accounts Receivable, Advances and Loans

The following table presents details of CSC's accounts receivable, advances, and loan balances:

(in thousands of dollars)
2021 2020
Receivables - Other government departments and agencies 30,762 37,699
Receivables - External parties 73,873 69,592
Employee advances 3,608 4,444
Parolee loans and advances to individuals other than employees 147 174
108,390 111,909
Allowance for doubtful accounts on receivables from external parties and parolee loans (545) (802)
Gross accounts receivable and advances 107,845 111,107
Accounts receivable held on behalf of Government (823) (929)
Net accounts receivable and advances 107,022 110,178

10. Inventories

The following table presents details of CSC's inventories:

(in thousands of dollars)
2021 2020
Inventories held for resale
Raw materials 8,832 9,088
Work in progress 347 682
Finished goods 7,286 10,451
16,465 20,221
Provision for obsolete inventory (2,431) (1,129)
Total inventories held for resale 14,034 19,092
Inventories not for resale
Pharmaceuticals and health care supplies 43,089 12,202
Other Supplies 10,093 8,159
Clothing 11,119 9,629
Building materials 4,450 3,888
Utilities 3,700 2,348
Other Inventory 4,529 4,350
Total inventories not for resale 76,980 40,576
Total Inventories 91,014 59,668

The cost of consumed inventories not for resale recognized as an expense in the Consolidated Statement of Operations and Organizational Net Financial Position is $150,411 thousand in 2021 ($153,722 thousand in 2020).

11. 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:
Asset Class Amortization Period
Buildings 25 to 40 years
Works and Infrastructure 20 to 25 years
Machinery and Equipment 10 years
Informatics Hardware and Software 3 to 10 years
Vehicles 5 to 10 years
Leasehold Improvements Straight Line over the lesser of useful life of improvement or lease term
Assets under Capital Leases Straight Line over the lesser of useful life of improvement or lease term
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.
(in thousands of dollars)
Cost Accumulated Amortization Net Book Value
Capital Asset Class Opening Balance Acquisitions Adjustments (1) Disposals and Write-Offs Closing Balance Opening Balance Amortization Adjustments (1) Disposals and Write-Offs Closing Balance 2021 2020
Land 14,545 - - - 14,545 - - - - - 14,545 14,545
Buildings 2,793,382 - 4,108 - 2,797,490 1,379,062 81,876 (3) - 1,460,935 1,336,555 1,414,320
Works and infrastructure 767,570 - 36,855 - 804,425 488,969 21,687 (18) - 510,638 293,987 278,601
Machinery and equipment 131,999 13,490 (42) (1,704) 143,743 92,668 3,570 (79) (1,539) 94,620 49,123 39,331
Informatics Hardware and Software 91,971 27 13 (96) 91,915 79,168 3,368 - (96) 82,440 9,475 12,803
Vehicles 89,141 10,522 210 (2,147) 97,726 49,794 8,424 167 (1,896) 56,489 41,237 39,347
Leasehold Improvements 61,782 - 579 - 62,361 38,931 3,323 - - 42,254 20,107 22,851
Assets under construction 503,628 100,449 (44,266) - 559,811 - - - - - 559,811 503,628
Total 4,454,018 124,488 (2,543) (3,947) 4,572,016 2,128,592 122,248 67 (3,531) 2,247,376 2,324,640 2,325,426
(1) Adjustments include assets under construction of $41,654 thousand ($75,570 thousand in 2020) that were transferred to the other capital asset classes upon completion of the project. Other net adjustments of $2,610 thousand are as a result of the capital asset validation exercise undertaken during the fiscal year including the write-off of various projects that were deemed to not meet CSC's capitalization criteria.

In April 2012, the Government of Canada announced it would close three institutions (Kingston Penitentiary, Ontario Regional Treatment Centre (ORTC) and Leclerc Institution). The closures were completed in September 2013 as planned. In December 2019, CSC received a market appraisal for the Kingston Penitentiary and ORTC. In accordance with PSAS 3150, this appraisal triggered an analysis of CSC's valuation of the properties and whether any adjustments to the net book values were required. In 2019, it was determined that Kingston Penitentiary and ORTC assets should be written-down to their combined net realizable value of $4,688 thousand, which resulted in a write-down of $40,512 thousand. This assessment of Kingston Penitentiary and ORTC's residual value was based on the market appraisal provided to CSC. CSC will continue to assess Kingston Penitentiary and ORTC yearly to determine if any future write-downs or other adjustments are required. There is no change from 2019-2020 to the Ontario RHQ net book value of $789 thousand. Should a further change in the Kingston Penitentiary's, ORTC's, or Ontario RHQ's net book values become known, any applicable amounts will be recorded at that time. Leclerc Institution remains a tangible capital asset of CSC and has been leased under a long-term operating agreement with the Province of Quebec.

