Canada Revenue Agency Quarterly Financial Report
For the quarter ended June 30, 2021
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.
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 2021-2022 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
Impact of the pandemic on authorities available for use
Full supply of the CRA’s 2021-2022 Main Estimates was approved on June 21, 2021 and 100% of the annual authorities are available for use. At Q1 2020-2021, only interim supply of Main Estimates was available for use, which includes 9/12 (approximately 75%) of Vote 1 and Vote 5, 100% of authorities available for use from the prior fiscal year, and 100% of statutory authorities. Full supply of 2020-2021 Main Estimates was approved on December 14, 2020.
Analysis of Authorities
This report reflects the results for the current fiscal year in relation to the Main Estimates, authorities available for use from the prior fiscal year, and Supplementary Estimates A.
As shown in the Statement of Authorities, the CRA’s total Budgetary Authorities available for use have increased by $4,220 million, from $7,341 million of interim supply in 2020-2021 to $11,561 million in 2021-2022.
If full supply had been released in 2020-2021, the CRA’s total Budgetary Authorities would have been $8,227 million, and the increase from 2020-2021 would be $3,334 million. The impacts of the prior year’s limited supply are primarily seen in the Vote 1 Gross Operating Expenditures Authority.
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 $1,651 million, from $3,176 million in 2020-2021 to $4,827 million in 2021-2022. If full supply had been released in 2020 2021, the Vote 1 Gross Operating Expenditures Authority would be $4,142 million, and the increase from 2020-2021 would be $685 million.
The $685 million increase in authorities, assuming full supply had been released, is mainly due to:
- $226 million increase in authorities related to the settlement of the Public Service Alliance of Canada Union of Taxation Employees (PSAC-UTE) and the Professional Institute of the Public Service of Canada (PIPSC) collective agreements;
- $197 million increase in authorities available for use from the prior fiscal year;
- $137 million increase in authorities to fulfill the CRA’s administrative responsibilities in support of the Canada Pension Plan (CPP) and Employment Insurance (EI) program;
- $115 million increase in authorities for subsidies administered by the CRA as part of Canada’s COVID-19 Economic Response Plan for the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Rent Subsidy (CERS), and the 10% Temporary Wage Subsidy;
- $16 million increase in authorities related to previous federal budgets for the implementation and administration of measures that pertain to cracking down on tax evasion and combatting tax avoidance; and
- $6 million decrease in authorities related to Budget 2018 for the implementation and administration of the Carbon Fuel Charge – Ontario and Climate Action Incentive (CAI) payments.
In 2021-2022, the CRA expects to spend $430 million to fulfill its administrative responsibilities in support of the CPP and EI program, compared to $293 million in 2020-2021 (interim supply), an increase of $137 million. The majority of this increase, $98 million, is due to timing of supply while the remainder, $39 million, pertains to adjustments related to the PSAC-UTE collective agreement and the annual volume adjustment. The 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 increased by $25 million, from $65 million in 2020-2021 to $90 million in 2021-2022. The Vote 5 Capital Expenditure Authority would have increased by $6 million if full supply had been released in 2020-2021, from $84 million that year to $90 million in 2021-2022. This $6 million increase is mainly due to:
- $3 million increase in authorities available for use from the prior fiscal year;
- $4 million increase in authorities for the administration of Canada’s COVID-19 Economic Response Plan, specifically CEWS; and
- $1 million planned decrease in Vote 5 Capital Expenditures Authority.
Total Budgetary Statutory Authorities increased by $2,681 million, from $4,392 million in 2020-2021 to $7,073 million in 2021-2022. The CRA received full supply of its Budgetary Statutory Authorities in 2020-2021 as of Q1. The increase in authorities is attributable to the following:
- $2,451 million in new CAI payments, due to an increased forecast provided by the Department of Finance reflects the increases in the prices on carbon pollution under the federal carbon pollution pricing system;
- $105 million in increased spending of revenues received primarily attributable to the Canada Emergency Response Benefit (CERB) and Canada Emergency Student Benefit (CESB) initiatives;
- $88 million in increased contributions to the Employee Benefit Plan (EBP);
- $25 million in increased payments for the Distribution of Fuel and Excess Emission Charges to reflect the updated forecast provided by the Department of Finance; and
- $12 million in increased payments under the Children’s Special Allowances Act.
Analysis of Expenditures
A two-year comparison of the CRA's annual net authorities available for use against the CRA’s 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, which will be resolved by the end of the fiscal year.
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Figure 1 – details
Figure 1: Annual Authorities and First Quarter Expenditures Footnote 1 - 2020-2021 2021-2022 Authorities - Excluding CAI $3,935,868 $5,704,889 Authorities - Climate Action Incentive Payments (CAI) $3,405,000 $5,856,000 Expenditures - Excluding CAI $1,164,615 $1,282,572 Expenditures - Climate Action Incentive Payments (CAI) $2,386,311 $3,331,934
A) Expended in the First Quarter by Authority
As displayed in the Statement of Authorities, the first quarter expenditures have increased by $1,064 million, from $3,551 million in 2020-2021 to $4,615 million in 2021-2022. The components of this year-over-year change are presented below.
The CRA’s first quarter net Vote 1 Operating Expenditures have increased by $82 million, or 9%, from $932 million in 2020-2021 to $1,014 million in 2021-2022. The $82 million increase is composed of a $131 million increase in salary expenditures and a $49 million decrease in operations and maintenance expenditures (O&M).
$64 million of the increase in salary expenditures is the result of the settlement of the PSAC UTE collective agreement in 2020-2021. The remainder of the increase in salary expenditures relates to the implementation and administration of the measures in Canada’s COVID-19 Economic Response Plan, including CEWS, CERS, and the 10% Temporary Wage Subsidy; as well as the administration of measures that pertain to compliance, cracking down on tax evasion, combatting tax avoidance, enhancing tax collections, improving client services, and the federal carbon pollution pricing system announced in previous federal budgets.
The $49 million decrease in O&M expenditures is primarily related to decreases in postage costs and IT office equipment, as a result of higher COVID-19 related payments in the prior year. The remainder of the decrease in O&M expenditures is due to the higher revenues recovered from the CPP and EI Accounts, most of which will be resolved by year end.
The CRA’s first quarter Vote 5 Capital Expenditures have increased by $1 million, from $10 million in 2020-2021 to $11 million in 2021-2022, an increase of 9%. This $1 million increase is primarily tied to expenditures for software development work to support Canada’s COVID-19 Economic Response Plan.
The CRA’s first quarter Budgetary Statutory Authorities have increased by $982 million, from $2,608 million in 2020-2021 to $3,590 million in 2021-2022. The increase in statutory authorities is attributable to the following:
- $946 million increase in CAI payments;
- $13 million increase in spending of revenues received. The increase in the spending of revenue is related to the timing of invoicing, for which fluctuations throughout the year are normal. These timing differences will be resolved by year-end;
- $12 million increase in payments for the Distribution of Fuel and Excess Emission Charges;
- $10 million increase in court awards;
- $9 million increase in contributions to the EBP;
- $8 million decrease in payments under the Children's Special Allowance Act. This decrease is due to the delivery of enhanced Canada Child Benefit payments paid in Q1 2020-2021.
B) Expended in the First Quarter by Standard Object
The Departmental Budgetary Expenditures by Standard Object table illustrates the increase in the CRA’s first quarter expenditures by standard object. The components of this year over-year change are presented below.
Personnel expenditures have increased by $151 million, or 16%, from $940 million in 2020 2021 to $1,091 million in 2021-2022.
As noted above, $41 million of the increase is a result of the settlement of the PSAC-UTE collective agreement. $25 million of the increase relates to the implementation and administration of Canada’s COVID-19 Economic Response Plan. An additional $5 million relates to the implementation and administration of measures that pertain to compliance, cracking down on tax evasion, combatting tax avoidance, enhancing tax collections, improving client services, and the federal carbon pollution pricing system announced in previous federal budgets.
Transportation and communications expenditures have decreased by $13 million, or 39%, from $33 million in 2020-2021 to $20 million in 2021-2022. This change is primarily the result of an $11 million decrease in postal services expenditures, which is due to the enhanced Canada Child Benefit and GST/HST credit payments which were mailed out in 2020 2021. There was also a decrease in travel expenditures of $1 million. Both variances in spending are the result of the impact of COVID-19 on the CRA’s operations.
Rentals expenditures have decreased by $11 million, or 14%, from $81 million in 2020-2021 to $70 million in 2021-2022. The majority of this decrease, $8 million, relates to the timing of expenditures posted for accommodation and real property services and will be resolved by year end. The remaining $3 million decrease pertains to software maintenance. This is a result of the large amount of software maintenance the CRA spent last year on expanding remote working capabilities to support Canada’s COVID-19 Economic Response Plan.
Purchased repair and maintenance expenditures have increased by $11 million, from $1 million in 2020-2021 to $12 million in 2021-2022, the majority of which is as a result of the timing of expenditures posted for accommodation and real property services and will be resolved by year end. The remainder of the increase is related to costs for a list of planned real property projects.
Acquisition of machinery and equipment expenditures have decreased by $12 million, or 68%, from $18 million in 2020-2021 to $6 million in 2021-2022. This is a result of the large amount of personal office equipment, primarily computer equipment, that the CRA spent last year on expanding remote working capabilities.
Transfer payments have increased by $950 million, from $2,491 million in 2020-2021 to $3,441 million in 2020-2021. Almost the entire increase, $946 million, is attributable to an increase in CAI payments. The remaining increase of $4 million is due to increased payments for the Distribution of Fuel & Excess Emissions Charges offset by a decrease in payments under the Children’s Special Allowances Act.
Other subsidies and payments have increased by $9 million, from $3 million in 2020-2021 to $12 million in 2020-2021. Almost the entire increase is attributable to an increase in court awards.
Risks and uncertainties
Conducting regular environmental scans and maintaining a corporate risk profile are integral for the CRA to be able to deliver on its core responsibilities as a tax and benefit administration. While employees and managers across most of the CRA’s business lines are engaged in managing risks on a daily basis, the CRA also dedicates significant effort to managing risk at the enterprise level. The Board of Management monitors and senior management receives regular updates on the CRA’s Corporate Risk Profile, which outlines the direction and decisions on the potential risks that could affect the CRA’s ability to meet its strategic priorities and objectives. Some of the top tier risks being closely monitored include employee health, well-being and safety, cybersecurity, service experience, reputation management, protection of taxpayer information, and workforce transformation. A few of these top tier risks are explained in greater detail, as follows.
Service experience
As the Government of Canada’s response to the COVID-19 pandemic continues, existing federal relief measures were extended and additional measures were put into place such as the Canadian Recovery Hiring Program (CRHP). The CRA was charged with the responsibility of promptly delivering these benefits to millions of Canadians. The CRA’s 2021 2022 Corporate Business Plan (CBP) included providing seamless, empathetic and client-centric service experience as one of their five priorities. As such, the risk of service experience is being closely monitored to ensure the CRA continues to improve the client experience through people-centric design and delivery of programs and services while successfully delivering its broader mandate of tax and benefits administration.
Cybersecurity
Strengthening trust through enhanced security, transparency and accountability is also a priority in the CRA’s 2021-2022 CBP. This priority relies on enhancing cyber security and protecting taxpayer information. The cyber security risk has shown a consistent upward trend in risk exposure for the past five years. This is due to the increased prevalence and sophistication of cyber threats, as well as the emergence of new threats. The CRA continues to take action to ensure that its cyber security posture keeps pace with the changing environment.
Protection of taxpayer information
The protection of taxpayer information risk results from the CRA's vast information holdings and associated linkages to cybersecurity. There have been an increasing number of external cybersecurity incidents occurring in the private sector, and to some extent, the public sector, of which some led to instances of identity theft resulting in fraudulent access to emergency relief measures. The CRA continues to invest in several programs and initiatives to protect data under its responsibility, including taxpayer information, to manage this risk appropriately. As outlined in Budget 2021’s priorities, $336.2 million over five years, and $51.2 million ongoing starting in 2021-2022, has been earmarked in the fiscal framework for the CRA to invest in new technologies and tools to safeguard the electronic data stored by the CRA, and protect Canadians’ personal information from falling into the wrong hands.
The CRA currently has a rigorous security program in place to guard against both external and internal threats and has dedicated a funding envelope for additional IT security sustainability initiatives. A Privacy Management Framework, which articulates the CRA’s vision, objective, and commitment to privacy, including how the CRA handles and protects personal information was recently developed and implemented.
Additionally, continued participation in international forums such as the International Public Sector Fraud Forum allows the CRA to learn about Five Eyes best practices and share potential mitigation strategies.
COVID-19
While all CRA core programs and activities have largely resumed as of January 2021, in accordance with its internal National Business Resumption Plan, in 2021-2022, the CRA will continue to administer the following emergency measures and recovery benefits to help Canadians and businesses facing hardship as a result of COVID-19:
- Canada Recovery Benefit (CRB)
- Canada Recovery Caregiving Benefit (CRCB)
- Canada Recovery Sickness Benefit (CRSB)
- Canada Emergency Rent Subsidy (CERS)
- Canada Emergency Wage Subsidy (CEWS)
- Canadian Recovery Hiring Program (CRHP)
The COVID-19 pandemic and resulting emergency measures to combat the spread of the virus have had significant impacts on the CRA's operations. The COVID 19 travel restrictions continue to keep the CRA’s operational travel low in Q1 of 2021 2022.
Significant changes in relation to operations, personnel, and programs
As of January 2021, all CRA core programs and activities have largely resumed. The CRA also continues to administer COVID-19 federal relief measures. A number of employees have been hired or reassigned to administer COVID-19 benefits and respond to public enquiries related to Canada’s COVID-19 Economic Response Plan. Since the beginning of the pandemic up to June 27, 2021, the CRA has processed 23 million CERB applications on behalf of Employment and Social Development Canada. The CRA has also processed 3.8 million CEWS, 1.2 million CERS, 21 million CRB, 5.7 million CRCB, and 1.2 million CRSB applications, to provide support to millions of Canadians.
To continue to deliver on these and other emergency measures, the CRA is seeking funding for the extension of the CERS, the CEWS, the CRB, the CRCB, and the CRSB. The CRA is also seeking funding for the new COVID-19 recovery program, CRHP.
The CRA has implemented its Employment Equity, Diversity and Inclusion (EEDI) Action Plan 2021-2025 to enhance diversity, inclusion and equity. This action plan has the goal of ensuring that Indigenous peoples, racialized people, persons with disabilities, people of all gender identities and other marginalized groups are reflected across the CRA and in positions of senior leadership. The following are items the CRA has been working on to achieve more diversity and foster an inclusive CRA workplace culture:
- Changes to staffing boards to include at least two members of designated employment equity-deserving groups,
- New unconscious bias training,
- New employee resources and tools to enhance inclusion in the workplace,
- New EEDI InfoZone page, and
- Employment systems review to identify employment barriers faced by members of employment equity designated groups.
To ensure CRA programs and services continue to be delivered to Canadians, while keeping staff safe, the majority of CRA employees have continued to work remotely. The CRA is actively planning for a post-pandemic model that enables both in office and virtual work, maintaining the balance between meeting employee preferences and effectively delivering tax and benefits programs to Canadians. The CRA continues to work on setting the right conditions to gradually return to office buildings in a timely and appropriate manner. The CRA continues to closely monitor the risk associated with employee health, well-being and safety after an extended period of personal and professional change brought about by the pandemic.
Approval by Senior Officials
Approved by:
[original signed by]
__________________________________
Bob Hamilton, Commissioner
[original signed by]
__________________________________
Janique Caron, Chief Financial Officer
Ottawa, Canada
Date: August 23, 2021
| Total available for use for the year ending March 31, 2022 Footnote 2 |
Used during the quarter ended June 30, 2021 |
Year to date used at quarter-end | |
|---|---|---|---|
| Vote 1 - Operating expenditures | - | - | - |
| Gross Operating expenditures | 4,827,615 | 1,132,505 | 1,132,505 |
| Revenues netted against expenditures | (429,530) | (118,547) | (118,547) |
| Net Vote 1 - Operating expenditures | 4,398,085 | 1,013,958 | 1,013,958 |
| Vote 5 - Capital expenditures | 89,892 | 11,011 | 11,011 |
| Budgetary Statutory Authorities | - | - | - |
| Contributions to employee benefit plans | 539,500 | 121,202 | 121,202 |
| Children's Special Allowance payments (Children's Special Allowances Act) | 373,000 | 97,299 | 97,299 |
| Climate Action Incentive payments | 5,856,000 | 3,331,934 | 3,331,934 |
| Spending of revenues received through the conduct of its operations pursuant to section 60 of the Canada Revenue Agency Act | 279,323 | 16,733 | 16,733 |
| Distribution of Fuel and Excess Emission Charges | 25,000 | 12,048 | 12,048 |
| Minister's salary and motor car allowance | 91 | 23 | 23 |
| Collection Agency Fees under section 17.1 of the Financial Administration Act | - | 0 | 0 |
| Court awards - Supreme Court | - | - | - |
| Court awards - Tax Court of Canada | - | 10,277 | 10,277 |
| Spending proceeds from the disposal of surplus Crown Assets | - | 21 | 21 |
| Energy Cost Benefit | - | (1) | (1) |
| Total Budgetary Statutory Authorities | 7,072,913 | 3,589,536 | 3,589,536 |
| Total Budgetary Authorities | 11,560,889 | 4,614,505 | 4,614,505 |
Note: The above table uses parentheses to show negative numbers.
| Total available for use for the year ending March 31, 2021Footnote 1, Footnote 2 |
Used during the quarter ended June 30, 2020 |
Year to date used at quarter-end | |
|---|---|---|---|
| Vote 1 - Operating expenditures | - | - | - |
| Gross Operating expenditures | 3,176,336 | 1,030,205 | 1,030,205 |
| Revenues netted against expenditures | (293,024) | (97,739) | (97,739) |
| Net Vote 1 - Operating expenditures | 2,883,312 | 932,466 | 932,466 |
| Vote 5 - Capital expenditures | 65,370 | 10,148 | 10,148 |
| Budgetary Statutory Authorities | - | - | - |
| Contributions to employee benefit plans | 451,936 | 112,984 | 112,984 |
| Children's Special Allowance payments (Children's Special Allowances Act) | 361,000 | 105,162 | 105,162 |
| Climate Action Incentive payments | 3,405,000 | 2,386,311 | 2,386,311 |
| Spending of revenues received through the conduct of its operations pursuant to section 60 of the Canada Revenue Agency Act | 174,160 | 3,463 | 3,463 |
| Distribution of Fuel and Excess Emission Charges | - | - | - |
| Minister's salary and motor car allowance | 89 | 22 | 22 |
| Collection Agency Fees under section 17.1 of the Financial Administration Act | - | - | - |
| Court awards - Supreme Court | - | 3 | 3 |
| Court awards - Tax Court of Canada | - | 369 | 369 |
| Spending proceeds from the disposal of surplus Crown Assets | - | 0 | 0 |
| Energy Cost Benefit | - | (2) | (2) |
| Total Budgetary Statutory Authorities | 4,392,186 | 2,608,312 | 2,608,312 |
| Total Budgetary Authorities | 7,340,868 | 3,550,926 | 3,550,926 |
Note: The above table uses parentheses to show negative numbers.
| Planned expenditures for the year ending March 31, 2022 |
Expended during the quarter ended June 30, 2021 |
Year to date used at quarter-end | |
|---|---|---|---|
| Expenditures: | |||
| Personnel | 4,288,449 | 1,091,378 | 1,091,378 |
| Transportation and communications | 241,284 | 19,777 | 19,777 |
| Information | 35,229 | 2,524 | 2,524 |
| Professional and special services | 679,089 | 76,263 | 76,263 |
| Rentals | 303,791 | 69,454 | 69,454 |
| Purchased repair and maintenance | 61,825 | 12,225 | 12,225 |
| Utilities, materials, and supplies | 37,263 | 2,430 | 2,430 |
| Acquisition of machinery and equipment | 86,596 | 5,652 | 5,652 |
| Transfer payments | 6,256,693 | 3,441,280 | 3,441,280 |
| Other subsidies and payments | 200 | 12,069 | 12,069 |
| Total Gross Budgetary Expenditures | 11,990,420 | 4,733,052 | 4,733,052 |
| Less: Revenues netted against expenditures | 429,530 | 118,547 | 118,547 |
| Total Net Budgetary Expenditures | 11,560,889 | 4,614,505 | 4,614,505 |
| Planned expenditures for the year ending March 31, 2021 Footnote 1 |
Expended during the quarter ended June 30, 2020 |
Year to date used at quarter-end | |
|---|---|---|---|
| Expenditures: | |||
| Personnel | 2,900,732 | 940,326 | 940,326 |
| Transportation and communications | 176,090 | 32,642 | 32,642 |
| Information | 5,010 | 1,789 | 1,789 |
| Professional and special services | 452,739 | 76,718 | 76,718 |
| Rentals | 211,649 | 80,609 | 80,609 |
| Purchased repair and maintenance | 50,243 | 411 | 411 |
| Utilities, materials, and supplies | 26,566 | 3,217 | 3,217 |
| Acquisition of machinery and equipment | 44,624 | 17,924 | 17,924 |
| Transfer payments | 3,766,000 | 2,491,472 | 2,491,472 |
| Other subsidies and payments | 240 | 3,557 | 3,557 |
| Total Gross Budgetary Expenditures | 7,633,892 | 3,648,665 | 3,648,665 |
| Less: Revenues netted against expenditures | 293,024 | 97,739 | 97,739 |
| Total Net Budgetary Expenditures | 7,340,868 | 3,550,926 | 3,550,926 |
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