Statement of management responsibility, including internal control over financial reporting (2021-2022)

Responsibility for the integrity and objectivity of the accompanying consolidated financial statements for the year ended March 31, 2022, and all information contained in these statements rests with the management of the Correctional Service of Canada (CSC). These consolidated financial statements have been prepared by management using the Government of Canada'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 consolidated financial statements. Some of the information in the consolidated 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 CSC's financial transactions. Financial information submitted in the preparation of the Public Accounts of Canada, and included in CSC's Departmental Results Report, is consistent with these consolidated 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 CSC 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 ongoing 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, 2022 was completed in accordance with the Treasury Board Policy on Financial Management and the results and action plans are summarized in the annex.

The effectiveness and adequacy of CSC's system of internal control is reviewed by the work of internal audit staff, who conduct periodic audits of different areas of CSC'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 consolidated financial statements to the Commissioner.

The consolidated financial statements of CSC have not been audited.

Original Signed by

Tony Matson,
Chief Financial Officer

Original Signed by

Anne Kelly,
Commissioner
Ottawa, Canada
September 1st, 2022

Consolidated statement of financial position (unaudited)

As at March 31
(in thousands of dollars)
2022 2021
Liabilities
Accounts payable and accrued liabilities (note 4) 720,313 810,298
Vacation pay and compensatory leave 103,675 109,652
Employee future benefits (note 5) 45,573 52,428
Inmate Trust Fund (note 6) 23,943 21,075
Environmental liabilities (note 7) 2,353 2,657
Deferred revenue (note 8) 801 181
Total net liabilities 896,658 996,291
Assets
Financial assets
Due from Consolidated Revenue Fund 292,341 387,987
Accounts receivable, advances and loans (note 9) 91,566 107,845
Inventories held for resale (note 10) 14,636 14,034
Total gross financial assets 398,543 509,866
Financial assets held on behalf of Government
Accounts receivable, advances and loans (note 9) (1,159) (823)
Total financial assets held on behalf of Government (1,159) (823)
Total net financial assets 397,384 509,043
Organizational net debt 499,274 487,248
Non-financial assets
Inventories not for resale (note 10) 72,500 76,980
Tangible capital assets (note 11) 2,330,861 2,324,640
Total non-financial assets 2,403,361 2,401,620
Organizational net financial position 1,904,087 1,914,372

Contractual obligations (note 12)

Contingent liabilities and assets (note 13)

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

Original Signed by

Tony Matson,
Chief Financial Officer

Original Signed by

Anne Kelly,
Commissioner
Ottawa, Canada
September 1st, 2022

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

For the Year Ended March 31
(in thousands of dollars)
2022 Planned Results 2022 2021
Expenses
Care and Custody 1,827,287 1,958,951 1,938,239
Correctional Interventions 571,585 562,419 607,663
Community Supervision 181,482 185,131 181,369
Internal Services 410,179 412,463 412,532
Expenses incurred on behalf of Government - (21) (37)
Total expenses 2,990,533 3,118,943 3,139,766
Revenues
Sales of goods and services 51,111 38,674 40,306
Miscellaneous revenues 4,331 7,932 6,083
Revenues earned on behalf of Government (4,331) (3,665) (3,098)
Total revenues 51,111 42,941 43,291
Net cost of operations before government funding and transfers 2,939,422 3,076,002 3,096,475
Government funding and transfers
Net cash provided by Government 2,978,665 2,839,091
Change in due from Consolidated Revenue Fund (95,646) 96,747
Services provided without charge by other government departments (note 14a) 182,809 177,801
Transfer of the transition payments for implementing salary payments in arrears - (2)
Other transfers of assets and liabilities (to)/from other government departments (note 14c) (111) 45
Total Government Funding and Transfers 3,065,717 3,113,682
Net cost of (revenue from) operations after government funding and transfers 10,285 (17,207)
Organizational net financial position - Beginning of year 1,914,372 1,897,165
Organizational net financial position - End of year 1,904,087 1,914,372

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)
2022 2021
Net cost of (revenue from) operations after government funding and transfers 10,285 (17,207)
Change due to tangible capital assets
Acquisition of tangible capital assets (note 11) 147,050 124,488
Amortization of tangible capital assets (note 11) (135,815) (122,248)
Proceeds from disposal of tangible capital assets (1,104) (396)
Gain (loss) on disposal of tangible capital assets 329 (20)
Tangible capital assets adjustments (note 11) (4,239) (2,610)
Total change due to tangible capital assets 6,221 (786)
Change due to inventories not for resale (4,480) 36,404
Net increase in organizational net debt 12,026 18,411
Organizational net debt - Beginning of year 487,248 468,837
Organizational net debt - End of year 499,274 487,248