CSC also has Buildings and Works and Infrastructure located on reserves as defined in the Indian Act which are not recognized above.

12. Contractual Obligations

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

(in thousands of dollars)
2022 2023 2024 2025 2026 and thereafter Total
Acquisition of goods and services 195,688 4,878 2,302 1,437 385 204,690

13. Contingent Liabilities and Contingent Assets

a) Contingent Liabilities

Claims & Litigation

Claims have been made against CSC 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. CSC 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. Other claims and litigations against CSC that have not been recorded in the allowance include class action suits for which the likelihood of liability is not determinable and/or a reasonable amount cannot be estimated.

b) Contingent Assets

CSC may bring a claim as part of its normal course of operations which could result in a contingent asset, however none are known to exist as at March 31, 2021.

14. Related Party Transactions

CSC 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.

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

During the year, CSC did not enter into material transactions at a value different from that which would have been arrived at if the parties were unrelated.

a) Common services provided without charge by other government departments

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

(in thousands of dollars)
2021 2020
Employer's contribution to the health and dental insurance plans 154,964 142,400
Accommodation 17,866 17,904
Workers' compensation 3,290 3,611
Legal services 1,681 1,549
Total 177,801 165,464

The Government has centralized some of its administrative activities for efficient, cost-effective, 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 the payroll and cheque issuance services provided by Public Services and Procurement Canada, audit services provided by the Office of the Auditor General, and information technology services provided by Shared Services Canada, are not included in CSC's Consolidated Statement of Operations and Organizational Net Financial Position.

b) Other transactions with other government departments

(in thousands of dollars)
2021 2020
Accounts receivable 30,762 37,699
Accounts payable 73,379 49,842
Expenses 448,798 389,484
Revenues 99,980 110,866

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

c) Transfers of assets and liabilities (to) from other government departments

During the year, CSC transferred in amounts related to salary overpayments receivable from other government departments for a net amount of $45 thousand ($21 thousand in 2020).

There were no capital asset transfers to an other government department during 2021 ($1 thousand in 2020).

15. Segmented Information

Presentation by segment is based on CSC's departmental results framework. The presentation by segment is based on the same accounting policies as described in the Summary of Significant Accounting Policies in note 2. The following table presents the expenses incurred and revenues generated for the main programs, by major objects of expense and by major types of revenue. The segment results for the period are as follows:

(in thousands of dollars)
2021 2020
Care and Custody Correctional Interventions Community Supervision Internal Services Intra-entity Transactions (with CORCAN) Total Total
Transfer payments
Organizations and muncipialities 1,905 - 1,822 - - 3,727 2,507
Total transfer payments 1,905 - 1,822 - - 3,727 2,507
Operating expenses
Salaries and employee benefits 1,465,361 503,118 28,466 297,028 - 2,293,973 1,988,766
Professional and special services 130,333 71,203 131,619 51,411 (42,555) 342,011 340,210
Utilities, materials and supplies 137,060 27,725 3,016 3,856 (5,515) 166,142 178,629
Amortization of tangible capital assets 115,912 1,837 1,888 2,611 - 122,248 125,833
Payment in lieu of taxes 33,173 - - - - 33,173 34,082
Damages and Claims Against the Crown 17,301 10,086 396 4,430 - 32,213 1,588
Machinery and equipment 14,713 1,457 319 17,886 (2,167) 32,208 20,338
Rentals 2,177 3,292 3,974 18,446 (172) 27,717 26,342
Inmate pay - 18,445 - - - 18,445 13,128
Accomodation - - 9,084 8,782 - 17,866 17,904
Repairs and maintenance 24,449 3,795 621 360 (12,841) 16,384 19,950
Travel 4,543 1,158 109 1,716 - 7,526 20,252
Telecommunications 194 3 3 3,282 (1) 3,481 1,492
Relocation - (19) - 3,050 (37) 2,994 5,143
Loss (gain) on disposal of tangible capital assets (105) - 35 90 - 20 (336)
Environmental liabilities 7 - - - - 7 (562)
Other subsidies and expenses 10,471 7,401 226 1,713 (143) 19,668 345,415
Intra-entity Transactions (with CORCAN) (19,255) (41,838) (209) (2,129) 63,431 - -
Total operating expenses 1,936,334 607,663 179,547 412,532 - 3,136,076 3,138,174
Sub-Total Expenses 1,938,239 607,663 181,369 412,532 - 3,139,803 3,140,681
Expenses incurred on behalf of Government (2) (3) - (32) - (37) (167)
Total Expenses 1,938,237 607,660 181,369 412,500 - 3,139,766 3,140,514
Revenues
Sales of goods and services - 62,089 - - (21,783) 40,306 52,027
Miscellaneous revenues 2,934 41,808 - 2,989 (41,648) 6,083 4,297
Revenues earned on behalf of Government (2,933) (154) - (11) - (3,098) (4,297)
Intra-entity Transactions (with CORCAN) - (63,431) - - 63,431 - -
Total Revenues 1 40,312 - 2,978 - 43,291 52,027
Net cost of operations before
government funding and transfers
1,938,236 567,348 181,369 409,522 - 3,096,475 3,088,487

