Departmental Plan 2017-18

Details on transfer payment programs of $5 million or more

Future-Oriented Statement of Operations

Statement of Management Responsibility

We have prepared the accompanying Future-oriented Statement of Operations (FOSO) of the Canada Revenue Agency (CRA) for Agency Activities which includes only those operational revenues and expenses which are managed by the CRA and utilized in running the organization. They are prepared according to the accounting principles consistent with those applied in preparing the financial statements of the Government of Canada. No FOSO were prepared for Administered Activities because it is analogous to information presented by the Department of Finance. Significant accounting policies are set out in note 4 of the FOSO. The FOSO is submitted for Part III of the Estimates (Departmental Plan). The information will also be presented in the CRA's Departmental Results Report to compare with actual results.

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

The actual results achieved for the fiscal years covered in the accompanying FOSO will vary from the information presented and the variations may be material.

Approved by:

Original signed

Bob Hamilton
Commissioner of Revenue and Chief Executive Officer of the CRA  

Original signed

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

Ottawa, Ontario
January 23, 2017  

Canada Revenue Agency

Future-oriented Statement of Operations – Agency Activities

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

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

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

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

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

In delivering its mandate, the CRA operates under the following core responsibilities:

(a) Tax: to ensure that Canada's voluntary self-assessment tax system is sustained by providing taxpayers with the support and information they need to understand and fulfil their tax obligations, and by taking compliance and enforcement action when necessary to uphold the integrity of the system, offering avenues for redress whenever taxpayers may disagree with an assessment/decision

(b) Internal services: Internal services are those groups of related activities and resources that the Federal Government considers to be services in support of programs and/or required to meet corporate obligations of an organization. Internal services refer to the activities and resources of the ten distinct services that support program delivery in the organization

(c) Benefits: to ensure that Canadians obtain the support and information they need to know what benefits they may be eligible to receive, that they receive their benefit payments in a timely manner, and have avenues of redress when they disagree with a decision on their benefit eligibility

(d) Taxpayers' Ombudsman: Canadians have access to trusted and independent review of service complaints about the CRA

2. Methodology and significant assumptions

The Future-oriented Statement of Operations has been prepared on the basis of government priorities and Agency plans as described in the Departmental Plan.

The information in the estimated results for fiscal year 2016-2017 is primarily based on actual results as at October 31, 2016 and on forecasts for the remainder of the fiscal year. Forecasts have been made for the planned results for the 2017-2018 fiscal year.

The main assumptions underlying the forecasts are as follows:

(a) The CRA's activities will remain substantially the same as the previous year, except for an anticipated growth compared to actual results from 2015-2016 with regards to compliance and benefits activities in line with Government priorities

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

3. Variations and changes to the forecast financial information

While every attempt has been made to forecast final results for the remainder of 2016-2017 and for 2017-2018, actual results achieved for both years are likely to vary from the forecast information presented, and this variation could be material.

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

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

(a) Implementation of new collective agreements

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

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

Once the Departmental Plan is presented, the CRA will not be updating the forecasts for any changes in financial resources made in ensuing supplementary estimates. Variances will be explained in the Departmental Results Report.

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

The Future-oriented Statement of Operations – Agency Activities has been prepared using Government's accounting policies in effect for the year ending March 31, 2017 which 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. Accounting for appropriations provided to the CRA does not parallel financial reporting according to Canadian public sector accounting standards, as they are based in large part on cash flow requirements. Consequently, items recognized in the Future-oriented Statement of Operations may be different from those provided through appropriations from Parliament. Note 5(b) provides a high-level reconciliation between the two bases of reporting.

(b) Expenses

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

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

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

(ii) Vacation pay and compensatory leave

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

(iii) Employee benefits

(iii.1) Pension benefits

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

(iii.2) Health and dental benefits

The Government of Canada sponsors 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 plan, which are provided without charge by the Treasury Board Secretariat, are recorded at cost based on a percentage of the salary expenses and charged to personnel expenses in the year incurred.

(iii.3) Severance benefits

Some employees were still entitled to severance benefits, as provided for under labour contracts and conditions of employment until October 31, 2016. The cost of these benefits was accrued as employees rendered the services necessary to earn them up until that date.

(iii.4) Sick leave benefits

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

(iv) Allowance for doubtful accounts

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

(v) Amortization of tangible capital assets

All initial costs of $10,000 or more incurred by the CRA to acquire or develop tangible capital assets are capitalized 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:

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

(vi) Provision for contingent liabilities

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

(c) Revenues

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

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

5. Parliamentary appropriations

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

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

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

6. Expenses by category

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

7. Non-tax revenues by category

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

8. Related party transactions

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

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

Planned Spending and Full-Time Equivalents

Services Received Without Charge

Sources of Respendable Non-Tax Revenue and Non-Respendable Non-Tax Revenue

Summary of Capital Spending

Upcoming evaluations over the next three fiscal years

Upcoming internal audits for the coming fiscal year