Statement outlining results, risks and significant changes in operations, personnel and program

Introduction

This quarterly financial report has been prepared by management as required by section 65.1 of the Financial Administration Act in the form and manner prescribed by the Treasury Board. This report should be read in conjunction with the Main Estimates.

Further details on the Canada Revenue Agency’s (CRA) program activities can be found in the Departmental Plan.

Basis of presentation

This quarterly report has been prepared using an expenditure basis of accounting. The accompanying Statement of Authorities includes the CRA's spending authorities granted by Parliament and those used by the CRA consistent with the Main Estimates for the 2021-2022 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

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

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

This quarterly report has not been subject to an external audit or review.

Highlights of fiscal quarter and fiscal year to date results

1. Analysis of authorities

This report reflects the results for the current fiscal year in relation to the Main Estimates, authorities available for use from the prior fiscal year, and Supplementary Estimates A.

As shown in the restated table below, the CRA’s total Budgetary Authorities have increased by $1,801 million since the third quarter of 2020-2021, from $9,832 million in 2020-2021, to $11,633 million in 2021-2022.

The Vote 1 Gross Operating Expenditures Authority increased by $695 million, from $4,208 million in 2020-2021 to $4,903 million in 2021-2022.

The items that have a material impact on the Vote 1 Gross Operating Expenditure Authority include:

• $226 million increase in authorities related to the settlement of the Public Service Alliance of Canada Union of Taxation Employees (PSAC-UTE) and the Professional Institute of the Public Service of Canada (PIPSC) collective agreements;
• $197 million increase in authorities available for use from the prior fiscal year;
• $248 million increase in authorities received in Supplementary Estimates A:
  • $115 million increase for subsidies administered by the CRA as part of Canada’s COVID-19 Economic Response Plan, namely the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Rent Subsidy (CERS), and the 10% Temporary Wage Subsidy; and
  • $133 million increase is related to Budget 2021 initiatives, primarily for strengthening the CRA’s service channels (web, chatbot and telephones)
• $49 million decrease in end state initiatives from previous federal budget measures; and
• $42 million increase in authorities to fulfill the CRA’s administrative responsibilities in support of the Canada Pension Plan (CPP) and Employment Insurance

The Revenue Credited to the Vote is for the CRA’s administrative responsibilities to support the CPP and EI program. In 2021-2022, the CRA’s commitment is $433 million compared to $391 million in 2020-2021, an increase of $42 million. This increase pertains to adjustments related to the PSAC-UTE collective agreement and the annual volume adjustment. The increase in Vote 1 Gross Operating Expenditure Authority is offset by an equivalent increase in revenues recovered from the CPP and EI Accounts.

The Vote 5 Capital Expenditures Authority increased by $6 million, from $84 million in 2020 2021 to $90 million in 2021-2022. The majority of the $6 million increase is due to an increase in authorities for the administration of Canada’s COVID-19 Economic Response Plan, specifically the CEWS.

Total Budgetary Statutory Authorities increased by $1,142 million, from $5,931 million in 2020-2021 to $7,073 million in 2021-2022.

• $1,216 million increase related to new Climate Action Incentive (CAI) payments, due to an increased forecast provided by the Department of Finance which reflects the increases in the prices on carbon pollution under the federal carbon pollution pricing system; and
• $148 million decrease related to the Public Health Events of National Concern and Income Support Act (PHENCPA) statutory authority, which is no longer applicable in 2021-2022 as it expired on December 31, 2020.

2. Analysis of Expenditures

A two-year comparison of the CRA's annual net authorities available for use against the CRA’s third quarter expenditures and year-to-date expenditures as at December 31 is presented in Figure 1.

Certain components of the quarterly year-over-year expenditure variances are attributable to timing differences in invoices and payments, which will be resolved by the end of the fiscal year.

2.1 Expenditures by Authority

The year-to-date expenditures have increased by $1,409 million, as displayed in the Statement of Authorities. The material components of these year-over-year changes are presented below.

As the explanations for the year-over-year third quarter variances are often similar to the year-to-date variances, only the year-to-date variances are explained in detail.