16. 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 (unaudited)

Summary of the assessment of effectiveness of the systems of internal control over financial reporting for fiscal year 2020-2021 and the action plan of Correctional service of Canada

1. Introduction

This document provides summary information on the measures taken by Correctional Service of Canada (CSC) 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 CSC's authority, mandate, and program can be found in the Departmental Results Report and the Departmental Plan.

2. Departmental system of internal control over financial reporting

CSC recognizes the importance of setting the tone from the top to ensure that employees throughout the organization understand their roles and responsibilities in maintaining an effective system of ICFR. CSC's focus is to ensure that risks are well managed through a responsive and risk-based control environment that enables continuous improvement and innovation.

2.1 Internal Control Management

CSC has a well-established governance and accountability structure to support organizational assessment efforts and oversight of its system of internal control. CSC's Internal Controls over Financial Reporting (ICFR) Framework, approved by the Commissioner in May 2018, is in place and includes:

The Departmental Audit Committee provides advice to the Commissioner on the adequacy and functioning of the department's risk management, control and governance frameworks and processes.

2.2 Service Arrangements relevant to financial statements

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

3. CSC's Assessment results during fiscal year 2020-2021

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

New or significantly amended key controls: CSC re-assesses key controls affected by new or significantly amended processes identified in its ongoing risk-based monitoring plan. Some minor amendments were made to existing controls as a consequence of COVID-19 and a shift to telework for CSC personnel. For example, transaction approvals that had previously been given in writing were transitioned to electronic forms. CSC will monitor the impacts of the changing work environment on key controls and adapt ongoing monitoring activities accordingly. There were no significantly amended key controls in existing processes that required a reassessment.

Ongoing risk-based monitoring plan: As part of its ongoing risk-based monitoring plan, CSC completed reassessments of the following processes: Entity Level Controls, Financial Close and Reporting, and Pay Administration. Substantial work was completed as well on a reassessment of the Capital Assets (excluding Real Property) process; work will be completed in 2021-2022. A special assessment was conducted of the Post-Payment Verification (PPV) process due to the high volume of emergency procurements resulting from COVID-19 and the transition to electronic approvals. A risk assessment of financial systems was completed, the results of which will be used to guide future internal control monitoring of Information Technology General Controls (ITGC).

Key controls tested as part of CSC's ongoing risk-based monitoring plan in 2020-2021 were found to be operating effectively with some opportunities for improvement in areas such as:

4. CSC's Action plan

4.1 Progress during fiscal year 2020-2021

During 2020-2021, CSC conducted ongoing risk-based monitoring according to the previous fiscal year's rotational plan for the current year as shown in the following table. Due to operational conditions, some scheduling modifications were made to the plan:

Progress during Fiscal Year 2020-2021
Element in previous year's action plan Status as at March 31, 2021
Entity-Level Controls Completed as planned; remedial actions started.
Pay Administration Completed as planned; remedial actions started.
Financial Close and Reporting Completed as planned; remedial actions started.
Purchases, Payables, and Payments Post-Payment Verification (PPV) special assessment completed: remedial actions started.
Capital Assets (excluding Real Property) Ongoing monitoring assessment started; completion in 2021-2022.
Inventory Ongoing monitoring assessment started; completion in 2021-2022.
4.2 Status and action plan for the next fiscal year and subsequent years

CSC's rotational ongoing risk-based monitoring plan over the next three years, based on an annual validation of the high-risk processes and controls and related adjustments to the ongoing monitoring plan as required, is shown in the following table.

Rotational Ongoing Risk-Based Monitoring Plan
Key Control Areas- Process 2021-2022 2022-2023 2023-2024
Entity Level Controls (ELC)
Entity-Level Controls x
Financial Management ProcessesFootnote 1
Budgeting and Forecasting x x
Costing x x x
Investment Planning x x
CFO Attestation x x
Internal Control over Financial Reporting (ICFR)
Financial Close and Reporting x
Revenues, Receivables, and Receipts x
Purchases, Payables, and Payments x x x
Pay Administration x x x
Inmate Trust Fund x*
Inventory x x x
Capital Assets x x x
Information Technology General Controls (ITGC)
IT General Controls x x x
* Identifies partial ongoing monitoring work. The work will consist of process description update, risk assessment update and monitoring of the implementation of management action plans. No extensive sample testing will be done.

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