Canada Revenue Agency Quarterly Financial Report
For the Quarter ended June 30, 2019

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

Introduction

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

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

Basis of Presentation

This quarterly report has been prepared by management using an expenditure basis of accounting. The accompanying Statement of Authorities includes the CRA's spending authorities granted by Parliament and those used by the CRA consistent with the Main Estimates for the 2019-2020 fiscal year. This quarterly report has been prepared using a special purpose financial reporting framework designed to meet financial information needs with respect to the use of spending authorities.

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

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

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

Highlights of fiscal quarter and fiscal year to date (YTD) results

Analysis of Authorities

This report reflects the results for the current fiscal year in relation to the Main Estimates for which full supply was released on June 25, 2019, authorities available for use from the prior fiscal year, as well as allocations from centrally held Budget Implementation Votes.

As shown in the Statement of Authorities, the CRA’s total Budgetary Authorities available for use have increased by $312 million, from $4,352 million in 2018-2019 to $4,664 million in 2019-2020. The components of the Vote 1 Gross Operating Expenditures Authority, Vote 5 Capital Expenditures Authority and Budgetary Statutory Authorities are outlined below.

The Vote 1 Gross Operating Expenditures Authority increased by $292 million, from $3,704 million in 2018-2019 to $3,996 million in 2019-2020. This is mainly due to the following legislative and technical changes:

Legislative

Other technical items

In 2019-2020, the CRA expects to spend $364 million to fulfill its administrative responsibilities in support of the CPP and EI program, up from $349 million in 2018-2019. This $15 million increase in Vote 1 Gross Operating Expenditure Authority is offset by an equivalent increase in revenues recovered from the CPP and EI Accounts.

The Vote 5 Capital Expenditures Authority decreased by $20 million, from $77 million in 2018-2019 to $57 million in 2019-2020. This decrease is primarily the result of the following factors:

Total Budgetary Statutory Authorities are forecasted to increase by $55 million, from $920 million in 2018-2019 to $975 million in 2019-2020. This increase is attributable to the following:

Analysis of Expenditures

A two-year comparison of the CRA's annual net authorities available for use against first quarter net expenditures as at June 30 is presented in Figure 1.

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

Figure 1: Annual Authorities against First Quarter Expenditures (in millions of dollars)
  2019-2020 2018-2019
Authorities 4,664 4,352
First Quarter Expenditures 1,119 1,267

A) Expended in the First Quarter by Authority

As displayed in the Statement of Authorities, the first quarter expenditures have decreased by $148 million, or 12%, from $1,267 million in 2018-2019 to $1,119 million in 2019-2020. The components of this year-over-year change are presented below.

The CRA’s first quarter net Vote 1 Operating Expenditures have decreased by $158 million, or 15%, from $1,051 million in 2018-2019 to $893 million in 2019-2020. The decrease is primarily the result of retroactive salary payments posted in 2018-2019 from the settlement of PIPSC-AFS and due to additional economic increases in the Public Service Alliance of Canada Union of Taxation Employees (PSAC-UTE) collective agreements. These expenditures pertain to 2017-2018 and prior years and were subsequently applied against the related accrued salary provision after quarter 1 2018-2019. 

In addition, timing related to the payment of invoices for the Department of Justice has contributed to the decrease in Vote 1 expenditures, which were paid earlier in 2018-2019. These timing differences will be resolved by year-end.

A further $3 million reduction in expenditures relates to the CRA’s first quarter Vote 5 Capital Expenditures, going from $10 million in 2018-2019 to $7 million in 2019-2020, a decrease of 24%. Fluctuations in capital expenditures are not unusual as the quarterly distribution may vary from year to year, depending on the status of major project investments and the timing of capital procurements.

Expenditures for Total Budgetary Statutory Authorities have increased by $13 million, or 6%, from $206 million in 2018-2019 to $219 million in 2019-2020. The majority of the increase, $8 million, is attributable to increased contributions to employee benefit plans. Another $3 million pertains to increased payments under the Children’s Special Allowances in quarter 1 of this year compared to last year, which is consistent with the increase in year over year authorities.

B) Expended in the First Quarter by Standard Object

As illustrated in the Departmental Budgetary Expenditures by Standard Object table, the CRA’s personnel expenditures have decreased by $124 million, or 12%, from $1,028 million in 2018-2019 to $904 million in 2019-2020. As noted above, the main contributing reason for the decrease includes the settlement of the PIPSC-AFS and PSAC-UTE collective agreements.

Transportation and communications expenditures have increased by $2 million, or 5%, from $34 million in 2018-2019 to $36 million in 2019-2020 and is attributable to public service travel, mainly related to core mandate workload.

Information expenditures have increased by $2 million, from under $1 million in 2018-2019 to close to $3 million in 2019-2020 due to a reclassification of accounts in 2018-2019 moved from standard object “Professional and Special Services”.

Professional and special services expenditures have decreased by $33 million, or 29%, from $117 million in 2018-2019 to $84 million in 2019-2020. The decrease is primarily the result of timing differences in the payment of invoices for the Department of Justice, as previously mentioned.

Rentals expenditures have increased by $13 million, or 19%, from $67 million in 2018-2019 to $80 million in 2019-2020. Similarly, purchased repair and maintenance expenditures have decreased by $8 million, from $9 million in 2018-2019 to $1 million in 2019-2020. The year over year variances for these two standard objects are related to the accounting classification of expenditures for accommodation and real property services and will be resolved by year-end.

Other subsidies and payments expenditures that pertain to salary overpayments have decreased by $2 million, from $6 million in 2018-2019 to $4 million in 2019-2020, or 39%.

Risks and Uncertainties

The CRA maintains a corporate risk inventory to identify and address organizational risks. Mitigation strategies have been put in place to protect the CRA from exposure to these risks and the associated financial impacts.

