2015-16 Departmental Performance Report

Statement of Management Responsibility Including Internal Control Over Financial Reporting

We have prepared the accompanying financial statements of the Canada Revenue Agency (CRA) according to accounting principles consistent with those applied in preparing the financial statements of the Government of Canada. Significant accounting policies are set out in Note 2 to the financial statements. Some of the information included in the financial statements, such as accruals and the allowance for doubtful accounts, is based on management's best estimates and judgment, with due consideration to materiality. The CRA's management is responsible for the integrity and objectivity of data in these financial statements. Financial information submitted to the Public Accounts of Canada, and included in this report, is consistent with these financial statements.

To fulfill its accounting and reporting responsibilities, management maintains sets of accounts which provide records of the CRA's financial transactions. Management also maintains an effective system of internal control over financial reporting (ICFR) that take into account costs, benefits and risks. They are designed to provide reasonable assurance that transactions are within the authorities provided by Parliament, and by others such as provinces and territories, are executed in accordance with prescribed regulations and the Financial Administration Act, and are properly recorded to maintain the accountability of funds and safeguarding of assets.

Financial management and internal control systems are reinforced by the maintenance of internal audit programs. The CRA also seeks to assure the objectivity and integrity of data in its financial statements by the careful selection, training, and development of qualified staff; by organizational arrangements that provide appropriate divisions of responsibility; by communication programs aimed at ensuring that its regulations, policies, standards, and managerial authorities are understood throughout the organization; and by conducting an annual assessment of the effectiveness of its system of ICFR. An assessment for the year ended March 31, 2016 was completed in accordance with the Treasury Board Policy on Internal Control and the results and action plans are summarized in the Annex.

The system of ICFR is designed to mitigate risks to a reasonable level based on an on-going process to identify key risks, to assess effectiveness of associated key controls, and to make any necessary adjustments. The effectiveness and adequacy of the CRA's financial management and its system of internal control are reviewed by the work of internal audit staff, who conduct periodic audits of different areas of the CRA's operations, and by the Board of Management which is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal control and exercises this responsibility through the Audit Committee of the Board of Management. To assure objectivity and freedom from bias, these financial statements have been reviewed by the Audit Committee and approved by the Board of Management. The Audit Committee is independent of management and meets with management, the internal auditors, and the Auditor General of Canada on a regular basis. The auditors have full and free access to the Audit Committee.

The Auditor General of Canada conducts independent audits and expresses separate opinions on the accompanying financial statements which do not include an audit opinion on the annual assessment of the effectiveness of the CRA's internal controls over financial reporting.

Approved by:

Original signed  

Bob Hamilton
Commissioner of Revenue and Chief Executive Officer of the Canada Revenue Agency  

Original signed

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

Ottawa, Ontario
August 30, 2016 

 

Office of the Auditor General of Canada Logo

INDEPENDENT AUDITOR'S REPORT

To the Board of Management of the Canada Revenue Agency and the Minister of National Revenue

I have audited the accompanying financial statements of the Agency Activities of the Canada Revenue Agency, which comprise the statement of financial position as at 31 March 2016, and the statement of operations and agency net financial position, statement of change in agency net debt and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian public sector accounting standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion, the financial statements present fairly, in all material respects, the financial position of the Agency Activities of the Canada Revenue Agency as at 31 March 2016, and the results of its operations, changes in its net debt, and its cash flows for the year then ended in accordance with Canadian public sector accounting standards.

Original signed

Chantale Perreault, CPA, CA
Principal
for the Auditor General of Canada

30 August 2016
Ottawa, Canada

Canada Revenue Agency Financial Statements – Agency Activities

Canada Revenue Agency
Statement of Financial Position – Agency Activities
as at March 31
(in thousands of dollars)

 

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The Canada Revenue Agency Statement of Financial Position - Agency Activities as at March 31, 2016 (presented in thousands of dollars) is separated in 3 categories: liabilities, financial assets, and non-financial assets.

Under the liabilities section,

Accrued salaries for 2016 are 329,274 and for 2015 are 267,026
Accounts payable and accrued liabilities (see note 4 for additional information) for 2016 are 87,790 and for 2015 are 120,595
Vacation pay and compensatory leave for 2016 are 189,038 and for 2015 are 188,444
Employee severance benefits (see note 5e for additional information) for 2016 are 604,149 and for 2015 are 606,770
Employee sick leave benefits (see note 5e for additional information) for 2016 are 253,665 and for 2015 are 246,742

The Total liabilities for 2016 are 1,463,916 and for 2015 are 1,429,577
  
Under the financial assets section,  
  
Due from the Consolidated Revenue Fund for 2016 are 269,109 and for 2015 are 282,102
Accounts receivable and advances (see note 6 for additional information) for 2016 are 7,415 and for 2015 are 10,153

Total financial assets for 2016 are 276,524 and for 2015 are 292,255
  
Total Agency net debt for 2016 are 1,187,392 and for 2015 are 1,137,322
  
Under non-financial assets
  
Prepaid expenses for 2016 are 12,454 and for 2015 are 12,538
Tangible capital assets (see note 7 for additional information) for 2016 are 402,322 and for 2015 are 393,415

Total non-financial assets for 2016 are 414,776 and for 2015 are 405,953
  
Agency net financial position for 2016 are 772,616 and for 2015 are 731,369

Contingent liabilities (see note 13 for additional information)

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

Original signed

Bob Hamilton
Commissioner of Revenue and
Chief Executive Officer of the Canada Revenue Agency  

Date August 30, 2016
  
Original signed

Richard Thorpe, CPA, FCPA, CMA, FCMA
Director and Chair, Board of Management  

Date August 30, 2016

Canada Revenue Agency
Statement of Operations and Agency Net Financial Position – Agency Activities
for the year ended March 31
(in thousands of dollars)

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The Canada Revenue Agency Statement of Operations and Agency Net Financial Position – Agency Activities as at March 31, 2016 (presented in thousands of dollars) is separated in 3 categories: expenses, non-tax revenues, and Government funding and transfers.

Under the expenses section (see note 8 for additional information)
      
Reporting compliance: the 2016 planned result is 1,142,140, the 2016 actual result is 1,180,967, and the 2015 actual result is 1,185,957
Internal services: the 2016 planned result is 1,159,390, the 2016 actual result is 1,143,400, and the 2015 actual result is 1,155,630
Collections and returns compliance: the 2016 planned result is 695,281, the 2016 actual result is 732,717, and the 2015 actual result is 740,480
Assessment of returns and payment processing: the 2016 planned result is 720,214, the 2016 actual result is 699,127, and the 2015 actual result is 726,520
Taxpayer and business assistance: the 2016 planned result is 364,406, the 2016 actual result is 379,574, and the 2015 actual result is 382,732
Appeals: the 2016 planned result is 238,525, the 2016 actual result is 247,009, and the 2015 actual result is 264,331
Benefit programs: the 2016 planned result is 149,102, the 2016 actual result is 154,287, and the 2015 actual result is 149,088
Taxpayers' Ombudsman: the 2016 planned result is 3,466, the 2016 actual result is 2,213, and the 2015 actual result is 2,755

Total expenses the 2016 planned result is 4,472,524, the 2016 actual result is 4,539,294, and the 2015 actual result is 4,607,493
    

Under the non-tax revenues section (see note 9 for additional information)    
    
Reporting compliance: the 2016 planned result is 30,720, the 2016 actual result is 28,820, and the 2015 actual result is 26,096
Internal services: the 2016 planned result is 153,903, the 2016 actual result is 167,592, and the 2015 actual result is 165,488
Collections and returns compliance: the 2016 planned result is 197,662, the 2016 actual result is 198,428, and the 2015 actual result is 193,499
Assessment of returns and payment processing: the 2016 planned result is 60,846, the 2016 actual result is 56,498, and the 2015 actual result is 56,442
Taxpayer and business assistance the 2016 planned result is 65,481, the 2016 actual result is 62,986, and the 2015 actual result is 61,126
Appeals: the 2016 planned result is 20,470, the 2016 actual result is 23,049, and the 2015 actual result is 18,992
Benefit programs: the 2016 planned result is 26,386, the 2016 actual result is 22,095, and the 2015 actual result is 23,671
Revenues earned on behalf of Government: the 2016 planned result is (66,511), the 2016 actual result is (69,543), and the 2015 actual result is (64,694)

Total non-tax revenues: the 2016 planned result is 488,957, the 2016 actual result is 489,925, and the 2015 actual result is 480,620
    
Net cost of operations before government funding and transfers: the 2016 planned result is 3,983,567, the 2016 actual result is 4,049,369, and the 2015 actual result is 4,126,873
    
Under the Government funding and transfers section
    
Net cash provided by the Government of Canada: the 2016 planned result is 4,064,775, the 2016 actual result is 3,558,385, and the 2015 actual result is 3,574,766
Change in due from the Consolidated Revenue Fund: there are no planned results for 2016, the 2016 actual result is (12,993), and the 2015 actual result is 118,697
Services provided without charge from other government agencies and departments (see note 10 for additional information): the 2016 planned result is 436,284, the 2016 actual result is 463,247, and the 2015 actual result is 449,754
Transfer of transition payments for implementing salary payments in arrears (see note 11 for additional information): there is no planned actual for 2016, the 2016 actual result is (506), and the 2015 actual result is (88,104)
Net transfers of tangible capital assets to other government departments (OGD): there is no planned actual for 2016,the 2016 actual result is (11), and the 2015 actual result is (6)
Total government funding and transfers: the 2016 planned result is 4,501,059, the 2016 actual result is 4,008,122, and the 2015 actual result is 4,055,107
    
Net cost (surplus) of operations after government funding and transfers: the 2016 planned result is (517,492), the 2016 actual result is 41,247, and the 2015 actual result is 71,766
    
Agency net financial position - Beginning of year: the 2016 planned result is 731,369, the 2016 actual result is 731,369, and the 2015 actual result is 659,603
    
Agency net financial position - End of year: the 2016 planned result is 213,877, the 2016 actual result is 772,616, and the 2015 actual result is 731,369


The accompanying notes form an integral part of these financial statements

 

Canada Revenue Agency
Statement of Change in Agency Net Debt – Agency Activities
for the year ended March 31
(in thousands of dollars)

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The Canada Revenue Agency Statement of Change in Agency Net Debt – Agency Activities as at March 31, 2016 is presented in thousands of dollars

Net cost (surplus) of operations after government funding and transfers: the 2016 planned result is (517,492), the 2016 actual result is 41,247, and the 2015 actual result is 71,766   

Under Change in tangible capital assets    

Acquisition of tangible capital assets (see note 7 for additional information): the 2016 planned result is 140,107, the 2016 actual result is 93,664, and the 2015 actual result is 91,855
Amortization of tangible capital assets (see note 7 for additional information): the 2016 planned result is (83,426), the 2016 actual result is (83,842), and the 2015 actual result is (79,171)
Proceeds from disposal of tangible capital assets: no 2016 planned results, the 2016 actual result is (51) and the 2015 actual result is (127)
Net loss on disposal/write-off of tangible capital assets: the 2016 planned result is (1,908), the 2016 actual result is (853), and the 2015 actual result is (5,463)
Net transfers of tangible capital assets to OGD: no 2016 planned results, the 2016 actual result is (11) and the 2015 actual result is (6)
Total change in tangible capital assets: the 2016 planned result is 54,773, the 2016 actual result is 8,907, and the 2015 actual result is 7,088
    
Change in prepaid expenses: no 2016 planned results, the 2016 actual result is (84) and the 2015 actual result is 575
    
Net increase (decrease) in agency net debt: the 2016 planned result is (462,719), the 2016 actual result is 50,070, and the 2015 actual result is 79,429
    
Agency net debt - Beginning of year: the 2016 planned result is 1,137,322, the 2016 actual result is 1,137,322, and the 2015 actual result is 1,057,893
    
Agency net debt - End of year: the 2016 planned result is 674,603, the 2016 actual result is 1,187,392, and the 2015 actual result is 1,137,322


The accompanying notes form an integral part of these financial statements

 

Canada Revenue Agency
Statement of Cash Flows – Agency Activities
for the year ended March 31
(in thousands of dollars)

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The Canada Revenue Agency Statement of Cash Flows – Agency Activities as at March 31, 2016 (presented in thousands of dollars) is separated in 2 categories: operating activities and capital investing activities.

Under the operating activities section
  
Net cost of operations before government funding and transfers: for 2016 the amount is 4,049,369 and for 2015 the amount is 4,126,873

Items not affecting cash
   
Amortization of tangible capital assets (see note 7 for additional details): for 2016 the amount is (83,842) and for 2015 the amount is (79,171)
Net loss on disposal/write-off of tangible capital assets: for 2016 the amount is (853) and for 2015 the amount is (5,463)
Services provided without charge from other government agencies and departments (see note 10 for additional details): for 2016 the amount is (463,247) and for 2015 the amount is (449,754)
Transition payments for implementing salary payments in arrears (see note 11 for additional information): for 2016 the amount is 506 and for 2015 the amount is 88,104
Change in accounts receivable and advances: for 2016 the amount is (2,738) and for 2015 the amount is 3,475
Change in prepaid expenses: for 2016 the amount is (84) and for 2015 the amount is 575
Change in accrued salaries: for 2016 the amount is (62,248) and for 2015 the amount is (137,437)
Change in accounts payable and accrued liabilities: for 2016 the amount is 32,805  and for 2015 the amount is (25,694)
Change in vacation pay and compensatory leave: for 2016 the amount is (594) and for 2015 the amount is 1,228
Change in employee severance benefits: for 2016 the amount is 2,621 and for 2015 the amount is (36,656)
Change in employee sick leave benefits: for 2016 the amount is (6,923) and for 2015 the amount is (3,042)
Cash used in operating activities: for 2016 the amount is 3,464,772 and for 2015 the amount is 3,483,038
   
Under the Capital investing activities section
  
Acquisition of tangible capital assets (see note 7 for additional details): for 2016 the amount is 93,664 and for 2015 the amount is 91,855
Proceeds from disposal of tangible capital assets: for 2016 the amount is (51) and for 2015 the amount is (127)
Cash used in capital investing activities: for 2016 the amount is 93,613 and for 2015 the amount is 91,728
   
Net cash provided by the Government of Canada: for 2016 the amount is 3,558,385 and for 2015 the amount is 3,574,766
   
 
The accompanying notes form an integral part of these financial statements

 

Canada Revenue Agency
Notes to the Financial Statements – 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 administers 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 administers other amounts, including Canada Pension Plan contributions, for other groups or organizations. It is responsible for administering and enforcing 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) Reporting compliance: Verifies complete and accurate disclosure by taxpayers of all required information to establish tax liabilities;

(b) 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;

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

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

(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. Summary of significant accounting policies

For financial reporting purposes, the CRA's activities have been divided into two sets of financial statements: agency activities and administered activities. The Financial Statements – Agency Activities include those operational revenues and expenses which are managed by the CRA and utilized in running the organization. The Financial Statements – Administered Activities include those revenues and expenses that are administered on behalf of the federal, provincial, and territorial governments, First Nations, and other organizations. 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. Tax-related assets, liabilities, revenues and expenses are excluded from these financial statements because they can only accrue to a government, not to the tax agency that administers those transactions.

As required by the Canada Revenue Agency Act, the Financial Statements – Agency Activities have been prepared using accounting principles consistent with those applied in the preparation of the financial statements of the Government of Canada. The accounting principles used are based on 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. Financial reporting of authorities 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 Statement of Financial Position and the Statement of Operations and Agency Net Financial Position may be different from those provided through appropriations from Parliament. Note 3(b) provides a high-level reconciliation between the two bases of reporting. The Future-oriented Statement of Operations – Agency Activities and its accompanying notes included in the 2015-2016 Report on Plans and Priorities are the source of information for the planned results in the financial statements.

(b) Net cash provided by the Government of Canada

The CRA operates within the Consolidated Revenue Fund (CRF), which is administered by the Receiver General for Canada. All cash received by the CRA is deposited to the CRF and all cash disbursements made by the CRA are paid from the CRF. The net cash provided by government is the difference between all respendable cash receipts and all cash disbursements including transactions with departments and agencies.

(c) Expense recognition

Expenses are recognized when goods are received and/or services are rendered.

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

Estimates of the cost for services provided without charge from other government agencies and departments are recorded as expenses at their estimated cost.

(e) Revenue recognition

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 as a reduction of the CRA's gross revenues.

(f) Vacation pay and compensatory leave

Vacation pay and compensatory leave expenses are accrued as the benefits are earned by the employees under their respective terms of employment. The liability for vacation pay and compensatory leave is calculated at the salary levels in effect at the end of the year for all unused vacation pay and compensatory leave benefits accruing to employees.