The CRA’s year-over-year net Vote 1 Operating Expenditures have increased by $682 million on a year-to-date basis. The year to-date increase is composed of a $498 million increase in salary expenditures and a $184 million increase in operations and maintenance (O&M) expenditures. The items that have a material impact on the year to date increase in salary and O&M expenditures include:

Salary expenditures

• $162 million increase related to the settlement of the PSAC‑UTE and PIPSC collective agreements;
• $125 million increase related to spending on Budget 2021 initiatives;
• $98 million increase related to the implementation and administration of the measures in Canada’s COVID-19 Economic Response Plan, including the CEWS, the CERS, and the 10% Temporary Wage Subsidy, as well as additional overtime to support these programs; and
• $18 million increase due to differences in timing for spending of revenues received.

O&M expenditures

• $68 million increase due to differences in timing for spending of revenues received;
• $43 million increase related to services and consultants, including services received from Shared Services Canada (SSC). The majority of the increase in SSC billing is related to an increase in computing power for the CRA;
• $22 million increase related to personal computer equipment purchased for employees and replacement equipment;
• $15 million increase in legal services from the Department of Justice for 2021‑2022; which is a direct result of the measures funded in the Fall Economic Statement 2020; and
• $11 million increase in the accommodations special purpose allotment (SPA), which is due to inflationary costs for rent as well as projects that were delayed until this fiscal year that have a focus on the workplace of the future.

The CRA’s year-over-year Budgetary Statutory Authorities have increased by $725 million on a year-to-date basis.

• The year-to-date increase primarily relates to an increase in the amount of CAI payments, which is offset by a net decrease in other statutory items, including expenditures charged to the PHENCPA statutory authority.

2.2 Expenditures by Standard Object

The Departmental Budgetary Expenditures by Standard Object table illustrates the increase in the CRA’s third quarter expenditures by standard object. The material components of the year-to-date changes are presented below.

The year-over-year personnel expenditures have increased by $494 million on a year to date basis. Please refer to Vote 1 salary explanation for the variance explanation.

The year-over-year transportation and communication expenditures have decreased by $14 million on a year-to-date basis. The items that have a material impact on the year to date decrease in transportation and communications expenditures are a result of COVID-19 on the CRA’s operations and include:

• $11 million decrease for postal services expenditures, due to the additional enhanced Canada Child Benefit and GST/HST credit payments mailed out in 2020 2021; and
• $3 million decrease relating to lower travel expenditures in 2021-2022 compared to 2020-2021.

The year-over-year information expenditures have decreased $1 million on a year-to-date basis. The year to date decrease in information expenditures is due to lower marketing expenditures such as advertising and printing.

The year-over-year professional and special services expenditures have increased by $65 million on a year-to-date basis. The items that have a material impact on the year to date increase in professional and special services expenditures include:

• $43 million increase related to services and consultants, including services received from SSC. The majority of the increase in SSC billing is related to an increase in computing power for the CRA;
• $15 million increase in legal services from the Department of Justice for 2021‑2022; which is a direct result of the measures funded in the Fall Economic Statement 2020; and
• $4 million increase relating to training and course fees.

The year-over-year purchased repair and maintenance expenditures have increased by $12 million on a year-to-date basis. The majority of the year-to-date increase is a result of the increase in the accommodations SPA, which is due to inflationary increases in rent as well as projects that were delayed until this fiscal year that have a focus on the workplace of the future.

The year-over-year acquisition of machinery and equipment expenditures have increased by $14 million on a year-to-date basis. The year-to-date increase is a result of personal computer equipment purchased for employees and replacement equipment.

The year-over-year transfer payments have increased by $896 million on a year-to-date basis. The year-to-date increase is primarily attributable to changes in the amount of CAI payments.

The year-over-year other subsidies and payments have increased by $9 million on a year‑to-date basis. The majority of the year‑to-date increase is attributable to an increase in court awards paid in the first quarter of 2021-2022.