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)
2022 2021
Operating activities
Net cost of operations before government funding and transfers 3,076,002 3,096,475
Non-cash items
Amortization of tangible capital assets (note 11) (135,815) (122,248)
Net gain (loss) on disposal of tangible capital assets 329 (20)
Tangible capital assets adjustments (note 11) (4,239) (2,610)
Services provided without charge by other government departments (note 14a) (182,809) (177,801)
Transition payments for implementing salary payments in arrears - 2
Variations in Consolidated Statement of Financial Position
Decrease (increase) in accounts payable and accrued liabilities (note 4) 89,985 (74,611)
Decrease (increase) in vacation pay and compensatory leave 5,977 (35,311)
Decrease in employee future benefits (note 5) 6,855 6,491
(Increase) in Inmate Trust Fund (note 6) (2,868) (3,575)
Decrease (increase) in environmental liabilities (note 7) 304 (8)
(Increase) decrease in deferred revenue (note 8) (620) 70
(Decrease) in accounts receivable, advances and loans (note 9) (16,615) (3,156)
(Decrease) increase in inventories (note 10) (3,878) 31,346
Transfer of assets to (from) other government departments (note 14c) 111 (45)
Cash used in operating activities 2,832,719 2,714,999
Capital investing activities
Acquisitions of tangible capital assets (note 11) 147,050 124,488
Proceeds from disposal of tangible capital assets (1,104) (396)
Cash used in capital investing activities 145,946 124,092
Net cash provided by Government of Canada 2,978,665 2,839,091

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 offenders, including day-to-day needs of offenders 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 10 distinct service categories that support program delivery in the organization, regardless of the Internal Services delivery model in a department. The 10 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 Management 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 2021-2022 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 2021-2022 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, the 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)
2022 2021
Net cost of operations before government funding and transfers 3,076,002 3,096,475
Adjustments for items affecting net cost of operations but not affecting authorities:
Add (Less):
Amortization of tangible capital assets (note 11) (135,815) (122,248)
Net loss on disposal of tangible capital assets and other adjustments (3,817) (1,364)
Services provided without charge by other government departments (note 14a) (182,809) (177,801)
Decrease (increase) in vacation pay and compensatory leave 5,977 (35,311)
Decrease in employee future benefits 6,855 6,491
Decrease (increase) in environmental liabilities 304 (8)
Refund of prior years' expenditures 7,631 4,810
Other (14,097) (3,222)
(315,771) (328,653)
Adjustments for items not affecting net cost of operations but affecting authorities:
Add (Less):
Acquisitions of tangible capital assets (note 11) 147,050 124,488
Transition payments for implementing salary payments in arrears - 2
(Decrease) increase in inventories (3,878) 31,346
Other 6,519 7,559
149,691 163,395
Current year authorities used 2,909,922 2,931,217

b) Authorities provided and used

(in thousands of dollars)
2022 2021
Vote 1 - Operating expenditures 2,759,698 2,750,492
Vote 5 - Capital expenditures 234,454 200,234
Statutory items:
CORCAN Revolving Fund 242,910 8,879
Other Statutory Items 11,966 249,202
3,249,028 3,208,807
Less:
Authorities available for future years (excluding CORCAN) 1,089 205
CORCAN Revolving Fund available authority 13,225 11,966
Lapsed authorities: Vote 1 - Operating expenditures 237,314 187,172
Lapsed authorities: Vote 5 - Capital expenditures 87,478 78,247
Current year authorities used 2,909,922 2,931,217

4. Accounts Payable and Accrued Liabilities

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

(in thousands of dollars)
2022 2021
Accounts payable - Other government departments and agencies 44,118 73,379
Accounts payable - External parties 81,782 77,900
Total accounts payable 125,900 151,279
Accrued liabilities 594,413 659,019
Total accounts payable and accrued liabilities 720,313 810,298

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/Qu├ębec 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 2021-2022 expense amounts to $167,352 thousand ($173,851 thousand in 2020-2021). For Group 1 members, the expense represents approximately 1.01 times (1.01 times in 2020-2021) the employee contributions and, for Group 2 members, approximately 1.00 times (1.00 times in 2020-2021) 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, 2022, 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)
2022 2021
Accrued benefit obligation - Beginning of year 52,428 58,919
Expenses for the year (4,760) (1,369)
Benefits paid during the year (2,095) (5,122)
Accrued benefit obligation - End of year 45,573 52,428

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)
2022 2021
Beginning of year 21,075 17,500
Receipts 43,679 41,904
Disbursements (40,811) (38,329)
End of year 23,943 21,075

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 39 sites (43 sites in 2021) where contamination may exist and assessment, remediation and monitoring may be required. Of these, CSC has identified 13 sites (20 sites in 2021) where action is required and for which a gross liability of $1,376 thousand ($1,748 thousand in 2021) 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, 7 sites are projected to have a liability (7 sites in 2021) where a liability estimate of $977 thousand ($909 thousand in 2021) has been recorded using this model.

These two estimates combined, totalling $2,353 thousand ($2,657 thousand in 2021), 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 19 sites (16 sites in 2021), 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, 2022 and March 31, 2021. 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 2021). Inflation is included in the undiscounted amount.

Nature & source of liability
2022 2021
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) 14 5 648 16 7 615
Landfills/Waste Sites (2) 16 7 942 18 12 1,015
Other (3) 9 8 763 9 8 1,027
Totals 39 20 2,353 43 27 2,657
(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 7 sites (4 sites in 2021) 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 no sites (2 sites in 2021) 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)
2022 2021
Opening balance 181 251
Amounts received 8,037 16,841
Revenue recognized (7,417) (16,911)
Ending balance 801 181

9. Accounts Receivable, Advances and Loans

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

(in thousands of dollars)
2022 2021
Receivables - Other government departments and agencies 8,787 30,762
Receivables - External parties 80,325 73,873
Employee advances 2,866 3,608
Parolee loans and advances to individuals other than employees 112 147
92,090 108,390
Allowance for doubtful accounts on receivables from external parties and parolee loans (524) (545)
Gross accounts receivable and advances 91,566 107,845
Accounts receivable held on behalf of Government (1,159) (823)
Net accounts receivable and advances 90,407 107,022

10. Inventories

The following table presents details of CSC's inventories:

(in thousands of dollars)
2022 2021
Inventories held for resale
Raw materials 9,435 8,832
Work in progress 246 347
Finished goods 8,270 7,286
17,951 16,465
Provision for obsolete inventory (3,315) (2,431)
Total inventories held for resale 14,636 14,034
Inventories not for resale
Pharmaceuticals and health care supplies 37,902 43,089
Other Supplies 9,952 10,093
Clothing 11,728 11,119
Building materials 4,686 4,450
Utilities 4,049 3,700
Other Inventory 4,183 4,529
Total inventories not for resale 72,500 76,980
Total Inventories 87,136 91,014

The cost of consumed inventories not for resale recognized as an expense in the Consolidated Statement of Operations and Organizational Net Financial Position is $122,375 thousand in 2022 ($150,411 thousand in 2021).

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 2022 2021
Land 14,545 - - - 14,545 - - - - - 14,545 14,545
Buildings 2,797,490 - 94,716 (78) 2,892,128 1,460,935 85,725 (192) (16) 1,546,452 1,345,676 1,336,555
Works and infrastructure 804,425 - 37,733 (55) 842,103 510,638 21,291 21,124 (2) 553,051 289,052 293,787
Machinery and equipment 143,743 4,313 (436) (9,000) 138,620 94,620 4,643 148 (8,745) 90,666 47,954 49,123
Informatics Hardware and Software 91,915 24 27,466 (158) 119,247 82,440 10,812 - (158) 93,094 26,153 9,475
Vehicles 97,726 9,281 722 (3,993) 103,736 56,489 8,742 161 (3,588) 61,804 41,932 41,237
Leasehold Improvements 62,361 - 4,142 - 66,503 42,254 4,602 - - 46,856 19,647 20,107
Assets under construction 559,811 133,432 (147,341) - 545,902 - - - - - 545,902 559,811
Total 4,572,016 147,050 17,002 (13,284) 4,722,784 2,247,376 135,815 21,241 (12,509) 2,391,923 2,330,861 2,324,640
(1) Adjustments include assets under construction of $143,120 thousand ($41,654 thousand in 2021) that were transferred to the other capital asset classes upon completion of the project. Other net adjustments of $4,239 thousand ($2,610 thousand in 2021) 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 2020-2021 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)
2023 2024 2025 2026 2027 and thereafter Total
Acquisition of goods and services 179,117 6,148 1,602 535 364 187,766

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, 2022.

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)
2022 2021
Employer's contribution to the health and dental insurance plans 159,337 154,964
Accommodation 18,739 17,866
Workers' compensation 3,041 3,290
Legal services 1,692 1,681
Total 182,809 177,801

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)
2022 2021
Accounts receivable 8,787 30,762
Accounts payable 44,118 73,379
Expenses 450,179 448,798
Revenues 92,949 99,980

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

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

During the year, CSC transferred in amounts related to salary overpayments receivable from other government departments for a net amount of $111 thousand ($45 thousand were transferred to other government departments in 2021).

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)
2022 2021
Care and Custody Correctional Interventions Community Supervision Internal Services Intra-entity Transactions (with CORCAN) Total Total
Transfer payments
Organizations and municipialities 165 - 3,307 - - 3,472 3,727
Total transfer payments 165 - 3,307 - - 3,472 3,727
Operating expenses
Salaries and employee benefits 1,410,601 468,686 29,036 288,982 - 2,197,305 2,293,973
Professional and special services 159,367 66,095 132,674 57,002 (35,987) 379,151 342,011
Utilities, materials and supplies 139,697 27,994 3,809 4,980 (2,607) 173,873 166,142
Amortization of tangible capital assets 121,109 1,755 2,504 10,447 - 135,815 122,248
Payment in lieu of taxes 33,031 - - - - 33,031 33,173
Rentals 2,024 3,200 3,883 24,029 (86) 33,050 27,717
Machinery and equipment 13,987 2,148 307 9,023 (4,642) 20,823 32,208
Accommodation - - 9,335 9,404 - 18,739 17,866
Inmate pay - 17,231 - - - 17,231 18,445
Repairs and maintenance 21,236 1,909 735 426 (14,508) 9,798 16,384
Travel 4,876 1,509 98 2,525 (1) 9,007 7,526
Damages and Claims Against the Crown 4,835 (72) (47) (260) - 4,456 32,213
Relocation - 9 - 3,839 - 3,848 2,994
Telecommunications 194 4 3 3,128 - 3,329 3,481
Environmental liabilities 68 (372) - - - (304) 7
(Gain) loss on disposal of tangible capital assets (371) - 15 28 - (328) 20
Other subsidies and expenses 66,687 7,886 151 2,046 (102) 76,668 19,668
Intra-entity Transactions (with CORCAN) (18,555) (35,563) (679) (3,136) 57,933 - -
Total operating expenses 1,958,786 562,419 181,824 412,463 - 3,115,492 3,136,076
Sub-Total Expenses 1,958,951 562,419 185,131 412,463 - 3,118,964 3,139,803
Expenses incurred on behalf of Government (12) - - (9) - (21) (37)
Total Expenses 1,958,939 562,419 181,131 412,454 - 3,118,943 3,139,766
Revenues
Sales of goods and services - 61,224 - - (22,550) 38,674 40,306
Miscellaneous revenues 3,106 35,642 - 4,567 (35,383) 7,932 6,083
Revenues earned on behalf of Government (3,096) (256) - (313) - (3,665) (3,098)
Intra-entity Transactions (with CORCAN) - (57,933) - - 57,933 - -
Total Revenues 10 38,677 - 4,254 - 42,941 43,291
Net cost of operations before
government funding and transfers
1,958,929 523,742 185,131 408,200 - 3,076,002 3,096,475

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 2021-2022 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 Plan and the Departmental Results Report.

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:

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

3. CSC's Assessment results for the 2021-2022 fiscal year

The following table summarizes the status of the ongoing monitoring activities according to the previous fiscal year's rotational plan. Due to reduced staff levels, some scheduling modifications were made to the plan:

Progress during the 2021-2022 fiscal year
Processes in previous year's action plan Status as at March 31, 2022
Planning and Budgeting (including Investment Planning) Completed as planned; remedial actions started.
Forecasting Completed as planned; remedial actions started.
Costing Completed as planned; remedial actions started.
CFO Attestation Completed as planned; remedial actions started.
Pay Administration Completed as planned; remedial actions started.
Purchases, Payables & Payments Completed as planned; remedial actions started.
Inmate Trust Fund Process mapping and risk assessment updates completed; testing to be completed in 2023-2024.
Inventory Process mapping and risk assessment updates completed; testing to be completed in 2022-2023.
Capital Assets (excluding Real Property) Completed as planned; remedial actions started.
Integrated Financial & Material Management System (IFMMS)
Information Technology General Controls (ITGC)
Completed as planned; remedial actions started.

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 the COVID-19 pandemic 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, as planned: Planning and Budgeting (including Investment Planning); Forecasting; Costing (Non-Capital and Capital Costing); CFO attestation; Purchasing, Payables and Payments (Payables, Payments, Quality Assurance and Vendor Records Sub-Processes); Pay Administration; Capital Assets (excluding Real Property); and Information Technology General Controls (ITGC) and application controls in the Integrated Financial and Material Management System (IFMMS).

For the most part, the key controls that were tested performed as intended with some opportunities for improvement, and management action plans addressing recommendations were developed by process owners as required.

4. CSC's Action plan for the next fiscal year and subsequent fiscal 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 2022-2023 2023-2024 2024-2025
Entity Level Controls (ELC)
Entity Level Controls x
Financial Management Processes
Forecasting x
Planning & Budgeting (including Investment Planning) x
Costing x
CFO Attestation x
Internal Control over Financial Reporting (ICFR)
Financial Close and Reporting x
Revenues, Receivables, and Receipts (RRR)Footnote 1 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 ControlsFootnote 2 x x x

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