(g) Employee future benefits

a) Pension benefits

All eligible CRA 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 and represent the total pension obligation of the CRA. Current legislation does not require the CRA to make contributions with respect to any actuarial deficiencies of the Public Service Pension Plan.

b) Health and dental benefits

The Government of Canada sponsors employee benefit plans (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 plans, 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. They represent the CRA's total obligation to the plans. Current legislation does not require the CRA to make contributions for any future unfunded liabilities of the plans.

c) 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. These benefits represent an obligation of the CRA that entails settlement by future payments. The liability resulting from the benefits earned by CRA employees is calculated using information from an actuarial valuation based on the projected benefit method prorated on services. Changes in actuarial assumptions and any variance between the expected and the actual experience of the severance benefits plan give rise to actuarial gains or losses. These gains or losses are amortized on a straight-line basis over the expected average remaining service life of the employees starting in the fiscal year following the one in which they arose.

d) 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. A liability is recorded for unused sick leave credits expected to be used in future years in excess of future allotments, based on an actuarial valuation using an accrued benefit method. Changes in actuarial assumptions and any variance between the expected and the actual experience of the sick leave benefits plan give rise to actuarial gains or losses. These gains or losses are amortized on a straight-line basis over the expected average remaining service life of the employees starting in the fiscal year following the one in which they arose.

(h) Due from the Consolidated Revenue Fund (CRF)

Amounts due from the CRF are the result of timing differences 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 the CRA is entitled to draw from the CRF without further authorities to discharge its liabilities.

(i) Accounts receivable and advances

Accounts receivable and advances are stated at the lower of cost and net recoverable value. An allowance for doubtful accounts is recorded where recovery is considered uncertain.

(j) Tangible capital assets

All initial costs of $10,000 or more incurred by the CRA to acquire or develop tangible capital assets are capitalized and amortized over the useful lives of the assets. 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:

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The table describes the asset classes and the usefull life for each item.

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

Assets under construction/development are recorded as costs are incurred and are not amortized until completed and put into operation.

(k) 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. If the likelihood is not determinable, the CRA's best estimate of the contingency is disclosed in the notes to the financial statements.

(l) Foreign currency translation

Transactions involving foreign currencies are translated into Canadian dollars by applying the exchange rate in effect at the time of those transactions. Realized foreign exchange gains and losses resulting from foreign currency transactions are included in the other services and expenses category in note 8 – Segmented information – Expenses.

(m) Financial instruments

The CRA uses non-derivative financial instruments in the course of its operations. Those financial instruments gave rise to the following financial assets and financial liabilities that are measured at cost or amortized cost, as per the table below.

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The table describes the financial assets and financial liabilities and the measurement for each item.

For the Accounts receivable and advances the measurement is Amortized cost
For the Accrued salaries the measurement is cost
For the Accounts payable and accrued liabilities the measurement is cost
For the Vacation pay and compensatory leave the measurement is cost

(n) Measurement uncertainty

The preparation of these financial statements in accordance with Canadian public sector accounting standards requires management to make estimates and assumptions that affect the reported amounts of liabilities, assets, revenues, expenses and related disclosure reported on the financial statements. At the time of preparation of these statements, management believes the estimates and assumptions to be reasonable. Employee severance and sick leave benefits, contingent liabilities, the useful life of tangible capital assets and services provided without charge are the most significant items where estimates and assumptions are used. Actual results could differ significantly from the current estimates. Management's estimates are reviewed periodically and, as adjustments become necessary, they are recorded in the financial statements in the period in which they become known. The methodologies used to determine the estimates were applied consistently with the previous year.

3. Parliamentary appropriations

The CRA receives most of its funding through annual Parliamentary appropriations. Items recognized in the Statement of Financial Position and the Statement of Operations and Agency Net Financial Position 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 provided and used:

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The table presents parliamentary appropriations - Reconciliation of Parliamentary appropriations provided and used. The information is presented in thousands of dollars.  

  
Parliamentary appropriations — provided:   
   
Vote 1 – Operating expenditures, contributions and recoverable expenses on behalf of the Canada Pension Plan and the Employment Insurance Act: the amount for 2016 is 3,268,072 and for 2015 is 3,391,870
Vote 5 – Capital expenditures: the amount for 2016 is 128,693 and for 2015 is 123,414
Spending of revenues received through the conduct of operations pursuant to section 60 of the Canada Revenue Agency Act: the amount for 2016 is 169,032 and for 2015 is 166,085
Spending of proceeds from disposal of surplus Crown assets: the amount for 2016 is 92 and for 2015 is 174

Statutory expenditures:   

Contributions to employee benefit plans: the amount for 2016 is 432,794 and for 2015 is 447,675
Disbursements to provinces under the Softwood Lumber Products Export Charge Act, 2006 (see footnote 1): the amount for 2016 is 121,481 and for 2015 is (15,119)
Children's special allowance payments (see footnote 1): the amount for 2016 is 309,173 and for 2015 is 214,761
Other: the amount for 2016 is 1,577 and for 2015 is 3,536
Statutory expenditures sub-total: the amount for 2016 is 4,430,914 and for 2015 is 4,332,396
   
Less:   
   
Appropriations available for future year (see footnote 2) :   
Vote 1: the amount for 2016 is (227,536) and for 2015 is (214,323)
Vote 5: the amount for 2016 is (49,890) and for 2015 is (47,123)
Appropriations lapsed:   
Vote 1: the amount for 2016 is (6,501) and for 2015 is (10,117)
Expenditures related to administered activities (see footnote 1): the amount for 2016 is (430,661) and for 2015 is (199,672)
Appropriations available for future year (see footnote 2) subtotal: the amount for 2016 is (714,588) and for 2015 is (471,235)
   
Total Parliamentary appropriations used: the amount for 2016 is 3,716,326 and for 2015 is 3,861,161

Followed by:

Footnote 1: In accordance with the division of activities for financial reporting purposes outlined in note 2, the payments under the Softwood Lumber Products Export Charge Act, 2006 and 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. The Softwood Lumber Agreement expired on October 12, 2015 and the CRA will continue to administer retroactive transactions in accordance with the terms set in the Agreement.

Footnote 2: Pursuant to section 60(1) of the Canada Revenue Agency Act, the CRA has up to two fiscal years to utilize parliamentary appropriations once approved.

 

 

b) Reconciliation of net cost of operations before government funding and transfers to current year Parliamentary appropriations used:

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The table presents parliamentary appropriations, reconciliation of net cost of operations before government funding and transfers to current year Parliamentary appropriations used. The information is presented in thousands of dollars.  
  
Net cost of operations before government funding and transfers: for 2016 the amount is 4,049,369 and for 2015 the amount is 4,126,873
  
Expenses not requiring use of current year appropriations:
  
Amortization of tangible capital assets (see note 7 for additional information): for 2016 the amount is (83,842) and for 2015 the amount is (79,171)
Adjustment to prior years' accruals: for 2016 the amount is 3,131 and for 2015 the amount is 1,871
Loss on disposal/write-off of tangible capital assets: for 2016 the amount is (899) and for 2015 the amount is (5,584)
Services provided without charge from other government agencies and departments (see note 10 for additional information): for 2016 the amount is (463,247) and for 2015 the amount is (449,754)
Other: for 2016 the amount is (489) and for 2015 the amount is (134)
The sub-total for expenses not requiring use of current year appropriations: for 2016 the amount is (545,346) and for 2015 the amount is (532,772)
  
Changes to non financial assets affecting appropriations:
   
Tangible capital assets acquisitions (see note 7 for additional information): for 2016 the amount is 93,664 and for 2015 the amount is 91,855
Less: Variation in prior years expenses capitalization: for 2016 the amount is 486 and for 2015 the amount is 278
Variation in prepaid expenses: for 2016 the amount is (84) and for 2015 the amount is 575
Transition payments for implementing salary payments in arrears (see note 11 for additional information): for 2016 the amount is 506 and for 2015 the amount is 88,104
The sub-total for changes to non financial assets affecting appropriations: for 2016 the amount is 94,572 and for 2015 the amount is 180,812
  
Changes in future funding requirements: 
 
Salary, vacation pay and compensatory leave: for 2016 the amount is (45,488) and for 2015 the amount is (39,130)
Employee severance benefits: for 2016 the amount is 2,621 and for 2015 the amount is (36,656)
Employee sick leave benefits: for 2016 the amount is (6,923) and for 2015 the amount is (3,042)
The sub-total for changes in future funding requirements: for 2016 the amount is (49,790) and for 2015 the amount is (78,828)
  
Non-tax revenues available for spending (see note 9 for additional information): for 2016 the amount is 167,521 and for 2015 the amount is 165,076
  
Total Parliamentary appropriations used: for 2016 the amount is 3,716,326 and for 2015 the amount is 3,861,161

4. Accounts payable and accrued liabilities

Accounts payable and accrued liabilities are measured at cost, the majority of which are due within 30 days of year-end.

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The table presents Accounts payable and accrued liabilities. The information is presented in thousands of dollars.

Accounts payable and accrued liabilities - Related parties: the amount for 2016 is 30,503 and 2015 is 56,630
Accounts payable and accrued liabilities - External: the amount for 2016 is 57,287 and for 2015 is 63,965
The total amount for accounts payable and accrued liabilities is 87,790 for 2016 and 120,595 for 2015.

5. Employee future benefits

a) Pension benefits

The CRA and all eligible employees contribute to 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 two 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 CRA and the employees contribute to the Plan. Due to the amendment of the Public Service Superannuation Act following the implementation of provisions related to the Jobs and Growth Act 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 current year expense for the CRA's contributions for Group 1 members represents approximately 1.25 times (1.41 times in 2014-2015) the contributions by employees and, for Group 2 members, approximately 1.24 times (1.39 times in 2014-2015) the contributions of employees.

The contributions to the Plan for the year were as follows:

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The table presents employee future benefits - Pension benefits. The information is presented in thousands of dollars.

The amount for CRA's contributions for 2016 is 298,325 and for 2015 is 306,030
The amount for Employees' contributions for 2016 is 238,747 and for 2015 is 217,120

The CRA's responsibility with regard to this Plan is limited to its contributions. Actuarial surpluses or deficiencies are recognized in the financial statements of the Government of Canada.

b) Health and dental benefits

The CRA contributes for all eligible employees to the Public Service Health Care Plan and Public Service Dental Care Plan, which are sponsored by the Government of Canada. The CRA's responsibility with regard to these plans is limited to its contributions (refer to note 10).

c) Severance benefits

The CRA provides severance benefits to entitled employees based on eligibility, years of service and salary upon termination of employment. These severance benefits are unfunded. Benefits will be paid from future appropriations.

d) Sick leave benefits

Employees are credited, based on service, a maximum of 15 days annually for use as paid absences, due to illness or injury. Employees are allowed to accumulate unused sick leave credits each year. Accumulated credits may be used in future years to the extent that the employee's illness or injury exceeds the current year's allocation of credits. The use of accumulated sick leave balance for sick-leave compensation ceases on termination of employment. These sick leave benefits are unfunded. They will be paid from future appropriations.

e) Valuation of future benefits

Annually, as at March 31 of each year, the CRA obtains an actuarial valuation of the accrued employee severance and sick leave benefit obligations for accounting purposes.

Changes from the prior year in the actuarial value of these accrued employee benefit obligations that is used to determine the related employee future benefits liabilities presented in the Statement of Financial Position as at March 31 were as follows:

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The table presents Valuation of future benefits. The information is presented in thousands of dollars.

Accrued employee benefits obligations, beginning of year

Severance benefits for 2016: 629,399
Severance benefits for 2015: 519,956
Sick leave benefits for 2016: 214,600
Sick leave benefits for 2015: 214,800

Benefits earned (see footnote 1 and 2)

Severance benefits for 2016: 27,622
Severance benefits for 2015: 68,992
Sick leave benefits for 2016: 36,164
Sick leave benefits for 2015: 36,300

Interest on average accrued benefit obligations (see note 8 for additional information)

Severance benefits for 2016: 14,826
Severance benefits for 2015: 17,976
Sick leave benefits for 2016: 5,177
Sick leave benefits for 2015: 7,500

Benefits paid

Severance benefits for 2016: (50,876)
Severance benefits for 2015: (46,062)
Sick leave benefits for 2016: (34,011)
Sick leave benefits for 2015: (38,600)

Actuarial (gain)/loss

Severance benefits for 2016: (5,943)
Severance benefits for 2015: 68,537
Sick leave benefits for 2016: 17,957
Sick leave benefits for 2015: (5,400)

Accrued employee benefits obligations, end of year

Severance benefits for 2016: 615,028
Severance benefits for 2015: 629,399
Sick leave benefits for 2016: 239,887
Sick leave benefits for 2015: 214,600

Accumulated net actuarial gain/(loss)

Severance benefits for 2016: (12,436)
Severance benefits for 2015: (18,379)
Sick leave benefits for 2016: 16,343
Sick leave benefits for 2015: 34,300

less: amortization on net actuarial gain/(loss) (see footnote 1)

Severance benefits for 2016: (1,557)
Severance benefits for 2015: 4,250
Sick leave benefits for 2016: 2,565
Sick leave benefits for 2015: 2,158

Unamortized accumulated net actuarial gain/(loss)

Severance benefits for 2016: (10,879)
Severance benefits for 2015: (22,629)
Sick leave benefits for 2016: 13,778
Sick leave benefits for 2015: 32,142

Employee benefits liability

Severance benefits for 2016: 604,149
Severance benefits for 2015: 606,770
Sick leave benefits for 2016: 253,665
Sick leave benefits for 2015: 246,742

Footnote 1: These expenses represent the severance and sick leave benefits that are included in the Other allowances and benefits category in note 8.

Footnote 2: The severance benefits disclosed for the year ended March 31, 2015 include an adjustment of $44,391,764 to the benefits earned as a result of improvements to the underlying data.

f) Actuarial assumptions

Actuarial assumptions are used to determine the severance and sick leave accrued benefit obligations and includes estimates of the discount rate and yearly salary growth. These assumptions are reviewed at March 31 of each year and are based on management's best estimate. The actuarial valuation as at March 31, 2016 for both severance and sick leave benefit obligations used a discount rate of 2.3% and salary growth of 2.2% - 2.6% (2.4% and 2.0% - 2.6% respectively as at March 31, 2015). The expected average remaining service life is 13.2 years for sick leave benefits and 11.6 years for severance benefits as at March 31, 2016 (13.3 years and 11.8 years respectively as at March 31, 2015).

g) Sensitivity Analysis

Changes in assumptions can result in significantly higher or lower estimates of the accrued employee benefits obligations. The table below illustrates the possible impact of a 1% change in the principal actuarial assumptions being the discount rate and the salary growth.

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The table presents Sensitivity Analysis. The information is presented in thousands of dollars.

Possible impact on the accrued employee benefits obligations due to:

Increase of 1% in discount rate

Severance benefits for 2016: (52,736)
Severance benefits for 2015: (53,281)
Sick leave benefits for 2016: (14,647)
Sick leave benefits for 2015: (12,700)

Decrease of 1% in discount rate

Severance benefits for 2016: 61,952
Severance benefits for 2015: 62,575
Sick leave benefits for 2016: 16,666
Sick leave benefits for 2015: 14,400

Increase of 1% in salary growth

Severance benefits for 2016: 61,192
Severance benefits for 2015: 61,908
Sick leave benefits for 2016: 18,937
Sick leave benefits for 2015: 18,600

Decrease of 1% in salary growth

Severance benefits for 2016: (53,128)
Severance benefits for 2015: (53,755)
Sick leave benefits for 2016: (16,926)
Sick leave benefits for 2015: (16,700)

6. Accounts receivable and advances

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The table presents the accounts receivable and advances. The information is presented in thousands of dollars.    
    
The amount for Accounts receivable - Related parties for 2016 is 4,691 and for 2015 is 6,842
The amount for Accounts receivable - External for 2016 is 950 and for 2015 is 898
The amount for Advances to employees for 2016 is 396 and for 2015 is 689
The amount for Salary overpayments for 2016 is 1,930 and for 2015 is 2,330
The subtotal for 2016 is 7,967 and for 2015 is 10,759
Less: the amount for Accounts allowance for doubtful accounts for 2016 is (552) and for 2015 is (606)
The Total amount for accounts receivable and advances for 2016 is 7,415 and for 2015 is 10,153

7. Tangible capital assets

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The table presents the tangible capital assets. The information is presented in thousands of dollars.

