Canada Revenue Agency Quarterly Financial Report For the quarter ended June 30, 2022
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 2022-2023 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
1. Analysis of Authorities
This report reflects the results for the current fiscal year in relation to the Main Estimates and authorities available for use from the prior fiscal year.
As shown in the restated table below, the CRA’s total Budgetary Authorities have increased by $1,662 million, since the first quarter of 2021-2022, from $11,561 million in 2021-2022, to $13,223 million in 2022-2023.
| (in thousands of dollars) | Total available for use for the year ending March 31, 2023 table 1 note 1 |
Total available for use for the year ending March 31, 2022 |
Variance in budgetary authorities |
|---|---|---|---|
| Gross Vote 1 – Operating Expenditures | 5,165,248 | 4,827,615 | 337,633 |
| Revenue Credited to the Vote | (440,567) | (429,530) | (11,037) |
| Vote 5 – Capital Expenditures | 109,060 | 89,892 | 19,168 |
| Budgetary Statutory Authorities | 8,389,076 | 7,072,913 | 1,316,163 |
| Total Budgetary Authorities | 13,222,817 | 11,560,889 | 1,661,928 |
Table 1 Notes
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The Vote 1 Gross Operating Expenditures Authority increased by $338 million, from $4,828 million in 2021-2022 to $5,165 million in 2022-2023.
The items that have a material impact on the Vote 1 Gross Operating Expenditure Authority include:
- $195 million increase in authorities available for use from the prior fiscal year;
- $37 million increase in authorities for Budget 2021 measures that pertain to compliance and combatting tax evasion and avoidance;
- $24 million increase in Vote 1 authorities due to a smaller vote realignment from Vote 1 to Vote 5 for the Strategic Investment Plan (SIP) and to address capital requirements for information technology (IT) work undertaken for the administration of COVID-19 measures;
- $13 million increase in authorities for incremental salary increases related to the CRA’s collective agreements;
- $11 million increase in authorities to fulfill the CRA’s administrative responsibilities in support of the Canada Pension Plan (CPP) and Employment Insurance (EI) program due to the annual volume adjustment; and
- $9 million increase in authorities for the Accommodations Special Purpose Allotments, which is due to the annual reference level adjustment to reflect changes in rental and fit-up costs and total space occupied by the CRA.
The Revenue Credited to the Vote is for the CRA’s administrative responsibilities to support the CPP and EI program. In 2022-2023, the CRA’s commitment is $441 million compared to $430 million in 2021-2022, an increase of $11 million, which pertains to 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 $19 million, from $90 million in 2021-2022 to $109 million in 2022-2023. This increase is due to:
- $31 million increase in authorities available for use from the prior fiscal year;
- $24 million decrease in authorities due to a smaller vote realignment from Vote 1 to Vote 5 for the SIP and to address capital requirements for IT work undertaken for the administration of COVID-19 measures;
- $19 million increase in authorities related to the Budget 2021 initiatives: GST/HST Agile Risk Assessment, and Protecting Taxpayer Information;
- $4 million decrease in authorities for the Canada Emergency Wage Subsidy (CEWS); and
- $3 million decrease in authorities related to the Budget 2019 measure - Measures for Service Excellence and Fairness in Canada's Tax System.
Total Budgetary Statutory Authorities increased by $1,316 million, from $7,073 million in 2021-2022 to $8,389 million in 2022-2023. The majority increase in authorities is attributable to the following:
- $1,232 million in new Climate Action Incentive (CAI) payments, due to an increased forecast provided by the Department of Finance which reflects the increases in the prices on carbon pollution under the federal carbon pollution pricing system;
- $106 million in increased spending of revenues received primarily attributable to the Canada Recovery Benefit (CRB), Canada Recovery Caregiving Benefit (CRCB) and Canada Recovery Sickness Benefit (CRSB) initiatives;
- $8 million in decreased contributions to the Employee Benefit Plan (EBP) due to an adjustment to align total EBP authorities with the Treasury Board Secretariat established rate;
- $8 million in decreased forecasted payments under the Children’s Special Allowances Act as the 2021-2022 forecast included COVID-19 Canada Child Benefit Boost supplemental payment amounts; and
- $6 million in decreased forecasted payments for the Distribution of Fuel and Excess Emission Charges to reflect the updated forecast provided by the Department of Finance
2. 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.
This graphic provides a two-year comparison of the Agency’s annual authorities available for use as of June 30 against first quarter expenditures for 2022-2023 and 2021-2022. In 2022-2023, the Agency’s annual authorities available for use were $13,223M, while first quarter expenditures were $1,532M. In comparison, 2021-2022 annual authorities available for use were $11,561M, while first quarter expenditures were $4,615M. This graphic also shows the portion of authorities and expenditures related to Climate Action Incentive (CAI) payments. In 2022-23, $7,088M of the annual authorities, and $115M of year-to-date expenditures were related to CAI payments. Comparatively, in 2021-22, $5,856M of the annual authorities, and $3,332M of year-to-date expenditures were related to CAI payments
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Figure 1 – details
Figure 1: Annual Authorities against Year-to-Date Expenditures and First Quarter Expenditures Year Authority/Expenditure Total authorities excluding CAI CAI payments Total 2021-2022 Authorities $5,704,889 $5,856,000 $11,560,889 Year-to-date Expenditures $1,282,572 $3,331,934 $4,614,505 2022-2023 Authorities $6,134,817 $7,088,000 $13,222,817 Year-to-date Expenditures $1,417,729 $114,645 $1,532,373
2.1 Expended in the First Quarter by Authority
The first quarter expenditures have decreased by $3,082 million, as displayed in the Statement of Authorities. The material components of these year-over-year changes are presented below.
| (in thousands of dollars) | Expenditures at June 30, 2022 Footnote 1 |
Expenditures at June 30, 2021 |
Variance in first quarter expenditures |
|---|---|---|---|
| Net Vote 1 – Operating Expenditures | 1,096,961 | 1,013,958 | 83,004 |
| Vote 5 – Capital Expenditures | 8,618 | 11,011 | (2,393) |
| Budgetary Statutory Authorities | 426,794 | 3,589,536 | (3,162,743) |
| Total Budgetary Authorities | 1,532,373 | 4,614,505 | (3,082,132) |
Table 1 Notes
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The CRA’s first quarter Net Vote 1 Operating Expenditures have increased by $83 million, or 8%. The $83 million increase is composed of a $78 million increase in salary expenditures and a $5 million increase in operations and maintenance (O&M) expenditures. The items that have a material impact on the increase in salary and O&M expenditures include:
Salary expenditures
- $33 million increase is related to spending on CRA contact centres responding to high call volumes;
- $24 million increase is related to the implementation and administration of the measures in Canada’s COVID-19 Economic Response Plan, including the original and extension of the CEWS and the Canada Emergency Rent Subsidy (CERS), as well as the 10% Temporary Wage Subsidy, the Hardest-Hit Business Recovery Program, and the Tourism and Hospitality Recovery Program; and
- $21 million increase is related to spending on Budget 2021 initiatives.
O&M expenditures
- $14 million increase in IT services from Shared Services Canada (SSC) and other business services, which is mainly due to timing of invoicing and increased SSC invoices for ongoing costs;
- $11 million increase in personal computer equipment, as most purchases made in 2021-2022 were for lower value items, such as monitors and keyboards, whereas there has been a significant amount of higher value items, such as laptops, purchased in 2022-2023;
- $8 million increase is related to differences in timing of posting of CPP and EI expenditures;
- $2 million increase in net rent, which is determined between real property and Public Services and Procurement Canada (PSPC) on an annual basis;
- $1 million increase in postage for collection efforts and courier services;
- Offset by a $19 million decrease due to differences in timing of recoveries for spending on activities administered on behalf of other government departments; and
- $12 million decrease in the Transfer of GST Administration to Quebec, due to differences in the timing of payments.
The CRA’s first quarter Vote 5 Capital Expenditures have decreased by $2 million, or 22%, from $11 million in 2021-2022 to $9 million in 2022-2023. This $2 million decrease is primarily tied to a decrease in capital funding for Budget 2021 and COVID-19 initiatives.
The CRA’s first quarter Budgetary Statutory Authorities have decreased by $3,163 million, or 88%, from $3,590 million in 2021-2022 to $427 million in 2022-2023. The majority of the decrease in statutory authorities is attributable to the following:
- $3,217 million decrease due to differences in the timing and approach of CAI payments. In 2021-2022, payments were made when individuals filed their tax return, whereas in 2022-2023, they are being made in quarterly installments. The first payment of this fiscal year was in the second quarter, on July 15;
- $62 million increase due to differences in timing for spending of revenues received, the majority of this difference will be resolved by year-end.
2.2 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 material components of this year over-year change are presented below.
Personnel expenditures have increased by $126 million, or 12%, from $1,091 million in 2021 2022 to $1,217 million in 2022-2023.
- $33 million increase is related to spending on CRA contact centres responding to high call volumes;
- $24 million increase is related to the implementation and administration of the measures in Canada’s COVID-19 Economic Response Plan, including the original and extension of the CEWS and the CERS, as well as the 10% Temporary Wage Subsidy, the Hardest-Hit Business Recovery Program, and the Tourism and Hospitality Recovery Program;
- $21 million increase is related to spending on Budget 2021 initiatives;
- $17 million increase is related to the retroactive payments posted for the new Executive pay rates approved in the first quarter of 2022-2023; and
- The remainder of the increase in personnel expenditures can be attributed to the significant amount of hiring in the past year for the contact centers and for ramping up compliance work related to the COVID-19 benefits and federal budget initiatives.
Transportation and communications expenditures have increased by $1 million, or 6%, from $20 million in 2021-2022 to $21 million in 2022-2023. This change is primarily the result of an increase in the level of postage for collection efforts and courier services.
Information expenditures have increased by $2 million, or 81%, from $3 million in 2021-2022 to $5 million in 2022-2023. The majority of this increase is related to advertising expenditures for the Benefits and Credits campaign, which began later in 2021-2022.
Rentals expenditures have increased by $15 million, or 21%, from $69 million in 2021-2022 to $84 million in 2022-2023. The majority of this increase, $12 million, relates to the timing of expenditures posted for accommodation and real property services and will be resolved by year end. $2 million relates to the increase in net rent, which is determined between real property and PSPC on an annual basis.
Purchased repair and maintenance expenditures have decreased by $11 million, or 94%, from $12 million in 2021-2022 to $1 million in 2022-2023, 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.
Acquisition of machinery and equipment expenditures have increased by $10 million, or 185%, from $6 million in 2021-2022 to $16 million in 2022-2023. The majority of this increase is related to the purchase of personal computer equipment, as most purchases made in 2021-2022 were for lower value items, such as monitors and keyboards, whereas there has been a significant amount of higher value items, such as laptops, purchased in 2022-2023.
Transfer payments have decreased by $3,226 million, or 94%, from $3,441 million in 2021-2022 to $215 million in 2022-2023. The majority of this decrease, $3,217 million, is attributable to a decrease in CAI payments. This is due to differences in the timing and approach of CAI payments. In 2021-2022, payments were made when individuals filed their tax return, whereas in 2022-2023, they are being made in quarterly installments. The first payment of this fiscal year was in the second quarter, on July 15.
Other subsidies and payments have decreased by $10 million, or 80%, from $12 million in 2021-2022 to $2 million in 2022-2023. Almost the entire decrease is attributable to a court award paid out in Q1 of 2021-2022.
Risks and uncertainties
The CRA dedicates significant effort to conduct regular environmental scans and update its Corporate Risk Profile (CRP) as the economic and technological landscape changes. The Board of Management monitors, and CRA senior management receives, quarterly updates on the CRP. As the CRA progresses through the phases of the transition plan to a hybrid working model and resumes more core compliance activities, it remains critical to manage and mitigate its key risks.
In terms of financial management, the timing of funding received for the implementation of federal budget initiatives and related commitments is a risk as well as the level of certainty regarding the CRA’s authority levels given that a significant portion is based on costs recovered from other government departments. To mitigate these financial management risks, the CRA continuously and cautiously monitors its authority levels and expenditures throughout the year, conducts accurate and reliable forecasting of its operational spending, and has effective controls in place to ensure it does not go beyond its authorities.
Furthermore, almost all the risks listed in the Departmental Plan could have financial impacts should they materialize. Cybersecurity and the protection of information have shown a consistent upward trend in risk exposure for the past five years in most organizations. There is a risk that external cyber threats will leverage system vulnerabilities or business process flaws to compromise CRA IT systems, services, and/or taxpayer information. There is also an increased possibility for service interruptions due to cyber attacks on third-party service providers to the CRA. As more information and activities by individuals and organizations move online, there is an increased risk that the CRA will unintentionally release, lose, or compromise taxpayer information, or as an organization, be unable to protect information from an intentionally malicious person or group. To mitigate these risks, the CRA continually strengthens its overarching security program to ensure its cybersecurity and data protection posture keeps pace with the changing threat and work environment. The creation of the Security Branch recognizes the stronger posture needed for this program. With an increased level of resources, the Security Branch continues to identify and implement measures to reduce and proactively address potential risks, while responding swiftly to incidents and events. Additional information regarding the CRA’s key risk areas is presented in the 2022-2023 Departmental Plan.
Significant changes in relation to operations, personnel, and programs
During the past year, the CRA has hired over 8,000 new employees to work on the administration of COVID-19 benefits as well as on Budget 2021 initiatives announced by the federal government. The majority of these individuals were hired in the contact centres, to maintain the service experience while also responding to inquiries about the COVID-19 recovery benefits.
Approval by Senior Officials
Approved by:
________________________
Bob Hamilton, Commissioner
_____________________________
Janique Caron, Chief Financial Officer
Ottawa, Canada
Date:
| Total available for use for the year ending March 31, 2023table 4 note 1 | Used during the quarter ended June 30, 2022 |
Year-to-date used at quarter-end | |
|---|---|---|---|
| Vote 1 – Operating expenditures | |||
| Gross Operating expenditures | 5,165,248 | 1,207,841 | 1,207,841 |
| Revenues netted against expenditures | (440,567) | (110,880) | (110,880) |
| Net Vote 1 – Operating expenditures | 4,724,681 | 1,096,961 | 1,096,961 |
| Vote 5 – Capital expenditures | 109,060 | 8,618 | 8,618 |
| Budgetary Statutory Authorities | |||
| Contributions to employee benefit plans | 531,985 | 132,996 | 132,996 |
| Children's Special Allowance payments (Children's Special Allowances Act) | 365,000 | 90,817 | 90,817 |
| Climate Action Incentive payments | 7,088,000 | 114,645 | 114,645 |
| Spending of revenues received through the conduct of its operations pursuant to section 60 of the Canada Revenue Agency Act | 384,998 | 78,693 | 78,693 |
| Distribution of Fuel and Excess Emission Charges | 19,000 | 9,093 | 9,093 |
| Minister's salary and motor car allowance | 93 | 23 | 23 |
| Collection Agency Fees under section 17.1 of the Financial Administration Act | - | 0 | 0 |
| Court awards – Supreme Court | - | 28 | 28 |
| Court awards – Tax Court of Canada | - | 494 | 494 |
| Spending proceeds from the disposal of surplus Crown Assets | - | 2 | 2 |
| Energy Cost Benefit | - | (1) | (1) |
| Refunds of previous years revenue | - | 4 | 4 |
| Total Budgetary Statutory Authorities | 8,389,076 | 426,794 | 426,794 |
| Total Budgetary Authorities | 13,222,817 | 1,532,373 | 1,532,373 |
Table 4 Notes
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This financial table compares the Agency’s total available authorities available as of June 30, expenditures used during the quarter and year-to-date expenditures for fiscal years 2022-2023 and 2021-2022 by voted authority. This table uses parentheses to show negative numbers.
| Total available for use for the year ending March 31, 2022table 5 note 1 | 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) |
| Refunds of previous years revenue | - | - | - |
| 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 |
Table 4 Notes
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This financial table compares the Agency’s total available authorities available as of June 30, expenditures used during the quarter and year-to-date expenditures for fiscal years 2022-2023 and 2021-2022 by voted authority. This table uses parentheses to show negative numbers.
| Planned expenditures for the year ending March 31, 2023 | Expended during the quarter ended June 30, 2022 | Year-to-date used at quarter-end | |
|---|---|---|---|
| Expenditures: | |||
| Personnel | 4,467,368 | 1,217,040 | 1,217,040 |
| Transportation and communications | 262,833 | 20,908 | 20,908 |
| Information | 46,486 | 4,570 | 4,570 |
| Professional and special services | 901,666 | 80,310 | 80,310 |
| Rentals | 321,105 | 84,365 | 84,365 |
| Purchased repair and maintenance | 84,907 | 717 | 717 |
| Utilities, materials and supplies | 44,012 | 2,324 | 2,324 |
| Acquisition of machinery and equipment | 57,801 | 16,100 | 16,100 |
| Transfer payments | 7,476,854 | 214,564 | 214,564 |
| Other subsidies and payments | 353 | 2,355 | 2,355 |
| Total Gross Budgetary Expenditures | 13,663,384 | 1,643,253 | 1,643,253 |
| Less: Revenues netted against expenditures | 440,567 | 110,880 | 110,880 |
| Total Net Budgetary Expenditures | 13,222,817 | 1,532,373 | 1,532,373 |
This financial table compares the Agency’s planned expenditures available as of June 30, expenditures used during the quarter and year-to-date expenditures for fiscal years 2022-2023 and 2021-2022 by standard object. This 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 | 4,733,053 | 4,733,053 |
| Less: Revenues netted against expenditures | 429,530 | 118,547 | 118,547 |
| Total Net Budgetary Expenditures | 11,560,889 | 4,614,505 | 4,614,505 |
This financial table compares the Agency’s planned expenditures available as of June 30, expenditures used during the quarter and year-to-date expenditures for fiscal years 2022-2023 and 2021-2022 by standard object. This table uses parentheses to show negative numbers