Annual Report to Parliament 2014-2015

Section 3: Supplementary information

Financial Statements Highlights

Condensed Statement of Operations (unaudited)
For the Year Ended March 31, 2015
Financial Information 2014-15
Planned results
(2014-15 actual minus
2014-15 planned)
actual minus
2013-14 actual)
Total expenses 4,622,265,000 4,607,492,897 4,562,082,581 (14,772,103) 45,410,316
Total revenues 489,581,000 480,619,960 493,500,773 (8,961,040) (12,880,813)
Net cost of operations before government funding and transfers 4,132,684,000 4,126,872,937 4,068,581,808 (5,811,063) 58,291,129

The CRA's 2014-2015 net cost of operations before government funding and transfers amounted to $4,126.9 million, an increase of $58.3 million from the $4,068.6 million net cost of operations before government funding and transfers in 2013-2014.

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

The increase in personnel costs of $27.8 million is mostly attributable to economic salary increases and increments pursuant to collective agreement provisions and increases in employee severance benefit expenses; partly offset by a slight reduction in the workforce decreasing salary expenses and a decrease in the employer's portion of contributions to the Public Service pension plan.

Non-personnel expenses have increased by $17.6 million in 2014-2015. This variance mainly results from an increase in postage cost due to higher postage fees charged by Canada Post Corporation, new external storage and warehousing services for the administration of the CRA's records, and an increase in IT services; partly offset by a decrease in fit-up cost and decreased legal services.

Non-tax revenues slightly decreased in 2014-2015 as a result of a modification to the cost recovery approach employed by the CRA for the provision of services to Employment and Social Development Canada for the administration of the Canada Pension Plan and the Employment Insurance Act.

Condensed Statement of Financial Position (unaudited)
For the Year Ended March 31, 2015
Financial Information   2014-15 2013-14  Difference
Total liabilities 1,429,577,039 1,227,975,851 201,601,188
Total net financial assets 292,255,010 170,082,996 122,172,014
CRA net debt 1,137,322,029 1,057,892,855 79,429,174
Total non-financial assets 405,953,313 398,289,996 7,663,317
CRA net financial position 731,368,716 659,602,859 71,765,857

Liabilities have increased by $88.1M as a result of the implementation of the pay in arrears initiative in 2014-2015. An amount of $25.5M payable to Treasury Board Secretariat at year-end for the employer's portion of the employee benefit plans contributed to the increase in liabilities.

The increase in financial assets is correlated to specific increases in liabilities, as an account receivable is created for liabilities that are not settled at year-end, but for which appropriations were used. This account receivable, the Due from the Consolidated Revenue Fund represents the net amount of cash the CRA is entitled to draw from the Consolidated Revenue Fund which is administered by the Receiver General for Canada without using further appropriations to discharge its liabilities. The salary accrual resulting from the transition to pay in arrears as well as the account payable to Treasury Board Secretariat for employee benefit plans mostly contributed to the increase in financial assets.

Non-financial assets are comprised of 97% tangible capital assets. The CRA managed a capital budget of $123.4 million for the year 2014-2015 ($110.0 million for 2013-2014), of which a total of $47.1 million ($46.7 million for 2013-2014) remains available for use in future years in accordance with the CRA's multi-year resource management strategy.

Financial Statements

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 the CRA's Annual 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 financial management and 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, 2015 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

Andrew Treusch
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 28, 2015  

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