As mentioned in the previous year’s quarterly reports, the implementation of the government-wide Pay Modernization Project (Phoenix) has affected departments and individuals across government. To mitigate the associated risks, the CRA continues to monitor pay transactions and makes appropriate adjustments, when necessary, in a timely manner.

Significant changes in relation to operations, personnel and programs

Budget 2019 supports the Minister of National Revenue's top priorities, to improve client services and ensuring a fair tax system for all Canadians by:

In addition, the government has demonstrated its commitment to continuing resolving issues related to the Phoenix Pay System and has proposed an investment of $9.2 million for the CRA in 2019–2020. This will ensure that the CRA is able to quickly and accurately process income tax reassessments for federal government employees that are required due to Phoenix pay issues, and to support related telephone enquiries.

Approval by Senior Officials

Approved by:

[original signed by]

________________________

Bob Hamilton, Commissioner 

[original signed by]

_____________________________

Janique Caron, Chief Financial Officer

Ottawa, Canada

Date: August 22, 2019

Statement of Authorities (unaudited) - Fiscal year 2019-2020
(in thousands of dollars)
  Total available for use for the year ending March 31, 2020Footnote 1 Used during the quarter ended
June 30, 2019
Year to date used at quarter-end
Vote 1 - Operating expenditures      
Gross Operating expenditures 3,996,267 981,995 981,995
Revenues netted against expenditures (363,797) (89,034) (89,034)
Net Vote 1 - Operating expenditures 3,632,470 892,961 892,961
Vote 5 - Capital expenditures 57,047 7,445 7,445
Budgetary Statutory Authorities      
Contributions to employee benefit plans 458,824 112,848 112,848
Children's Special Allowance payments (Children's Special Allowances Act) 337,000 87,059 87,059
Spending of revenues received through the conduct of its operations pursuant to section 60 of the Canada Revenue Agency Act 178,954 18,061 18,061
Minister's salary and motor car allowance 88 22 22
Court awards - Tax Court of Canada - 591 591
Spending proceeds from the disposal of surplus Crown Assets - 47 47
Energy Cost Benefit - 0 0
Refunds of previous years revenue - 27 27
Total Budgetary Statutory Authorities 974,866 218,655 218,655
Total Budgetary Authorities 4,664,383 1,119,061 1,119,061
Statement of Authorities (unaudited) - Fiscal year 2018-2019
(in thousands of dollars)
  Total available for use for the year ending March 31, 2019Footnote 1 Used during the quarter ended
June 30, 2018
Year to date used at quarter-end
Vote 1 - Operating expenditures      
Gross Operating expenditures 3,703,845 1,139,732 1,139,732
Revenues netted against expenditures (348,525) (88,753) (88,753)
Net Vote 1 - Operating expenditures 3,355,320 1,050,979 1,050,979
Vote 5 - Capital expenditures 76,921 9,768 9,768
Budgetary Statutory Authorities      
Contributions to employee benefit plans 424,475 105,417 105,417
Children's Special Allowance payments (Children's Special Allowances Act) 335,000 83,727 83,727
Spending of revenues received through the conduct of its operations pursuant to section 60 of the Canada Revenue Agency Act 159,856 16,573 16,573
Minister's salary and motor car allowance 86 22 22
Court awards - Tax Court of Canada - 805 805
Spending proceeds from the disposal of surplus Crown Assets - 5 5
Energy Cost Benefit - 0 0
Refunds of previous years revenue - - -
Total Budgetary Statutory Authorities 919,417 206,549 206,549
Total Budgetary Authorities 4,351,658 1,267,296 1,267,296
Departmental Budgetary Expenditures by Standard Object (unaudited)
Fiscal year 2019-2020

(in thousands of dollars)
  Planned expenditures for the year ending March 31, 2020 Expended during the quarter ended June 30, 2019 Year to date used at quarter-end
Expenditures:      
Personnel 3,570,341 904,171 904,171
Transportation and communications 188,152 35,560 35,560
Information 4,415 2,494 2,494
Professional and special services 506,345 83,577 83,577
Rentals 279,800 80,312 80,312
Purchased repair and maintenance 71,158 1,365 1,365
Utilities, materials and supplies 29,346 3,528 3,528
Acquisition of machinery and equipment 41,423 6,459 6,459
Transfer payments 337,000 87,059 87,059
Public debt charges - - -
Other subsidies and payments 200 3,570 3,570
Total Gross Budgetary Expenditures 5,028,180 1,208,095 1,208,095
Less: Revenues netted against expenditures 363,797 89,034 89,034
Total Net Budgetary Expenditures 4,664,383 1,119,061 1,119,061
Departmental Budgetary Expenditures by Standard Object (unaudited)
Fiscal year 2018-2019

(in thousands of dollars)
  Planned expenditures for the year ending March 31, 2019 Expended during the quarter ended June 30, 2018 Year to date used at quarter-end
Expenditures:      
Personnel 3,318,237 1,027,810 1,027,810
Transportation and communications 170,626 33,758 33,758
Information 1,956 293 293
Professional and special services 472,433 117,336 117,336
Rentals 280,850 67,294 67,294
Purchased repair and maintenance 59,601 8,832 8,832
Utilities, materials and supplies 25,047 4,577 4,577
Acquisition of machinery and equipment 36,233 6,579 6,579
Transfer payments 335,000 83,727 83,727
Public debt charges - 5 5
Other subsidies and payments 200 5,838 5,838
Total Gross Budgetary Expenditures 4,700,183 1,356,049 1,356,049
Less: Revenues netted against expenditures 348,525 88,753 88,753
Total Net Budgetary Expenditures 4,351,658 1,267,296 1,267,296
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