Cost

Machinery, equipment and furniture: the opening balance is 6,931, the acquisitions 826, the disposals and adjustments (335), the transfers to OGD (12), and the closing balance 7,410
Software (purchased and in-house developed and/or in development): the opening balance is 919,072, the acquisitions 91,622, the disposals and adjustments (3,517), the transfers to OGD (1,631), and the closing balance 1,005,546
Vehicles and other means of transportation: the opening balance is 1,800, the acquisitions 22, the disposals and adjustments (175), the transfers to OGD (0), and the closing balance 1,647
Information technology equipment: the opening balance is 6,606, the acquisitions 1,194, the disposals and adjustments (253), the transfers to OGD (38), and the closing balance 7,509
Total: the opening balance is 934,409, the acquisitions 93,664, the disposals and adjustments (4,280), the transfers to OGD (1,681), and the closing balance 1,022,112

Accumulated amortization

Machinery, equipment and furniture: the opening balance is 4,291, the acquisitions 491, the disposals and adjustments (283), the transfers to OGD (11), and the closing balance 4,488
Software (purchased and in-house developed and/or in development): the opening balance is 529,602, the acquisitions 82,790, the disposals and adjustments (2,670), the transfers to OGD (1,621), and the closing balance 608,101
Vehicles and other means of transportation: the opening balance is 1,075, the acquisitions 248, the disposals and adjustments (170), the transfers to OGD (0), and the closing balance 1,153
Information technology equipment: the opening balance is 6,026, the acquisitions 313, the disposals and adjustments (253), the transfers to OGD (38), and the closing balance 6,048
Total: the opening balance is 540,994, the acquisitions 83,842, the disposals and adjustments (3,376), the transfers to OGD (1,670), and the closing balance 619,790

Net book value

Machinery, equipment and furniture: 2016 is 2,922 and 2015 is 2,640
Software (purchased and in-house developed and/or in development): 2016 is 397,445 and 2015 is 389,470
Vehicles and other means of transportation: 2016 is 494 and 2015 is 725
Information technology equipment: 2016 is 1,461 and 2015 is 580
Total: 2016 is 402,322 and 2015 is 393,415

The cost of software in development, which is not amortized, is $122,875,191 as at March 31, 2016 ($89,657,175 as at March 31, 2015).

8. Segmented information – Expenses

Presentation by segment is based on the CRA's program activity as described in note 1 of these financial statements. 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 for the main program activities, by major object of expense. The segment results for the period are as follows:

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The table presents the segmented information - Expenses. The information is presented in thousands of dollars.    
           
Personnel:           
Salaries: Reporting compliance 731,112, internal
services 517,629, collections
and returns compliance 429,170, assessment of returns and payment processing 308,909, taxpayer and business assistance 236,678, appeals 107,812, benefit programs 74,157, taxpayers' Ombudsman 1,374, total for 2016 2,406,841, and total for 2015 2,420,180
Other allowances and benefits (including employee benefits described in note 5): Reporting compliance 301,058, internal
services 207,338, collections
and returns compliance 171,900, assessment of returns and payment processing 120,433, taxpayer and business assistance 92,047, appeals 44,986, benefit programs 28,426, taxpayers' Ombudsman 498, total for 2016 966,686, and total for 2015 995,625
Total for personnel: Reporting compliance 1,032,170, internal
services 724,967, collections
and returns compliance 601,070, assessment of returns and payment processing 429,342, taxpayer and business assistance 328,725, appeals 152,798, benefit programs 102,583, taxpayers' Ombudsman 1,872, total for 2016 3,373,527, and total for 2015 3,415,805
           
Professional and business services: Reporting compliance 15,928, internal
services 251,121, collections
and returns compliance 22,875, assessment of returns and payment processing 4,623, taxpayer and business assistance 3,816, appeals 75,849, benefit programs 1,573, taxpayers' Ombudsman 27, total for 2016 375,812, and total for 2015 370,037
Accommodation: Reporting compliance 83,597, internal
services 75,131, collections
and returns compliance 62,895, assessment of returns and payment processing 36,802, taxpayer and business assistance 35,385, appeals 12,730, benefit programs 8,487, taxpayers' Ombudsman 189, total for 2016 315,216, and total for 2015 331,325
Federal sales tax administration costs by the Province of Québec: Reporting compliance -, internal
services -, collections
and returns compliance -, assessment of returns and payment processing 142,275, taxpayer and business assistance -, appeals -, benefit programs  -, taxpayers' Ombudsman -, total for 2016 142,275, and total for 2015 142,133
Transportation and communications: Reporting compliance 17,247, internal
services 23,777, collections
and returns compliance 16,064, assessment of returns and payment processing 42,182, taxpayer and business assistance 2,975, appeals 656, benefit programs 24,709, taxpayers' Ombudsman 89, total for 2016 127,699, and total for 2015 125,987
Amortization of tangible capital assets (see note 7 for additional details): Reporting compliance 13,542, internal
services 10,552, collections
and returns compliance 20,355, assessment of returns and payment processing 28,488, taxpayer and business assistance 3,388, appeals 1,351, benefit programs 6,167, taxpayers' Ombudsman -, total for 2016 83,843, and total for 2015 79,171
Other services and expenses: Reporting compliance 5,927, internal
services 10,654, collections
and returns compliance 3,246, assessment of returns and payment processing 2,744, taxpayer and business assistance 1,188, appeals 2,030, benefit programs 9,576, taxpayers' Ombudsman 3, total for 2016 35,368, and total for 2015 42,573
Repair and maintenance: Reporting compliance 260, internal
services 19,077, collections
and returns compliance 27, assessment of returns and payment processing 725, taxpayer and business assistance 49, appeals 2, benefit programs 3, taxpayers' Ombudsman - , total for 2016 20,143, and total for 2015 21,358
Interest on average accrued benefit obligations (note 5): Reporting compliance 6,120, internal
services 4,299, collections
and returns compliance 3,564, assessment of returns and payment processing 2,546, taxpayer and business assistance 1,949, appeals 906, benefit programs 608, taxpayers' Ombudsman 11, total for 2016 20,003, and total for 2015 25,476
Materials and supplies: Reporting compliance 2,712, internal
services 8,192, collections
and returns compliance 1,246, assessment of returns and payment processing 6,440, taxpayer and business assistance 547, appeals 424, benefit programs 227, taxpayers' Ombudsman 6, total for 2016 19,794, and total for 2015 19,229
Equipment purchases: Reporting compliance 2,902, internal
services 10,945, collections
and returns compliance 916, assessment of returns and payment processing 1,026, taxpayer and business assistance 1,184, appeals 171, benefit programs 315, taxpayers' Ombudsman 2, total for 2016 17,461, and total for 2015 18,747
Advertising, information and printing services: Reporting compliance 131, internal
services 2,707, collections
and returns compliance 175, assessment of returns and payment processing 1,576, taxpayer and business assistance 251, appeals 3, benefit programs 11, taxpayers' Ombudsman 11, total for 2016 4,865, and total for 2015 7,710
Equipment rentals: Reporting compliance 431, internal
services  1,113, collections
and returns compliance 284, assessment of returns and payment processing 324, taxpayer and business assistance 117, appeals 89, benefit programs 28, taxpayers' Ombudsman 3, total for 2016 2,389, and total for 2015 2,358
Loss on disposal/write-off of tangible capital assets: Reporting compliance -, internal
services 865, collections
and returns compliance -, assessment of returns and payment processing 34, taxpayer and business assistance -, appeals -, benefit programs -, taxpayers' Ombudsman -, total for 2016 899, and total for 2015 5,584
Total expenses: Reporting compliance 1,180,967, internal
services 1,143,400, collections
and returns compliance 732,717, assessment of returns and payment processing 699,127, taxpayer and business assistance 379,574, appeals 247,009, benefit programs 154,287, taxpayers' Ombudsman 2,213, total for 2016 4,539,294, and total for 2015 4,607,493

9. Segmented information – Non-tax revenues

Presentation by segment is based on the CRA's program activity as described in note 1 of these financial statements. 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 non-tax revenues generated for the main program activities, by major type of non-tax revenues. The segment results for the period are as follows:

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The table presents the Segmented information – Non-tax revenues. The information is presented in thousands of dollars.

Non-tax revenues credited to Vote 1 
         
Fees for administering the Employment Insurance Act: Reporting compliance -, Internal services 30,609, Collections
and returns compliance 89,858, Assessment of returns and payment processing 16,614, Taxpayer and business assistance 32,135, Appeals 9,439, Benefit programs 541, total for 2016 179,196, and total for 2015 174,319.
Fees for administering the Canada Pension Plan: Reporting compliance -, Internal services 27,525, Collections
and returns compliance 75,449, Assessment of returns and payment processing 17,790, Taxpayer and business assistance 18,381, Appeals 4,063, Benefit programs -, total for 2016 143,208, and total for 2015 141,225.
Total for non-tax revenues credited to Vote 1: Reporting compliance -, Internal services 58,134, Collections
and returns compliance 165,307, Assessment of returns and payment processing 34,404, Taxpayer and business assistance 50,516, Appeals 13,502, Benefit programs 541, total for 2016 322,404, and total for 2015 315,544.

Non-tax revenues available for spending
          
Services fees: Reporting compliance 760, Internal services 48,684, Collections
and returns compliance 253, Assessment of returns and payment processing 2,112, Taxpayer and business assistance 368, Appeals -, Benefit programs 1,545, total for 2016 53,722, and total for 2015 54,190.
Administration fees - provinces and territories: Reporting compliance 23,650, Internal services 46,404, Collections
and returns compliance 4,210, Assessment of returns and payment processing 13,566, Taxpayer and business assistance 839, Appeals 3,377, Benefit programs 18,341, total for 2016 110,387, and total for 2015 108,424.
Miscellaneous respendable revenues: Reporting compliance 521, Internal services 300, Collections
and returns compliance -, Assessment of returns and payment processing 6, Taxpayer and business assistance 2,580, Appeals -, Benefit programs 5, total for 2016 3,412, and total for 2015 2,462.
Total non-tax revenues available for spending: Reporting compliance 24,931, Internal services 95,388, Collections and returns compliance 4,463, Assessment of returns and payment processing 15,684, Taxpayer and business assistance 3,787, Appeals 3,377, Benefit programs 19,891, total for 2016 167,521, and total for 2015 165,076.

Non-tax revenues not available for spending
          
Recovery of employee benefit costs relating to non-tax revenues credited to Vote 1 and revenues available for spending: Reporting compliance 3,889, Internal services 13,779, Collections and returns compliance 28,658, Assessment of returns and payment processing 6,410, Taxpayer and business assistance 8,683, Appeals 2,571, Benefit programs 1,663, total for 2016 65,653, and total for 2015 63,925.
Miscellaneous non-tax revenues: Reporting compliance -, Internal services 291, Collections and returns compliance -, Assessment of returns and payment processing -, Taxpayer and business assistance -, Appeals 3,599, Benefit programs -, total for 2016 3,890, and total for 2015 769.
Total non-tax revenues not available for spending: Reporting compliance 3,889, Internal services 14,070, Collections
and returns compliance 28,658, Assessment of returns and payment processing 6,410, Taxpayer and business assistance 8,683, Appeals 6,170, Benefit programs 1,663, total for 2016 69,543, and total for 2015 64,694.
          
Total non-tax revenues before revenues earned on behalf of Government: Reporting compliance 28,820, Internal
services 167,592, Collections and returns compliance 198,428, Assessment of returns and payment processing 56,498, Taxpayer and business assistance 62,986, Appeals 23,049, Benefit programs 22,095, total for 2016 559,468, and total for 2015 545,314.
          
Revenues earned on behalf of Government: Reporting compliance (3,889), Internal services (14,070), Collections
and returns compliance (28,658), Assessment of returns and payment processing (6,410), Taxpayer and business assistance (8,683), Appeals (6,170), Benefit programs (1,663), total for 2016 (69,543), and total for 2015 (64,694).

Total non-tax revenues: Reporting compliance 24,931, Internal services 153,522, Collections and returns compliance 169,770, Assessment of returns and payment processing 50,088, Taxpayer and business assistance 54,303, Appeals 16,879, Benefit programs 20,432, total for 2016 489,925, and total for 2015 480,620.

10. 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, except for transfers of tangible capital assets that are carried out at net book value.

During the year, the CRA received various services without charge from other government agencies and departments. The estimated costs for significant services provided without charge that have been recorded include:

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The table presents the related party transactions. The information is presented in thousands of dollars.

Employer’s contribution to the health and dental insurance plans - Treasury Board Secretariat: for 2016, the amount is 237,736 and 228,066 for 2015.
Information technology services - Shared Services Canada: for 2016, the amount is 179,474 and 179,474 for 2015.
Legal services - Justice Canada: for 2016, the amount is 37,668 and 33,702 for 2015.
Audit services - Office of the Auditor General of Canada: for 2016, the amount is 2,600 and 2,594 for 2015.
Payroll services - Public Services and Procurement Canada: for 2016, the amount is 4,515 and 4,563 for 2015.
Workers' compensation benefits - Employment and Social Development Canada: for 2016, the amount is 1,254 and 1,355 for 2015.
Total: for 2016, the amount is 463,247 and 449,754 for 2015.

11. Transfer of the transition payments for implementing salary payments in arrears

The Government of Canada implemented salary payments in arrears in 2014-2015. As a result, a one-time payment was issued to employees and will be recovered from them in the future. The transition to salary payments in arrears forms part of the transformation initiative that replaces the pay system and also streamlines and modernizes the pay processes. This change to the pay system had no impact on the expenses of the CRA. However, it did result in the use of additional spending authorities by the CRA. Prior to year-end, the transition payments for implementing salary payments in arrears were transferred to a central account administered by Public Services and Procurement Canada, who is responsible for the administration of the Government pay system.

12. Board of Management

Pursuant to the Canada Revenue Agency Act, a Board of Management is appointed to oversee the organization and administration of the CRA and the management of its resources, services, property, personnel and contracts. The expenses relating to the board's activities for the year included in the net cost of operations were as follows:

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The table presents the Board of Management. The information is presented in thousands of dollars.

Board of Management

Compensation: the amount for 2016 is 262 and 267 for 2015.
Travel: the amount for 2016 is 80 and 77 for 2015.
Professional services and other expenses: the amount for 2016 is 62 and 78 for 2015.
Total for the Board of Management: the amount for 2016 is 404 and 422 for 2015.

Other related costs

Corporate Secretariat support: the amount for 2016 is 572 and 596 for 2015.

Total: the amount for 2016 is 976 and 1,018 for 2015.

13. Contingent liabilities

The CRA is a defendant in certain cases of pending and threatened litigation which arises in the normal course of business of agency activities as defined in note 2. The amount to be paid in respect of the cases identified as likely to be lost has been recorded in accounts payable and accrued liabilities, based on the current best estimate of the consideration required to settle the present liabilities at the end of the reporting period, taking into account the risks and uncertainties surrounding the liabilities. All other cases, excluding those assessed as unlikely to be lost, are considered contingent liabilities and the related amounts are disclosed whenever the amount of the contingency can be reasonably estimated. As at March 31, 2016, contingent liabilities for claims and pending and threatened litigation have been estimated at $11,848,954 ($10,592,354 as at March 31, 2015) which is based on management's best estimate determined on a case by case basis.

14. Financial risk management

The CRA uses non-derivative financial instruments in the course of its operations that give rise to financial assets and financial liabilities. Those financial liabilities comprise accrued salaries, accounts payable and accrued liabilities, vacation pay and compensatory leave. Accounts receivable and advances represent those financial assets.

The CRA is exposed to credit risk, liquidity risk and market risk in connection with its financial instruments.

The credit risk is the risk that another party owing money to the CRA would fail to discharge its obligation creating a financial loss for the CRA. The maximum exposure of the CRA to the credit risk amounted to $7,415,374 as at March 31, 2016 ($10,152,549 as at March 31, 2015), which is equal to the carrying value of its accounts receivable and advances. As the vast majority of the CRA's accounts receivable and advances are either with other government departments or employees, the credit risk is low.

The liquidity risk is the risk that the CRA would encounter difficulty in meeting its obligations associated with its financial liabilities. The CRA's liquidity risk is minimal given that the CRA receives most of its funding through annual Parliamentary appropriations and maintains strong controls over expenditure management.

The market risk is defined as the risk that future cash flows of a financial instrument would fluctuate because of changes in currency rates, interest rates and/or other rates. The CRA's exposure to market risk is limited to fluctuations in the currency rates and the impact of such variations on CRA's cash flows is negligible as its financial transactions in foreign currency are immaterial.

The CRA's exposure to these risks and the policies and processes to manage and measure them did not change significantly from the prior year.

Financial Statements Discussion and Analysis – Agency Activities (unaudited)

Introduction

This section of the financial statements provides unaudited complementary information on Agency Activities, on an accrual basis, in respect of matters reported in the audited financial statements. The Canada Revenue Agency's (CRA) management is responsible for the preparation of this financial statements discussion and analysis.

Capacity to deliver services

The CRA's workforce of more than 40,000 employees is fundamental to the achievement of its mandate. In fiscal year 2015-2016, this workforce was comprised of 77% permanent employees, 21% term employees and 2% students.

CRA employees are located throughout Canada, in the following operational regions: Ontario (31%), Headquarters (25%), Prairies (13%); Québec (12%); Pacific (11%); and Atlantic (8%). They provide services to taxpayers in more than 50 tax services offices and tax centers, as well as program services and internal services supporting those programs.

The CRA's information technology (IT) capacity is also critical to its ability to deliver services to Canadians. It involves an extensive IT infrastructure that is managed primarily by Shared Services Canada and includes the development and maintenance of applications across a distributed computing environment.

Risk management

The CRA recognizes that a variety of risks could have potential implications on its financial position and operations. The Enterprise Risk Management (ERM) Division of the Audit, Evaluation, and Risk Branch plays a key role in ensuring that corporate risks are identified, impacts are assessed, and strategies for risk management are adopted, notably by producing the CRA Corporate Risk Profile.

Further details on ERM at the CRA are discussed in this report. This financial statements discussion and analysis will elaborate on specific financial risks throughout its content, where applicable.

Financial highlights

The CRA's financial position and operations remained stable for fiscal year 2015-2016. During the year, the CRA performed its responsibilities within its approved fiscal plan while continuing to modernize its services and compliance activities to improve the efficiency and effectiveness of its operations and programs.  

The CRA has managed within the Parliamentary approved authorities for 2015-2016, with underspending of $277.4 million. These unspent funds, available for use in 2016-2017, were largely planned and are a crucial element of the current Resource Management Strategy to address known financial commitments and emerging funding challenges.

Further delays in the ratification of collective agreements have necessitated an increase to the previously established provision for retroactive payments, which represents a significant component of the CRA's appropriations available for future years as of March 31, 2016. A portion of the internally funded strategic investment plan is another important component of those available appropriations. Major IT projects can face challenges due to the long-term and complex nature of these projects and as such require flexibility in the timing of resource utilization.

As part of its resource management strategy, the CRA continuously reviews and revises plans and priorities to ensure the effective and efficient use of government resources and the achievement of its core business outcomes. In 2015-2016, the majority of key performance targets were met or exceeded.

Discussion and analysis

Net cost of operations before government funding and transfers

The CRA's 2015-2016 net cost of operations before government funding and transfers amounted to $4,049.4 million, a decrease of $77.5 million from the $4,126.9 million net cost of operations before government funding and transfers in 2014-2015.

Details of the net cost of operations before government funding and transfers are illustrated below (see note 8 to the Financial Statements – Agency Activities for a further breakdown of expenses by category):

Figure 1: Details on the net cost of operations before government funding and transfers

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The table presents the figure 1: Details on the net cost of operations before government funding and transfers. The information is presented in thousands of dollars.

Personnel: the amount for 2016 is 3,373,527, 3,415,805 for 2015, and the difference is (42,278).
Accommodation: the amount for 2016 is 315,216, 331,325 for 2015, and the difference is (16,109).
IT equipment and services: the amount for 2016 is 352,817, 346,262 for 2015, and the difference is 6,555.
Transportation: the amount for 2016 is 125,796, 124,081 for 2015, and the difference is 1,715.
Professional and business services excluding IT: the amount for 2016 is 138,004, 140,175 for 2015, and the difference is (2,171).
Federal sales tax administration costs - Province of Québec: the amount for 2016 is 142,275, 142,133 for 2015, and the difference is 142.
Other: the amount for 2016 is 91,659, 107,712 for 2015, and the difference is (16,053).
Total expenses: the amount for 2016 is 4,539,294, 4,607,493 for 2015, and the difference is (68,199).
Less Non-tax revenues: the amount for 2016 is 489,925, 480,620 for 2015, and the difference is 9,305.
Net cost of operations before government funding and transfers: the amount for 2016 is 4,049,369, 4,126,873 for 2015, and the difference is (77,504).

Personnel expenses (salaries, other allowances and benefits) represent 74% of total expenses and are the CRA's primary costs. The remaining 26% of expenses are comprised of other costs such as accommodation and information technology related expenses.

Personnel costs have remained fairly stable in 2015-2016, decreasing by 1%. The decrease in employee severance benefit expenses was the main contributor to the overall decrease in personnel costs.

Non-personnel expenses have decreased by $25.9 million or 2% in 2015-2016. This variance mainly results from a reduction in occupied office space following the implementation of the Government-wide strategy to support the Clerk of the Privy Council's commitment to workplace renewal.

Non-tax revenues slightly increased in 2015-2016 mostly as a result of increased workloads for the administration of the Canada Pension Plan and the Employment Insurance Act.

Financial position

The change in the Agency's net financial position compared to the previous year is as follows:

Figure 2: Statement of Financial Position

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The table presents the Figure 2: Statement of Financial Position. The information is presented in thousands of dollars.

Liabilities: the amount for 2016 is 1,463,916, 1,429,577, and the difference is 34,339.
Financial assets: the amount for 2016 is 276,524, 292,255, and the difference is (15,731).
Agency net debt: the amount for 2016 is 1,187,392, 1,137,322, and the difference is 50,070.
Non-financial assets: the amount for 2016 is 414,776, 405,953, and the difference is 8,823.
Agency net financial position: the amount for 2016 is 772,616, 731,369, and the difference is 41,247.

Liabilities

Liabilities have increased by $34.4M mainly as a result of increased salary accruals in 2015-2016. This was offset in part, by a decrease in the accounts payable considering the amount payable to Treasury Board Secretariat (TBS) in 2014-2015 for the CRA's employee benefit plan.

Employee benefits represent a significant component of the CRA liabilities. They include obligations for severance and sick leave benefits as well as vacation pay and compensatory leave accrual.

Employee severance benefits remain the CRA's most important obligation as illustrated in the table below.

Figure 3: Liabilities by category

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Figure 3 presents the liabilities by category. The information is displayed in pie charts.   
   
  
For 2015-2016     
Accrued salaries 22%.
Accounts payable and accrued liabilities 6%
Vacation pay and compensatory leave 13%
Employee severance benefits 42%
Empoyee sick leave benefits 17%


For 2014-2015      
Accrued salaries 19%
Accounts payable and accrued liabilities 8%
Vacation pay and compensatory leave 13%
Employee severance benefits 43%
Empoyee sick leave benefits 17%

Employee sick leave and severance benefits account for 59% of the CRA total liabilities in 2015-2016. These are significant liabilities that require the use of management estimates and assumptions to determine their present value as at March 31 of each year. As such, there is a financial risk of imprecision in the financial position of the CRA where actual liabilities and the related expenses may differ significantly from current estimates. To minimize this risk, the CRA uses the expertise of the Office of the Chief Actuary, who provides an actuarial valuation report on a yearly basis, presenting the actuarial assumptions and method used to determine the actuarial present value of those employee benefits. Actuarial assumptions used by the CRA are consistent with those used by the Government of Canada.

It should be noted that, in August 2016, the CRA reached a tentative agreement with the Union of Taxation Employees in the Public Service Alliance of Canada, which will be subject to a ratification vote by employees. If ratified, employees will be given the option to be paid their accrued severance benefits in accordance to the provisions of the new collective agreement. As a result, it is anticipated that the CRA's employee severance benefit liability will be significantly reduced in the coming and future years.

Non-financial assets

Non-financial assets are comprised of 97% tangible capital assets. The CRA managed a capital budget of $128.7 million for the year 2015-2016 ($123.4 million for 2014-2015), of which a total of $49.9 million ($47.1 million for 2014-2015) remains available for use in future years in accordance with the CRA's multi-year resource management strategy.

The net book value of tangible capital assets remained fairly stable in 2015-2016 with a net increase of $8.9 million. The vast majority of tangible capital assets owned by the CRA relates to IT, specifically in-house developed software. As a large organization responsible for delivering an extensive range of tax and benefits programs on behalf of the federal and of provincial governments, the CRA has specialized software needs that are primarily fulfilled internally through the development of in-house tailored applications by CRA employees.

To prioritize investment decisions regarding in-house developed software and support the effective management of resources, the CRA Finance Committee (FC) oversees investment projects above $1 million. All projects brought to the FC require a formal attestation from the ERM Division that the CRA risk management process was followed and that sound risk information forms part of the submission. The attestation process takes place at various project development stages. Enterprise risk information is also used to inform the development of the CRA Strategic Investment Plan, a long-term plan of significant future investments. Alignment with the priorities outlined in the CRA Corporate Risk Profile is one of the considerations used to inform the priority ranking of initiatives.

Five year comparative financial information

The following tables provide a five year comparison of financial information based on the accounting policies described in note 2 to the audited financial statements.

Figure 4: Statement of Financial position

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Figure 4 presents the Statement of Financial position. The information is presented in thousands of dollars.

Liabilities

Accrued salaries: the amount for 2012 is 78,257, 84,546 in 2013, 129,589 in 2014, 267,026 in 2015, and 329,274 in 2016.
Accounts payable and accrued liabilities: the amount for 2012 is 152,187, 118,466 in 2013, 94,901 in 2014, 120,595 in 2015, and 87,790 in 2016.
Vacation pay and compensatory leave: the amount for 2012 is 182,977, 187,625 in 2013, 189,672 in 2014, 188,444 in 2015, and 189,038 in 2016.
Employee severance benefits: the amount for 2012 is 732,313, 580,511 in 2013, 570,114 in 2014, 606,770 in 2015, and 604,149 in 2016.
Employee sick leave benefits: the amount for 2012 is 234,700, 235,200 in 2013, 243,700 in 2014, 246,742 in 2015, and 253,665 in 2016.
Total liabilities: the amount for 2012 is 1,380,434, 1,206,348 in 2013, 1,227,976 in 2014, 1,429,577 in 2015, and 1,463,916 in 2016.

Financial assets

Cash: the amount for 2012 is 77, 67 in 2013, 54 in 2014, - in 2015, and - in 2016.
Due from the Consolidated Revenue Fund: the amount for 2012 is 175,851, 132,003 in 2013, 163,405 in 2014, 282,102 in 2015, and 269,109 in 2016.
Accounts receivable and advances: the amount for 2012 is 8,382, 37,348 in 2013, 6,624 in 2014, 10,153 in 2015, and 7,415 in 2016.
Total financial assets: the amount for 2012 is 184,310, 169,418 in 2013, 170,083 in 2014, 292,255 in 2015, and 276,524 in 2016.

Agency net debt: the amount for 2012 is 1,196,124, 1,036,930 in 2013, 1,057,893 in 2014, 1,137,322 in 2015, and 1,187,392 in 2016.

Non-financial assets

Prepaid expenses: the amount for 2012 is 12,953, 10,350 in 2013, 11,963 in 2014, 12,538 in 2015, and 12,454 in 2016.
Tangible capital assets: the amount for 2012 is 403,936, 391,779 in 2013, 386,327 in 2014, 393,415 in 2015, and 402,322 in 2016.
Total non-financial assets: the amount for 2012 is 416,889, 402,129 in 2013, 398,290 in 2014, 405,953 in 2015, and 414,776 in 2016.

Agency net financial position: the amount for 2012 is 779,235, 634,801 in 2013, 659,603 in 2014, 731,369 in 2015, and 772,616 in 2016.

Figure 5: Segmented information – Expenses

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Figure 5 presents the Segmented information - expenses. The information is presented in thousands of dollars.

Personnel:

Salaries: the amount for 2012 is 2,360,040, 2,381,913 in 2013, 2,408,276 in 2014, 2,420,180 in 2015, and 2,406,841 in 2016.
Other allowances and benefits: the amount for 2012 is 1,184,690, 979,491 in 2013, 979,750 in 2014, 995,625 in 2015, and 966,686 in 2016.
Total personnel: the amount for 2012 is 3,544,730, 3,361,404 in 2013, 3,388,026 in 2014, 3,415,805 in 2015, and 3,373,527 in 2016.

Professional and business services: the amount for 2012 is 259,437, 368,636 in 2013, 372,352 in 2014, 370,037 in 2015, and 375,812 in 2016.
Accommodation: the amount for 2012 is 344,894, 348,320 in 2013, 349,810 in 2014, 331,325 in 2015, and 315,216 in 2016.
Federal sales tax administration costs by the Province of Québec: the amount for 2012 is 141,067, 142,222 in 2013, 142,772 in 2014, 142,133 in 2015, and 142,275 in 2016.
Transportation and communications: the amount for 2012 is 160,653, 126,048 in 2013, 115,408 in 2014, 125,987 in 2015, and 127,699 in 2016.
Amortization of tangible capital assets: the amount for 2012 is 94,770, 70,131 in 2013, 75,040 in 2014, 79,171 in 2015, and 83,843 in 2016.
Other services and expenses: the amount for 2012 is 47,102, 39,120 in 2013, 28,726 in 2014, 42,573 in 2015, and 35,368 in 2016.
Repair and maintenance: the amount for 2012 is 68,769, 30,274 in 2013, 17,102 in 2014, 21,358 in 2015, and 20,143 in 2016.
Interest on average accrued benefit obligations: the amount for 2012 is -, 24,749 in 2013, 21,526 in 2014, 25,476 in 2015, and 20,003 in 2016.
Materials and supplies: the amount for 2012 is 26,319, 23,951 in 2013, 20,094 in 2014, 19,229 in 2015, and 19,794 in 2016.
Equipment purchases: the amount for 2012 is 63,924, 25,788 in 2013, 17,056 in 2014, 18,747 in 2015, and 17,461 in 2016.
Advertising, information and printing services: the amount for 2012 is 8,836, 8,815 in 2013, 8,805 in 2014, 7,710 in 2015, and 4,865 in 2016.
Equipment rentals: the amount for 2012 is 3,611, 2,755 in 2013, 3,162 in 2014, 2,358 in 2015, and 2,389 in 2016.
Loss on disposal/write-off of tangible capital assets: the amount for 2012 is 19,929, 2,789 in 2013, 2,204 in 2014, 5,584 in 2015, and 899 in 2016.
Total expenses: the amount for 2012 is 4,784,041, 4,575,002 in 2013, 4,562,083 in 2014, 4,607,493 in 2015, and 4,539,294 in 2016.

Figure 6: Segmented information – Non-tax revenue

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Figure 6 presents the Segmented information - Non-tax revenue. The information is presented in thousands of dollars.

Non-tax revenues credited to Vote 1

Fees for administering the Employment Insurance Act: the amount for 2012 is 176,355, 182,573 in 2013, 182,794 in 2014, 174,319 in 2015, and 179,196 in 2016.
Fees for administering the Canada Pension Plan: the amount for 2012 is 138,828, 147,718 in 2013, 147,771 in 2014, 141,225 in 2015, and 143,208 in 2016.
Total Non-tax revenues credited to Vote 1: the amount for 2012 is 315,183, 330,291 in 2013, 330,565 in 2014, 315,544 in 2015, and 322,404 in 2016.

Non-tax revenues available for spending

Services fees: the amount for 2012 is 138,698, 61,214 in 2013, 56,496 in 2014, 54,190 in 2015, and 53,722 in 2016.
Administration fees - provinces and territories: the amount for 2012 is 103,315, 102,539 in 2013, 104,115 in 2014, 108,424 in 2015, and 110,387 in 2016.
Miscellaneous respendable revenues: the amount for 2012 is 2,444, 2,701 in 2013, 2,325 in 2014, 2,462 in 2015, and 3,412 in 2016.
Total Non-tax revenues available for spending: the amount for 2012 is 244,457, 166,454 in 2013, 162,936 in 2014, 165,076 in 2015, and 167,521 in 2016.

Non-tax revenues not available for spending

Recovery of employee benefit costs relating to non-tax revenues credited to Vote 1 and revenues available for spending: the amount for 2012 is 61,242, 60,717 in 2013, 61,834 in 2014, 63,925 in 2015, and 65,653 in 2016.
Miscellaneous non-tax revenues: the amount for 2012 is 1,470, 2,898 in 2013, 1,172 in 2014, 769 in 2015, and 3,890 in 2016.
Total Non-tax revenues not available for spending: the amount for 2012 is 62,712, 63,615 in 2013, 63,006 in 2014, 64,694 in 2015, and 69,543 in 2016.

Total non-tax revenues before revenues earned on behalf of Government: the amount for 2012 is 622,352, 560,360 in 2013, 556,507 in 2014, 545,314 in 2015, and 559,468 in 2016.

Revenues earned on behalf of Government: the amount for 2012 is (62,712), (63,615) in 2013, (63,006) in 2014, (64,694) in 2015, and (69,543) in 2016.

Total non-tax revenues: the amount for 2012 is 559,640, 496,745 in 2013, 493,501 in 2014, 480,620 in 2015, and 489,925 in 2016.

Outlook

Looking ahead, the CRA will continue to modernize its services and compliance activities to improve the efficiency and effectiveness of its operations and programs while contributing to the Government of Canada's priorities.

As announced in the 2016 federal budget, the Government of Canada will invest an additional $1 billion over the next five years to strengthen the CRA's capacity to improve service to Canadians, combat tax evasion and tax avoidance and enhance tax collections.

Canada Revenue Agency Financial Statements – Administered Activities

Office of the Auditor General of Canada Logo

INDEPENDENT AUDITOR'S REPORT

To the Board of Management of the Canada Revenue Agency and the Minister of National Revenue

I have audited the accompanying statement of administered assets and liabilities of the Canada Revenue Agency as at 31 March 2016, and the statement of administered revenues and pension contributions, statement of administered expenses and recoveries and statement of administered cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information (together "the financial information"). The financial information has been prepared by management using the basis of accounting described in Note 2.

Management's Responsibility for the Financial Information

Management is responsible for the preparation and fair presentation of this financial information in accordance with the basis of accounting described in Note 2; this includes determining that the basis of accounting is an acceptable basis for the preparation of the financial information in the circumstances, and for such internal control as management determines is necessary to enable the preparation of the financial information that is free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

My responsibility is to express an opinion on the financial information based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial information is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial information. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial information, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial information.

I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.

Opinion

In my opinion, the financial information presents fairly, in all material respects, the administered assets and liabilities of the Canada Revenue Agency as at 31 March 2016, and the results of its administered operations and its administered cash flows for the year then ended in accordance with the basis of accounting described in Note 2.

Emphasis of Matter

Without modifying my opinion, I draw attention to Note 2 to the financial information, which describes the purpose and basis of accounting for reporting activities administered by the Canada Revenue Agency on behalf of others. This financial information may not be suitable for another purpose. Management prepares a separate set of financial statements to report the operational revenues and expenses of the Canada Revenue Agency.

Original signed

Chantale Perreault, CPA, CA
Principal
for the Auditor General of Canada

30 August 2016
Ottawa, Canada

Canada Revenue Agency
Statement of Administered Assets and Liabilities
as at March 31
(in thousands of dollars)

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The table describes the statement of Administered Assets and Liabilities. The information is presented in thousands of dollars
    
Administered assets    
    
Cash on hand: the amount for 2016 is 7,861,143 and 7,397,817 for 2015.
Amounts receivable from taxpayers (see note 3): the amount for 2016 is 105,225,411 and 96,885,030 for 2015.
Amounts receivable under the tobacco civil settlements (see note 4): the amount for 2016 is 240,578 and 310,633 for 2015.
Total assets: the amount for 2016 is 113,327,132 and 104,593,480 for 2015.
    
    
Administered liabilities    
    
Amounts payable to taxpayers (see note 5): the amount for 2016 is 53,701,199 and 56,203,780 for 2015.
Amounts payable to provinces (see note 6): the amount for 2016 is 624,017 and 600,570 for 2015.
Deposit accounts (note 7): the amount for 2016 is 189,979 and 178,508 for 2015.
Total for administered liabilities: the amount for 2016 is 54,515,195 and 56,982,858 for 2015.

Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada and others (see note 8): the amount for 2016 is 58,811,937 and 47,610,622 for 2015.
Total liabilities: the amount for 2016 is 113,327,132 and 104,593,480 for 2015.

Contingent liabilities (see note 9)
The accompanying notes form an integral part of these financial statements.

Approved by:

 


Original signed 

Bob Hamilton
Commissioner of Revenue and Chief Executive Officer of the Canada Revenue Agency  

Date August 30, 2016
  
Original signed

Richard Thorpe, CPA, FCPA, CMA, FCMA
Director and Chair, Board of Management  

Date August 30, 2016

Canada Revenue Agency
Statement of Administered Revenues and Pension Contributions
for the year ended March 31
(in thousands of dollars)

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The table describes the Statement of Administered Revenues and Pension Contributions. The information is presented in thousands of dollars
    
  
Federal administered revenues  

Income tax revenues  

Individuals and Trusts (see note 10): the amount for 2016 is 144,953,138 and 135,810,323 for 2015.
Corporations: the amount for 2016 is 41,443,831 and 39,446,519 for 2015.
Non-resident tax withholdings: the amount for 2016 is  6,505,060 and 6,216,306 for 2015.
Total income tax revenues: the amount for 2016 is 192,902,029 and 181,473,148 for 2015.


Other taxes, duties, and charges  

Goods and services tax (see note 11): the amount for 2016 is 11,214,278 and 10,310,612 for 2015.
Energy taxes: the amount for 2016 is 5,495,888 and 5,469,039 for 2015.
Other excise taxes and duties: the amount for 2016 is 3,619,059 and 3,530,554 for 2015.
Miscellaneous charges (see note 12): the amount for 2016 is 851,571 and 691,002 for 2015.
Total other taxes, duties, and charges: the amount for 2016 is 21,180,796 and 20,001,207 for 2015.

Employment insurance premiums: the amount for 2016 is 23,491,100 and 22,962,274 for 2015.
Interest, penalties, and other revenues (see note 13): the amount for 2016 is 4,346,573 and 4,508,971 for 2015.
Revenues administered for the Government of Canada: the amount for 2016 is 241,920,498 and 228,945,600 for 2015.
  
Provincial, territorial and First Nations administered revenues 
 
Income tax revenues
  
Individuals and Trusts: the amount for 2016 is 66,859,379 and 62,206,617 for 2015.
Corporations: the amount for 2016 is 18,130,252 and 15,869,127 for 2015.
Total income tax revenues: the amount for 2016 is 84,989,631 and 78,075,744 for 2015.

Provincial portion of harmonized sales tax (see note 14) and 24,542,052 and 23,515,772 for 2015.

Other revenues (see note 15): the amount for 2016 is 489,217 and 568,300 for 2015.
Revenues administered for provincial and territorial governments and First Nations: the amount for 2016 is 110,020,900 and 102,159,816 for 2015.
Pension contributions, interest, and penalties administered for the Canada Pension Plan (see note 16): the amount for 2016 is 46,212,741 and 45,158,794 for 2015.
Total administered revenues and pension contributions: the amount for 2016 is 398,154,139 and 376,264,210 for 2015.

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

 

 

Canada Revenue Agency
Statement of Administered Expenses and Recoveries
for the year ended March 31
(in thousands of dollars)

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The table describes the Statement of Administered Revenues and Pension Contributions. The information is presented in thousands of dollars
    

Federal administered expenses
  
Transfers to individuals
  
Child tax benefits (see note 18): the amount for 2016 is 10,509,650 and 10,372,188 for 2015.
Universal child care benefits (see note 18): the amount for 2016 is 7,522,699 and 3,935,467 for 2015.
Working income tax benefit: the amount for 2016 is 1,241,999 and 1,257,805 for 2015.
Children’s special allowances: the amount for 2016 is 309,173 and 214,761 for 2015.
Refundable tax credits: the amount for 2016 is 334,245 and 142,496 for 2015.
Total transfers to individuals: the amount for 2016 is 19,917,766 and 15,922,717 for 2015.

Transfers to corporations
  
Refundable investment tax credit: the amount for 2016 is 1,350,582 and 1,392,292 for 2015.
Film and video tax credits: the amount for 2016 is 343,663 and 357,768 for 2015.
Total transfers to corporations: the amount for 2016 is 1,694,245 and 1,750,060 for 2015.

Other federal expenses 
 
Doubtful accounts expense (see note 3): the amount for 2016 is 3,840,614 and 3,861,357 for 2015.
Interest expense: the amount for 2016 is 396,414 and 388,469 for 2015.
Transfers to provinces for softwood lumber products export charge: the amount for 2016 is 121,481 and (15,119) for 2015.
Total other federal expenses: the amount for 2016 is 4,358,509 and 4,234,707 for 2015.

Total federal administered expenses: the amount for 2016 is 25,970,520 and 21,907,484 for 2015.

 

Federal administered recoveries 
 
Old age security benefits: the amount for 2016 is (1,517,042) and (1,449,945) for 2015.
Employment insurance benefits: the amount for 2016 is (270,830) and (235,234) for 2015.
Total federal administered recoveries: the amount for 2016 is (1,787,872) and (1,685,179) for 2015.


Net expenses and recoveries administered for the Government of Canada: the amount for 2016 is 24,182,648 and 20,222,305 for 2015.
  

Provincial and territorial administered expenses  

Transfers to individuals  

Ontario energy and property tax credit: the amount for 2016 is 1,357,865 and 1,196,643 for 2015.
Family benefit programs: the amount for 2016 is 1,358,369 and 1,188,203 for 2015.
British Columbia low-income climate action tax credit: the amount for 2016 is 194,802 and 191,869 for 2015.
Ontario senior homeowners’ property tax grant: the amount for 2016 is 233,708 and 232,893 for 2015.
Other property tax credits: the amount for 2016 is 122,964 and 121,184 for 2015.
Other transfers: the amount for 2016 is 371,588 and 398,527 for 2015.
Total transfers to individuals: the amount for 2016 is 3,639,296 and 3,329,319 for 2015.


Transfers to corporations
  
Refundable investment tax credits: the amount for 2016 is 740,872 and 852,539 for 2015.
Film and television production services tax credits: the amount for 2016 is 839,993 and 873,830 for 2015.
Total transfers to corporations: the amount for 2016 is 1,580,865 and 1,726,369 for 2015.


Expenses administered for provincial and territorial governments: the amount for 2016 is 5,220,161 and 5,055,688 for 2015.
Doubtful accounts expense administered for the Canada Pension Plan (see note 3): the amount for 2016 is 93,433 and 113,056 for 2015.
Total net administered expenses and recoveries: the amount for 2016 is 29,496,242 and 25,391,049 for 2015.

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

 

Canada Revenue Agency
Statement of Administered Cash Flows
for the year ended March 31
(in thousands of dollars)

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The table describes the Statement of Administered Cash Flows. The information is presented in thousands of dollars

Total administered revenues and pension contributions: the amount for 2016 is 398,154,139 and 376,264,210 for 2015.

Total net administered expenses and recoveries: the amount for 2016 is (29,496,242) and (25,391,049) for 2015.

Revenues paid or payable directly to a province: the amount for 2016 is (436,136) and (520,648) for 2015.

Changes in administered assets and liabilities:

Cash on hand: the amount for 2016 is (463,326) and 91,444 for 2015.
Amounts receivable from taxpayers: the amount for 2016 is (8,340,381) and (5,929,265) for 2015.
Amounts receivable under the tobacco civil settlements: the amount for 2016 is 70,055 and 87,811 for 2015.
Amounts payable to taxpayers: the amount for 2016 is (2,502,581) and 3,598,423 for 2015.
Amounts payable to provinces: the amount for 2016 is 23,447 and (47,447) for 2015.
Deposit accounts: the amount for 2016 is 11,471 and 16,178 for 2015.
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada (note 8): the amount for 2016 is 357,020,446 and 348,169,657 for 2015.

Consisting of:

Cash deposits to the Consolidated Revenue Fund: the amount for 2016 is 484,790,491 and 469,928,612 for 2015.
Cash refunds/payments from the Consolidated Revenue Fund: the amount for 2016 is (127,770,045) and (121,758,955) for 2015.
Net cash deposited in the Consolidated Revenue Fund of the Government of Canada (note 8): the amount for 2016 is 357,020,446 and 348,169,657 for 2015.

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

Canada Revenue Agency Notes to the Financial Statements – Administered 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 the 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 administers 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 administers other amounts, including Canada Pension Plan contributions, for other groups or organizations. It is responsible for administering and enforcing 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 the province of Quebec, Revenu Québec (RQ) acts as an agent of the CRA in administering and enforcing the GST, except for GST in respect of selected listed financial institutions. The CRA monitors cash transfers made by RQ, reports the GST revenues administered on its behalf, and transfers funds out of the Consolidated Revenue Fund to RQ so it can issue refunds.

Under an agreement with the province of Nova Scotia, the CRA receives worker's compensation payments and transfers these to the province. The CRA's mandate for administering customs legislation is limited to the collection functions noted under Part V.1 of the Customs Act. The CRA also provides collection services to Employment and Social Development Canada for certain accounts receivable under various acts.

2. Summary of significant accounting policies

For financial reporting purposes, the CRA's activities have been divided into two sets of financial statements: agency activities and administered activities. The purpose of these administered activities statements is to give information about the tax-related revenues, expenses, assets, and liabilities that the CRA administers on behalf of the federal, provincial, and territorial governments, First Nations, and other organizations. The CRA administers individual income tax for all provinces except Quebec, and corporation income tax for all provinces except Quebec and Alberta. The Financial Statements – Agency Activities include the operational revenues and expenses that the CRA manages and uses to run the organization.

The Canada Revenue Agency Act requires the CRA to prepare financial statements in accordance with accounting principles consistent with those applied in preparing the financial statements of the Government of Canada. As a result, CRA follows those accounting principles to account for the federal administered activities. In addition, activities administered for the provincial and territorial governments, First Nations and other organizations are accounted for on the same basis as those administered for the federal government, and may differ from the accounting principles used by those provincial and territorial governments, First Nations and other organizations. These stated accounting policies are based on Canadian public sector accounting standards.

A summary of the significant accounting policies follows:

(a) Revenue and pension contributions recognition

Revenues and pension contributions are recognized in the year in which the event that generates the revenue or the pension contribution occurs and when the effective date of the related legislation has passed and either the legislation, regulation or by-laws have been approved by the legislature or the ability to assess and collect tax has been provided through legislative convention.

The Canadian tax system is based on self-assessment, so taxpayers are expected to understand the tax laws and comply with them. This has an impact on the completeness of tax revenues when taxpayers fail to comply with tax laws, for example, if they do not report all of their income. The CRA has implemented systems and controls to detect and correct situations where taxpayers are not complying with the various acts it administers. These systems and controls include audits of taxpayer records when the CRA decides they are necessary, but these procedures cannot be expected to identify all sources of unreported income or other cases of non-compliance with tax laws. The CRA is unable to estimate the amount of unreported tax.

An assessment (or reassessment) of tax includes all decisions and other steps made or taken by the Minister of National Revenue and officials of the CRA under the federal, provincial, and territorial acts or sections of the acts the CRA administers to calculate tax payable by taxpayers. When verifying a taxpayer's return, the CRA uses the various tax acts it administers and other criteria it developed that are designed to substantially meet the provisions of these acts. Reassessments include changes to previously assessed taxes payable at the request of the taxpayer, for example to claim a subsequent loss carry-back, or changes the CRA initiated as a result of applying procedures to verify reporting compliance, such as taxpayer audits.

Revenues are reported net of tax concessions. As foregone revenue, tax concessions do not give rise to assets or expenses of the taxing government. Refundable tax credits, deductions, or exemptions provided by the federal, provincial, territorial or First Nations governments are considered tax concessions when they provide tax relief to taxpayers and relate to the types of taxes that are a revenue source administered by CRA. When the CRA does not administer the related tax revenue, these refundable tax credits, deductions, or exemptions are accounted for as transfers made through the tax system.

The following policies are applied for specific streams:

(i) Income taxes, Canada Pension Plan contributions, and Employment insurance premiums:

Income tax revenues are recognized when the taxpayer has earned income that is subject to tax. Income is calculated net of tax deductions and credits allowed under the Income Tax Act, including refundable taxes resulting from current-year activity.

Canada Pension Plan (CPP) contributions from employees, employers and self-employed persons are recognized when the pensionable income is earned. Employment insurance (EI) premiums are recognized as revenue in the period the insurable earnings are earned. For non-resident taxpayers (individuals and corporations), revenues are recognized when the taxpayers receive income from which tax is withheld on active and inactive income they earned in Canada.

These revenues and pension contributions are measured from amounts assessed/reassessed and from estimates of amounts not yet assessed/reassessed based on cash received that relates to the fiscal year ended March 31. Revenues and pension contributions for the fiscal year also include adjustments between the estimated revenues of previous years and actual amounts, as well as revenues from reassessments relating to prior years. An additional estimate of future reassessments is only recorded when it can be reliably determined. This is limited to assessments under objection or appealed to various courts.

(ii) Other taxes, duties, and charges:

Goods and services tax (GST) and harmonized sales tax (HST) revenues on domestic goods and services, as well as the Quebec sales tax in respect of selected listed financial institutions are recognized at the time the goods are sold or the services provided. Revenues are reported net of input tax credits, GST/HST rebates, and the GST quarterly tax credits in the case of GST revenues. Input tax credits are the recovery of GST/HST paid or owed on purchases related to domestic and imported commercial activities of the taxpayer. Rebates are granted in various circumstances, for example to relieve the tax burden in areas where the cost of housing is very high, or to allow for the recovery of taxes on purchases where the purchaser cannot claim an input tax credit. The GST quarterly tax credit for low-income individuals and families is recorded in the period it relates to. It is intended to offset the cost of the tax for low-income individuals and families.

For excise taxes, revenue is recognized when a taxpayer sells goods taxable under the Excise Tax Act. For excise duties, revenue is recognized when the taxpayer manufactures goods taxable under the Excise Act and the Excise Act, 2001.

These revenues are measured from amounts assessed, and from estimates of amounts not yet assessed based on cash received or historical information, that relate to the fiscal year ended March 31. Miscellaneous charges are recognized as revenue when they are earned.

(iii) Interest, penalties, and other revenues:

Interest, penalties, and other revenues are recorded when they are earned. Except for the portion related to CPP which is credited to the CPP account, all interest and penalty revenues are reported as revenues administered for the federal government as stated in the terms of the tax collection agreements with the provinces and territories. Interest and penalties are recorded net of amounts waived under the various tax acts.

(b) Expenses

(i) Transfers:

Transfers are recognized in the year during which the events giving rise to them occur, provided that the transfer is authorized and all eligibility criteria have been met by the recipient, and a reasonable estimate of the amounts can be made. Transfers made through a tax system are considered authorized when the related tax measures are authorized. Transfers to provinces for the softwood lumber products export charge are recorded as an expense in the same year that the related softwood lumber products export charge revenues are recognized.

(ii) Interest expense:

Refunds may arise late, largely from the resolution of long-standing corporation tax files in favour of the taxpayer. Interest is accrued on refunds from the date that the tax instalment was initially paid to the date that the case is resolved. The CRA records the interest expense in the fiscal year it relates to.

(iii) Administered recoveries:

Recoveries of old age security and EI benefits are recognized when assessed. Amounts not yet assessed are estimated. The CRA reports only recoveries assessed through the individual income tax system. Recoveries determined by other federal government departments are not reported in these financial statements.

(c) Cash on hand

Cash on hand refers to amounts received in the CRA's offices or by its agents up to March 31 but not yet deposited to the credit of the Consolidated Revenue Fund of the Government of Canada. CRA or its agents deposit funds to the Consolidated Revenue Fund on a daily basis.

(d) Amounts receivable from taxpayers

Amounts receivable from taxpayers include taxes, interest, penalties, and other revenues assessed or estimated by the CRA but not yet collected. A significant portion of the receivable balance results from recording accrued receivables that relate to the current fiscal year but are not due to be paid by taxpayers until the next fiscal year.

(e) Allowance for doubtful accounts

The allowance for doubtful accounts is management's best estimate of the portion of receivable amounts that have been assessed that won't be collected, including the related interest and penalties, but not yet paid. The allowance for doubtful accounts has two components. A general allowance is calculated based on the age and type of tax accounts using rates based on historical collection experience. A specific allowance is calculated based on an annual review of all accounts over $10 million.

The allowance for doubtful accounts is adjusted every year through the doubtful accounts expense and is reduced by amounts written off as uncollectible during the year. The annual expense is reported in the Statement of Administered Expenses and Recoveries. Except for the portion related to CPP contributions, which is charged to the CPP account, the provision is charged to expenses administered for the federal government because it assumes all collection risks, as stated in the terms of the tax collection agreements with the provinces, territories, and First Nations.

(f) Amounts payable to taxpayers

Amounts payable to taxpayers include refunds and related interest assessed or estimated by the CRA that were not paid up to March 31. A significant portion of the amount payable results from recording accrued payables that relate to the current year but are not due for payment until the next fiscal year. They include refunds resulting from assessments completed after March 31, and estimates of refunds for individual and trust income tax and corporation income tax not yet assessed.

(g) Contingent liabilities

Contingent liabilities are potential liabilities resulting from, for example, previously assessed taxes recorded as revenue that might become actual liabilities if one or more future events occurs or does not occur. If the future event is likely to occur or likely to not occur, and a reasonable estimate of the loss can be made, an estimated liability is accrued and the revenues are reduced. If the likelihood cannot be determined or an amount cannot be reasonably estimated, the contingency is disclosed in the notes to the financial statements.

(h) Measurement uncertainty

To prepare these statements, management has to make estimates and assumptions that affect the amounts of assets, liabilities, revenues, expenses, and recoveries reported. For these financial statements items, measurement uncertainty is inherent but inestimable. Estimates are used to record unassessed tax revenues and the related amounts receivable and payable, as well as the allowance for doubtful accounts. In particular, estimates are made to determine individual and trust income tax revenues, corporation income tax revenues, non-resident tax withholdings, GST/HST revenues, energy taxes, other excise tax and duty revenues, EI premiums, CPP contributions, and the related amounts receivable and payable.
A key assumption used in estimating tax revenues is that tax installments and historical information on refund rates, payments received upon filing tax returns and amounts receivable assessed are good indicators of the amount of tax revenue earned to March 31 that has not yet been assessed. Another assumption is that historical tax assessment information is a good basis to allocate tax revenues between their various components (for example, between federal, provincial and territorial tax revenues). Relevant factors such as new administered activities, legislative changes and economic factors may also be considered. Finally, the key assumption used to estimate the general allowance for doubtful accounts is that historical collection information is a good indicator of uncollectible receivables.

Estimates are based on the best information available at the time of preparation of these statements and management believes these estimates and assumptions to be reasonable. Actual results could differ significantly from the estimates and any differences are recorded in the year the actual amounts are determined. Management monitors the accuracy of the estimates and the underlying assumptions through annual validation procedures and adjusts its estimation models as required. The methodologies used to determine the estimates were applied consistently with the previous year.

3. Amounts receivable from taxpayers

Amounts receivable from taxpayers include taxes, interest, penalties, and other revenues assessed or estimated by the CRA but not yet collected. A significant portion of the receivable balance results from recording accrued receivables that relate to the current fiscal year but are not due to be paid by taxpayers until the next fiscal year.

The following table shows details of the amounts receivable from taxpayers as reported in the Statement of Administered Assets and Liabilities. Amounts receivable from individuals and employers include Canada Pension Plan contributions and Employment insurance premiums as applicable.

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The table shows the changes in the allowance for doubtful accounts. The information is presented in thousands of dollars.
    

Income taxes    
 
Individuals: the Allowance for doubtful accounts March 31, 2015 is (6,659,992), the Doubtful accounts expense is (1,780,452), the write-offs are 1,443,119, and the allowance for doubtful accounts March 31, 2016 is (6,997,325).
Employers: the Allowance for doubtful accounts March 31, 2015 is (1,051,753), the Doubtful accounts expense is (365,856), the write-offs are 282,896, and the allowance for doubtful accounts March 31, 2016 is (1,134,713).
Corporations: the Allowance for doubtful accounts March 31, 2015 is (2,282,670), the Doubtful accounts expense is (763,236), the write-offs are 517,378, and the allowance for doubtful accounts March 31, 2016 is (2,528,528).
Non-residents: the Allowance for doubtful accounts March 31, 2015 is (137,764), the Doubtful accounts expense is (27,065), the write-offs are 32,681, and the allowance for doubtful accounts March 31, 2016 is (132,148).

GST/HST: the Allowance for doubtful accounts March 31, 2015 is (2,693,741), the Doubtful accounts expense is (724,911), the write-offs are 896,351, and the allowance for doubtful accounts March 31, 2016 is (2,522,301).

Excise taxes and duties and miscellaneous charges: the Allowance for doubtful accounts March 31, 2015 is (195,689), the Doubtful accounts expense is (272,527), the write-offs are 19,196, and the allowance for doubtful accounts March 31, 2016 is (449,020).

Total: the Allowance for doubtful accounts March 31, 2015 is (13,021,609), the Doubtful accounts expense is (3,934,047), the write-offs are 3,191,621, and the allowance for doubtful accounts March 31, 2016 is (13,764,035).

 

Changes in the allowance for doubtful accounts include the following:

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The table shows the changes in the allowance for doubtful accounts. The information is presented in thousands of dollars.
    

Income taxes    
 
Individuals: the Allowance for doubtful accounts March 31, 2015 is (6,659,992), the Doubtful accounts expense is (1,780,452), the write-offs is 1,443,119, and the allowance for doubtful accounts March 31, 2016 is (6,997,325).
Employers: the Allowance for doubtful accounts March 31, 2015 is (1,051,753), the Doubtful accounts expense is (365,856), the write-offs is 282,896, and the allowance for doubtful accounts March 31, 2016 is (1,134,713).
Corporations: the Allowance for doubtful accounts March 31, 2015 is (2,282,670), the Doubtful accounts expense is (763,236), the write-offs is 517,378, and the allowance for doubtful accounts March 31, 2016 is (2,528,528).
Non-residents: the Allowance for doubtful accounts March 31, 2015 is (137,764), the Doubtful accounts expense is (27,065), the write-offs is 32,681, and the allowance for doubtful accounts March 31, 2016 is (132,148).

GST/HST: the Allowance for doubtful accounts March 31, 2015 is (2,693,741), the Doubtful accounts expense is (724,911), the write-offs is 896,351, and the allowance for doubtful accounts March 31, 2016 is (2,522,301).

Excise taxes and duties and miscellaneous charges: the Allowance for doubtful accounts March 31, 2015 is (195,689), the Doubtful accounts expense is (272,527), the write-offs is 19,196, and the allowance for doubtful accounts March 31, 2016 is (449,020).

Total: the Allowance for doubtful accounts March 31, 2015 is (13,021,609), the Doubtful accounts expense is (3,934,047), the write-offs is 3,191,621, and the allowance for doubtful accounts March 31, 2016 is (13,764,035).

The doubtful accounts expense of $3,934 million ($3,974 million in 2015) reported above includes an amount of $3,841 million ($3,861 million in 2015) recorded as an expense administered on behalf of the federal government (see note 2(e)) and $93 million ($113 million in 2015) charged against expenses administered on behalf of the Canada Pension Plan.

4. Amounts receivable under the tobacco civil settlements

On July 31, 2008, the federal and provincial governments entered into civil settlement agreements with two tobacco companies to resolve potential civil claims. Under the terms of the agreements, payments totalling $850 million are to be made to Canada, for Canada and the provinces. The federal government's share is $325 million and the provincial governments' share is $525 million. The settlement agreements state that the amounts will be fully paid by 2023. Up to $800 million is expected to be received in the first 10 years of the agreements and about $50 million in the following five years. These amounts are recorded at the nominal value.

The following table gives details of the amounts receivable related to the tobacco civil settlement agreements:

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Amounts receivable under the tobacco civil settlements

The following table gives details of the amounts receivable related to the tobacco civil settlement agreements in 2016 and 2015 in thousands of dollars:


It is broken down by Government of Canada share and the Provincial share for each year 2016 and 2015.
 
2016 Balance, beginning of year for Government of Canada share is 162,000, the Provincial share is 148,633 and the total is 310,633.

2015 Balance, beginning of year for Government of Canada share is 196,000, the Provincial share is 202,444 and the total is 398,444.


Amounts received during the year for 2016 Government of Canada share is (34,000), the Provincial share is (36,055) and the total is (70,055).
Amounts received during the year for 2015 Government of Canada share is (34,000), the Provincial share is (53,811) and the total is (87,811). 

Total 2016 Balance, end of year for Government of Canada share is 128,000, the Provincial share is 112,578 and the total is 240,578.

Total 2015 Balance, end of year for Government of Canada share is 162,000, the Provincial share is 148,633 and the total is 310,633.

 

5. Amounts payable to taxpayers

The following table gives details of the amounts payable to taxpayers as reported in the Statement of Administered Assets and Liabilities:

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Amounts payable to taxpayers

The following table gives details of the amounts payable to taxpayers as reported in the Statement of Administered Assets and Liabilities for 2016 and 2015 in thousands of dollars:

Individuals 34,321,628 in 2016, 35,815,426 in 2015
Corporations 8,293,710 in 2016, 9,327,020 in 2015
GST/HST 10,755,233 in 2016, 10,904,114 in 2015
Employers and non-residents 268,023 in 2016, 59,617 in 2015
Excise taxes and duties and miscellaneous charges 62,605 in 2016, 97,603 in 2015
Total for 2016 is 53,701,199 and  56,203,780 for 2015

 

6. Amounts payable to provinces

The following table gives details of amounts payable to provinces as reported in the Statement of Administered Assets and Liabilities:

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Amounts payable to provinces

The following table gives details of amounts payable to provinces as reported in the Statement of Administered Assets and Liabilities for 2016 and 2015 in thousands of dollars:

Provincial share of the tobacco civil settlements (see note 4) in 2016 was 112,578 and 148,633 in 2015
Amounts payable to Quebec:
for Individual income tax withholdings 211,846 in 2016, 221,576 in 2015
for GST refunds issued by Quebec 88,983 in 2016, 110,504 in 2015
Quebec sales tax in respect of selected listed financial institutions 159,746 in 2016, 139,375 in 2015
British Columbia sales tax transitional measures 1,487 in 2016, (2,942) in 2015
Nova Scotia worker’s compensation 1,139 in 2016, 1,126 in 2015
Ontario corporation income tax and opportunities fund 1,244 in 2016, 1,584 in 2015
Softwood lumber products export charge net of costs incurred by the federal government 46,994 in 2016, (19,286) in 2015

Total 624,017 in 2016, 600,570 in 2015

 

 

The CRA is acting as an agent for the provinces under the tobacco civil settlements. The CRA's liability to the provinces for their expected share of the settlement amounts is limited to the amounts that will ultimately be collected from the tobacco companies.

Amounts payable to provinces, territories, and other organizations, which are settled by other departments such as the Department of Finance for provincial, territorial, and First Nations taxes, are not recorded in these financial statements because these amounts are outside the CRA's responsibility.

The CRA received $270 million in Nova Scotia worker's compensation payments during the year ($265 million in 2015), these payments are transferred directly to the province. Since this is a flow through arrangement, it is not reported as administered revenues.

7. Deposit accounts

Deposit accounts are established to record cash and securities required to guarantee payment of GST for non-resident registrants and certain licensees for excise taxes, which are both payable pursuant to the Excise Tax Act. The following table shows activity on the deposit accounts as reported in the Statement of Administered Assets and Liabilities:

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Deposit accounts

The following table shows activity on the deposit accounts as reported in the Statement of Administered Assets and Liabilities for 2016 and 2015 in thousands of dollars:

Balance, beginning of year was 178,548 in 2016, 162,370 in 2015.
Receipts and other credits was 40,981 in 2016, 41,120 in 2015.
Payments and other charges was (29,510) in 2016, (24,942) in 2015 .                     
Balance, end of year was 190,019 in 2016, 178,548 in 2015.
Securities held in trust was (40) in 2016, (40) in 2015.
Net deposit accounts was 189,979 in 2016, 178,508 in 2015.

8. Net amount due to the Consolidated Revenue Fund

The net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada and others is the difference between administered assets (taxes not yet received and/or deposited in the fund) and administered liabilities payable by the CRA out of the fund.

The net cash deposited in the Consolidated Revenue Fund of the Government of Canada includes amounts the CRA receives on behalf of the federal government, provinces, territories, and other organizations and deposits in the fund, less refunds and payments issued from the fund during the year.

The following table shows the change in the net amount due to the Consolidated Revenue Fund during the fiscal year:

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Net amount due to the Consolidated Revenue Fund

The following table shows the change in the net amount due to the Consolidated Revenue Fund during the fiscal year for 2016 and 2015 in thousands of dollars:

 

Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada and others at the beginning of the year was 47,610,622 in 2016, 45,427,766 in 2015

Total administered revenues and pension contributions were 398,154,139 in 2016, 376,264,210 in 2015
  
Total net administered expenses and recoveries were (29,496,242), (25,391,049) in 2015

Revenues paid or payable directly to a province were (436,136), (520,648) in 2015

Net cash deposited in the Consolidated Revenue Fund of the Government of Canada was (357,020,446) in 2016, (348,169,657) in 2015

Net amount due to the Consolidated Revenue Fund on behalf of the Government of Canada and others at the end of the year was 58,811,937 in 2016, 47,610,622 in 2015

 

9. Contingent liabilities

Contingent liabilities include previously assessed taxes where amounts are under objection or are being appealed to the Tax Court of Canada, the Federal Court of Canada, or the Supreme Court of Canada. As of March 31, 2016, $21,915 million was under objection at the CRA level ($22,987 million for 2015) and $7,035 million was being appealed to the courts ($5,450 million for 2015). The CRA has recorded, in the amounts payable to taxpayers or in reduction of the amounts receivable from taxpayers, as applicable, the estimated amount of objections or appeals that are considered likely to be lost and that can be reasonably estimated.

10. Quebec abatement

The Quebec abatement is provided to Quebec residents under the Income Tax Act (ITA) and the Federal-Provincial Fiscal Arrangement Act. Residents of Quebec subtract 16.5 per cent of the Basic Federal Tax owed to the Government of Canada when compiling their taxes while the government of Quebec receives additional tax room. In accordance with the Federal-Provincial Fiscal Revision Act, 1964 and the Federal-Provincial Fiscal Arrangement Act, the Government of Quebec pays the federal government the value of the Quebec Abatement through an equivalent reduction in transfer payments to the province of Quebec for programs delivered by the federal government.

The Quebec Abatement reduces the federal tax payable under the ITA and is therefore accounted for as a tax concession netted against individual income tax revenues. For the fiscal year ended March 31, 2016, the Quebec abatement assessed by CRA was $4,489 million ($4,236 million for 2015).

11. Goods and services tax revenues

The GST reported on the Statement of Administered Revenues and Pension Contributions includes the federal portion of HST. It is net of input tax credits (ITC), rebates, and the GST quarterly tax credit for low income individuals and families that the CRA administers. It does not include GST revenues on imported goods, which are administered and reported by the Canada Border Services Agency. The CRA has sole responsibility for administering all ITC, including those claimed on imported goods. ITC relating to GST on imports are not accounted for separately from ITC relating to GST on domestic transactions.

The following table shows details of the GST revenues that the CRA administers for the Government of Canada as reported in the Statement of Administered Revenues and Pension Contributions:

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Goods and services tax revenues

The following table shows details of the GST revenues that the CRA administers for the Government of Canada as reported in the Statement of Administered Revenues and Pension Contributions for 2016 and 2015 in thousands of dollars:

Gross GST revenues for 2016 were 153,378,249 and for 2015 were 155,155,484.
ITC for 2016 was (131,711,894) and for 2015 was (134,592,306).
GST revenues net of ITC for 2016 were 21,666,355 and for 2015 were 20,563,178.
GST rebates for 2016 were (6,094,603) and for 2015 were (6,058,107).
GST quarterly tax credits for low-income individuals and families for 2016 were (4,357,474) and for 2015 were (4,194,459).
The total GST net revenues for 2016 were 11,214,278 and for 2015 were 10,310,612.

12. Miscellaneous charges

The following table details the miscellaneous charges that the CRA administers for the federal government as reported in the Statement of Administered Revenues and Pension Contributions:

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Miscellaneous charges

The following table details the miscellaneous charges that the CRA administers for the federal government as reported in the Statement of Administered Revenues and Pension Contributions for 2016 and 2015 in thousands of dollars:

Softwood lumber products export charge for 2016 was 130,347 and for 2015 was (4,700)
Air travellers security charge for 2016 was 721,224 and for 2015 was 695,702
the Total for 2016 was 851,571 and for 2015 was 691,002

 

The Softwood Lumber Agreement expired on October 12, 2015. CRA will continue to administer retroactive transactions in accordance with the terms set out in the Agreement.

13. Interest, penalties, and other revenues

Various tax legislations give the CRA the authority, under certain conditions, to assess interest and penalties related to taxes due and regulations that taxpayers have not complied with. Interest is charged on overdue balances using rates determined quarterly, which in most cases are based on the ninety day Treasury Bills rate rounded plus 4%. The interest rate applicable as at March 31, 2016 on most overdue balances was 5% (5% in 2015). The CRA has the authority to waive the interest and penalties that would normally be charged under certain circumstances such as processing delays caused by the CRA, financial hardship experienced by taxpayers, or other extraordinary circumstances.

Other revenues consist of miscellaneous fees and charges such as court fines and administration charges for dishonoured payments.

The following table gives details on interest, penalties, and other revenues that the CRA administers for the federal government as reported in the Statement of Administered Revenues and Pension Contributions:

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Interest, penalties, and other revenues

The following table gives details on interest, penalties, and other revenues that the CRA administers for the federal government as reported in the Statement of Administered Revenues and Pension Contributions for 2016 and 2015 in thousands of dollars:

Gross interest and penalties for 2016 was 4,646,250 and for 2015 was 4,775,971
Interest and penalties waived under authority of the Income Tax Act for 2016 were (309,179) and for 2015 were (274,874)
Net interest and penalties for 2016 were 4,337,071 and for 2015 were 4,501,097
Fines imposed under various acts for 2016 was 8,343 and for 2015 was 6,620
Other revenues for 2016 were 1,159 and for 2015 were 1,254
Total Interest, penalties, and other revenues for 2016 were 4,346,573 and for 2015 were 4,508,971

 

14. Provincial portion of harmonized sales tax

During the year, CRA administered the provincial portion of the HST for the provinces of Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador and Prince Edward Island as well as returns for the period from July 2010 to March 2013 for British Columbia. CRA recorded these revenues in accordance with the accounting policies described in note 2.

The provincial portion of HST reported on the Statement of Administered Revenues and Pension Contributions is net of input tax credits (ITC), rebates and credits accounted as tax concessions. It includes the recaptured ITC, which applies to certain types of supplies purchased by large businesses. It does not include the provincial portion of HST collected on imported goods, which is administered and reported by the Canada Border Services Agency.

The following table details the provincial portion of HST revenues as reported in the Statement of Administered Revenues and Pension Contributions:

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Provincial portion of harmonized sales tax

The following table details the provincial portion of HST revenues as reported in the Statement of Administered Revenues and Pension Contributions for 2016 and 2015 in thousands of dollars.

Provincial portion of gross HST revenues for 2016 was 107,485,979 and for 2015 was 108,574,218
Provincial portion of ITC for 2016 was (76,958,195) and for 2015 was (79,425,774)
Provincial portion of HST rebates for 2016 was (899,766) and for 2015 was (900,547)
Recaptured ITC for 2016 was 480,221 and for 2015 was 524,468
Transitional tax for 2016 was 21,712 and for 2015 was 26,537
HST provincial rebates for 2016 was (4,145,471) and for 2015 was(3,963,636)
The total Provincial portion of HST net revenues before credits for 2016 was 25,984,480 and for 2015 was 24,835,266

Provincial sales tax credits  

Ontario sales tax credit for 2016 was (1,315,607) and for 2015 was (1,193,820)
British Columbia harmonized sales tax credit for 2016 was (8,756) and for 2015 was (9,960)
Nova Scotia affordable living tax credit for 2016 was (65,625) and for 2015 was (65,698)
Newfoundland and Labrador harmonized sales tax credit for 2016 was (46,008) and for 2015 was (43,888)
Ontario sales tax transition benefit for 2016 was 6 and for 2015 was 22
Prince Edward Island sales tax credits for 2016 was (6,438) and for 2015 was (6,150)
The Total provincial sales tax credits in 2016 was (1,442,428) and for 2015 was (1,319,494)
The Net Provincial portion of HST in 2016 was 24,542,052 and for 2015 was 23,515,772

 

15. Other revenues

The following table gives details of other revenues the CRA administers for provincial and territorial governments and First Nations as reported in the Statement of Administered Revenues and Pension Contributions.

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Other revenues

The following table gives details of other revenues the CRA administers for provincial and territorial governments and First Nations as reported in the Statement of Administered Revenues and Pension Contributions.

The Quebec sales tax in respect of selected listed financial institutions for 2016 was 436,136 and for 2015 was 520,648

The First Nations sales tax and GST for 2016 was 24,717, and for 2015 was 24,494

The First Nations income tax for 2016 was 28,364, and for 2015 was 23,158

The total for Other Revenues in 2016 was 489,217, and for 2015 was 568,300

 

16. Pension contributions, interest, and penalties administered on behalf of the Canada Pension Plan

The following table shows details of the transactions the CRA administers on behalf of the Canada Pension Plan as reported in the Statement of Administered Revenues and Pension Contributions:

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The following table shows details of the transactions the CRA administers on behalf of the Canada Pension Plan as reported in the Statement of Administered Revenues and Pension Contributions for 2016 and 2015, and in thousands of dollars.
  
The Pension contributions were 46,021,004 and for 2015 were 44,959,939.
The Interest and penalties for 2016 were 191,737 and for 2015 were 198,855.
The combined total for 2016 was 46,212,741, and for 2015 was 45,158,794.

17. Related-party transactions

The CRA is related in terms of common ownership to all Government of Canada departments, agencies, and Crown corporations. The CRA deposits all monies received to the Consolidated Revenue Fund (CRF), and the Department of Finance makes payments out of the CRF to provinces, territories, and other organizations for amounts such as provincial, territorial, and First Nations taxes, for which the CRA administers the revenue. Old age security benefit recoveries, Canada Pension Plan contributions (net of overpayments refunded by the CRA), and Employment insurance premiums are credited to Employment and Social Development Canada, which administers the Old Age Security program, the Canada Pension Plan, and the Employment Insurance Operating Account. The CRA also administers a refund set-off program that can use individuals' tax refunds to pay debts they owe under federal, provincial, or territorial programs.

The CRA provides collection services to the Canada Border Services Agency under Part V.I of the Customs Act. It also provides collection services to Employment and Social Development Canada for certain accounts receivable under the Canada Education Savings Act, the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Canada Pension Plan, and the Old Age Security Act. The related payments are made directly to either the Canada Border Services Agency or Employment and Social Development Canada, who are responsible for their deposits to the CRF, as well as their accounting and reporting. These payments are not recorded in the CRA's accounts.

Employment insurance premiums administered on behalf of the federal government include the employer's share that the federal government pays. The GST declared to the CRA includes the GST the federal government pays to its suppliers on domestic purchases. The GST that other federal government departments collect is deposited to the CRF, declared to the CRA, and included in the GST domestic revenues.

18. Future changes to the child tax benefit and the universal child care benefit

Effective July 1st 2016, the CRA will begin to administer the Canada child benefit (CCB) announced in the federal budget, which was tabled in Parliament on March 22, 2016. It will replace the child tax benefit (CTB) and the universal child care benefit (UCCB). Similar to the CTB, the CCB will be paid monthly and benefits will be income tested and not taxable.

The CRA will also continue to administer retroactive payments for the CTB and the UCCB for a period of 10 years after the original entitlement period.

Financial Statements Discussion and Analysis – Administered Activities (unaudited)

Introduction

The Financial Statements – Administered Activities reflect the total assets and liabilities, tax and non-tax revenues, expenses and recoveries, and cash flows administered by the Canada Revenue Agency on behalf of the Government of Canada, provinces, territories, First Nations, and other government organizations. Revenues and expenses are recognized on an accrual basis.

Tax Revenues

The Canada Revenue Agency collects the majority of federal tax revenues. Other agencies and departments, such as the Canada Border Services Agency, account for the balance of total federal revenues reported in the Public Accounts of Canada. For further information on revenues collected by the Government of Canada as a whole, please refer to the Annual Financial Report of the Government of Canada, available at www.fin.gc.ca/purl/afr-eng.aspxii.

Revenues Administered for the Government of Canada

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This table  shows the total revenues administered for the Government of Canada in 2016, 2015, the difference, and percentage difference

Federal administered revenues in thousands on dollars

The Income tax revenues for Individuals and trusts in 2016 were 144,953,138, for 2015 were 135,810,323, the difference is 9,142,815, the percentage difference is 6.7%.
The income tax revenue for  Corporations in 2016 were 41,443,831, for 2015 were 39,446,519, the difference is 1,997,312, the percentage difference is 5.1%.
The income tax revenues for Non-resident tax withholdings were 6,505,060, for 2015 were 6,216,306, the difference is 288,754, and the percentage difference is 4.6%.

The total Federal administered revenues in thousands on dollars for 2016 were 192,902,029, for 2015 were 181,473,148, the difference is 11,428,881, and the percentage difference is 6.3%.


Other taxes, duties, and charges in thousands of dollars
    
The Goods and services tax for 2016 was 11,214,278, for 2015 was 10,310,612, the difference is 903,666, and the percentage difference is 8.8%.
The Energy taxes for 2016 were 5,495,888, for 2015 were 5,469,039, the difference is 26,849, and the percentage difference is 0.5%.
The Other excise taxes and duties for 2016 were 3,619,059, for 2015 were 3,530,554, the difference is 88,505, and the percentage difference is 2.5%.
The Miscellaneous charges for 2016 were 851,571, for 2015 were 691,002, the difference is 160,569, the percentage difference is 23.2%.
 

The total Other taxes, duties, and charges in thousands of dollars for 2016 was 21,180,796, for 2015 was 20,001,207, the difference is 1,179,589, the percentage difference is 5.9%.
    
The Employment insurance premiums for 2016 were 23,491,100, for 2015 were 22,962,274,the difference is 528,826, and the percentage difference is 2.3%.
The Interest, penalties, and other revenues for 2016 were 4,346,573, for 2015 were 4,508,971, the difference is (162,398), and the percentage difference is (3.6%).
The total for employment insurance premiums,interest, and other revebues for 2016 were 27,837,673, for 2015 were 27,471,245, the difference is 366,428, and the percentage difference is 1.3%.

The total Revenues administered for the Government of Canada in 2016 were 241,920,498, for 2015 were 228,945,600, the difference is 12,974,898, and the percentage difference is 5.7%.

 

Revenues administered for the Government of Canada were $241.9 billion in 2016, approximately $13.0 billion higher than in 2015. Revenues increased as a result of the growth in individuals and trusts and corporations income tax revenues, higher goods and services tax (GST) revenues, and higher employment insurance premiums.

Individuals and trusts income tax

Individuals and trusts income tax revenues increased by $9,143 million or 6.7%. The increase reflects the growth in employment and wages and various federal legislative changes.

Corporations income tax

Corporations income tax revenues increased by $1,997 million or 5.1%. The increase is due to large credit reassessments and low accrued revenue estimates in fiscal year 2015, partly offset by lower resource sector earnings.

Non-resident tax withholdings

Non-resident tax withholdings revenues increased by $289 million or 4.6%. The increase is due to the growth in the financial and manufacturing sectors.

Goods and services tax

GST revenues increased by $904 million or 8.8%. The increase is due to the growth in retail sales and relatively low input tax credits related to GST on imports.

Energy taxes

Energy taxes increased by $27 million or 0.5%. The increase is attributable to slightly higher gasoline and diesel fuel consumption, partially offset by lower aviation gas revenue.

Other excise taxes and duties

Other excise taxes and duties increased by $89 million or 2.5%. The increase reflects higher tobacco production, as well as higher liquor, spirits and beer duty revenues.

Miscellaneous charges

Miscellaneous charges increased by $161 million or 23.2%. The increase is mostly due to higher softwood lumber products export charge revenues as a result of the decrease in the price of lumber.

Employment insurance premiums

Employment insurance premiums increased by $529 million or 2.3%. The increase results from the growth in employment and wages, offset in part by the impact of the small business job credit.

Interest, penalties, and other revenues

Interest, penalties, and other revenues decreased by $162 million or 3.6%. The decrease results from lower corporations income tax transfer pricing penalties and some large non-resident tax credit reassessments, offset in part by higher arrears interest.

Figure 1 – Direct tax revenues

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Figure 1 shows total percentage of Direct Tax Revenues for 2016 and 2015 broken down by Individuals and trusts, Corporations and Non-Residents.

2016 Direct Tax Revenues

Individuals and trusts are 75%.

Corporations are 21.5%.

Non-residents are 3.5%.

2015 Direct Tax Revenues

Individuals and trusts are 74.8%.

Corporations are 21.7%.

Non-residents are 3.5%. 

 

As shown in Figure 1, the distribution of direct tax revenues remained stable in 2016.

Figure 2 – Indirect tax revenues

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Figure 2 shows total percentage of Indirect Tax Revenues for 2016 and 2015 broken down by Goods and Services Tax, Energy Taxes, Other excise Taxes and duties and miscellaneous charges

2016 Indirect Tax Revenues

Goods and Services tax are 53%.

Energy Taxes are 26%.

Other excise taxes and duties are 17%. 

Miscellaneous charges are 4%.

2015 Indirect Tax Revenues

Goods and Services tax are 51.6%.

Energy Taxes are 27.3%.

Other excise taxes and duties are 17.7%. 

Miscellaneous charges are 3.4%.

 

As shown in Figure 2, the proportion of goods and services tax increased, and the proportion of energy taxes and other excise taxes and duties decreased in 2016.

Revenues Administered for Provincial and Territorial Governments, First Nations, and the Canada Pension Plan

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This table shows the revenues administered for provincial, territorial governments, first nations, and the Canada Pension Plan for 2016 and 2015, the difference and the percentage difference.    


Administered expenses and recoveries shown in the thousands of dollars.
   
  
The Income tax revenues for Individual and Trusts in 2016 was 66,859,379, for 2015 was 62,206,617, the difference is 4,652,762 and the percentage difference is 7.5.

The income tax revenues for Corporations in 2016 was 18,130,252, for 2015 was 15,869,127, the difference is 2,261,125, and the percentage difference is 14.2.

The Provincial portion of harmonized sales tax in 2016 was 24,542,052, in 2015 was 23,515,772, the difference is 1,026,280 and the percentage difference is 4.4.

The other revenues for 2016 were 489,217, for 2015 were 568,300, the difference is (79,083), and the percentage difference is (13.9)

The TOTAL revenues administered for provincial and territorial governments and First Nations for 2016 was 110,020,900, for 2015 was 102,159,816, the difference is 7,861,084, and the percentage difference is 7.7.
    
The Pension contributions, interest and penalties administered for the Canada Pension Plan in 2016 was 46,212,741, in 2015 was 45,158,794, the difference is 1,053,947 and the perecntage difference is 2.3.

 

Revenues administered for the provincial and territorial governments and First Nations (FN) were $110.0 billion in 2016, approximately $7.9 billion higher than in 2015. Pension contributions and other revenues administered for the Canada Pension Plan were $46.2 billion in 2016, $1.1 billion more than in 2015.

Individuals and trusts income tax

Individuals and trusts income tax revenues increased by $4,653 million, or 7.5%. The increase reflects the growth in employment and wages and various legislative changes.

Corporations income tax

Corporations income tax revenues increased by $2,261 million or 14.2%. The increase is due to generally strong corporate earnings, as well as large credit reassessments and low accrued revenue estimates in fiscal year 2015.

Provincial portion of harmonized sales tax (HST)

Provincial HST revenues increased by $1,026 million or 4.4%. The increase reflects the growth in retail sales.

Other revenues

Other revenues decreased by $79 million or 13.9%. The decrease is due to large Quebec selected listed financial institutions assessments in fiscal year 2015.

Figure 3 – Revenues administered for the provincial and territorial governments and First Nations

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Figure 3 is Revenues administered for the provincial and territorial governments and First Nations

2016 Provincial, territorial and First Nations

Income tax for individuals and trusts are 60.8%.

Income tax for Corporations is 16.5%.

Harmonized sales tax is 22.3%.

Other revenues is 0.4%.


2015 Provincial, territorial and First Nations

Income tax for individuals and trusts are 60.9%.

Income tax for Corporations is 15.5%.

Harmonized sales tax is 23%.

Other revenues is 0.6%.

 

As shown in Figure 3, the distribution of revenues administered for the provincial and territorial governments and First Nations was generally stable in 2016.

Pension contributions, interest and penalties administered for the Canada Pension Plan

Canada Pension Plan pension contributions and other revenues rose by $1,054 million or 2.3%. The increase results from the growth in employment and wages.

Expenses and Recoveries Administered for the Government of Canada and Provincial and Territorial Governments

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Net federal expenses and recoveries were $24.2 billion in 2016, $4.0 billion higher than in 2015. Provincial and territorial expenses were $5.2 billion, $165 million higher than in 2015.

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This table shows the expenses and recoveries administered for the Government of Canada and provincial and territorial Governments.

 in thousands of dollars, for 2016 and 2015, the difference and the percentage difference.
    
The Federal administered expenses for 2016 were 25,970,520, for 2015 were 21,907,484 and the difference is 4,063,036, and the percentage is 18.5.
The Federal administered recoveries for 2016 were (1,787,872), for 2015 were (1,685,179) and the difference is (102,693) and the percentage is 6.1.
    
The Net expenses and recoveries administered     
for the Government of Canada for 2016 were 24,182,648, for 2015 were 20,222,305, the difference is 3,960,343, and the percentage is 19.6.
    
The Provincial and territorial administered expenses for 2016 were 5,220,161, for 2015 were 5,055,689, the difference is 164,472, and the percentage is 3.3.
    
The Provision for doubtful accounts administered for
the Canada Pension Plan in 2016 was 93,433, for 2015 was 113,056, the difference is (19,623), and the percentage is (17.4)
    
The Total net administered
expenses and recoveries for 2016 were 29,496,242, for 2015 were 25,391,050, the difference is 4,105,192, and the percentage is 16.2.

 

Federal administered expenses

Federal administered expenses increased by $4,063 million or 18.5%. The increase is due to higher universal child care benefit payments as a result of the implementation of the enhanced benefits effective January 1, 2015.

Federal administered recoveries

Federal administered recoveries increased by $103 million or 6.1%. The increase reflects a higher number of old age security benefit recipients and a growth in taxable income.

Expenses administered for provincial and territorial governments

Expenses administered for provinces and territories increased by $165 million or 3.3%. The increase is due to the implementation of the British Columbia early childhood tax benefit effective April 1, 2015, as well as higher Ontario energy and property tax credits, offset by lower Ontario apprenticeship training tax credits and British Columbia mining exploration tax credits.

Doubtful accounts expense administered for the Canada Pension Plan

The doubtful accounts expense administered for the Canada Pension Plan decreased by $20 million or 17.4%. The decrease is due to lower write-offs allocated to Canada Pension Plan.

Figure 4 – Expenses and recoveries administered for the Government of Canada and provincial and territorial governments

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Figure 4 is Expense and recoveries administered for the Government of Canada and provincial and territorial governments

2016 Administered expenses

Net federal administered and expenses and recoveries are 82%.

Provincial and territorial administered expenses are 18%.


2015 Administered expenses

Net federal administered expenses and recoveries are 79.6%.

Provincial and territorial administered expenses are 20.4%.

 

As shown in Figure 4, the proportion of expenses and recoveries administered on behalf of the Government of Canada rose in 2016 due to higher universal child care benefit payments.

Summary of the assessment of effectiveness of the system of internal control over financial reporting and the action plan of the Canada Revenue Agency

Fiscal Year 2015-2016

1. Introduction

This document provides summary information on the measures taken by the Canada Revenue Agency (CRA) 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 the CRA's authority, mandate, and program activities can be found in the Departmental Performance Report at www.cra-arc.gc.ca/gncy/prfrmnc_rprts/menu-eng.htmlxiii and the Report on Plans and Priorities www.cra-arc.gc.ca/gncy/rprts/menu-eng.htmlxiv.

2. CRA system of internal control over financial reporting

2.1 Internal control management

The CRA has a well-established governance and accountability structure to support the CRA's assessment efforts and oversight of its system of internal control. A CRA internal control management framework, approved by the Commissioner and the Board of Management, is in place and includes:

  • organizational accountability structures as they relate to internal control management to support sound financial management, including roles and responsibilities of senior managers in their areas of responsibility for control management;
  • values and ethics;
  • ongoing communication and training on statutory requirements and policies and procedures for sound financial management and control; and
  • regular updates on internal control management as well as the provision of related assessment results and action plans to the Commissioner, senior management and the Audit Committee of the Board of Management.

The CRA Finance Committee provides support to the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) in relation to control activities. It is chaired by the CFO and has representatives from each branch and region at the executive level.

In addition, the Audit Committee of the Board of Management provides advice on the adequacy and functioning of the CRA's risk management, control and governance frameworks and processes.

2.2 Service arrangements relevant to financial statements

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

Common Arrangements

  • Public Services and Procurement Canada centrally administers the payments of salaries and the procurement of some goods and services in accordance with the CRA's Delegation of Authority and provides accommodation services.
  • Treasury Board Secretariat provides the CRA with information used to calculate various accruals and allowances.
  • Department of Justice provides legal services to the CRA.
  • Shared Services Canada provides information technology (IT) infrastructure services to the CRA in the areas of data centres and network services. The scope and responsibilities are addressed in the interdepartmental arrangement between Shared Services Canada and the CRA.
Specific Arrangements
  • Revenu Québec is responsible for the joint administration of the goods and services tax and Quebec sales tax for businesses in the Province of Quebec.
  • Department of Finance Canada provides the CRA with the federal and provincial shares of Goods and Services Tax/Harmonized Sales Tax (GST/HST) revenues that are used to determine provincial payments for the HST.
  • Canada Border Services Agency provides the CRA with the amount of GST revenues collected from importers, which is used in the calculation of the provincial portion of the HST revenues.
  • Department of Finance Canada and Employment and Social Development Canada provide estimates of Canada Pension Plan and Employment Insurance revenues respectively for the months of January to March.

Other government departments rely on the CRA for the processing of certain transactions or information that affect financial statements as follows:

  • Canada Border Services Agency for information technology services such as commensurate internal controls testing for general computer controls, as well as collection services on their behalf for duties, taxes, fees, penalties, or other amounts owing under the Customs Act, Customs Tariff, Excise Tax Act, Excise Act 2001, and/or related regulations;
  • Department of Finance Canada for the determination of tax receivables and payables under Tax Collection Agreements (TCAs) with provincial and territorial governments and First Nations; and
  • Employment and Social Development Canada for the collection of its accounts receivable and the administration of a number of activities related to the Canada Pension Plan and Employment Insurance Operating Account.

3. CRA assessment results during fiscal year 2015-2016

3.1 Design effectiveness testing of key controls

In 2015-2016, the CRA commenced the design effectiveness testing of the Individual Income Tax (T1) Program, which includes a limited scope around the T1 system redesign. Furthermore, the CRA completed design effectiveness testing of the Non-Resident Tax program.

As a result of the Non-Resident design effectiveness testing, the CRA identified the following required remediation:

  • Implementation of the final phases of the CRA action plan relating to the granting and monitoring of system access to prevent segregation of duty conflicts and to ensure minimum access need to be completed. The plan is complex and requires a multi-phased implementation, but the completion date remains on schedule.
  • Continued implementation of controls over procedures with respect to recording and modifying non-financial information in the Non-Resident Source Deductions system including implementation of a review process.

3.2 Ongoing monitoring of key controls

In 2015-2016, the CRA completed planned ongoing monitoring of the following processes:

1. Entity-level controls;

2. General computer controls; and

3. All other business processes:

  1. Payroll
  2. Procurement to pay
  3. Capital assets
  4. Budgeting
  5. Financial close and reporting

As a result of ongoing monitoring, the CRA identified the following required remediation:

  • Further progress is required to improve the process surrounding the granting and monitoring of access to prevent segregation of duty conflicts and ensure minimum access.
  • Controls over the timely review of Agency financial information must be improved and documentation retained, to support the existing process.

4. CRA Action Plan

4.1 Progress during fiscal year 2015-2016

The CRA continued to make progress in assessing and improving its key controls. The following table summarizes the CRA's progress based on the plans identified in the previous fiscal year's Annex.

Progress during fiscal year 2015-2016 
Element in previous year's action plan Status
Agency Activities ongoing monitoring  Ongoing monitoring testing was completed for entity-level controls, general computer controls, and Agency business processes including payroll, procurement to pay, capital assets, budgeting, and financial close and reporting process.
Non-Resident Tax  Design effectiveness testing was completed and remediation actions plans are being developed.
Individual Income Tax (T1) Program Documentation of the control framework was finalized as planned. Testing of the design and implementation of the controls is in progress.
Follow-up of activities requiring remediation from previous assessments  The CRA has followed up on action plans from the:
  • 2014-2015 Agency Activities testing as part of ongoing monitoring;
  • T2 design effectiveness assessment and OAG audit report as at November 30, 2008;
  • T1 design effectiveness assessment and OAG audit report as at November 30, 2010;
  • T2 operating effectiveness assessment and OAG audit for the six-month period ending March 31, 2013;
  • T1 Unapplied Taxes as part of the Individual Income Tax Program design effectiveness assessment and OAG audit report as at January 31, 2014; and
  • GST/HST design effectiveness assessment as at March 31, 2014.

Overall results have been positive and the majority of the recommendations made have been implemented. However, the following items that were identified in prior years remain:

  • Access to systems and segregation of duties; and
  • Implementing the final phase for processing of GST/HST elections filed by registrants.
4.2 Status and action plan for the next fiscal year and subsequent years

The CRA has continued to make progress on assessing its internal controls over financial reporting throughout the numerous programs that the CRA administers. It is recognized that implementation for all its processes requires multi-year initiatives. After design effectiveness and operational effectiveness testing are complete, the CRA will be applying its rotational ongoing monitoring plan to reassess control performance on a risk basis across all control areas, with the exception of those under the scope of TCA assessments as explained in Note 3.

Status and action plan for the next fiscal year and subsequent years
Key control areas Design effectiveness testing and remediation Operational effectiveness testing and remediation Ongoing monitoring rotation Note 1
Administered Activities under the Tax Collection Agreements with the provinces and territories
T1 individual income tax (legacy system) Complete - -
T1 unapplied taxes/source deductions Complete - -
T1 individual income tax (including limited scope T1 System Redesign) Note 2  2016-2017   Future years Note 3  N/A Note 3
T2 corporation income tax Complete Complete  N/A Note 3
T3 trust income tax  Complete Future years Note 3  N/A Note 3
Other Administered Activities
GST/HST Complete Future years Future years
Non-resident income tax Complete Future years Future years
Benefits 
 
2016-2017 Future years Future years
Excise Tax  2017-2018  Future years Future years
Agency Activities 
Entity level controls Note 4
 
Complete  Complete  2016-2017
IT general controls under CRA management Note 4 Complete Complete 2016-2017
Payroll Note 5  Complete Complete 2016-2017
Procurement to pay  Complete Complete 2016-2017
Capital assets  Complete Complete 2016-2017
Budgeting  Complete Complete  2016-2017
Financial close and reporting  Complete Complete 2016-2017

Note 1: The frequency of the ongoing monitoring of key control areas is risk-based and occurs over a three-year cycle with the exception of high risk areas, which are tested on an annual basis, or controls with prior year exceptions which are tested in the following fiscal year.

Note 2: The legacy T1 system is being upgraded through the T1 System Redesign initiative. This initiative is a multi-year project resulting in a significant modification to the systems and business processes related to the processing of T1 returns. Due to the magnitude of these changes, it was determined that design effectiveness testing of the new processes and systems with a limited scope would be appropriate as a next step.

Note 3: The CRA performs the control assessment testing for engagements related to the TCA with the Provinces and Territories and submits the results to the OAG who is responsible to review the controls in accordance with an approved framework. TCA-related control assessments do not go into a regular ongoing monitoring phase because complete re-assessment engagements are required to fully test all control activities to ensure that the selected income tax program is still designed and operating effectively. As such, the timing and frequency of these complete control assessment audits are determined in conjunction with the OAG and will continue to be conducted on a rotational annual basis.

Note 4: Entity Level Controls and IT general controls under CRA management are also evaluated through the Administered Activities projects.

Note 5: In April 2016 the CRA transitioned to the new Phoenix pay system. Controls for the new system will be assessed beginning in 2016-2017.

Unaudited Supplementary Financial Information

Financial Performance Information – Parliamentary Appropriations

Introduction

This section provides the details of the CRA's resource management performance for the purpose of reporting to Parliament on the use of appropriations in 2015-2016. This complements the information provided in the spending profile sections under each program and satisfies the reporting requirements set for annual reports to Parliament.

Financial reporting methodologies

The CRA's funding is provided by Parliament through annual appropriations (modified cash accounting basis) and, in this section, the CRA reports its expenditures and performance, together with details on the management of Parliamentary appropriations on the same basis. In addition to its reporting requirements, the CRA also has to prepare its annual financial statements in accordance with the accounting principles applied in preparing the financial statements of the Government of Canada (full accrual accounting basis). Accordingly, the audited Statement of Operations and Agency Net Financial Position – Agency Activities on page 104 includes certain items such as services received without charge from other government departments and federal agencies. A reconciliation can be found in Note 3 on page 111.

The CRA prepared and included future-oriented financial statements in the 2015-16 Report on Plans and Priorities. As directed by the Treasury Board of Canada Secretariat (TBS), this future-oriented financial information was prepared on an accrual basis to strengthen accountability and improve transparency and financial management. As part of the analysis of net cost of operations, the report compares actual results to the initial future-oriented financial statements contained in the 2015-16 Report on Plans and Priorities.  

CRA financial information
Activities of the CRA 2015-16 (dollars) (FTEs)
Main EstimatesFootnote 1 3,804,844,388 38,416
Planned SpendingFootnote 2 3,804,844,388 38,416
Total AuthoritiesFootnote 3 4,430,914,195 -
Actual Spending 4,146,987,294  37,977

The Financial Statements – Agency Activities reports total Parliamentary appropriations used as $3,716.3 million (Note 3b on page page 112 shows the reconciliation to the net cost of operations). The difference from the $4,147.0 million noted above is primarily explained by two items reported in the Financial Statements – Administered Activities, namely statutory disbursements to provinces under the Softwood Lumber Products Export Charge Act, 2006, $121.5 million; and children's special allowance payments, $309.2 million.

Overview

For 2015-2016, Parliament approved $3,804.8 million through the Main Estimates, as shown in the CRA's 2015-16 Report on Plans and Priorities.

The 2015-2016 Main Estimates were adjusted to include:

  • $261.4 million for the carry-forward from 2014-2015;
  • $121.5 million for disbursements to provinces under the Softwood Lumber Products Export Charge Act, 2006;
  • $81.9 million for severance payments, parental benefits and vacation credits;
  • $72.2 million in payments under the Children's Special Allowance Act for eligible children in the care of agencies and foster parents;
  • $63.9 million for the implementation and administration of various tax measures announced in the 2015 federal budget;
  • $19.6 million transferred from Public Services and Procurement Canada due to a reduction in CRA's accommodation needs;
  • $4.6 million for contributions to employee benefit plans; and
  • $1.7 million for court awards and Crown assets disposal.

These increases were offset by the following reductions:

  • $0.4 million in the spending of revenues received through the conduct of its operations; and
  • $0.3 million for a transfer to Transfer to Innovation, Science and Economic Development Canada for the Get it in Writing Campaign for Canadian Home Builders' Association.

This resulted in total approved authorities of $4,430.9 million for 2015-2016, representing an in-year increase of 16.5% over the Main Estimates.

Of the $4,430.9 million total authority, CRA's actual spending totalled $4,147.0 million resulting in $283.9 million remaining unexpended at year-end. After deducting unused resources related primarily to Government advertising campaigns, accommodation and real property services, the back-office transformation initiative and the 2016 census, the remaining $277.4 million is available for use by the CRA in 2016-2017 under its statutory two-year spending authority.

The CRA's two-year spending authority enables the CRA to be more strategic in using public funds by taking a multi-year view of plans and budgets. The financial flexibility in 2015-2016 is relatively consistent with that of the prior fiscal year as the agency continues to focus its efforts to implement initiatives that improve efficiency. The carry-forward from 2015-2016 forms part of the CRA's strategy to address unfunded operating pressures in 2016-2017, including the amounts set aside in anticipation of wage settlements for the period under the operating budget freeze.

Revenues administered by the CRA

Total revenues administered by the CRA amount to $398.2 billion in 2015-2016, an increase of 5.8% from the $376.3 billion administered in 2014-2015.

Revenues administered by the CRA
(in dollars) 2015-16 2014-15
Federal government 241,920,498,000 228,945,600,000
Provincial, territorial governments and First Nations 110,020,900,000 102,159,816,000
Canada Pension Plan 46,212,741,000 45,158,794,000
Total 398,154,139,000 376,264,210,000
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