2015-16 Report on Plans and Priorities

• Table of contents

Statement of Management Responsibility

We have prepared the accompanying Future-oriented Statement of Operations of the Canada Revenue Agency (CRA) according to the accounting principles consistent with those applied in preparing the financial statements of the Government of Canada. Significant accounting policies are set out in note 4 to the Future-oriented Statement of Operations. The Future-oriented Statement of Operations is submitted for Part III of the Estimates (Report on Plans and Priorities). The information will also be presented in the CRA's Departmental Performance Report to compare with actual results.

Management is responsible for the integrity and objectivity of the information contained in this Future-oriented Statement of Operations and for the process of developing assumptions. Assumptions and estimates are based upon information available and known to management at the time of development, reflect current business and economic conditions, and assume a continuation of current governmental priorities and consistency in the CRA's mandate and strategic objectives. Much of the Future-oriented Statement of Operations is based on these assumptions, best estimates, and judgment and gives due consideration to materiality. At the time of preparation of this statement of operations, management believes the estimates and assumptions to be reasonable. However, as with all such assumptions, there is a measure of uncertainty surrounding them. This uncertainty increases as the forecast horizon extends.

The actual results achieved for the fiscal years covered in the accompanying Future-oriented Statement of Operations will vary from the information presented and the variations may be material.

Approved by:

original signed

Andrew Treusch
Commissioner of Revenue and Chief Executive Officer of the CRA

original signed

Roch Huppé
Chief Financial Officer and Assistant Commissioner, Finance and Administration

Ottawa, Ontario
January 5, 2015

Canada Revenue Agency Future-oriented Statement of Operations – Agency Activities

Future-oriented Statement of Operations – Agency Activities
for the year ended March 31
(in thousands of dollars)

	Estimated results 2015	Planned results 2016
Expenses (note 6)
Internal services	1,259,962	1,159,390
Reporting compliance	1,151,167	1,142,140
Assessment of returns and payment processing	711,584	720,214
Collections and returns compliance	675,833	695,281
Taxpayer and business assistance	339,947	364,406
Appeals	277,828	238,525
Benefit programs	151,244	149,102
Taxpayers' Ombudsman	3,419	3,466
Total expenses	4,570,984	4,472,524
Non-Tax Revenues (note 7)
Internal services	155,645	153,903
Reporting compliance	30,619	30,720
Assessment of returns and payment processing	60,662	60,846
Collections and returns compliance	194,809	197,662
Taxpayer and business assistance	65,186	65,481
Appeals	19,148	20,470
Benefit programs	25,857	26,386
Revenues earned on behalf of Government	(65,711)	(66,511)
Total non-tax revenues	486,215	488,957
Net cost of operations	4,084,769	3,983,567

The accompanying notes are an integral part of this future-oriented statement of operations.

Notes to the Future-oriented Statement of Operations – Agency Activities

1. Authority and objectives

The Canada Revenue Agency (CRA) is an agent of Her Majesty in right of Canada under the Canada Revenue Agency Act. The CRA is a departmental corporation named in Schedule II of the Financial Administration Act and reports to Parliament through the Minister of National Revenue.

The mandate of the CRA is to support the administration and enforcement of tax legislation and other related legislation. The CRA provides support, advice, and services by:

(a) supporting the administration and enforcement of program legislation;

(b) implementing agreements between the Government of Canada or the CRA and the government of a province, territory or other public body performing a function of government in Canada to carry out an activity or administer a tax or program;

(c) implementing agreements or arrangements between the CRA and departments or agencies of the Government of Canada to carry out an activity or administer a program; and

(d) implementing agreements between the Government of Canada and First Nations governments to administer a tax.

The CRA collects revenues, including income and sales taxes and employment insurance premiums, administers tax legislation, delivers a number of social benefit programs to Canadians for the federal, provincial, territorial, and First Nations governments, and collects amounts, including Canada Pension Plan contributions, for other groups or organizations. It is responsible for administering and enforcing of the following acts or parts of acts: the Air Travellers Security Charge Act, the Canada Revenue Agency Act, the Children's Special Allowances Act, Part V.1 of the Customs Act, section 2 of the Energy Costs Assistance Measures Act, the Excise Act, the Excise Tax Act (including the goods and services tax (GST) and the harmonized sales tax (HST) except for GST/HST on imported goods), the Excise Act, 2001, the Income Tax Act, the Softwood Lumber Products Export Charge Act, 2006, the Universal Child Care Benefit Act, and others including various provincial acts.

In delivering its mandate, the CRA operates under the following program activities:

(a) Internal services: Provides internal services across the CRA, such as human resources management, financial management and information technology, to support the needs of programs and corporate obligations;

(b) Reporting compliance: Verifies complete and accurate disclosure by taxpayers of all required information to establish tax liabilities;

(c) Assessment of returns and payment processing: Processes and validates taxpayer returns; registers, establishes, and maintains taxpayer accounts; and, receives payments;

(d) Collections and returns compliance: Identifies and addresses non-compliance with taxpayer filing and remittance requirements;

(e) Taxpayer and business assistance: Assists taxpayers in meeting their obligations under the self-assessment;

(f) Appeals: Provides a dispute resolution process for taxpayers who disagree with decisions taken by the CRA;

(g) Benefit programs: Provides Canadians certain income-based benefits, credits and other services on behalf of federal, provincial (except Québec), and territorial governments;

(h) Taxpayers' Ombudsman: Addresses requests for reviews made by taxpayers and benefit recipients with respect to service matters.

2. Methodology and significant assumptions

The Future-oriented Statement of Operations has been prepared on the basis of government priorities and departmental plans as described in the Report on Plans and Priorities.

The information in the estimated results for fiscal year 2014-2015 is based on actual results as at October 31, 2014 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2015-2016 fiscal year.

The main assumptions underlying the forecasts are as follows:

(a) The CRA's activities will remain substantially the same as for the previous year;

(b) Expenses and revenues, including the determination of amounts internal and external to the government, are based on historical experience. The general historical pattern is expected to continue.

3. Variations and changes to the forecast financial information

While every attempt has been made to forecast final results for the remainder of 2014-2015 and for 2015-2016, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

In preparing this Future-oriented Statement of Operations the CRA has made estimates and assumptions concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Factors that could lead to material differences between the Future-oriented Statement of Operations and the historical statement of operations include:

(a) The timing and amount of acquisitions and disposals of tangible capital assets may affect gains/losses and amortization expense.

(b) Implementation of new collective agreements.

(c) Further changes to the operating budget through additional new initiatives or technical adjustments later in the year.

Once the Report on Plans and Priorities is presented, the CRA will not be updating the forecasts for any changes in financial resources made in ensuing supplementary estimates. Variances will be explained in the Departmental Performance Report.

4. Summary of significant accounting policies

For financial reporting purposes, the activities of the CRA have been divided into two sets of financial statements: Agency Activities and Administered Activities. The Future-oriented Statement of Operations – Agency Activities include only those operational revenues and expenses which are managed by the CRA and utilized in running the organization. The purpose of the distinction between Agency and Administered activities is to facilitate, among other things, the assessment of the administrative efficiency of the CRA in achieving its mandate. No future-oriented financial statements were prepared for Administered Activities because it is analogous to information presented by the Department of Finance.

The Future-oriented Statement of Operations – Agency Activities has been prepared using Government's accounting policies that came into effect for the 2014-2015 fiscal year 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. A summary of significant accounting policies follows:

(a) Parliamentary appropriations

The CRA is financed by the Government of Canada through Parliamentary appropriations. Accounting for appropriations provided to the CRA does not parallel financial reporting according to Canadian public sector accounting standards, as they are based in large part on cash flow requirements. Consequently, items recognized in the Future-oriented Statement of Operations may be different from those provided through appropriations from Parliament. Note 5(b) provides a high-level reconciliation between the two bases of reporting.

(b) Expenses

Expenses for the CRA's operations are recognized, on an accrual basis, when goods are received and/or services are rendered.

(i) Services provided without charge from other government agencies and departments

Costs for services received without charge from other government agencies and departments are included in expenses and are recognized at their estimated cost (see note 8).

(ii) Vacation pay and compensatory leave

Vacation pay and compensatory leave are expensed as the benefits accrue to employees under their respective terms of employment.

(iii) Employee benefits

(iii.1) Pension benefits

All eligible employees participate in the Public Service Pension Plan administered by the Government of Canada. The CRA's contributions reflect the full cost as employer. These amounts are currently based on a multiple of an employee's required contributions and may change over time depending on the experience of the Plan. The CRA's contributions are expensed during the year in which the services are rendered.

(iii.2) Health and dental benefits

The Government of Canada sponsors an employee benefit plan (health and dental) in which the CRA participates. Employees are entitled to health and dental benefits, as provided for under labour contracts and conditions of employment. The CRA's contributions to the plan, which are provided without charge by the Treasury Board Secretariat, are recorded at cost based on a percentage of the salary expenses and charged to personnel expenses in the year incurred.

(iii.3) Severance benefits

Some employees are entitled to severance benefits, as provided for under labour contracts and conditions of employment. The cost of these benefits is accrued as employees render the services necessary to earn them.

(iii.4) Sick leave benefits

Employees are eligible to accumulate sick leave benefits until retirement or termination according to their terms of employment. Sick leave benefits are earned based on employee services rendered and are paid upon an illness or injury related absence. These are accumulating non-vesting benefits that can be carried forward to future years, but are not eligible for payment on retirement or termination, nor can these be used for any other purpose.

(iv) Allowance for doubtful accounts

An allowance for doubtful accounts is recorded where the recovery of account receivables and advances is considered uncertain.

(v) Amortization of tangible capital assets

All initial costs of $10,000 or more incurred by the CRA to acquire or develop tangible capital assets are capitalized. Similar items under $10,000 are expensed. Tangible capital assets are amortized on a straight-line basis over the estimated useful lives of assets as follows:

Asset class	Useful life
Machinery, equipment, and furniture	10 years
In-house developed software	5-10 years
Vehicles and other means of transportation	5 years
Information technology equipment	5 years
Purchased software	3 years

Assets under construction/development are not amortized until completed and put into operation.

(vi) Provision for contingent liabilities

Contingent liabilities are potential liabilities that may become actual liabilities when one or more future events occur or fail to occur. To the extent that the future event is likely to occur or fail to occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and an expense recorded.

(c) Revenues

Non-tax revenues are recognized when the services are rendered by the CRA.

Non-tax revenues that are not available for spending cannot be used to discharge the CRA's liabilities. While management is expected to maintain accounting control, it has no authority regarding the disposition of non-respendable revenues. As a result, non-respendable revenues are considered to be earned on behalf of the Government of Canada and are therefore presented in reduction of the CRA's gross revenues.

5. Parliamentary appropriations

The CRA receives most of its funding through annual Parliamentary appropriations. Items recognized in the Future-oriented Statement of Operations in one year may be funded through Parliamentary appropriations in prior, current, or future years. Accordingly, the CRA has different net results of operations for the year on a government funding basis than on an accrual accounting basis. These differences are reconciled below.

a) Reconciliation of Parliamentary appropriations to be provided and requested:

(in thousands of dollars)

	Estimated results 2015	Planned results 2016
Parliamentary appropriations — to be provided:
Vote 1 – Operating expenditures, contributions and recoverable expenses on behalf of the Canada Pension Plan and the Employment Insurance Act	3,393,153	3,085,894
Vote 5 – Capital expenditures	123,414	120,452
Spending of revenues received through the conduct of its operation pursuant to section 60 of the Canada Revenue Agency Act	170,672	169,466
Statutory expenditures:
Contributions to employee benefit plans	414,689	418,871
Children's Special Allowance PaymentsFootnote 1	246,000	237,000
Minister of National Revenue – Salary and motor car allowance	80	82
	4,348,008	4,031,766
Less:
Appropriations available for future years Footnote 2 – Vote 1	(186,966)	-
Appropriations available for future yearsFootnote 2 – Vote 5	(39,956)	-
Appropriations lapsed	(1,000)	-
Expenditures related to Administered ActivitiesFootnote 1	(246,000)	(237,000)
	(473,922)	(237,000)
Total Parliamentary appropriations to be requested	3,874,086	3,794,766

b) Reconciliation of net cost of operations to Parliamentary appropriations requested:

(in thousands of dollars)

	Estimated results 2015	Planned results 2016
Net cost of operations	4,084,769	3,983,567
Expenses not requiring the use of current year appropriations:
Amortization of tangible capital assets	(80,682)	(83,426)
Loss on disposal/write-off of tangible capital assets	(2,411)	(1,908)
Services to be provided without charge from other government agencies and departments (note 8)	(443,628)	(436,284)
Other	4,088	(439,475)
	(522,633)	(961,093)
Use of current year appropriations not affecting expenses:
Tangible capital assets acquisitions	100,479	140,107
Transition to pay in arrears	87,132	-
	187,611	140,107
Changes in future funding requirements:
Salary, vacation pay and compensatory leave	(39,940)	85,731
Employee severance benefits	(3,351)	380,929
Employee sick leave benefits	(3,042)	(3,941)
	(46,333)	462,719
Non-tax revenues available for spending	170,672	169,466
Total Parliamentary appropriations to be requested	3,874,086	3,794,766

6. Expenses by category

In the Future-oriented Statement of Operations, expenses are presented by program activity. The following presents expenses by category.

(in thousands of dollars)

	Estimated results 2015	Planned results 2016
Personnel:
Salaries	2,318,679	2,352,900
Other allowances and benefits (including employee benefits)	931,989	921,828
	3,250,668	3,274,728
Professional and business services	620,980	541,018
Accommodation	321,523	304,941
Transportation and communications	146,922	130,959
Amortization of tangible capital assets	80,682	83,426
Interest on average accrued benefit obligations	25,513	25,714
Materials and supplies	25,464	22,702
Repair and maintenance	23,586	21,035
Equipment purchases	23,448	20,803
Other services and expenses	21,015	18,737
Equipment rentals	18,611	16,599
Advertising, information and printing services	10,161	9,954
Loss on disposal/write-off of tangible capital assets	2,411	1,908
Total expenses	4,570,984	4,472,524

7. Non-tax revenues by category

In the Future-oriented Statement of Operations, non-tax revenues are presented by program activity. The following presents non-tax revenues by category. The nature of each category is defined by the treatment permitted from a Parliamentary appropriations perspective.

(in thousands of dollars)

	Estimated results 2015	Planned results 2016
Non-tax revenues credited to Vote 1
Fees for administering the Employment Insurance Act	174,319	176,282
Fees for administering the Canada Pension Plan	141,224	143,209
	315,543	319,491
Non-tax revenues available for spending
Administration fees – provinces and territories	109,059	108,288
Services fees	59,178	58,760
Miscellaneous respendable revenues	2,435	2,418
	170,672	169,466
Non-tax revenues not available for spending
Recovery of employee benefit costs relating to non-tax revenue credited to Vote 1 and revenues available for spending	65,231	66,031
Miscellaneous non-tax revenues	480	480
	65,711	66,511
Total non-tax revenues before revenues earned on behalf of Government	551,926	555,468
Revenues earned on behalf of Government	(65,711)	(66,511)
Total non-tax revenues	486,215	488,957

8. Related party transactions

The CRA is related in terms of common ownership to all Government of Canada departments, agencies, and Crown corporations. Transactions with Crown corporations entered into by the CRA are in the normal course of business and on normal trade terms applicable to all individuals and enterprises. Transactions with other Government of Canada departments and agencies are conducted on a cost recovery basis.

The CRA is expected to receive various services without charge from other government agencies and departments in the coming years. The estimated costs for significant services to be provided without charge include:

(in thousands of dollars)

	Estimated results 2015	Planned results 2016
Employer's contribution to the health and dental insurance plans – Treasury Board Secretariat	221,733	216,915
Information technology services – Shared Services Canada	179,474	179,474
Legal services – Justice Canada	34,103	31,783
Payroll services – Public Works and Government Services Canada	4,287	4,149
Audit services – Office of the Auditor General of Canada	2,662	2,662
Workers' compensation benefits – Human Resources and Skills Development Canada	1,369	1,301
Total	443,628	436,284

Footnotes

Footnote 1

In accordance with the division of activities for financial reporting purposes outlined in note 4, the payments under the Children's Special Allowances Act are reported as federal administered expenses on the Statement of Administered Expenses and Recoveries of the CRA's Financial Statements – Administered Activities.

Return to footnote 1 referrer

Footnote 2

Pursuant to section 60(1) of the Canada Revenue Agency Act, the balance of money appropriated by Parliament for the use of the CRA that remains unexpended at the end of the fiscal year lapses at the end of the following fiscal year.

Return to footnote 2 referrer

Footnote 3

The decrease in planned full-time equivalents under the CPP/EI Appeals to the minister and Appeals to the courts subprogram from 2015-2016 to 2017-2018 results from a change in the recoverable expenditures on behalf of the Canada Pension Plan and the Employment Insurance Act.

Return to footnote 3referrer

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Date modified:

2015-03-31