Risks and uncertainties

The CRA dedicates significant effort to managing risk at the enterprise level by conducting regular environmental scans and maintaining a Corporate Risk Profile (CRP). The Board of Management monitors and senior management receives regular updates on the CRA’s CRP, which has now been re-designed to be more flexible, relevant, and timely through quarterly risk reporting, and includes assessing the internal and external environment. The key risks to be monitored as we continue to deal with the pandemic are employee health, well-being, and safety; service experience; reputation management; and external and internal cybersecurity. These top tier risks are explained in greater detail, as follows.

Employee health, well-being, and safety

As a result of the COVID-19 pandemic, the increased risk associated with employee health, well-being and safety has been at the centre of all decisions. The CRA is mitigating this risk by having the majority of CRA employees continue to work remotely while also actively planning for post-pandemic work arrangements. In addition, over the past 18 months, the CRA focused on initiatives that supported employees, such as the Employee Assistance Program, fitness challenges, and virtual wellness fairs. The CRA also enhanced communication with employees with respect to its transition towards a hybrid model of working and the sharing of mental health resources.

Service experience

There is a risk that the CRA's services and client interactions will not meet the expectations of those it serves, both externally and internally. As the Government of Canada’s response to the COVID-19 pandemic continues, existing federal relief measures were extended. Some of the key federal relief measures that the CRA is responsible for are the Canada Recovery Benefit (CRB), the Canada Recovery Sickness Benefit (CRSB), the Canada Emergency Rent Subsidy (CERS), the CEWS, and the Canadian Recovery Hiring Program (CRHP). The CRA has been charged with the responsibility of promptly delivering these benefits to millions of Canadians. As such, the risk of service experience is being closely monitored to ensure the CRA continues to improve the client experience through people-centric design and delivery of programs and services while successfully delivering its broader mandate of tax and benefits administration.

Reputation management

It is important that public trust and the CRA’s reputation for fairness be upheld, and that efforts be deployed to ensure communications and interactions with all stakeholders are effective, coordinated, and responsive, particularly in the administration of COVID-19 emergency measures.

Cybersecurity

There is a risk that external cyber threats or internal vulnerabilities will compromise CRA IT systems, services, and/or taxpayer information. Cybersecurity and the protection of personal information have shown a consistent upward trend in risk exposure for the past five years in most organizations. This trend is due to increased cybercrime-related motivations (e.g. fraud, identity theft and ransomware), along with geopolitical tensions being more often realized as risk to Government departments and agencies. The CRA continues to take action to ensure that its cybersecurity and data protection posture keeps pace with the changing environment.

COVID-19

The CRA continues to administer the following emergency measures and recovery benefits to help Canadians and businesses facing hardship as a result of COVID-19:

• Canada Recovery Benefit (CRB)
• Canada Recovery Caregiving Benefit (CRCB)
• Canada Recovery Sickness Benefit (CRSB)
• Canada Emergency Rent Subsidy (CERS)
• Canada Emergency Wage Subsidy (CEWS)
• Canadian Recovery Hiring Program (CRHP)

To continue to deliver on these and other emergency measures, the CRA is seeking funding through Supplementary Estimates “C” for the extension of the CERS, the CEWS, the CRB, the CRCB, and the CRSB, as well as for the other changes to the COVID-19 measures announced in October 2021.

Significant changes in relation to operations, personnel, and programs

As of January 2021, all CRA core programs and activities have largely resumed. The CRA also continues to administer COVID-19 federal relief measures. A number of employees have been hired or reassigned to administer COVID-19 benefits and respond to public enquiries related to Canada’s COVID-19 Economic Response Plan. Since the beginning of the pandemic up to December 19, 2021, the CRA has processed 4.9 million CEWS, 2.0 million CERS, 29.8 million CRB, 7.7 million CRCB, 1.8 million CRSB, and 49,400 CRHP applications to provide support to millions of Canadians. In 2021-2022, the CRA has paid out $24.9 billion in COVID-19 benefits to Canadians to date.

Approval by Senior Officials

Approved by:

Ottawa, Canada

Date: